author: BRYNER, Justice.

text:
    HAWKEN NORTHWEST, INC. and ADEC, J.V., Appellants, v. STATE of Alaska, DEPARTMENT OF ADMINISTRATION, Appellee.
    No. S-10455.
    Supreme Court of Alaska.
    Aug. 22, 2003.

      Robert C. Erwin and Roberta C. Erwin, Erwin & Erwin, LLC, Anchorage, for Appellants.
    William F. Cummings, Assistant Attorney General, and Bruce M. Botelho, Attorney General, Juneau, for Appellee.
    Before: FABE, Chief Justice, MATTHEWS, EASTAUGH, and BRYNER, Justices.
   OPINION

BRYNER, Justice.

I. INTRODUCTION

Dale Young/Hawken Northwest, Inc., and ADEC, JV., (collectively, Hawken) appeal the Department of Administration's decision awarding Hawken $194,097.09 in damages for breach of contract against the State of Alaska. Hawken asserts that it is entitled to significantly greater damages because the two releases it signed were invalid as a result of economic duress; the construction specifications were ambiguous; the department breached the implied covenant of good faith and fair dealing; and the department erroneously denied prejudgment interest. Because the hearing officer's findings and conclusions are supported by substantial evidence and are correct as a matter of law, we affirm the department's decision.

II FACTS AND PROCEEDINGS

A. Facts

In November 1988 the Department of Administration issued an invitation to bid for a lease of laboratory space in Juneau for the Department of Environmental Conservation. The invitation to bid provided for an initial ten-year lease term with options for the department to renew the lease for two additional five-year terms. Because no existing facility in Juneau met the specifications for laboratory space, the invitation effectively required construction of a new building.

Hawken submitted the lowest bid for the laboratory lease, but the department canceled the invitation to bid in March 1989, determining that it was in the department's best interests to reject all bids without an award. Hawken protested, its protest was ultimately upheld, and Hawken was eventually awarded the contract.

On July 24, 1989, state contracting officer Walt Harvey issued a formal notice of the award to Hawken. Two days later, a letter from Harvey advised Hawken that the occu-paney date for the new building would be extended in light of the delay in awarding the contract and that the department would sign a lease agreement with Hawken when the laboratory was ready for occupancy. Harvey's letter also reminded Hawken of its obligation to submit a floor plan within forty-five days and evidence of a financial commitment within sixty days. Harvey noted that failure to comply with these deadlines would be cause for default.

Hawken's first financing proposal was a lease-purchase arrangement under which the department would own the building at the end of the lease. The department rejected this proposal as not complying with the invitation to bid requirements and gave Hawken an extension of its sixty-day financing deadline. Hawken next submitted a series of proposals for financing through tax-exempt bonds issued by various parties. The department was concerned about the potentially adverse consequences for the department's credit rating posed by this kind of arrangement and retained special bond counsel to review the financing proposals.

On October 2, 1989, Hawken requested an extension for the laboratory completion date based on what it saw as the department's delay in reviewing the proposed financing documents. Hawken pointed out that the delay meant that it was now facing a fall start date and winter construction. The department denied the extension, asserting that any delays resulted from Hawken's failure to arrange financing that complied with the invitation to bid. Contracting officer Harvey also stated that Hawken should have anticipated increased costs associated with winter when it submitted its bid.

During this period of financing negotiations, a controversy arose over whether Alaska's Little Davis-Bacon Act would apply to the laboratory construction project. Two Juneau labor unions filed a declaratory judgment action against the department to establish that the project amounted to "public construction" subject to Little Davis-Bacon prevailing wage requirements. The department advised Hawken of the suit and asked whether its bid included sufficient amounts to pay prevailing wages. Hawken responded that its bid was not calculated based on payment of Little Davis-Bacon wages but included sufficient funds to pay them.

At about the same time-October 1989-Hawken requested that the department sign the laboratory lease so that Hawken could pursue tax-exempt financing. The department indicated its reluctance to sign before the building was ready for occupancy but offered to do so in exchange for including lease provisions requiring Hawken to indemnify the department against liability for payment of Little Davis-Bacon Act prevailing wages and to release the department from all claims arising from alleged defects in the invitation to bid specifications. A lease containing these provisions was executed on November 18, 1989.

Numerous construction disputes regarding deadlines, delay, modifications, and increased costs occurred during the year following the lease's signing. An especially thorny controversy arose over the building's heating, ventilation, and air-conditioning (HVAC) system-particularly the ventilation system for the laboratory's fume hoods. Hawken hired an engineering firm, USKH, to prepare the mechanical design plans for the laboratory but initially failed to provide USKH with an amendment to the contract specifications that required a variable air volume fume hood system; Hawken sent USKH the amended specifications only after USKH completed a mechanical design plan specifying a constant volume ventilation system. Hawken proposed USKH's initial plan to the department, maintaining that the constant volume system was an improvement over the variable air volume system specified in the amended invitation to bid and proposing, alternatively, that the constant volume system could be modified to work with variable air volume fume hoods. After consulting with an engineer, the department rejected these proposed alternatives. USKH later redesigned the mechanical plans to provide a variable air volume system, as required by the amended specifications.

Meanwhile, in November 1989, Hawken was still attempting to secure tax-exempt financing for the laboratory project by issuing bonds through a public or non-profit entity. Hawken began negotiating with the City of Kasaan and determined that an assignment of the department lease from Hawken to the city would be required. On January 31, 1990, Hawken requested the department's approval of the proposed assignment. The department's special bond counsel reviewed the proposed financing and raised concerns regarding the department's potential liability on the bonds. The Commissioner of Revenue, a member of the state bond committee, subsequently advised against approving the assignment until these wrinkles could be froned out.

Hawken requested an additional extension to complete the laboratory, expressing frustration over the department's delay in approving the proposed bond arrangement; the department denied the request, responding that any delays concerning financing were the result of Hawken's proposal of alternative financing approaches that conflicted with the invitation to bid.

To resolve the department's remaining concerns regarding the proposed bond financing, Hawken obtained an irrevocable letter of credit from Sumitomo Trust & Banking Company acknowledging that the department had no liability on the bonds to be issued by the City of Kasaan. On September 14, 1990, the department offered to consent to the assignment of the lease to the City of Kasaan and to extend the occupancy date for the laboratory until April 30, 1991, if Hawken released the department from any claims arising from the delays caused by its review of the lease financing proposals. Hawken agreed to these terms and, on September 27, 1990, executed a release in return for the department's consent to the assignment of the lease to the City of Kasaan.

Although some preliminary construction work had been done before these financing arrangements were completed, most of the construction work occurred between October 1990 and October 1991. The department accepted occupancy of the laboratory on October 26, 1991.

B. Proceedings

Hawken filed claims for breach of contract under the state procurement code on August 27, 1998, asserting financing and construction damages in excess of seven million dollars. After contracting officer Harvey denied all claims, Hawken appealed to the Commissioner of the Department of Administration. A fifteen-day administrative hearing was conducted before a hearing officer.

In a 106-page decision, the hearing officer found that a number of factors had delayed construction: Hawken's inability to arrange financing that conformed to the original invitation to bid specifications and the time consumed by Hawken's efforts to arrange alternative financing that met with the department's approval; the need to implement revised mechanical plans for the laboratory's fume hood system; the need to clarify the mechanical, electrical, and equipment specifications in the original invitation to bid; severe winter weather conditions; Hawken's deficient project management; and Hawk-en's installation of a sprinkler system instead of the originally specified Halon fire suppression system. The hearing officer also found that both the releases signed by Hawken were valid and that they effectively released all construction claims against the department through September of 1990. Based on these findings, the hearing officer recommended - awarding - Hawken - only $194,097.09 in damages, plus prejudgment interest on its award. On remand from the commissioner, however, the hearing officer reconsidered the award of prejudgment interest and concluded that it was not legally permissible. The commissioner adopted the hearing officer's amended recommendations, and the superior court affirmed the department's decision in all respects. Hawken appeals.

III. DISCUSSION

A. - Standard of Review

We independently review decisions made by the superior court as an intermediate court of appeal. When reviewing an administrative decision, we apply our independent judgment to resolve questions of law not involving agency expertise. We review agency factfinding under the substantial evidence test, upholding the findings when they are supported by "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." If the agency's findings are supported by substantial evidence, we "do not choose between competing inferences or evaluate the strength of the evidence."

B. Hawken's Releases

Hawken signed two releases: the first was incorporated into the November 18, 1989, Standard Lease Form, and the second was the September 27, 1990, Agreement and Mutual Release. Hawken argues that both are void because they were signed under economic duress.

A signed release agreement may only be invalidated for economic duress when (1) one party involuntarily accepted the terms of another, (2) cireumstances permitted no other alternative, and (8) the civeum-stances were the result of coercive acts by the other party. The party claiming economic duress must prove all three prongs by clear and convincing evidence.

