Appeal
from the Superior Court No. 3PA-05-01317 CI of the State of
Alaska, Third Judicial District, Palmer, Vanessa White,
Judge.
Kenneth P. Jacobus, P.C., Anchorage, for Appellants.
Chris
D. Gronning, Bankston Gronning O'Hara, P.C., Anchorage,
for Appellee.
Before: Stowers, Chief Justice, Winfree, Maassen, and Bolger,
Justices. [Fabe, Justice, not participating.]
OPINION
MAASSEN, Justice.
I.
INTRODUCTION
This
case has returned to us for review of the superior
court's decision of attorney's fees issues following
our remand in Windel v. Mat-Su Title Insurance Agency,
Inc. (Windel I).[1] The underlying lawsuit involved the
validity of an easement that Thomas Carnahan claimed extended
over property belonging to Keven and Marlene Windel, as well
as Carnahan's responsibility for damage allegedly caused
by improvements within that easement. The substantive issues
were resolved in Carnahan's favor in Windel I,
but we remanded the case to the superior court for its
reconsideration of attorney's fees issues. On remand, the
superior court awarded attorney's fees to Carnahan under
Alaska Civil Rule 68, finding that, when the case was viewed
in its entirety, he had prevailed and had done better than
his offer of judgment.
The
Windels again appeal. They argue that the superior court
erred in its analysis of Rule 68, failed to decide whether
Carnahan's offer of judgment was valid, and erred in
disregarding objections to specific billing entries in
Carnahan's claim for fees. We conclude that the superior
court did not err in its Rule 68 analysis or in its
attorney's fees award, and we therefore affirm the
judgment of the superior court.
II.
FACTS AND PROCEEDINGS
A.
First Appeal And Our Decision In Windel I
On
their first appeal in 2011, the Windels challenged the
superior court's rulings that Carnahan's claimed
easement across their property was valid, that Carnahan was
not responsible for the easement's continued maintenance,
and that Carnahan was entitled to an award of attorney's
fees under Rule 68.[2] In Windel I we affirmed the
superior court's ruling that the easement was
valid[3] and held that the superior court did not
err in declining to hold Carnahan responsible for the
easement's future maintenance and
improvements.[4] But we remanded the case to the superior
court for reconsideration of attorney's
fees.[5]
On
appeal the Windels had made alternative arguments about
attorney's fees, involving both Rule 68 and Rule 82. The
Rule 68 arguments stemmed from an offer of judgment Carnahan
made in 2006, a year after the Windels filed suit. The offer
of judgment had four essential terms: (1) a declaratory
judgment that Carnahan's claimed easement was valid; (2)
payment to the Windels of $ 10, 000 in trespass damages; (3)
an award of attorney's fees and costs to the Windels; and
(4) dismissal of Carnahan's counterclaims.[6] The Windels did
not accept the offer.[7]
The
Windels' first Rule 68 argument on appeal was based on a
partial settlement agreement reached in early 2009, after the
superior court had ruled on summary judgment that
Carnahan's claimed easement was valid. Under the
settlement agreement the parties dismissed their remaining
damages claims against each other except with regard to the
Windels' recently raised nuisance abatement claim, which
alleged they were damaged when work within the easement
exacerbated ponding on their property.[8] For the nuisance
abatement claim, the parties agreed to hire an independent
engineer to evaluate its basis and recommend a resolution; if
either party declined to accept the engineer's
recommendation they would submit the claim to the judge for
decision.[9] The Windels argued in the first appeal
that this partial settlement agreement resolved all claims
for attorney's fees incurred up to early 2009, when they
asserted their nuisance abatement claim.
