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Johnson v. Aleut Corp.

Supreme Court of Alaska

August 23, 2013

Troy JOHNSON, Appellant,
v.
The ALEUT CORPORATION, Appellee.

Page 943

Molly C. Brown and Michael D. White, Patton Boggs LLP, Anchorage, for Appellant.

William J. Evans, Sedor, Wendlandt, Evans & Filippi, LLC, Anchorage, for Appellee.

Before: FABE, Chief Justice, WINFREE, STOWERS, MAASSEN, and BOLGER, Justices.

OPINION

FABE, Chief Justice.

I. INTRODUCTION

The Aleut Corporation terminated the employment of its chief executive officer, Troy Johnson. Johnson challenged the termination, and the matter was submitted to binding arbitration as required by the employment contract, which contained a broad arbitration clause providing that " [a]ny and all disputes ... arising out of, relating in any way to or in connection with this Agreement and/or Executive's employment with or termination of employment from the Company ... shall be solely settled by an arbitration." At arbitration, the parties disputed whether The Aleut Corporation had violated the employment contract by terminating Johnson and whether Johnson's alleged breach of contract justified the termination. After determining that The Aleut Corporation had breached the employment contract, the arbitrator awarded damages to Johnson.

The Aleut Corporation petitioned the superior court to vacate the arbitrator's decision, claiming that the arbitrator had addressed an issue that was never submitted to arbitration and was thus not arbitrable. The superior court vacated the arbitration award, concluding that the arbitrator had exceeded his authority, and Johnson appeals. Because the

Page 944

dispute was arbitrable, we conclude that the arbitrator did not exceed his authority, and we therefore reverse the superior court's decision to vacate the arbitration award.

II. FACTS AND PROCEEDINGS

A. Facts

The Aleut Corporation is one of the 13 regional Native corporations established in 1972 under the Alaska Native Claims Settlement Act.[1] Troy Johnson is an Aleut Corporation shareholder and a business executive. In 2007 The Aleut Corporation hired Johnson as its new chief executive officer (CEO), and the two parties negotiated an agreement setting forth the terms of Johnson's employment.

Paragraph 5 of the employment agreement established that Johnson's " Initial Term" as CEO would last three years, ending on March 31, 2010. Paragraph 5 also provided for a two-year " automatic extension" of Johnson's term, at The Aleut Corporation's option. To trigger this option term, Paragraph 5 required Johnson to provide a reminder notice to The Aleut Corporation's Board of its ability to cancel the option term. This notice was to be sent to the Board Chair at least 120 days before March 31, 2010. Upon receiving this reminder notice, The Aleut Corporation was to have the option to cancel the automatic extension of the term by written notice to Johnson at least 90 days before March 31, 2010. Paragraph 5 of the employment agreement provided:

Term. Subject to the provisions for earlier termination set forth in Paragraph 9, the term of the Executive's employment hereunder shall commence on the Effective Date and terminate (3) years thereafter on March 31, 2010 (the " Initial Term" ). Company shall have an option, exercisable in writing on or before ninety (90) days prior to the expiration of the Initial Term, to cancel the automatic extension of the term of this Agreement for an additional two (2) year period commencing on April 1, 2010, terminating on March 31, 2012 (the " Option Term" ). Executive shall notify the Chair of the Board, in writing, 120 days before the expiration of the Initial Term of the Company's option to cancel, but if he fails to so notify the Chair of the Board, this Agreement will expire at the end of the Initial Term. The Initial Term and the Option Term, if not cancelled by the Company, are herein called the " Term." Neither the Company nor Executive will have any obligation to renew or extend this Agreement beyond the Term.

(Emphasis in original.) The employment agreement also contained a broadly drafted arbitration clause: " Any and all disputes between Executive and the Company, however significant, arising out of, relating in any way to or in connection with this Agreement and/or Executive's employment with or termination of employment from the Company ... shall be solely settled by an arbitration...."

Johnson testified that when he negotiated the employment agreement, he sought a longer initial term because he " wanted that security of a five-year contract" for his family. He further explained that " having been through the work of changing a company ... three years is a pretty short period of time." Johnson and The Aleut Corporation agreed that the purpose of the reminder notice provision was to ensure that the Board would not overlook the option term and inadvertently allow Johnson's contract to extend.

In July 2009, as the end of Johnson's initial three-year term approached, Johnson and The Aleut Corporation began negotiations for a new contract. On July 22, 2009, Johnson drafted a letter to Sharon Lind, the chair of The Aleut Corporation Board of Directors, providing the required notice of The Aleut Corporation's option to cancel the automatic extension of the term. Johnson created a fax cover sheet for the letter and attempted to fax the letter to Lind's office. But a subsequent review of electronic records from the fax machine at Lind's office indicated that Lind's machine never received Johnson's fax. Johnson also claimed that he later gave Lind a hard copy of the letter with a packet of other documents.