The test for the first prong simply requires an assertion of subjectively involuntary acceptance. Hawken's claim of economic duress satisfied this prong.

The second prong's determination of whether an alternative to accepting the release terms was available is objective. It required Hawken to show that it had "no reasonable alternative to agreeing" to the department's terms or "no adequate remedy if the [department's] threat were to be carried out." Whether a reasonable alternative existed is a question of fact that depends on the circumstances of the case. "An available legal remedy, such as an action for breach of contract, may provide such an alternative," but may be inadequate "where the delay involved in pursuing that remedy would cause immediate and irreparable loss to one's economic or business interest."

Under the third prong, Hawken was required to show that the department intentionally caused it to enter into the releases through "wrongful acts or threats." Wrongfulness depends on the circumstances of the case but may be proved by conduct that is criminal, tortious, or morally reprehensible. In addition to proof of coercive acts by the other party, the third prong requires a causal link between those acts and the circumstances of the releasing party's economic duress.

1. November 1989 release

In November 1989 Hawken agreed to sign a release in exchange for the department's agreement to sign a lease on the new laboratory building in advance of its construction. The release, which was incorporated into the lease agreement, required that Hawken indemnify the department for Little Davis-Bacon wage claims and released the department from any and all claims by Hawken related to the department's actions or omissions in soliciting bids under its invitation to bid.

The hearing officer found that the 1989 release was valid and not the product of economic duress, ruling that Hawken had failed to satisfy prongs two and three of the economic duress test, because Hawken had other reasonable alternatives and the department did not engage in coercive conduct or cause Hawken's financial instability.

As to the second prong, the hearing officer noted that construction had not yet begun when Hawken signed the release and that Hawken had not yet entered into any major subcontractor agreements. Because Hawken had made no binding financial commitments at this early stage, the hearing officer reasoned, the company had failed to prove that executing the release was its only reasonable alternative. In addition, the officer found that Hawken had confirmed that its original bid included enough to pay the Little Davis, Bacon wages. The officer decided that "[ujn-der these circumstances, Hawken has not persuasively demonstrated that pursuing a contract claim or lawsuit would have caused immediate and irreparable loss to Hawken's economic interests."

With regard to the third prong, the hearing officer determined that the department's conduct did not amount to "a wrongful exploitation of Hawken's financial and bargaining position." The officer found that Hawken derived a significant benefit from the release agreement because the agreement required the department to execute a premature lease, which entitled Hawken to pursue tax-exempt financing. Thus, in the hearing officer's view, Hawken received ample consideration for the release and indemnification. - Moreover, the hearing officer found no evidence of improper conduct on the department's part and noted, "(elven if [the department's] conduct [was] considered to be coercive or wrongful, there was no causal link between such conduct and [Hawken's] financial condition." - Instead, the hearing officer attributed Hawken's troubled finances to a stagnant local economy and difficulties with other projects and investments.

Hawken contends that the hearing officer's findings are not supported by substantial evidence. Hawken asserts that it was in a severe financial condition, on the verge of bankruptcy, and that its desperate situation was communicated to the department. The company argues that it would have lost everything if it did not agree to sign the release because it could not build the laboratory without the financing, which it could not obtain without the signed lease. Thus, Hawken claims, it was forced to accept the department's terms. According to Hawken, pursuit of a contract claim under these cireum-stances, which the hearing officer found to be a reasonable alternative, would have resulted in bankruptey for the company.

But substantial evidence supports the hearing officer's findings on the existence of reasonable alternatives. As the hearing officer noted, Hawken had not begun construction, had not signed any major subeon-tracts, and had not yet managed to obtain approved financing. Although Hawken insists that the financing it desperately needed depended on the department's willingness to sign a long-term lease for the laboratory, the terms of Hawken's contract obligated the department to lease the building only upon its completion. The release agreement thus required important concessions by both parties: in return for Hawken's release of potential claims, the department gave up its right to wait for the laboratory's completion before entering into a binding lease.

Moreover, while Hawken's available alternatives may well have resulted in further delay, the record supports the hearing officer's finding that Hawken failed to establish that the delay would have caused immediate and irreparable loss. Hawken repeatedly asserts that it would have been forced into bankruptey if it had not agreed to the release, but it fails to identify any substantial evidence to support these assertions. Because the hearing officer's finding that Hawken failed to prove economic duress is not clearly erroneous, we affirm his conclusion that the November 1989 release was validly executed.

Our holding on this point makes it unnee-essary to consider whether Hawken met its burden of establishing that the department engaged in the coercive conduct that caused its financial duress.

2. September 1990 release

Hawken signed the second release in exchange for the department's consent to Hawken's assignment of the laboratory lease to the City of Kasaan. The language of this release agreement explicitly acknowledged that Hawken had a potential claim against the department for failing to promptly consent to the assignment and that the department had a potential claim against Hawken for its failure to deliver the laboratory building on deadline. Under the agreement, the occupancy deadlines were extended and the parties released each other from "any and all claims" related to the assignment and lease amendment dispute referred to in the agreement.

The hearing officer upheld this release, finding that Hawken had met its burden of proving involuntariness and the lack of a reasonable alternative but had failed to prove that its situation was caused by the department's misconduct. The hearing officer found that "by September 1990 Hawken's financial and contractual commitments to the laboratory project were so substantial that the delay involved in pursuing a legal remedy would likely have caused immediate and irreparable economic harm, potentially including bankruptcy." Moreover, the hearing officer noted, Hawken had spent considerable time and expense in preparation for the bond sale. Given these cireumstances, the hearing officer was convinced that "by the time the bond closing occurred in September 1990, Hawken's economic cireumstances did not permit a reasonable alternative or adequate remedy at law to signing the mutual release."

But the hearing officer remained unconvinced that the department coerced Hawken into signing the release by engaging in wrongful actions. The officer found that Hawken's decision to pursue tax-exempt financing was the primary cause of its strained financial condition and, consequently, that "the circumstances of Hawken's duress were largely of its own making, not the result of the [department's] improper or coercive con-duet." Moreover, the hearing officer found, the release was not exploitive; it entailed a compromise of substantial and genuinely disputed claims by both sides: Hawken released its potential claims relating to the department's delay in approving Hawken's lease assignment; and by extending the deadline for completion, the department relinquished its potential claims for Hawken's delay in delivering a completed building. Thus, the hearing officer found insufficient evidence of misconduct and causation.

Hawken challenges these findings as unsupported and clearly erroneous, contending that the release was tantamount to a threat because it was executed on the eve of the bond sale and the department knew that Hawken would be forced into bankruptcy if the bond sale failed.

The department disputes Hawken's characterization of the events preceding the release, contending that Hawken had the opportunity to consult with counsel before agreeing to the release and could have changed its mind during the thirteen-day period between the date Hawken notified the department of its agreement and the date of the release's execution. According to the department, the release was simply a reasonable business decision by both parties.

In our view, the record supports the department's position on this point, which is in accord with the hearing officer's findings. Although Hawken presented evidence to support its position, the hearing officer could properly weigh the conflicting evidence and decide that its evidence was less credible.

Hawken also maintains that the department's conduct was wrongful because the department knew that the bond sale would collapse unless the lease was assigned and took unfair advantage of the situation by demanding the release. But it is unclear whether the department's contract with Hawken obliged it to consent to the proposed lease assignment. More important, as already noted, the release was mutual, involving a relinquishment of substantial claims by both parties. Given these circumstances, the hearing officer could properly find that Hawken failed to prove any conduct by the department that was eriminal, tortious, or even ethically wrongful.

More fundamentally, the hearing officer could properly find that Hawken failed to prove a clear causal link between the department's opportunistic conduct and the circumstances that left Hawken with no choice but to agree to the release. Although Hawken insists that the department took unfair advantage of Hawken's financial instability, it fails to explain how the department's alleged misconduct caused those financial difficulties. As we have held, "economic necessity-very often the primary motivation for compromise-is not enough, by itself, to void an otherwise valid release."

The facts in this case are analogous to those in Northern Fabrication Co., Inc. v. UNOCAL, where we stated that a party "is not allowed to use its financial weakness as a sword to negate a properly executed release." There, the plaintiff seeking to void the release agreement, Northern Fabrication, attributed problems that led to significant cost overruns and delays to the defendant, UNOCAL. UNOCAL offered to compromise by paying half of the cost overrun; after six weeks, Northern Fabrication accepted UNOCAT's offer and signed a general release."

