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Oakly Enterprises, LLC v. NPI, LLC

Supreme Court of Alaska

August 28, 2015

NPI, LLC; NPI TIMBER, LLC; and COREY WHITNEY, individually and d/b/a WHITNEY LOGGING, Appellees.

Appeal from the Superior Court Nos. 3PA-08-01671 CI and 3PA-08-01349 CI (Consolidated) of the State of Alaska, Third Judicial District, Palmer, Kari Kristiansen, Judge.

David D. Clark, Law Office of David Clark, Anchorage, for Appellant.

Jonathon A. Katcher, Pope & Katcher, and Debra J. Fitzgerald, Anchorage, for Appellees.

Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and Bolger, Justices.


MAASSEN, Justice.


This case arises from a dispute over whether the owner of a wood chipper may be held jointly and severally liable, along with two property owners, for damages caused to their property by the chipper's leak of diesel fuel. The chipper's owner had leased it to another person, who abandoned it. The property owners claim they were only severally liable, if at all, for a portion of the damages and that the chipper's owner was liable for the rest. A jury found that the chipper did not contaminate one of the two properties, but as for the other the jury found its owner jointly and severally liable, along with the chipper's owner. The superior court then equitably allocated damages among the liable property owner, the owner of the chipper, and the chipper's lessee. This allocation left the property owner liable for most of his own loss.

Both property owners appeal the superior court's decision to equitably allocate damages.[1] They also appeal an evidentiary ruling and the award of attorney's fees. We affirm, holding that the superior court properly construed the governing statutes and the evidence rules and that its award of attorney's fees was not an abuse of discretion.


Ryan Friesen and Oakly Enterprises, LLC, own properties across the road from each other in Wasilla. Oakly Enterprises is a family-owned corporation, owned half by Friesen and half by his father and stepmother.

In 2004 a logger named Corey Whitney leased wood chipping equipment from NPI, LLC, a company involved in construction and timber leases. Whitney later entered into a lease with Oakly Enterprises for a shop and a place to store some of the leased equipment. He entered into another lease with Friesen for a heavy equipment parking area, where he parked the piece of equipment at issue here - a 1995 Peterson chipper he had leased from NPI.

In early 2006 the Alaska Department of Environmental Conservation discovered several diesel spills on the Oakly Enterprises property, near the chipper. In June the Department sent notices of violation to Whitney and Oakly Enterprises, asserting that they had violated state regulations[2] by failing to contact the Department and submit a site characterization plan before cleaning up surface stains from the diesel spills. Neither Whitney nor Oakly Enterprises was cooperative. In May 2007 Whitney notified Oakly Enterprises that he would vacate its property at the end of June, and in early July he transported some of the leased equipment back to NPI at Port MacKenzie, a commercial and industrial area on Cook Inlet. Whitney left the remainder of the equipment, including the Peterson chipper, in place on Friesen's and Oakly Enterprises' properties.

In July 2007 Friesen hand-delivered a letter to NPI claiming he had become "aware of some pretty large oil spills" on his property and would "start cleanup [him]self to prevent further pollution" if NPI did not respond within five days. Four days later he moved the Peterson chipper to property owned by his father. During the months that followed, NPI removed most of its remaining equipment from the Friesen and Oakly Enterprises properties, but it did not undertake any environmental cleanup. It recovered the Peterson chipper in October 2008.

In 2009 Friesen and Oakly Enterprises brought suit against NPI and Whitney, seeking damages in excess of $150, 000 for the contamination of their properties, costs of cleanup, and rent.[3] Whitney did not answer the complaint, and a default judgment was entered against him. The superior court initially granted summary judgment to NPI, holding that NPI was not liable for Whitney's actions in polluting the Friesen and Oakly Enterprises properties as the "operator" of the involved "facility" (as these terms are defined for purposes of AS 46.03.822, which imposes strict liability for damages and other costs "resulting from an unpermitted release of a hazardous substance"); as the lessor of the Peterson chipper; as Whitney's principal in an agency relationship; or through a veil-piercing "sham transaction" theory. On reconsideration, however, the superior court found genuine issues of material fact regarding NPI's liability under several theories, including whether it could be held liable as an "owner" or "operator" under AS 46.03.822 and whether it was liable for rent and other costs incurred after Whitney abandoned the Peterson chipper on the plaintiffs' property. The superior court also granted NPI's motion in limine to exclude a report on environmental conditions at NPI's Port MacKenzie property, which Friesen had planned to introduce "to rebut [NPI's] assertion that it ran a clean camp."

The superior court conducted an eight-day jury trial on the issue of whether NPI was liable for any of Friesen's and Oakly Enterprises' damages. The jury instructions included one on "avoidable consequences, " proposed by NPI, and a corresponding verdict form asking the jury to affix a dollar amount to the damages Friesen reasonably could have avoided, if any.[4] Answering specific questions on the special verdict form, the jury found that NPI was not the "operator of a facility" from which diesel fuel was spilled on Oakly Enterprises' property but that the diesel spill on Friesen's property came from the Peterson chipper. It found that "the reasonable costs of repairing the damage to the Ryan Friesen real property from the diesel spills" was $38, 437, and that Friesen reasonably incurred $14, 990 in expenses "in an effort to avoid or reduce other losses he reasonably believed were caused by NPI's 1995 Peterson Chipper on his land."[5] Finally, the jury answered "Yes" to the question whether Friesen could "reasonably have avoided all or part of the diesel spill on [his] property, " and it found that "the dollar amount of loss to Ryan Friesen due to the diesel spill on [his] property that [he] reasonably could have avoided" was $7, 687.40 (20 percent of the total amount it had found to represent the reasonable costs of repair).

NPI filed a post-trial motion asking the court "to equitably allocate damages among the parties through the contribution process found in AS 46.03.882(j)." The court granted NPI's motion in a comprehensive order that detailed the history of the parties' dispute, set out the jury's factual findings, and identified the equitable factors the court considered relevant. These included the "Gore factors, " which the court described in shorthand as "1) fault, 2) amount, 3) toxicity, 4) involvement, 5) care[, ] and 6) cooperation." [6] Other equitable factors the court found relevant were "failure to mitigate environmental damage, laches, unclean hands, and moral culpability." Applying these factors to the facts of the case, the court concluded that "[t]he most equitable and fairest means of dividing responsibility for the diesel spill is to allocate fault based upon the amount of time each party had responsibility for and control over the leaking chipper." The court found that for 115 days - 96 percent of the 119 days the chipper was leaking diesel onto Friesen's property - "both Whitney and Ryan [Friesen] knew or should have known that the chipper was leaking, and had the ability to control the ...

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