Appeal from the Superior Court No. 3AN-14-04688 CI of the State of Alaska, Third Judicial District, Anchorage, Frank A. Pfiffner, Judge.
LeRoy E. DeVeaux, DeVeaux and Associates, APC, Anchorage, for Appellant.
William E. Milks, Assistant Attorney General, and Michael C. Geraghty, Attorney General, Juneau, for Appellees.
Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and Bolger, Justices.
The executive director of the Alaska State Commission for Human Rights brought an action on behalf of an employee who alleged that her employer's racist and insensitive remarks created a hostile work environment. The Commission ultimately found that the employee did not suffer a hostile work environment, but it denied the employer's request for attorney's fees. The employer now appeals on the single issue of attorney's fees, arguing that it was entitled to fees as the prevailing party and because it raised affirmative defenses under the Alaska and United States Constitutions. We affirm the Commission's denial of attorney's fees.
II. FACTS AND PROCEEDINGS
Ace Delivery & Moving, Inc. (Ace) hired Janet Wass on a temporary basis to perform data entry. Wass resigned on her third day and later filed a complaint with the Alaska State Commission for Human Rights, alleging that Ace's owner, Hank Schaub, made disparaging comments in her presence about various racial, ethnic, and religious groups. The executive director of the Commission issued a single-count accusation alleging that Ace "created a hostile working environment based on the owner's severe and pervasive derogatory comments and postings regarding race, national origin, and religion" - directed at Jews, Arabs, Muslims, and Mexicans - in violation of AS 18.80.220(a)(1). The accusation sought various forms of injunctive relief, including that Ace be required to adopt a nondiscrimination policy and that its "owner, manager, and supervisors" receive training in Alaska human rights law.
Ace asserted affirmative defenses in response, including that Schaub's comments were protected by the free speech guarantees of article I, section 5 of the Alaska Constitution and the First Amendment to the United States Constitution. Ace also argued that because the accusation violated Schaub's constitutional right to free speech, Ace was entitled to attorney's fees under federal law.
The matter was assigned to an administrative law judge with the Office of Administrative Hearings. In an order denying summary judgment to Ace, the administrative law judge rejected Ace's argument that Schaub's speech was constitutionally protected. Citing federal cases, the administrative law judge observed that "[s]peech in the work place that creates a hostile work environment is not protected speech."
An evidentiary hearing followed, after which the administrative law judge found that Ace had not subjected Wass to a hostile work environment. The administrative law judge noted that Wass did not belong to any of the groups Schaub had allegedly disparaged (though her daughter and ex-husband were both Jewish) and the evidence did not establish that Ace took any action against Wass based on her own religion or national origin. The Commission adopted the administrative law judge's decision.
Ace moved for an award of nearly $60, 000 in attorney's fees and costs.The administrative law judge denied Ace's motion. He relied on AS 18.80.130(e), which allows an award of attorney's fees in the Commission's discretion, and on a regulation adopted under that statute, 6 Alaska Administrative Code (AAC) 30.492 (2014). The administrative law judge reasoned that by adopting the regulation the Commission had exercised its statutory grant of discretion to limit attorney's fees awards in Commission proceedings to certain categories of cases, and that Ace's case did not qualify. The administrative law judge rejected Ace's reliance on 42 U.S.C. § 1988,  AS 09.60.010,  and Alaska Civil Rule 68  on grounds that they apply only to proceedings in court. This order was adopted by the Commission as the final agency order on attorney's fees.
Ace appealed the attorney's fees order to the superior court, which affirmed the order. The superior court held that Ace had not prevailed on a constitutional claim and had not alleged any civil rights claim under 42 U.S.C. § 1983 that could implicate ...