Alleging that UNOCAL knew of Northern Fabrication's bankruptcy history, Northern Fabrication argued that the company exploited Northern Fabrication's distressed financial condition by offering only half of what UNOCAL owed. We nevertheless upheld the release, finding that Northern Fabrication had failed to establish the third prong of the economic duress test because it had not produced clear and convincing evidence of either a coercive act on UNOCAL's part or a causal link between UNOCAL's conduct and Northern Fabrication's shaky finances. We concluded, under those circumstances, that "[ellearly the dispute with UNOCAL contributed to Northern Fabrication's financial instability. However, without evidence that UNOCAL did anything eriminal, tortious or even merely wrongful in the moral sense, there is no factual dispute on the third prong of the test for economic duress."

Our holding in Northern Fabrication governs this case. Like Northern Fabrication, Hawken "may not use the courts to re-examine the dispute simply because its financial situation limited its options at the time the release was signed." Because the record supports the hearing officer's finding that Hawken failed to establish either coercive misconduct or a causal connection, we uphold the hearing officer's conclusion that the September 1990 release was valid.

Our affirmance of the hearing officer's findings that Hawken failed to prove misconduct or bad faith by the department in connection with the 1989 and 1990 releases nee-essarily forecloses Hawken's separate claims that the department violated the covenant of good faith and fair dealing in obtaining these releases.

C. Ambiguity of the HVAC Specifications

Hawken claims various damages in connection with the department's insistence that the HVAC system be redesigned to use a variable air volume system rather than a constant volume system, as required by the amended specifications. Hawken claims that the original construction specifications were "performance specifications," rather than "design specifications." According to Hawk-en, this gave it sole discretion to design and construct any type of HVAC system that would meet the performance specifications. Because its constant flow system met the specified performance standards, Hawken alleges that the department should bear the cost of requiring Hawken to change to a variable air volume system.

But the hearing officer concluded that this claim would be barred under Hawken's 1989 release, even assuming that it had legal merit. We agree. The November 1989 lease release covered all claims "directly or indirectly" related to the department's "actions or omissions in soliciting bids for laboratory and office space under [the invitation to bid)." Since the plain language of the release applies to the HVAC claim, our decision that the release is valid disposes of the claim.

Our conclusion on this point also disposes of Hawken's related argument that the department's rejection of its HVAC design violated the covenant of good faith and fair dealing.

D. Implied Covenant Claim

Hawken claims that the department used its superior bargaining position to impose numerous roadblocks and unreasonable demands and maintains that the department's lack of cooperation doubled the cost of construction and cost Hawken ownership of both the building and the lease. According to Hawken, this conduct amounted to a breach of the covenant of good faith and fair dealing.

The covenant of good faith and fair dealing is implied in every contract to give effect to the reasonable expectations of the parties, preventing each party from interfering with another party's right to receive the benefits of the agreement. The implied covenant has both a subjective and an objective prong. The subjective prong prohibits one party from acting to deprive the other of the benefits of the contract. The objective prong requires both parties to act in a way that a reasonable person would consider fair.

1. - Cancellation of bids

During the interim period between the department's cancellation of the invitation to bid and its reinstatement after Hawk-en's protest, the department was engaged in discussions with the University of Alaska and the U.S. Forest Service regarding a joint laboratory facility - construction - project. Hawken asserts that the department breached the covenant of good faith and fair dealing by rejecting all bids and secretly using Hawken's bid as a benchmark for negotiations regarding the joint laboratory.

The hearing officer found this claim to be meritless, ruling that the department's decision to cancel all bids was not made in bad faith and that, in any event, Hawken was estopped from asserting this claim by its successful renewal of its bid.

Although we believe that substantial evidence supports the hearing officer's findings, we need not decide the point on its merits, since it is barred by the November 1989 release, which covers all claims directly or indirectly related to the department's conduct in soliciting bids.

2. Imposition of deadlines

Hawken next claims that the department breached the covenant of good faith and fair dealing by stalling its award of the contract and then threatening Hawken with immediate default unless it submitted scale drawings in forty-five days and proof of financing in sixty days. The department responds that it merely reminded Hawken of applicable contractual deadlines-deadlines that Hawken had chosen to accept.

The hearing officer rejected Hawken's claim, finding that "the [department's] notification of potential default in the event of noncompliance with the [invitation to bid] was consistent with the contract, was not a threat to breach the contract, and was not done in bad faith."

We agree. Substantial evidence supports the finding of a lack of subjective bad faith, and it was not objectively unfair for the department to remind Hawken of its contractual obligations.

3. Financing delays

Hawken also maintains that the department breached the covenant of good faith and fair dealing by delaying its approval of Hawken's proposal to arrange financing through tax-exempt bonds. The hearing officer found the department's delay reasonable in light of the bonding proposal's novelty and complexity. But we need not reach the merits of this claim, since it is barred by the 1990 release. After recognizing that Hawken had potential claims against the department for failing to promptly consent to its bond proposal, the 1990 release agreement expressly released the department from "any and all claims" related to this delay. Our decision upholding the release thus disposes of this claim.

E. Prejudgment Interest on Hawken's Award of Damages

The hearing officer initially recommended that interest be awarded on Hawk-en's damages from the date of the department's occupancy of the laboratory until paid. The Commissioner of Administration remanded the matter, directing the hearing officer to reconsider whether the commissioner had authority to award interest on a claim under the state procurement code. The hearing officer concluded on reconsideration that Hawken was not entitled to prejudgment interest on the damages awarded. Hawken challenges this conclusion.

We have consistently stated that prejudgment interest may not be assessed against the state unless specifically authorized by legislation. "In other words, only the legislature can waive the state's sovereign immunity and authorize an award of prejudgment interest against the state."

Hawken filed its claims under the state procurement code," the claims are "contract controversies" under AS 36.30.620, and they were appealed under AS 36.30.625. The procurement code does not specifically authorize prejudgment interest on awards under these provisions.

A provision allowing prejudgment interest on awards against the Department of Transportation and Public Facilities was added to the procurement code after Hawken filed this suit. Hawken asserts that this provision applies to all cases pending on the provision's effective date. But the legislature specified that the prejudgment interest provision would apply only to "[clontroversies for which a claim 1s filed with an ageney ... on or after the effective date of this act." Because Hawken did not file its action on or after the statute's effective date, the new provision does not apply.

Since the procurement code does not provide a basis for Hawken's prejudgment interest claim, its claim could only be granted if it fell under AS 09.50.280. We have recently interpreted this statute in cases similar to Hawken's, concluding that it does not authorize awards of prejudgment interest against the state in administrative appeals. These decisions directly control Hawken's claim and preclude an award of prejudgment interest.

IV. CONCLUSION

We AFFIRM the department's award.

CARPENETI, Justice, not participating.

      . AS 36.05. This act requires that workers on public construction projects receive at least the current prevailing wage. AS 36.05.010.

      . AS 36.05.010; AS 36.95.010.

      . Amendment 1 to the invitation to bid, which the department issued on December 6, 1988, described numerous changes and additions to the specifications in the original invitation to bid and stated, "All fume hoods shall be variable air volume type."

      . Anderson v. State, Dep't of Revenue, 26 P.3d 1106, 1108-09 (Alaska 2001); Handley v. State, Dep't of Revenue, 838 P.2d 1231, 1233 (Alaska 1992).

      . E.g., Anderson, 26 P.3d at 1109.

      . E.g. id.

      . Handley, 838 P.2d at 1233 (quotation marks omitted) (quoting Keiner v. City of Anchorage, 378 P.2d 406, 411 (Alaska 1963)).

      . Lopez v. Adm'r, Pub. Employees' Ret. Sys., 20 P.3d 568, 570 (Alaska 2001); see also Anderson, 26 P.3d at 1109.

      . Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Serv. Co., 584 P.2d 15, 21 (Alaska 1978).

      . Helstrom v. N. Slope Borough, 797 P.2d 1192, 1197 (Alaska 1990).

      . Zeilinger v. SOHIO Alaska Petroleum Co., 823 P.2d 653, 657 (Alaska 1992).

      . See N. Fabrication Co., Inc. v. UNOCAL, 980 P.2d 958, 960 (Alaska 1999) (describing first prong requirement as "almost meaningless").

      . Zeilinger, 823 P.2d at 658.

      . - Totem Marine, 584 P.2d at 22.

      . Id.

      . Id.

      . Id.

      . Id.

      . Zeilinger v. SOHIO Alaska Petroleum Co., 823 P.2d 653, 658 (Alaska 1992).

      . - The record citations in Hawken's brief refer to the following: testimony that Hawken's owner, Dale Young, was worried about the company's finances on an unspecified date; Young's testimony that his real estate holdings were in danger sometime during the period between December 1988 and March of 1989; and testimony that at the time of the release, there was concern about Hawken's possible exposure for the difference in bids if the department canceled the award and went with the next lowest bidder. This testimony provides only weak support for Hawken's assertion that bankruptcy was certain if the signed lease was not obtained. These after-the-fact expressions of subjective concern are not substantial evidence sufficient to establish clear and convincing proof of immediate and irreparable economic loss.

      . See Totem Marine, 584 P.2d at 22.

