Petition for Review from the Superior Court No. 2BA-15-00300
CI of the State of Alaska, Second Judicial District, Barrow,
Angela Greene, Judge.
Elizabeth Hodes and Anne Marie Tavella, Davis Wright Tremaine
LLP, Anchorage, for Petitioner.
James
K. Wilkens, Bliss Wilkens, Anchorage, and Robert Campbell,
Caliber Law Group, Barrow, for Respondent.
Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, and
Carney, Justices.
OPINION
MAASSEN, Justice.
I.
INTRODUCTION
We
granted a petition for review to resolve a venue dispute in
an employment case. Daniel Shearer alleges that Brooks Range
Petroleum Corporation (BRPC) promised him a ten-year term of
employment, then terminated his employment two and a half
years later. Shearer filed suit in the Second Judicial
District, where he alleged the parties had negotiated and
formed their contract. BRPC filed a motion to dismiss the
case or to change venue to the Third Judicial District, where
the contract was executed and where Shearer had performed
most of his job duties. The superior court denied the motion,
thus retaining venue in the Second Judicial District.
We
conclude that neither Shearer's tort claims nor his
contract-based claims arose in the Second Judicial District,
and the chosen venue was therefore not proper. We reverse the
superior court's order denying a change of venue.
II.
FACTS AND PROCEEDINGS
A.
Facts
Some of
the factual background of this case is controverted. Where
there is a reasonable dispute, we construe the facts in
Shearer's favor.[1]
Shearer,
a resident of Alberta, Canada, alleged that in October 2011
he was "working as a drilling consultant for British
Petroleum" (BP) when he was "presented an
attractive offer of full time employment with BP." While
considering BP's offer, Shearer learned that the
"key drilling consultant" for another North Slope
operator, BRPC, had suffered a heart attack, and he
"volunteered to help." He covered the consultant
position for BRPC during January 2012 at the Mustang location
near Nuiqsut.[2]
While
working there Shearer was approached by John Jay
"Bo" Darrah, BRPC's co-founder and then-chief
executive officer, who "recruited" Shearer to
"fill a permanent full-time position with BRPC."
Shearer told Darrah about BP's employment offer,
"emphasizing the importance... of long-term employment
security." According to Shearer, he and Darrah
"verbally confirm[ed] [a] guarantee of long-term
employment security of at least 10 years . .. [and] shook
hands on the agreement." "In reliance on these
promises and representations," Shearer ceased
negotiating for a permanent position with BP.
On
January 30, 2012, Shearer traveled to Anchorage and attended
a dinner hosted by BRPC, where he was "welcomed and
introduced as the 'new employee.'" The next day
the parties executed a short written employment contract at
BRPC's Anchorage office, effective February 1, 2012. The
contract made no reference to a guaranteed term of
employment.
The
parties dispute where the terms of their agreement were
negotiated and accepted. Shearer contends that the agreement
was fully negotiated at BRPC s Mustang location on the North
Slope and that the written contract executed in Anchorage
simply "memorializ[ed] the basic compensation terms of
the verbal employment contract. . . reached earlier."
BRPC contends that it negotiated the material terms of the
agreement and hired Shearer in Anchorage.
The
parties also dispute where Shearer was expected to do his
work. Shearer contends that he was hired to work primarily on
the North Slope, though he concedes that he "would be
expected to work in BRPC's Anchorage office during
periods when there was no activity on the North Slope."
BRPC contends that "Shearer was hired to work as a
Drilling Manager in BRPC's Anchorage, Alaska
office," but it concedes that "Shearer did travel
to the project site on the North Slope." The parties
agree that, as it turned out, Shearer worked primarily at
BRPC's Anchorage office.
In 2014
Shearer learned that BRPC might be sold. He met with the
president and chief executive officer, Barton J. Armfield,
and another BRPC employee, and he reminded them of
Darrah's oral commitment to a ten-year employment term.
But in August 2015 he "was verbally advised by Armfield
that his employment would be terminated." He was called
the next day by another corporate officer, who advised him
that "he would be receiving a letter informing him of
his release from employment." BRPC asserts that its
phone calls were made from Anchorage and the termination
letter was sent from Anchorage to Shearer's home in
Canada, which Shearer does not dispute.
B.