The
Windels' second Rule 68 argument was that if the partial
settlement agreement did not resolve the attorney's fees
issues, it was error for the superior court to decide that
Carnahan beat his offer of judgment.[10]
The
Windels' Rule 82 arguments addressed the superior
court's decision that the case could be divided into two
segments for purposes of attorney's fees: the first
"concerning the validity of the easements and associated
damages issues, and the second solely regarding the nuisance
claim."[11] The superior court decided that Carnahan
was the prevailing party in the first segment because he beat
his offer of judgment but that neither party prevailed in the
second segment.[12] The Windels argued that for Rule 82
purposes the case should be considered not as separate
segments but as a whole, and that under such an analysis
neither party prevailed because one main issue, the validity
of the easement, was resolved in Carnahan's favor and the
other main issue, nuisance, was resolved in the Windels'
favor.[13] Alternatively, the Windels maintained
that under a bifurcated analysis they should have been
considered the prevailing parties because the case's
first segment settled (and Carnahan was therefore entitled to
no fees for it) and they prevailed in the second part, which
involved only their nuisance claim.[14]
In
Windel I "we first reject[ed] the Windels'
argument that the 2009 settlement agreement resolved
attorney's fees for the litigation up to the point of the
settlement."[15] Noting that an amendment to the
settlement agreement stated that "[t]he final judgment
will be subject to motions for costs and attorney
'sfees, and to appeal"[16]we determined that
the agreement "clearly reflect[ed] that the parties
expected and left open questions of which party would be
entitled to recover costs and attorney's fees for both
the litigation up to the settlement agreement and the
anticipated future litigation over the equitable nuisance
abatement claim."[17] We therefore concluded that the
settlement agreement did not preclude Carnahan from
recovering attorney's fees for the entire
litigation.[18]
We then
considered whether the superior court had correctly
determined that Carnahan beat his offer of judgment as to the
first part of the litigation. We remanded the Rule 68 issue
to the superior court, concluding that "on the record
before us it [was] impossible to determine whether (1) it was
permissible to limit the application of Rule 68 to a
bifurcated portion of the superior court proceedings, and (2)
Carnahan 'beat' his offer of
judgment."[19] Noting that the purpose of Rule 68 is
"to encourage settlements and avoid prolonged
litigation, "[20] we held that "an offer of judgment
must encompass every claim in the
litigation."[21] We observed that Carnahan had
"attempted to comply" with the requirement that
"an offer of judgment [must] include all claims between
the parties and be capable of completely resolving the case
by way of a final judgment if accepted"[22] by including
language in his offer that "seem[ed] broad enough to
include not only Carnahan's post-offer assertion of a
counterclaim for easement-interference damages, but also the
Windels' post-offer assertion of nuisance damages and
equitable abatement relief."[23] We concluded that the
superior court's decision to bifurcate the litigation for
attorney's fees purposes was "unexplained and
appear[ed] contrary to our stated interpretation of Rule
68."[24]
We
observed that because of the "open bifurcation question,
" we were unable to determine whether Carnahan had beat
his offer of judgment.[25] If the offer of judgment properly
applied to the entire litigation, then the superior
court's comparison of the offer to the litigation only up
to the time of the partial settlement would have been
error.[26] We also noted that if on remand the
superior court considered the entire litigation for purposes
of the comparison, it should consider efforts Carnahan made
voluntarily in 2007 to abate potential damage to the
Windels' property as well as "the additional
court-ordered nuisance remediation" that resulted from
the superior court's later decision of the Windels'
nuisance abatement claim.[27]
Finally,
we addressed the issue of Rule 82 fees in case the superior
court found on remand that Carnahan was not entitled to fees
under Rule 68.[28] We noted that there was
"considerable tension" in the superior court's
treatment of the attorney's fees issues when it first
considered the litigation as a whole - determining that
Carnahan prevailed on the "main issue" of the
validity of the easement-but then decided that the case could
be bifurcated and treated as two segments.[29] We pointed
out that the bifurcation "suggests the [superior] court
then considered the litigation to include two main
issues": the validity of the easement and the
Windels' nuisance abatement claim.[30]We also
observed that "[t]here should be little dispute"
that Carnahan prevailed on the issue of the easement's
validity; we suggested, however, that "if, as it seems,
the superior court considered the equitable nuisance
abatement claim as another main issue, ... it may be
difficult to sustain a determination that neither party
prevailed on this issue" in light of Carnahan's 2007
voluntary remediation work and the additional remediation
ordered by the court, both of which would seem to work in the
Windels' favor.[31]
We
concluded that "the complex competing concerns and
interests in determining the prevailing party or
parties" warranted remand to the superior court. We
asked the superior court to "render sufficient findings
of fact and conclusions of law [on remand] in the event
further appellate review prove[d]
necessary."[32]
B.
Superior Court Proceedings After Remand
On
remand, in a lengthy written order issued in August 2014, the
superior court interpreted our decision in Windel
1"to hold that it had erred in considering the case
as two segments subject to separate analyses. The superior
court instead considered the litigation as a whole and ruled
in favor of Carnahan, concluding that under Rule 68 Carnahan
"fared better at the end of [the] litigation than in his
January 2006 Offer of Judgment."
As we
had directed, the superior court took into account the
voluntary and court-ordered remediation costs in determining
how well Carnahan fared. But the superior court disagreed
with our description of one of the relevant facts. In
Windel I we stated that Carnahan had voluntarily
constructed the 2007 culvert.[33] But on remand the superior
court found that "[u]pon careful review of the record,
it appears that [Carnahan] did not build the 2007
culvert." Because "the building of the 2007 culvert
was not a voluntary remediation effort attributable to
[Carnahan], " the superior court determined that
Carnahan only had to spend $4, 000 - the amount of the
additional court-ordered remediation.