      . Zeilinger, 823 P.2d at 658 (holding no economic duress by employer where inducement to release claims was employee's burdensome financial circumstances that were of her own making).

      . 980 P.2d 958, 962 (Alaska 1999).

      . Id. at 960.

      . Id.

      . Id.

      . Id. at 961.

      . Id. (quotation marks omitted) (quoting Helstrom v. N. Slope Borough, 797 P.2d 1192, 1198 (Alaska 1990)).

      . Id.

      . McConnell v. State, Dep't of Health & Soc. Servs., 991 P.2d 178, 184 (Alaska 1999); accord Restatement (Second) or Contracts § 205 (1981) ("Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.").

      . McConnell, 991 P.2d at 184.

      . Id.

      . Id.

      . Our decision upholding the releases and rejecting Hawken's implied covenant claims makes it unnecessary to decide any aspect of Hawken's arguments on damages except prejudgment interest. Hawken acknowledges that the damages issue is "somewhat murky," but asserts that "if thiis] court decides that there is bad faith or the releases are invalid," we should require a hearing to reconsider damages. Although Hawken devotes numerous pages to a discussion of the specific aspects of damages that it claims were incorrectly awarded, its arguments appear to be offered to establish the need for a remand in the event that Hawken prevails on either the economic duress or the covenant claims.

      . Samissa Anchorage, Inc. v. State, Dep't of Health & Soc. Servs., 57 P.3d 676, 679 (Alaska 2002); Danco Exploration, Inc. v. State, Dep't of Natural Res., 924 P.2d 432, 434 (Alaska 1996); Stewart & Grindle, Inc. v. State, 524 P.2d 1242, 1245 (Alaska 1974).

      . Samissa, 57 P.3d at 679.

      . AS 36.30.

      . AS 36.30.620 provides, in part "Contract controversies. (a) A contractor shall file a claim concerning a contract awarded under this chapter with the procurement officer."

      . AS 36.30.625 provides, in part: "Appeal on a contract controversy. (a) An appeal from a decision of the procurement officer on a contract controversy may be filed by the contractor with the commissioner of administration...."

      . AS 36.30.623 provides, in part: "Interest on certain controversies. 'The amount ultimately determined to be due ... accrues interest at the [statutory] rate applicable to judgments.... In this section, "department" means the Department of Transportation and Public Facilities."
      We assume for present purposes that this provision would extend to de facto construction contract claims filed against agencies other than the Department of Transportation and Public Facilities. Our conclusion that the statute did not apply retroactively to Hawken's claim makes it unnecessary to decide the issue here.

      . Ch. 98, § 4, SLA 2001 (emphasis added).

      . AS 09.50.280 authorizes prejudgment interest against the state for certain contract, quasi-contract, and tort claims covered by AS 09.50.250.

      . See Quality Asphalt Paving, Inc. v. State, Dep't of Transp. & Pub. Facilities, 71 P.3d 865, 878-80 (Alaska 2003); Samissa Anchorage, Inc. v. State, Dep't of Health & Soc. Servs., 57 P.3d 676, 680 (Alaska 2002); Danco Exploration, Inc. v. State, Dep't of Natural Res., 924 P.2d 432, 434 (Alaska 1996).


source: Caselaw Access Project

author: EASTAUGH, Justice.

license: Public Domain

text:
    KOYUKUK RIVER BASIN MOOSE CO-MANAGEMENT TEAM, Appellant, v. BOARD OF GAME, Frank Rue, in his official capacity as Commissioner of Alaska Department of Fish and Game, and State of Alaska, Appellees.
    No. S-10513.
    Supreme Court of Alaska.
    Aug. 22, 2003.

      Michael J. Walleri, Law Offices of Michael J. Walleri, Fairbanks, for Appellant.
    Kevin M. Saxby, Assistant Attorney General, Anchorage, and Bruce M. Botelho, Attorney General, Juneau, for Appellees.
    Before: FABE, Chief Justice, MATTHEWS, EASTAUGH, BRYNER, and CARPENETI, Justices.
   OPINION

EASTAUGH, Justice.

I. INTRODUCTION

We consider here whether the Alaska Board of Game violated either the sustained yield principle of article VIII, section 4 of the Alaska Constitution or Alaska's subsistence statutes in managing moose hunting in part of the Koyukuk River Basin. We affirm the superior court decision holding that there was no violation. The Board of Game was within its discretion in adopting a regulation that allowed for the issuance of "up to" 400 permits in a controlled use area that was part of two larger Game Management Units.

II. FACTS AND PROCEEDINGS

This appeal concerns the validity of moose hunting regulations for an area encompassing the Koyukuk Controlled Use Area (KCUA). The KCUA is located in the lower portion of the Koyukuk River drainage, and was established in 1979 to reduce the participation of non-local hunters by prohibiting the use of aircraft. The Koyukuk River flows through Game Management Units (GMT) 21D and 24. Approximately one half of the KCUA lies within the northern portion of GMU 21D, while the other half lies within the southern portion of GMU 24. Together, GMU 21D and GMU 24 cover roughly 38,000 square miles. The KCUA occupies roughly 4,791 square miles-about thirteen percent of the combined areas of GMU 21D and GMU 24. Despite the controlled use area designation, the abundance and density of moose in the KCUA continued to attract increasing numbers of non-local hunters throughout the 1980s and 1990s.

The Koyukuk River Basin Moose Co-Management Team (the team) represents a coalition of native villages located along the Koyu-kuk River. Villages in the Koyukuk River drainage are heavily dependent on subsistence, and the team contends that the moose population in the area has declined significantly due to increased hunting pressure.

In response to the declining moose population, the Alaska Department of Fish and Game organized the Koyukuk River Moose Hunter's Working Group to advise the department on Koyukuk River moose management. The working group was a citizen-based advisory body composed primarily of representatives from various state fish and game advisory committees. The department and the working group produced a draft management plan for Koyukuk River moose in February 2000. The plan recommended reducing the total moose harvest in the lower Koyukuk River drainage-within the area of the KCUA-by reducing the anterless moose harvest and changing the general hunt in the KCUA to a drawing hunt with separate resident and non-resident drawing pools.

The Board of Game met in Fairbanks March 3-18, 2000 and considered the draft management plan. The board heard public testimony on the proposals, including comments from team members, and written and oral comments from the team's counsel.

The board ultimately adopted, with some amendments, many of the changes proposed in the draft plan. Significant among these was Proposal No. 30, which recommended changing the portion of 5 Alaska Administrative Code (AAC) 85.045 pertaining to the general moose hunt in the KCUA. The general hunt in the KCUA had been a general registration hunt, but Proposal No. 80 recommended replacing it with a permit drawing hunt. The draft proposed a drawing hunt in the KCUA with an allowance for "up to" 820 resident permits and "up to" 80 non-resident permits in the combined portions of GMU 21D and GMU 24 that are within the KCUA. This proposal allowing for the issuance of "up to" 400 permits in the KCUA was adopted as part of 5 AAC 85.045 and is the focus of the team's appeal in this court. The subsistence registration hunt remained unlimited within the KCUA, as did the general hunt in GMU 21D outside the KCUA, and within portions of GMU 24 outside the KCUA. "Unlimited" here refers to a lack of numerical restrictions on the number of permits issued. And although the non-KCUA remainder of GMU 21D was regulated uniformly under 5 AAC 85.045, the non-KCUA remainder of GMU 24 was further subdivided so that different provisions applied to different geographical regions within that game management unit.

The subsections of 5 AAC 85.045 set permit limits for a drawing hunt in the KCUA, but the board does not manage moose in the KCUA as a distinct animal population. Rather, the board made findings under Alaska's subsistence laws and managed moose populations for the larger game management units.

The team filed suit against the Board of Game, Commissioner Frank Rue, and the state April 12, 2000. The complaint challenged the validity of 5 AAC 85.045, claiming that (1) the board made subsistence determinations using inconsistent populations; (2) the board failed to limit the moose harvest outside the KCUA; (8) the regulation allowing "up to" 400 general hunt permits in the KCUA violated the subsistence statute and sustained yield requirements of Alaska law; and (4) the board failed to consider predator harvest rates in determining intensive game management goals. The team sought declaratory and injunctive relief. The parties filed cross-motions for summary judgment, and the superior court granted summary judgment in favor of the defendants.

The team appeals the grant of summary judgment, arguing that 5 AAC 85.045 violates the principles of sustained yield management and that the board failed to make findings required under Alaska's subsistence statutes. The team does not appeal the board's actual findings. Rather, it argues that 5 AAC 85.045 exceeds the Board of Game's estimated sustained yield harvest rate.

III. DISCUSSION

A. -Standard of Review

We review a grant of summary judgment de novo. We substitute our judgment for that of the board when interpreting the Alaska Constitution and issues of law. We interpret the constitution and legal issues "according to reason, practicality, and common sense, taking into account the plain meaning and purpose of the law as well as the intent of the drafters."