Proceedings
Shearer
sued BRPC for misrepresentation, breach of contract, and
related claims. He served the summons and complaint on
Armfield, BRPC's registered agent, in Anchorage in the
Third Judicial District, but he filed his suit in Utqiagvik
in the Second Judicial District. The parties dispute the
location of BRPC's principal place of business:
Shearer's complaint asserted that it was on the
"North Slope, Alaska," but BRPC responded that it
was in Anchorage. In an affidavit filed in support of
BRPC's motion to change venue, Armfield asserted that it
"does not maintain any permanent offices or employees in
the Second Judicial District or Barrow [Utqiagvik]" and
that it "currently ha[d] no employees or active
operations in" the Second Judicial District. In a
responsive affidavit Shearer asserted that he was
"informed and believe[d] there [was] current activity at
BRPC's Mustang Pad" on the North Slope and that he
also believed "that BRPC [was] in the process of
designing a production facility that [would] be situated near
Nuiqsut, within the Second Judicial District."
BRPC
filed a motion to dismiss for improper venue or alternatively
to transfer venue to Anchorage in the Third Judicial
District. The superior court in Utqiagvik considered the
parties' pleadings and affidavits and denied the motion.
It decided that Shearer's contract claims arose in
Anchorage for venue purposes because that was "the place
of intended performance for Shearer's employment
contract," but that his tort claims arose in the Second
Judicial District because he "was first injured when he
relied on BRPC's alleged misrepresentations in
Nuiqsut" by "ceas[ing] negotiations with BP."
To
decide whether venue for the two different types of claims
could remain in Utqiagvik, the court weighed the private
interests of the litigants and the interests of the public.
It noted that Shearer had a private interest in the venue of
his choice but that "it would be easier and cheaper for
BRPC to litigate the case in Anchorage"; "it is
likely that most of the witnesses reside in Anchorage";
"it would be easier for witnesses outside of Alaska to
travel to Anchorage" than to Utqiagvik; and "most
of the evidence is in Anchorage." But the court also
noted that the cost of transporting employment records from
Anchorage to Utqiagvik was "minimal given that the
entire contents could be put on a thumb drive or CD" and
that "[w]itnesses c[ould] be deposed in Anchorage,"
though they "would have to testify in [Utqiagvik] if the
parties felt it necessary to have the live testimony."
The
superior court decided that these private interests were
outweighed by the public interest of "the local
community... in having this controversy decided on the North
Slope because a significant portion of the alleged wrongdoing
occurred in Nuiqsut." The court concluded that because
BRPC chose to do business on the North Slope-whose residents
"work in those jobs and depend on the money to sustain
them" - local jurors had "a stake in the
matter" that weighed heavily in favor of retaining venue
in the Second Judicial District. The court also declined to
transfer venue on convenience grounds, finding that it was
not necessary for "the convenience of witnesses and the
ends of justice."[3]
The
parties filed cross-petitions for review.[4] We granted
BRPC's petition and asked the parties to address the
following issues:
(1) Where did the claim arise for the alleged tort of
misrepresentation?
(2) Where did the claim arise for the alleged breach of
contract?
(3) Should we adopt the doctrine of ancillary (or pendent)
venue?
(4) Did the superior court abuse its discretion in denying a
change of venue under AS 22.10.040?
(5) How should we address issues of overlapping venue?
III.
STANDARD OF REVIEW
Whether
the plaintiffs initial choice of venue is proper under Alaska
Civil Rule 3(c) is a legal question we review de novo,
applying our independent judgment to adopt the rule of law
that is most persuasive in light of precedent, reason, and
policy.[5]
IV.
DISCUSSION
Venue
requirements "are designed to [e]nsure that litigation
is lodged in a convenient forum and to protect the defendant
against being sued in an arbitrary place."[6] Though important,
venue has rarely been addressed in our case law. In the
discussion that follows we first address how trial courts
should view the evidence on a motion based on improper venue.
We then address the tests used to determine where tort and
contract claims arise for venue purposes. Applying those
tests to Shearer's claims in this case, we decide that
the Second Judicial District was not a proper venue because
the claims did not arise there.
A.
The Plaintiff Bears The Burden Of Proving Proper Venue;
However, Absent An Evidentiary Hearing, The Court Evaluates
The Pleadings In The Light Most Favorable To The
Plaintiff.
By
statute, "[v]enue for all actions shall be set under
rules adopted by the supreme court."[7] Alaska Civil Rule
3 governs venue. Actions involving real property are
addressed by Rule 3(b); other civil actions are addressed by
Rule 3(c). "[P]laintiffs ... must commence suit in [a]
proper Rule 3 venue, and then, if that forum is inconvenient,
move for a change of venue under AS
22.10.040."[8] "This rule precludes plaintiffs from
selecting a forum they believe is convenient without regard
to Civil Rule 3."[9]
Alaska
Civil Rule 12(b) allows objections based on improper venue to
be asserted in a responsive pleading or made by motion.