The
superior court then conducted a point-by-point comparison of
the offer of judgment and the entire litigation. The court
ruled that Carnahan prevailed on the first term of his 2006
offer of judgment, which would have declared that the
easement was valid, because the court granted him summary
judgment on that issue. The court next determined that
Carnahan prevailed on the third term of his offer, which
would have provided for judgment in the Windels' favor
for attorney's fees and costs, on grounds that the
Windels "were not prevailing parties as to any important
aspect of the case and were not entitled to seek
attorney's fees or costs." With respect to the
fourth term of Carnahan's offer, the court found that
Carnahan "agreed to withdraw his counterclaims as part
of the [partial settlement agreement], just as he had offered
in his 2006 offer of judgment, " presumably meaning that
the court found this point to be a wash: Carnahan did no
better or worse than his offer. And finally, with respect to
the nuisance claim that the settlement agreement had reserved
for further negotiation or decision, the superior court found
that Carnahan prevailed because the $4, 000 he had to spend
in additional remediation was sufficiently less than the $10,
000 he offered to pay the Windels in his offer of judgment.
Finding
that Carnahan beat his offer of judgment when considering the
litigation in its entirety, the superior court concluded that
he was eligible for Rule 68 fees and directed him to
recalculate his fee request. Carnahan immediately complied.
The Windels eventually filed an untimely "Opposition to
Carnahan's Claimed Attorney's Fees, " arguing
(1) that he was not entitled to attorney's fees under
Rule 68; (2) that Rule 82 applied instead and resulted in a
lower award; (3) that certain billing entries should be
disallowed as unrelated to the litigation; and (4) that
Carnahan's claimed costs should also be reduced.
In
November 2014 the superior court awarded fees pursuant to
Rule 68 in the amount of $119, 989.50, at the same time
granting the Windels' two outstanding motions for
extensions of time to oppose the award. The court did not
address the issues raised in the Windels' opposition
except to note that their "objections to other minor
fees were expressly waived on appeal and by plaintiffs'
failure timely to object prior to the court awarding fees to
Carnahan in 2010."
C.
Issues Presented In This Appeal
The
Windels raise these issues on appeal: (1) When the litigation
is properly analyzed, did Carnahan do better than his offer
of judgment so as to be entitled to an award of
attorney's fees under Rule 68? (2) Did the superior court
err by failing to decide questions we noted but did not
decide in Windel I: (a) whether Carnahan's offer
of judgment was void to begin with because it was made to the
Windels jointly and unapportioned, and (b) whether an offeror
may tender an offer of judgment and then later assert
additional claims that change the litigation such that it may
be unfair to base an attorney's fees award on the
original offer? Finally, (3) did the superior court err when
it declined to exclude certain specific billing entries from
its attorney's fees calculation?
III.
STANDARDS OF REVIEW
"We
exercise our independent judgment in reviewing the superior
court's interpretation of Rule 68, as well as in
calculating a judgment's value to determine whether it
exceeded an offer of judgment."[34] A court's factual
findings, including whether waiver occurred, are reviewed for
clear error.[35]
IV.
DISCUSSION
A.
The Superior Court Did Not Err In Its Award Of Attorney's
Fees To Carnahan Under Civil Rule 68.
The
Windels contend that the superior court erred in its August
2014 award of Rule 68 attorney's fees by failing to
properly follow our decision in Windel
I.[36] Specifically, they argue that the
superior court, in comparing the 2006 offer of judgment with
the results of the litigation, erred by: (1) failing to
consider the cost of the 2007 culvert as a monetary payment
by Carnahan to the Windels, to be set off against the $10,
000 he offered to pay in the offer of judgment; (2) holding
that the cost of the additional court-ordered remediation was
only $4, 000; and (3) failing to put a monetary value on the
interference-with-access claim that Carnahan gave up in the
partial settlement. We conclude, however, that the superior
court did not err in its Rule 68 analysis.
1.
The superior court properly considered the 2007
culvert.
We
assumed in Windel I that Carnahan had constructed
the 2007 culvert.[37]Based on that assumption, we noted that
in the past we have "rejected the argument that
voluntary payments and partial settlements must be ignored
when comparing a final judgment to a previous offer of
judgment"; we therefore held that the cost of
constructing the 2007 culvert should factor into the superior
court's analysis on remand as an offset to Carnahan's
offer of judgment.[38] The Windels argue that the superior
court on remand failed to take the 2007 remediation into
account, but the record shows otherwise. The court found as a
factual matter that Carnahan did not build the 2007 culvert
and therefore the construction "was not a voluntary
remediation effort ...