We review the board's application of law to a particular set of facts for reasonableness. Under this standard, we "merely determine whether the agency's determination is supported by the facts and is reasonably based in law." We will not substitute our judgment for that of the board or alter its policy choice when the board's decision is based on its expertise.

Regulations adopted under Alaska's administrative procedure statute are presumptively valid," and challengers have the burden of demonstrating that the regulation is invalid. We will not overturn a resource management regulation simply because one group of resource users believes that the regulation should have a different substance.

B. The Board Was Within Its Discretion in Not Managing Moose in the KCUA as a Distinct Game Population.

The team argues that 5 AAC 85.045, the board's regulation allowing "up to" 400 permits in the KCUA, violates sustained yield principles for moose in the KCUA. The team relies on the board's population estimates and argues that actually issuing 400 permits would exceed sustained yield projections for moose in the KCUA.

The state argued below that it was within the board's discretion to delegate management authority to the department, and that the team's alleged violation was only theoretical because the regulation's language was permissive. The board viewed the 400-per-mit limit as a ceiling, and expected the department to issue fewer than 400 permits.

On appeal the team relies heavily on language in the superior court's memorandum decision and order which states:

When facts are construed in favor of the Team, the authorization of 400 permits represents a harvest rate by hunters of 9.24 percent. Although nothing in the ree-ord suggests that a 9.24 percent harvest rate could be sustained at this time in the KCUA, the Board's discussion of intensive management suggests that a harvest rate as high as 10 percent could be biologically feasible using predator control and habitat manipulation.

Despite its observation regarding sustained yield in the KCUA, the superior court granted summary judgment to the state. The superior court upheld the board's regulation as a permissive delegation of authority to the department to issue fewer than 400 permits, and noted evidence in the record supporting the proposition that a harvest rate of 9.24 percent could be sustained in the KCUA with intensive management techniques. The parties' arguments on appeal generally track the superior court's decision, and the briefs provide extensive discussion of permissible board delegations of authority to the department, and departmental discretion in implementing board regulations.

Much of this discussion overlooks this fundamental question: does the KCUA designate a relevant game population under Alaska law? The team alleges that the regulation violates sustained yield principles with respect to moose in the KCUA. It is not clear, however, that the controlled use area corresponds to a relevant game population for management purposes. If the KCUA does not designate a relevant game population, the board is not required to make findings or satisfy sustained yield requirements under Alaska's resource management laws for moose within the KCUA.

This is a threshold matter because the team's challenge to 5 AAC 85.045 is predicated on the notion that the state must satisfy the sustained yield principle for moose in the KCUA. The team does not dispute the board's findings or sustained yield projections for the two GM Us that encompass the KCUA. The state correctly indicates that the team seems to accept seven percent and five percent as estimates for the maximum sustained harvest for GMU 21D and GMU 24, respectively. The team does not argue that 5 AAC 85.045 exceeds these sustained yield harvest estimates for GMU 21D or GMU 24. Consequently, if GMU 21D and GMU 24 designate the relevant moose populations for purposes of managing all the moose in those GM Us, including moose that happen to be in the KCUA, the team's arguments regarding moose in the KCUA must fail.

The superior court's thorough memorandum decision accurately described the me-chanies of game management under Alaska's subsistence statute, AS 16.05.258. The board must first identify game populations customarily and traditionally taken or used for subsistence-the so-called "C & T" designation. It must then determine whether a portion of a game population given a positive C & T designation under AS 16.05.258(a) can be harvested consistent with sustained yield. If so, the board must then determine the amount of the harvestable portion reasonably necessary for subsistence. The board then calculates the amount, if any, available for non-subsistence uses. The amount of moose available for non-subsistence use is the number remaining after subtracting the number of moose necessary for subsistence use from the portion harvestable within the constraints of a sustained yield. If the harvestable portion is insufficient to provide for all uses, the subsistence statute prescribes the allocation of the harvestable portion between different user groups, giving preference to subsistence uses. For these determinations, the statute defines "game population" as "a group of game animals of a single species or subgroup manageable as a unit."

The board does not manage moose in the KCUA as a distinct game population. Rather, the board uses the larger GM Us and their subunits as the relevant game populations for managing Koyukuk moose. The subsections of 5 AAC 85.045 use the KCUA's geographic boundaries to set permit limits, but setting permit limits within the KCUA does not equate to game management under Alaska law.

In arguing that the board failed to make required findings under AS 16.05.255 and 258, the team contends that the board was required to manage moose in the KCUA as an identifiable game population because its regulation set harvest levels for the KCUA. The team's argument is largely conclusory. The team implies that the board's population determinations were irrational and arbitrary, but it fails to substantiate this proposition. The team presumes that because the board's regulations address moose within the KCUA, the board managed moose in the KCUA as a single population. These two propositions do not necessarily follow. Use of the KCUA boundary in 5 AAC 85.045 does not mean that the board managed moose in the KCUA as an identifiable or biologically significant game population.

The team recognizes that the board has substantial discretion to identify game populations, and acknowledges that it can do so "in any rational manner" reasonably related to the purposes of the subsistence statute. But it fails to explain why the board's decision not to manage moose in the KCUA as a distinct game population was arbitrary or somehow unreasonable in light of the statute. The team gives no legal or statutory support for the proposition that a controlled use area necessarily designates a manageable game population. The team similarly fails to substantiate the proposition that the board must manage moose in the KCUA as an identifiable game population because 5 AAC 85.045 sets permit limits within the geographical boundaries of the controlled use area. The team cites the constitutional provision requiring that Alaska's resources be "maintained on the sustained yield principle," but it cites no authority suggesting that this principle must be applied to animals within a controlled use area, or simply to any cognizable game population. Indeed, the latter proposition would be untenable.

The team has the burden of demonstrating the invalidity of 5 AAC 85.045, but in this case it failed to do so. The state maintains that it is within the board's discretion to determine game management populations, and that in this case it was reasonable not to manage moose in the KCUA as a distinct game population. We agree. While the burden of demonstrating invalidity lies with the team, the state offers substantial justification for the board's choice of management populations.

As an initial matter, creating a controlled use area does not necessarily amount to designating a relevant animal population for management purposes. In this case, the history of the KCUA is instructive: it was created to reduce non-local hunting by prohibiting the use of aireraft-not because it reflected a biologically significant animal population. We have held that the creation and management of a controlled use, area involves "matters of policy committed to the judgment of the Board," and we agree with the board's position that "[rlegulations directed at reducing competition or conflict among users of a game resource in specific areas do not amount to a concession that the animals within that smaller area are 'man-kH ageable as a unit.

In defense of its regulations, the board maintains that the KCUA boundaries are highly artificial, and that the KCUA moose population is too small and too dense to serve as a relevant game population for management purposes. The board correctly notes that any harvest would violate sustained yield principles if the population sample were sufficiently narrow. - Given inappropriately small geographic constraints, every resource harvest could approach 100 percent.

The board also defends its choice of management populations by noting that the GMUs are the traditional populations used for game management. Moreover, the board points to distinguishing characteristics of the KCUA, other than its size, that justify targeted permit limitations in that area. The board notes the significant moose density in the KCUA, hunter crowding problems not present in adjoining areas, and the significant harvest pressure relative to the larger GMU 21D and GMU 24. The board also refers us to this instructive testimony from an area biologist:

When we went through the plan and the discussion we had talked about the harvest rates, at the very back ... of the Koyukuk moose hunters working group plan. We gave these 8%, 7.5%, and 7% harvest rates. And those applied only to the high density portion of the controlled use area where it happens to overlay with that high density area of moose population. The generalized harvest rates of 5-7% for 21D still was the out of the bounds. So, even if we did have a higher harvest rate within the controlled use area, we were still-have the sideboards of not exceeding the unit-wide harvest rates. And so, we wouldn't be exceeding that population level for the more meaningful population biologically.

This suggests both that the KCUA does not designate the meaningful biological population, and that sustained yield principles could be satisfied for the "more meaningful" moose population despite a high rate of harvest in the KCUA.

Faced with a similar question in the fisheries context, we observed in Native Village of Elim v. State that "manageability" was the key element in classifying management populations. We held that a population determination made by the Board of Fisheries should receive "considerable deference" for two reasons: first, because the identification of populations requires knowledge and experience and thus falls within the board's expertise, and second, because the subsistence law defines populations broadly in order to give the board the flexibility it needs to accommodate the biological and ecological concerns involved in resource management. In the same case we also noted that courts are "singularly ill-equipped to make natural resource management decisions." The board's discretion is not unlimited in making population determinations, but we will uphold the board's determination if it is reasonably related to the purposes of the subsistence law. The board is not permitted to manipulate game populations "simply to achieve a predetermined outcome."