Because our Rule 12(b) is substantially similar to Federal
Rule of Civil Procedure 12(b), [10] we look to federal
practice for guidance in applying the rule. In the federal
courts there is a split of authority over who bears the
burden of proof on the question of proper
venue.[11] Some courts require a moving defendant
to bear the burden of proving that the plaintiffs choice of
venue is improper, [12] but an apparent majority - and what
Professors Wright and Miller deem the "correct"
view - places the burden of proof on the plaintiff, reasoning
that it is the plaintiffs obligation in the first instance to
file suit in a proper forum.[13]
We
follow the majority view, which is more consistent with our
expectation that plaintiffs will "commence suit in the
proper Rule 3 venue."[14] To withstand a motion based on
improper venue, the plaintiff must present a prima facie case
that the chosen venue is proper.[15] The trial court may
consider evidence outside the pleadings but should take the
plaintiffs uncontradicted allegations as true and construe
reasonable inferences and factual conflicts in favor of the
plaintiff.[16]
"As
a result, at least until facts are resolved, in many cases
the non-moving party will survive the Rule 12(b)(3)
motion" solely because of the lack of factual
development.[17] "To resolve such motions when
genuine factual issues are raised, it may be appropriate for
the [trial] court to hold a Rule 12(b)(3) motion in abeyance
until [it] holds an evidentiary hearing on the disputed
facts."[18] Whether to hold a hearing is committed
to the trial court's discretion.[19] "Alternatively, the
[trial] court may deny the Rule 12(b)(3) motion while
granting leave to refile it if further development of the
record eliminates any genuine factual
issue."[20] If the court does hold an evidentiary
hearing, the plaintiff must prove that the chosen venue is
proper by a preponderance of the evidence.[21]
B.
The Second Judicial District Is Not A Proper Venue For
Shearer's Misrepresentation Claims Because The Claims Did
Not Arise There.
As
relevant here, Rule 3(c) provides that "[i]f ... a
defendant can be personally served within a judicial district
of the State of Alaska, the action may be commenced either
in: (1) the judicial district in which the claim arose; or
(2) a judicial district where the defendant may be personally
served." Shearer served BRPC in Anchorage, in the Third
Judicial District, and venue is proper there under Rule
3(c)(2). Shearer does not contend that BRPC could also have
been personally served in the Second Judicial District; our
focus is therefore on whether his "claim arose"
there, which would make it an alternative proper venue under
Rule 3(c)(1).
Shearer's
complaint alleges claims in both tort and contract. His tort
claims, which we address first, are for
negligent[22] and intentional
misrepresentation.[23] Both types of misrepresentation claims
require that the plaintiff have suffered actual
harm.[24]
We
first decided where a tort "claim arose" for venue
purposes in Ebell v. Seapac Fisheries, Inc.[25] At the
time, venue in cases not involving real property was governed
by AS 22.10.030(b) - since repealed-which presaged Civil Rule
3(c). The statute provided: "If... a defendant can be
personally served within a judicial district of the state,
the action against that defendant shall be commenced in that
judicial district or in the judicial district in which the
claim arose." The plaintiff in Ebell alleged
that a law firm located in the Third Judicial District was
negligent in failing to advise him of the need to comply with
certain fisheries laws, "resulting in the seizure of
[the plaintiffs] vessels in Norton Sound in the Second
Judicial District."[26] The seized vessels were ordered to
Dutch Harbor in the Third Judicial District, where eventually
the fish on board were forfeited "and other losses were
incurred."[27]
The
plaintiff served the law firm with a summons and complaint in
the Third Judicial District, the firm's place of
business, but filed suit in the Second.[28] The superior
court denied the defendants' motion to change venue,
determining that the "claim arose" in the Second
Judicial District where "the injury
occurred."[29] This court affirmed.[30] We observed
that "[w]hen AS 22.10.030(b) was enacted in 1971, the
'claim arose' language had a generally understood
meaning in the context of tort suits," which was that a
claim "arose where the last event necessary to make the
defendant liable for the tort took place."[31] We further
explained:
The last event occurred when the harmful force, set in motion
by the defendant's negligence, first took effect on the
body or the property of the plaintiff. Thus, a claim for tort
arose where the harmful force first took effect, or where the
plaintiff suffered injury.[32]
We
concluded in Ebell that although the "harmful
force" may have been initiated in the Third Judicial
District, where the allegedly negligent advice was given,
"the harmful force first took effect when the vessels
were seized in the Second Judicial District"; it was
therefore "appropriate to say that the Second Judicial
District [was] a district in which the claim
arose."[33]
When a
tort is complete is a question that also arises in the
context of statutes of limitations. "[T]he statute of
limitation[s] as to torts does not usually begin to run until
the tort is complete," which ordinarily does not occur
"until there has been an invasion of a legally protected
interest of the plaintiff."[34] In Jones v.
