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Vol. 12, No. 17 Week of April 29, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Supreme Court upholds change in Rule 82

Alaska’s highest court sides with state Legislature in lawmakers’ quest to close costly loophole in public interest litigation

Rose Ragsdale

For Petroleum News

The Alaska Supreme Court has upheld an attempt by the Alaska Legislature to fix a growing problem with public interest litigation in the state with an amendment to the Alaska Constitution.

In State of Alaska v. Native Village of Nunapitchuk, et al. and Gov. Frank Murkowski v. Alaska FFL-CIO, et al., issued April 20, the state high court overturned an Alaska Superior Court ruling that invalidated a law passed by the Legislature in 2003 because it “unduly” interfered with the public’s access to the courts, and even if the law was constitutional, its passage would require a two-thirds majority of the Legislature instead of the simple majority that voted for the measure.

In the 40-page decision, the Supreme Court also vacated a $150,000 award of attorney’s fees and costs in the case and an award of $38,000 in fees and costs in a second Superior Court ruling based on the first judgment.

The Supreme Court justices unanimously concluded that the first superior court’s ruling was inappropriate and premature and the subsequent decision was based on an invalid precedent.

The case arose following the Legislature’s attempt to rectify what many observers considered to be a serious flaw in Alaska Rule of Civil Procedure 82 or Appellate Rule 508, also known as the public interest litigant exception or doctrine.

In 2003, state legislators passed House Bill 145, a measure aimed at correcting the problem.

To understand what the lawmakers tried to do, one must first understand Rule 82 and its impact on civil litigation in Alaska, especially in recent years.

Alaska only state with ‘loser pays’ rule

Alaska is the only state with a general “loser pays” rule for attorney’s fees in most civil litigation. Alaska courts generally award partial attorney’s fees to the prevailing party in a civil case or appeal, under the terms of Rule 82.

However, the rule has, since its adoption, allowed the trial court discretion to vary a fee award and Appellate Rule 508 gives the courts full discretionary powers to determine whether an award of fees should be ordered on appeal.

Further, the Alaska Supreme Court has interpreted the discretionary power granted in Rule 82 to deviate from the loser pays rule in fairly precise terms. Among them:

• Attorney’s fees may not be assessed against a losing public interest litigant;

• A winning public interest litigant is entitled to full reasonable attorney’s fees;

• A public interest litigant who prevails on some but not all issues is also generally entitled to full, reasonable attorney’s fees; and

• The same considerations generally apply to awards of costs and attorney’s fees on appeal.

Over time, the exception in Rule 82 has, in effect, served to promote and indeed subsidize litigation against the State of Alaska and private defendants such as oil and gas companies by providing generous awards of full attorney’s fees and costs where public interest litigants prevailed on any issue in a case, no matter how marginal or insubstantial the issue may be, according to proponents of HB 145.

They also argued that the Rule 82 exception shielded public interest litigants from having to abide by the “loser pays” doctrine and not requiring them to pay awards of fees and costs when they lost, even if their entire case lacked merit.

Oil and gas industry has been particularly hard hit

The oil and gas industry and the State of Alaska has been particularly hard hit over the years by the public interest litigant exception in Rule 82.

Litigants, proclaiming to be suing in the “public interest” — but in practice primarily environmental groups challenging oil and gas industry activities — could recover all of their costs and fees for bringing the action, even if they were victorious on only a single issue in the challenge.

Sen. Gene Therriault, R-Fairbanks, sponsored HB 145, to reform the public interest litigant practices, and a simple majority of legislators voted it into law.

Shortly after its passage, HB 145 was challenged and the superior court ruled it invalid.

HB 145 essentially amends existing state law in a number of ways to prevent discrimination in the awarding of court costs, including attorney’s fees. In effect it abolishes the judicially created public interest litigant exception entirely, but does not otherwise affect the authority and discretion of the courts to award costs and attorney’s fees under existing court rules, Civil Rules 79 and 82, respectively. While the law builds back a similar rule for plaintiff’s raising constitutional claims, the new statutory rule is far narrower than the previously existing rules by excluding claims based on state statutes or administrative regulations.

The vast majority of challenges brought against development projects in Alaska have not been based on the Alaska or United States Constitution but on state statutes or regulations. In the future, plaintiffs presenting such claims will not be entitled to any special treatment with respect to the awarding of costs and fees, according to a memorandum that state lawmakers circulated during debate on HB 145.

One issue super-majority vote

In response to the Superior Court rulings, attorneys for the State of Alaska argued that HB 145 did not require a super-majority vote of the Legislature for two reasons:

(1) The public interest litigant exception is not a court rule; rather it is a substantive rule of decisional law;

(2) Assuming that the act changes Rule 82, Rule 82 is substantive rather than a rule of practice and procedure and thus may be changed by a simple majority vote.

The state also argued that a facial judgment was inappropriate and that the superior court should have waited for a specific case to determine whether, as applied, access to the courts was effectively denied.

The Supreme Court agreed.

“We conclude that Rule 82 is a rule of practice and procedure authorized under article IV, section 15, of the Alaska Constitution. But we also conclude that the public interest litigant exception is a rule of substantive law that can be changed by the Legislature without a two-thirds vote. We conclude that HB 145 does not change Rule 82, but that courts, when considering the “other equitable factors” ground for varying awards, should be cognizant of the need to avoid using this ground as a means to encourage public interest litigation in violation of the policy underlying HB 145. We agree with the State that a declaratory judgment striking down HB 145 on the ground that it necessarily impedes access to the courts is inappropriate, and that any such determination must be made on a case-by-case basis,” said Justice Warren W. Matthews, writing for the Supreme Court.

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