Under this deferential standard, the Board of Game was properly within its discretion in not managing moose in the KCUA as a distinct game population. We are satisfied with the board's rationale and will not second-guess its assessment of the manageability of moose in the KCUA. Such a determination falls within the purview of agency expertise and discretion. The team failed to show that the board's population determinations were not reasonably related to the purposes of the subsistence law, or that they were somehow manipulated to achieve a predetermined outcome. Given the planning effort undertaken by the state, this case strikes us as similar to Native Village of Elim and Interior Alaska Airboat Association v. State, in which we held that we will not overturn a resource management regulation simply because one group of resource users believes that a different outcome is more desirable.

We decline to hold that all areas within a GMU must be regulated uniformly, or that the board's decision not to regulate GMU 21D and GMU 24 uniformly denotes the existence of multiple game populations for sustained yield analysis. And because we reject the team's position that the KCUA designates a relevant moose population for management purposes, we are unpersuaded by the team's argument that 5 AAC 85.045 violates the sustained yield requirements of the Alaska Constitution and Alaska law with respect to moose in the KCUA.

C. The Team's Other Arguments Regarding Sustained Yield Fail Because They Are Predicated on the Assumption that the KCUA Designates a Relevant Game Population.

In an argument similar to its sustained yield contention, the team also asserts that the board failed to make the findings for moose in the KCUA required by AS 16.05.255 (the intensive management statute) and AS 16.05.258 (the subsistence statute). As discussed above, the board was within its considerable discretion in not using the KCUA to define a relevant moose population for management purposes. It therefore was not required to make findings under the statutes for moose in the KCUA.

The team also argues that the board should have implemented intensive management techniques in the KCUA. In its memorandum decision the superior court noted that the harvest rate in the KCUA could be maintained through intensive management. The board did not implement intensive management in the KCUA, however, and the team argues that the board's regulation is arbitrary and unreasonable because the board could only avoid violating sustained yield principles for moose in the KCUA by applying intensive management techniques. The team even suggests in its reply brief that its claims "would have been mooted" if the board had adopted intensive management initiatives.

Again, though, the team's argument regarding intensive management is inherently predicated on the twin propositions that the KCUA designates a relevant moose population, and that sustained yield must be satisfied with respect to moose in the KCUA. We review the board's population determinations under the intensive management statute with the same deferential standard we apply to population determinations under the subsistence statute. Furthermore, the violation of sustained yield principles alleged here by the team relates to moose in the KCUA-not to the GMU populations that the board permissibly managed. The team's argument calling for intensive management techniques in the KCUA fails because it is aimed at preventing a violation of sustained yield requirements for a population that does not require sustained yield analysis.

Similarly, the team advances several arguments questioning whether the board can save 5 AAC 85.045 by delegating authority to the department to issue fewer than 400 permits in the KCUA. We need not reach these arguments because the team's delegation arguments assume that, absent the delegation, the regulation would violate sustained yield requirements for moose in the KCUA. The team's delegation arguments fail because the board permissibly determined that the KCUA does not identify a relevant management population. Because sustained yield analysis for moose in the KCUA is unnecessary, the regulation need not be saved by authority delegated to the department to issue fewer than 400 permits.

IV. CONCLUSION

For these reasons we AFFIRM the superi- or court's grant of summary judgment in favor of the state.

      . See Former 5 AAC 85.045 (1999) (general registration hunt in the KCUA).

      . See 5 AAC 85.045 (2003) (am.7/1/00) (changing the general registration hunt in the KCUA to a drawing hunt).

      . See 5 AAC 85.045(19), (22) (2003) (ana.7/1/00).

      . Id.

      . See, for example, the findings required under AS 16.05.255(e)-(g), and AS 16.05.258.

      . See, e.g., 5 AAC 92.108 (2003); 5 AAC 99.025 (2003).

      . - Appellants first brought suit in Koyukuk River Tribal Task Force on Moose Management v. Rue (Superior Court Case No. 4FA-99-561 Ci.), alleging various violations of Alaska subsistence stat-ules and constitutional provisions. That case was dismissed by the superior court for failure to exhaust administrative remedies, and we recently remanded the case following an appeal on the issue of attorney's fees. Koyukuk River Tribal Task Force on Moose Mgmt. v. Rue, 63 P.3d 1019, 1022 (Alaska 2003).

       The team's opening brief explains that the team "does not dispute the [department's] methodology, estimates of population, the amounts reasonably necessary for subsistence, nor the general hunt success ratios." The team acknowledges that these determinations require agency expertise, and "agrees, for the purposes of this litigation, that the Court[ ] should defer to the agency expertise with regard to the determination of these factors and the methodology used by the agency to determine sustained yield."

      . Native Vill. of Elim v. State, 990 P.2d 1, 5 (Alaska 1999).

      . Id.

      . Id.

      . Id.

      . Id. (quoting Hammer v. City of Fairbanks, 953 P.2d 500, 504 (Alaska 1998)).

      . Id.

      . See AS 44.62.100.

      . Native Vill. of Elim, 990 P.2d at 14. See also Interior Alaska Airboat Ass'n v. State, 18 P.3d 686, 689 (Alaska 2001) (noting that regulations will be upheld as long as they are "consistent with and reasonably necessary to implement the statutes authorizing their adoption" (quoting State, Bd. of Marine Pilots v. Renwick, 936 P.2d 526, 531 (Alaska 1997))).

      . Native Vill. of Elim, 990 P.2d at 14.

      . See AS 16.05.258; infra notes 19-24 and accompanying text.

      . AS 16.05.258(a).

      . AS 16.05.258(b).

      . Id.

      . Id.

      . AS 16.05.258(b)(1)-(4).

      . AS 16.05.940(19).

      . See 5 AAC 99.025 (2003) (C & T determinations under AS 16.05,.258); 5 AAC 92.108 (2003) (intensive management findings under AS 16.05.255(e)-(g)).

      . Alaska Const. art. VIII, § 4.

      . Native Vill. of Elim v. State, 990 P.2d 1, 14 (Alaska 1999) ("[A] regulation adopted under Alaska's administrative procedure statute, AS 44.62.100, is presumed to be valid, and a challenger has the burden to demonstrate that the regulation is invalid."); see also Interior Alaska Airboat Ass'n v. State, 18 P.3d 686, 689 (Alaska 2001).

      . Interior Alaska Airboat Ass'n, 18 P.3d at 693.

      . The record supports the state's contention that the KCUA yields sixty-five percent of the total moose harvest from GMU 21D and GMU 24.

      . 990 P.2d at 10-11.

      . Id.

      . Id. at 8.

      . Id. at 11.

      . Id.

      . 990 P.2d at 14.

      . 18 P.3d 686, 693 (Alaska 2001).


text:
    Alf R. SKAFLESTAD and Karlene Greenewald, for themselves and for all others who are similarly situated, Appellants, v. HUNA TOTEM CORPORATION, and Huna Totem Corporation Shareholder Settlement Trust, Appellees.
    No. S-10353.
    Supreme Court of Alaska.
    Aug. 29, 2003.
    Rehearing Denied Oct. 16, 2003.

      Fred W. Triem, Petersburg, for Appellants. Bruce E. Gagnon, Atkinson, Conway & Gagnon, for Appellee Huna Totem Corporation Shareholder Settlement Trust.
    Daniel G. Bruce, Baxter Bruce & Sullivan, P.C., Juneau, and Barbra Zan Nault, Bank-ston, Gronning, O'Hara, Sedor, Mills, Givens & Heaphey, P.C., Anchorage, for Appellee Huna Totem Corporation.
    Before: FABE, Chief Justice, EASTAUGH, BRYNER, and CARPENETI, Justices.
   OPINION

BRYNER, Justice.

I. INTRODUCTION

In keeping with a recommendation by Huna Totem Corporation's board of directors, the company's shareholders voted to put a large sum of available funds into a settlement trust. Certain shareholders later filed a class action, alleging that proxy information Hunga Totem sent them in creating the trust was materially misleading because it failed to disclose that, onee established, the trust could not be modified or terminated by shareholders unless two-thirds of its trustees recommended the action. After a bench trial, the superior court entered judgment for Huna Totem, finding that, although some of its proxy information was incomplete and ambiguous, the totality of the information was not materially misleading. Because the superior court applied the correct test of materiality and the evidence supports its ruling, we affirm the judgment in Huna Totem's favor.

I. FACTS AND PROCEEDINGS

Huna Totem Corporation is an Alaska Native village corporation organized under the Alaska Native Claims Settlement Act (ANC-SA). In 1998 Hunga Totem entered into a tax settlement with the IRS that left the corporation with more than $85 million in unrestricted cash in 1994. In debating what to do with these funds, Huna Totem's board of directors grew interested in the idea of establishing a settlement trust, and eventually the board proposed that its shareholders dedicate the settlement funds to a settlement trust.