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The contract negotiations that followed led Johnson to believe that Lind had received his reminder notice letter. In August 2009, Johnson watched The Aleut Corporation's attorney, Thomas M. Daniel, give a presentation to the full Board on the status of their negotiations. During the presentation, Daniel provided charts describing the terms of Johnson's current contract and contract proposals. The " term" section of the chart stated that Johnson's contract " automatically extended for 2 more years unless [The Aleut Corporation] gives notice of cancellation 90 days before expiration." The chart did not mention Johnson's obligation to provide notice. Johnson later testified that because Daniel's chart did not mention the requirement for him to provide the reminder notice, he assumed that Lind had received his letter reminding The Aleut Corporation of its option to cancel the automatic extension of the term.

Under Paragraph 5, notice from Johnson would have triggered The Aleut Corporation's responsibility to notify Johnson before December 31, 2009 if the company decided to cancel the automatic extension. The Aleut Corporation did not provide notice to Johnson of its decision to cancel the automatic extension of his term by that date.

Throughout the contract renewal negotiations, Board Chair Lind sent inquiries to Daniel, The Aleut Corporation's attorney, regarding the employment agreement. Early in the negotiations, Lind asked Daniel a question about the automatic extension provision in Johnson's contract. Daniel confirmed that according to the provision, Johnson's contract would " automatically renew" for an additional two years " unless the board affirmatively cancels the extension at least 90 days before the current contract expires. " (Emphasis in original.) Later, in February 2010, Daniel replied to an additional question from Lind, remarking that the " notice provisions" in the employment agreement were " mostly meaningless— the result of last minute changes that were made when we negotiated the contract." Meanwhile, the contract negotiations between The Aleut Corporation and Johnson continued into March 2010 without success.

On March 21, 2010, The Aleut Corporation's Board informed Johnson that it would allow Johnson's contract to expire at the end of the month. The following day, Johnson and a member of the Board discussed how Johnson might save his job. Johnson later testified that the Board member's comments led him to believe that he might retain his job if he fired Eric Waterman, The Aleut Corporation's director of operations. After the meeting, Johnson terminated Waterman and signed a severance and release agreement with him.

On March 30, 2010, Johnson's lawyer sent a letter to The Aleut Corporation declaring that The Aleut Corporation had improperly terminated Johnson's contract because Johnson had faxed the reminder notice to Lind and the Board had not timely cancelled the option. The next day, Johnson completed his last day of employment at The Aleut Corporation. On April 9, 2010, Johnson's attorney sent a second letter to The Aleut Corporation, proposing a settlement and advising that Johnson would proceed to arbitration if the parties could not agree on a settlement.

B. Arbitration Proceedings

The arbitration clause of the employment agreement required that " [a]ny and all disputes ... arising out of, relating in any way to or in connection" with the employment agreement " shall be solely settled by an arbitration" conducted in accordance with the American Arbitration Association rules. Accordingly, Johnson submitted a statement of claims to the American Arbitration Association on October 15, 2010.

Johnson's statement of claims argued that The Aleut Corporation had breached the employment agreement when it terminated his contract. Johnson explained that he had provided timely notice to the Board reminding it of its option to cancel the automatic extension and that the Board had failed to provide timely notice that it was cancelling the automatic extension. Johnson's statement of claims concluded with a request that " the arbitrator find the Company failed to timely exercise its option to terminate the automatic two-year extension of Mr. Johnson's Contract beyond March 31, 2010," and

Page 946

" that the Company['s] termination of Mr. Johnson's employment as CEO effective March 31, 2010, constituted a breach by the Company of the Contract."

The Aleut Corporation responded that Johnson had not in fact provided the required reminder notice and thus the employment agreement had expired on March 31, 2010. The Aleut Corporation also claimed, as an " [a]ffirmative [d]efense," that Johnson had breached the employment agreement by terminating Waterman and obligating The Aleut Corporation to a severance agreement without the proper authority.

The parties submitted a joint statement of uncontested facts to the arbitrator. That statement provided that " Paragraph 5 [of the employment agreement] required Johnson to notify the Chair of [The Aleut Corporation's] Board, Sharon Lind, of [The Aleut Corporation's] option to cancel the ‘ Option Term’ 120 days prior to March 31, 2010, or December 1, 2009." Their statement described the negotiations of Johnson's contract renewal, Johnson's letter to Lind, Daniel's ...


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