Alaska Interstate Construction, LLC v. Pacific Diversified Investments, Inc.

Summary

The Alaska Supreme Court reviews disputes arising from the management of Alaska Interstate Construction, LLC by Pacific Diversified Investments, Inc., including aircraft leases, alleged fraudulent billing, fiduciary-duty claims, and the parties’ operating agreement. The court holds that the Alaska Unfair Trade Practices Act applies because the Federal Aviation Administration regulations did not specifically regulate or prohibit the alleged fraudulent conduct. It also holds that the jury’s findings of fraud and willful misconduct required a finding of material breach as a matter of law, reverses related post-trial rulings, and vacates the prevailing-party, attorney-fee, and prejudgment-interest determinations.

Holdings

1. A party may not obtain JNOV on an exemption theory that was not raised in the directed-verdict motion and was first advanced after the jury was discharged. Pacific Diversified Investments therefore was not entitled to JNOV on the ground that the aircraft-lease conduct was exempt from the UTPA.
2. The UTPA exemption for acts or transactions regulated under other laws applies only when a separate and distinct statutory scheme regulates the conduct and prohibits the unfair practices at issue. Pacific Diversified Investments failed to establish that the FAA, Federal Aviation Regulations, or Airline Deregulation Act specifically regulated and prohibited the alleged fraudulent billing, double billing, billing for services not received, excessive termination fees, and unrelated charges.
3. The UTPA can apply to transactions between related corporate entities and to conduct by a fiduciary when the parties also engage in arms-length commercial transactions. Pacific Diversified Investments's aircraft leases and support services were commercial transactions within the UTPA.
4. Under the circumstances of this case, the jury's findings that Pacific Diversified Investments engaged in repeated fraud, self-dealing, conversion, and willful misconduct required a conclusion that it materially breached the operating agreement as a matter of law.
5. The superior court should have granted JNOV against Ellsworth's fraudulent-inducement claim because he presented no evidence that he misapprehended the written agreement or was induced by deception to sign the agreement's personal noncompetition provision.
6. The superior court did not clearly err in determining that Alaska Interstate Construction's aircraft-lease claims were tolled until it obtained access to information revealing the alleged fraud after Pacific Diversified Investments was removed from management.
7. The superior court did not abuse its discretion by denying Pacific Diversified Investments discovery of Alaska Interstate Construction's attorney-client communications. The issue was also waived when Pacific Diversified Investments dismissed its abuse-of-process claim.
8. The superior court properly instructed the jury that Pacific Diversified Investments had to establish its quasi-estoppel defense by clear and convincing evidence.
9. The superior court's prevailing-party determination, attorney-fee award, and prejudgment-interest award had to be vacated because the appellate reversals required entry of a new judgment.

Questions Presented

1. Whether Pacific Diversified Investments's defense that its aircraft-lease conduct was exempt from the Alaska Unfair Trade Practices Act was timely and supported by the evidence.
2. Whether the Alaska Unfair Trade Practices Act applies to commercial transactions between related corporate entities and fiduciaries.
3. Whether the jury's findings of fraud and willful misconduct required a finding that Pacific Diversified Investments materially breached the operating agreement as a matter of law.
4. Whether the evidence supported judgment notwithstanding the verdict on John Ellsworth's fraudulent-inducement claim concerning the operating agreement's noncompetition provision.
5. Whether Alaska Interstate Construction's aircraft-lease claims were barred by the statute of limitations.
6. Whether the superior court properly denied discovery of attorney-client communications sought to support Pacific Diversified Investments's abuse-of-process claim.
7. Whether the clear-and-convincing-evidence standard applied to Pacific Diversified Investments's quasi-estoppel defense.
8. Whether the prevailing-party, attorney-fee, and prejudgment-interest rulings should stand after the appellate disposition.

Disposition

reversed_and_remanded