In May 1994 the board sent shareholders an introductory "Shareholder Information Packet" describing the recent IRS settlement and introducing the idea of a settlement trust. This packet described the proposed trust in general terms, emphasizing that the information it contained was "not by any means a complete discussion of all of the important aspects of the Trust." In addressing how the trust could be modified or changed once adopted, the packet said only that "[alt periodic intervals-initially five years after the Trust is established, and then once every ten years thereafter-the beneficiaries could, by vote of a two thirds of all units, choose to distribute some or all of the accumulated income and principal, or to terminate the Trust entirely." The preliminary packet promised that "[slhareholders will be hearing and learning more about the Trust in the upcoming months, and will receive additional, detailed information."

In keeping with this promise, two months later, in July 1994, Huna Totem sent its shareholders a formal proxy solicitation that covered the proposed trust's review and termination provisions in far greater detail. The solicitation explained that, onee established, the trust could be amended or ended by shareholders only if the action was recommended by the trust's board of trustees:

The accumulated income and Settlement Trust principal generally would not be available to be distributed, except that five years after the Settlement Trust is established, and then once every ten years thereafter-upon a recommendation of two-thirds of the trustees, ratified by a two-thirds vote of the unit holders, some or all of the accumulated income and principal could be distributed or the Settlement Trust could be terminated entirely.

This explanation mirrored the provisions of the proposed settlement trust itself, the full text of which accompanied the July 1994 proxy solicitation as an appendix.

After the corporation mailed the proxy solicitation in late July 1994, members of its board conducted a series of shareholder workshops to discuss the proposed trust. Shareholders then overwhelmingly approved the trust proposal at a special meeting in September 1994, and the trust was established.

The five-year review began in January 2000. . Huna Totem solicited shareholder comments and held public meetings in several cities. The corporation also hired a research company to survey shareholders' opinions on the trust; this "survey showed that a substantial majority of unit holders favored continuation of the Trust, although many wanted some distribution of the trust corpus." In March 2000 the trustees voted to recommend a "relatively small" partial liquidation of the trust. Shareholders were then sent an information packet and a ballot to vote on this recommendation. They voted to ratify the trustees' recommendation by a six-to-one ratio. The settlement trust subsequently paid shareholders distributions of $50 per share, totaling roughly $4.4 million; the rest of the trust assets, about $40 million by then, remained in the settlement trust, subject to further review in ten years.

Soon after the board of trustees issued its five-year recommendation, several dissatisfied shareholders filed the class action at issue here, seeking to terminate and invalidate the settlement trust in its entirety because, they alleged, the information provided to shareholders by Huna Totem before the trust was adopted materially misled them concerning their right to vote on the issue of termination. -In particular, these shareholders argued that the proxy materials led them to believe that shareholders would have the unqualified right to vote on the trust's continued existence without regard to any recommendation by the trust's board of trustees. The shareholders based their claims in large part on the preliminary packet of information provided to shareholders in May 1994, which stated that shareholders "could" vote to review the trust in five years but did not explain that the shareholder vote would be contingent on the trustees' recommendation. According to the class action shareholders, the confusion generated by these preliminary communications was perpetuated by oral representations made by directors who met with shareholders to answer questions after Huna Totem mailed its formal proxy solicitation in July 1994. Huna Totem denied these allegations, claiming that its proxy materials accurately explained the five-year review process.

After a four-day bench trial, Superior Court Judge Patricia A. Collins ruled in favor of Huna Totem. Although Judge Collins believed that "the actual Proxy Statement is clear and unambiguous," she found that the "oral statements by directors and the "brief review of the proposed trust included in shareholder materials distributed prior to the vote were ambiguous in that they omitted information about the role of the trustees in the review process and procedure regarding future shareholder votes to modify or terminate the trust." But noting that, under Brown v. Ward, Alaska law deems proxy materials to be materially misleading or false only " 'if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote," the judge found that any information omitted from Huna Totem's preliminary materials or the directors' post-solicitation oral communications was not materially misleading in light of "the total mix of information available about the review process." Furthermore, though emphasizing that she was "not at all convinced that the alleged omissions had any impact on the initial vote to create the trust," Judge Collins alternatively found that the plaintiffs' proposed remedies-setting aside the trust, an award of nominal damages, and/or a revote on establishing the trust-would be barred as inequitable "[blecause of the long delay in seeking court intervention" and the significant harm that would inevitably result from " 'unserambling' the trust at this late date."

The plaintiffs/shareholders appeal.

III. DISCUSSION

A. - Standard of Review

The two central issues in this case-whether the superior court applied the wrong legal test in determining materiality and whether the court erred in failing to find material misstatements under the correct legal standard-primarily present questions of law; but the issue of materiality also implicates issues of fact We review the trial court's legal determinations using our independent judgment and review its factual determinations for clear error.

B. - Alaska Securities Law

Alaska corporations created under ANCSA are exempt from the federal Securities Act of 1933 and Securities Exchange Act of 1934. To the extent that the shareholders' claims are not directly governed by ANCSA, then, they are controlled by Alaska law rather than federal securities law. Nevertheless, as we held in Brown v. Ward, interpretations of relevant SEC and federal common law prohibitions against material falsehoods in proxy statements provide a "useful guide" in interpreting similar securities issues arising under state law in ANCSA cases.

The Alaska Securities Act prohibits misrepresentations of material fact in proxy solicitations:

A person may not, in a document filed with the administrator or in a proceeding under this chapter, make or cause to be made an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the cireumstances under which they are made, not misleading.

Under this provision, a two-fold analysis applies to misrepresentation issues in proxy solicitation cases, requiring courts to ask, first, whether any statements amounted to misrepresentations and, if so, whether those misrepresentations are material when considered "in the light of the cireumstances under which they are made."

The relevant definition of "misrepresentation," as set forth in 3 AAC 08.315(a), includes both positive statements and omissions:

[ A] statement that, at the time and under the cireumstances in which it is made (1) is false or misleading with respect to a material fact; (2) omits a material fact necessary in order to make a statement made in the solicitation not false or misleading; or (3) omits a material fact necessary to correct a statement, in an earlier communication regarding the solicitation of a proxy for the same meeting or subject matter, which has become false or misleading.

Under these provisions, then, statements or omissions qualify as misrepresentations when they are "misleading or false," and "a misleading or false statement 'is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.'

C. - Shareholders' Claims

1. Alleged misapplication of a scien-ter requirement

The shareholders first assert that the trial court erred by applying the wrong legal standard to their proxy solicitation claims. Specifically, they claim, Judge Collins imposed a scienter requirement and refused to impose liability because she found that management did not intend to deceive the shareholders. Huna Totem does not dispute that it would be improper to require scienter in determining materiality but insists that Judge Collins applied the correct materiality standard and did not require scienter. The record supports Huna Totem's position.

The shareholders base their scienter argument on several comments in the court's oral and written rulings in which Judge Collins expressed her view that the legal dispute in the present case was not the result of "bad people or bad motives." In her oral decision, for example, Judge Collins prefaced a remark about the shareholders' request for declaratory and injunctive relief with the observation that there was an "absence of fraud and intent to deceive." When discussing the evidence concerning false and misleading proxy materials in her subsequent written findings, Judge Collins made the same point, stressing that, "(als stated in [the] oral findings, the court is convinced that there was no intent by the directors of Huna Totem Corporation to mislead shareholders about the Settlement Trust."

But as Huna Totem correctly points out, the challenged comments concerning the corporation's lack of intent or bad faith did not address Judge Collins's application of the Brown v. Ward materiality test. Rather, when read against the background of the decision as a whole, these comments reflect little more than the court's desire to mend the relationship between Huna Totem and its shareholders, which the court described as having degenerated into "finger pointing" and "name calling" during the trial. Indeed, in her oral findings, Judge Collins expressly described her remarks on scienter as comments preliminary to her decision:

Before I enter my oral findings, ... I think it's important that I make some preliminary observations about the case and about the persons involved in the case. Many disputes come before the court where the parties ... attempt to portray the opposing party as bad people with bad motives. This case is no different. Those kinds of allegations have been made. I am convinced that this case does not involve bad people or bad motives[.]

And although the court returned to this theme at several points in its oral and written findings, it directed its comments not to the issue of materiality, but to the "tenor of argument and discussion between the [parties]." In contrast, when addressing the issue of materiality, Judge Collins described and applied Brown v. Ward's objective "reasonable shareholder" test with pinpoint accuracy, never mentioning or hinting at any consideration of motives or scienter.

The shareholders nonetheless insist that "the court directly link[ed]" its decision against them to their failure to prove scien-ter. In support of this claim, they point to "one particular sentence" toward the end of the oral findings, in which Judge Collins observed: "Given the absence of fraud and intent to deceive and the other factors I've mentioned here today, I believe it would be unfair and unjust to grant the declaratory and injunctive relief sought by the plaintiffs." But the shareholders overstate the significance of this reference to scienter. For it had nothing to do with the superior court's application of Brown v. Ward's objective materiality test; instead, by its own terms, the comment focused exclusively on Judge Col-ling's alternative basis for ruling: as we have described above, the judge's alternative ruling addressed the remedies requested in the lawsuit, concluding that they would be inappropriate even if the plaintiffs had proved a material misrepresentation. As Judge Collins correctly recognized, the plaintiffs' request for equitable remedies necessarily raised equitable issues on which seienter had direct bearing. In context, then, Judge Col-ling's comment simply confirms her understanding and correct application of Brown v. Ward's objective test of materiality. We thus find no merit in the shareholders' claims that Judge Collins wrongly imposed a scien-ter requirement in deciding the issue of materiality.

2. Materiality of Huna Totem's omissions

In addition to claiming that the trial court applied the wrong legal test of materiality, the shareholders maintain that the proxy materials are materially false and misleading under the right standard.

As previously noted, after hearing the testimony at trial and reviewing the various documents shareholders had received regarding the trust, Judge Collins determined that, while some of the documents were ambiguous, their ambiguities were not material. Specifically, Judge Collins found that Huna Totem's July 1994 proxy solicitation gave shareholders a complete and accurate picture of the periodic review process: "[The proxy statement and the full text of the settlement trust that was submitted to the shareholders is neither overly simplified [nlor unclear." Given the broad distribution and ready availability of this information, the court conelud-ed, "[the total mix of materials submitted to the Huna Totem shareholders was essentially accurate if to some degree overly simplified"; and in the court's view, any ambiguities or omissions in the May 1994 preliminary information packet or in the directors' post-solicitation oral presentations were immaterial under Brown v. Ward's objective test, which defines a misleading or false statement as " 'material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote'"

In propounding a contrary view on appeal, the shareholders concentrate primarily on the incompleteness of the preliminary information distributed in May 1994, insisting that the confusion generated by this information sowed a lasting seed of ambiguity that violated the "clear statement rule" and Huna Totem's duties of disclosure, completeness and candor; omitted facts "so obviously important" to individual shareholders as to be material as a matter of law; and should therefore be resolved in favor of the shareholders under ordinary rules of contract interpretation.

But the shareholders' narrow focus on the trial court's finding of an ambiguity in Huna Totem's preliminary information im-permissibly views that information in isolation, mistakenly disregarding the need to decide the materiality of a particular omission in light of the totality of available information. For as we have already observed, the Alaska Securities Act expressly requires us to determine the materiality of a statement's omissions contextually, rather than in isolation, by considering whether the statement "omitf{s] to state a material fact necessary in order to make the statement[ ] made, in the light of the cireumstances under which [it is] made, not misleading." Or as Judge Collins more simply phrased it, the pertinent inquiry here was whether "/t/hke total mix of materials submitted to the Huna Totem shareholders was essentially aceu-rate." (Emphasis added.)

Here, no matter how sketchy the corporation's initial description of its proposed settlement trust might seem, the uncontro-verted facts establish that Huna Totem's preliminary packet of information was labeled as a "brief introduction" to the proposed settlement trust; it expressly warned the shareholders of its own incompleteness and promised more information to follow. Keeping this promise, Huna Totem delivered the proxy solicitation itself-the most crucial - document-which provided each shareholder a complete and accurate summary of the proposed trust's review process, as well as a copy of the entire settlement trust document.

Applying Brown v. Ward's objective test to the total mix of available information, as the securities act requires, we conclude, as Judge Collins did, that a reasonable shareholder considering the information actually provided would not have been likely to find the information omitted from Huna Totem's preliminary packet and post-solicitation oral communications to be important in deciding how to vote. We thus affirm the superior court's materiality ruling.

3. Appropriateness - of - shareholders' proposed remedies

Finally, the shareholders argue that Judge Collins erred in her alternative ruling rejecting as inequitable their proposed remedies of declaratory relief, injunctive relief, and nominal damages. Because the superior court issued its alternative ruling on the assumption that Huna Totem's proxy materials might ultimately be found to be materially misleading-an eventuality that has not materialized-we need not consider the superior court's alternative ground for decision.

IV. CONCLUSION

We AFFIRM the superior court's judgment.

MATTHEWS, Justice, not participating.

      . 43 U.S.C. § 1601-162%h (1986 & Supp.2003).

      . Under Congress' 1987 amendments to ANCSA, "Native Corporations are allowed to convey assets to a 'settlement trust' to 'promote the health, education, and welfare of its beneficiaries and preserve the heritage and culture of the Natives." Hanson v. Kake Tribal Corp., 939 P.2d 1320, 1332 (Alaska 1997) (Fabe, J., dissenting) (quoting 43 U.S.C. § 1629e(b)(1) (Supp.1994)). Settlement trusts offer significant tax advantages and insulate assets from creditors' claims.

      . Brown v. Ward, 593 P.2d 247, 251 (Alaska 1979) (quoting TSC Indus., Inc., v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976)).

      . Judge Collins's core findings on ambiguity and materiality are as follows:
      7. While the actual Proxy Statement is clear and unambiguous, oral statements by directors and the "brief" review of the proposed trust included in shareholder materials distributed prior to the vote were ambiguous in that they omitted information about the role of the trustees in the review process and procedure regarding future shareholder votes to modify or terminate the trust. Thus, the plaintiffs have established an omission in proxy materials including oral statements and the shareholder information packet.
      8. While a close question, the above omissions and/or ambiguity in the oral representations and brief review of the proposed Settlement Trust do not, however, meet the materiality standard of Brown v. Ward. Specifically, under an objective standard, a reasonable shareholder considering future review of a trust for purposes of modifying or terminating the trust would reasonably anticipate some process or procedure would apply both to the review process and to the vote. While the "brief review" of the trust in the April mailing and oral representations likely did not detail the process for future review, it is difficult to conclude that such an omission would cause an objectively reasonable shareholder to assume no process would be followed and/or that a "free for all" vote on modification or termination would occur.
      9. While, again, a close question, this court cannot find[] on the particular facts of this case that there is a substantial likelihood that a reasonable shareholder would have considered it important that the five-year review process would entail review and recommendation regarding trust changes by the duly-elected trustees to precede any shareholder vote on modification or termination, particularly in light of the total mix of information available about the review process. Using an objective standard, a reasonable shareholder who thought the precise mechanism for review was important would likely have read the Proxy Statement and/or proposed Settlement Trust Agreement, both of which detailed the role of trustees in the review process and both of which were provided to shareholders.
      (Footnote omitted.)

      . TSC Indus., 426 U.S. at 450, 96 S.Ct. 2126 (''The issue of materiality may be characterized as a mixed question of law and fact, involving as it does the application of a legal standard to a particular set of facts.").

      . See N.A. v. State, 19 P.3d 597, 600-01 (Alaska 2001) ("We defer to the trial court's factual findings unless clearly erroneous and review de novo any questions of law.").

      . See 43 U.S.C. § 1625 (1986 & Supp.2003).

      . See Brown v. Ward, 593 P.2d 247, 249 (Alaska 1979).

      . Id. at 250 ('Since the SEC fraud rule and the common law both prohibit material falsehoods, authorities construing the SEC rule are a useful guide in determining when a misstatement is material under Alaska common law.").

      . AS 45.55.160.

      . Id.

      . Brown, 593 P.2d at 251 (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976).

      . See note 4, above.

      . Brown, 593 P.2d at 251 (quoting TSC Indus., 426 U.S. at 449, 96 S.Ct. 2126).

      . AS 45.55.160 (emphasis added).

      . See Brown, 593 P.2d at 251 (quoting TSC Indus., 426 U.S. at 449, 96 S.Ct. 2126).

      . Pointing to a pattern of similar descriptions some accurate, many incomplete-in various communications occurring between the time of the settlement trust's approval in 1994 and the first five-year review in 2000, the shareholders maintain that the continuing ambiguity and inconsistency of these statements relates back to the earlier communications, somehow confirming their originally misleading character. The shareholders further maintain that each of these post-1994 repetitions of the 1994 promise of a shareholder vote amounted to a new contract, creating a new cause of action. Moreover, the shareholders seem to argue, by violating various common law rules implicit in Brown v. Ward-a corporation's duty of disclosure, its duty of completeness, its duty of candor, and its duty of good. faith and fair dealing-FHuna Totem's original and subsequent materials became independently actionable. But these common law duties are largely incorporated in Alaska's statutory standards governing material misrepresentations. Thus, the common law claims depend on the shareholders' initial premise that Huna Totem's May 1994 preliminary statement was materially misleading; they add little to the statutory claims and fail to survive our rejection of the shareholders' arguments on scierter and materiality.