Westbrook we considered a claim that a lawyer, retained
to help sell a business, had committed malpractice by failing
to ensure that his client had a recorded security interest in
the business's physical assets.[35] Over seven years later
the Internal Revenue Service filed tax liens against the
assets, displacing the client's unsecured interest; we
held it was only then that the malpractice claim was
completed by the occurrence of "an appreciable
injury" to the client.[36]
In
Austin v Fulton Insurance Co., an insured alleged
that his insurer had negligently failed to provide requested
earthquake coverage.[37] The alleged negligence occurred in 1961,
but the insured was not aware of it until after the 1964
earthquake, when he suffered an uncovered loss.[38] We concluded
that the statute of limitations began to run in 1964,
reasoning that the insured's interests were not invaded
until he needed the coverage and discovered that he lacked
it.[39] We held that "there must be an
injury or harm to [the insured] as a consequence of [the
insurer's] negligence to serve as a basis for recovery of
damages before the tort became actionable and before the
period of limitation commenced to run."[40] We supported
this conclusion by reference to the First Restatement of
Torts, which states: "A cause of action for
misrepresentation in a business transaction is complete when
the injured person has been deprived of his property or
otherwise has suffered pecuniary loss or has incurred
liability as a result of a
misrepresentation."[41]
In
light of these authorities, we conclude that Shearer failed
to make a prima facie case that his misrepresentation claims
arose in the Second Judicial District. The record, viewed in
the light most favorable to Shearer, shows that the alleged
misrepresentations were made in the Second Judicial District,
while his contract was being negotiated near Nuiqsut, and
that Shearer justifiably relied on the misrepresentations in
the Second Judicial District when he ceased negotiating for a
full-time job with BP. But the representation and reliance
elements of a tort claim are not enough to "make the
defendant liable for the tort":[42] in fact there
was no tort until Shearer had suffered a pecuniary
loss, and he suffered no loss as long as he continued in
BRPC's employ. The alleged misrepresentations - "the
harmful force" - "took effect" on Shearer only
when BRPC terminated his employment two and a half years
later by telephone from Anchorage while he was at home in
Canada. Because Shearer suffered no injury in the Second
Judicial District, his tort claims cannot have arisen there
for venue purposes.
Shearer
argues that he first felt the harmful effect of the alleged
misrepresentations in the Second Judicial District
immediately after they were made, when he "gave up his
full-time consulting work for BP on the North Slope and
ceased negotiating the terms of permanent employment with BP,
probably foregoing consideration of employment with BP
forever." But Shearer had no tort claim at that time and
no reason to sue BRPC. He was not injured by accepting the
job he preferred in reliance on BRPC's alleged
misrepresentations; the effect of the alleged
misrepresentations was not harmful until he was terminated,
completing the tort.
We have
cautioned against blurring the reliance and loss elements of
a misrepresentation claim. In Anchorage Chrysler Center,
Inc. v. Daimler ChryslerMotors Corp. (Anchorage Chrysler
II), a car dealership sued a manufacturer for
misrepresentation in the context of failed plans to expand
the dealership's business.[43] We considered whether the
dealership had established the loss element of the
misrepresentation claim.[44] While noting the existence of minor
and unquantifiable losses made in reliance on the alleged
misrepresentation, we rejected the dealership's claim
that a weakening of its bargaining position was itself a harm
that satisfied the elements of the tort.[45] We noted that
"there is no precedent in Alaska for considering a
change in bargaining position to constitute in itself a loss
in a fraud action."[46] We explained that absent
"unusual circumstances ... [i]t would not be appropriate
to generally broaden the fifth element of the fraudulent
misrepresentation tort by treating changed bargaining
position as, in and of itself, an actual
loss."[47] We reasoned:
In virtually any fraudulent misrepresentation case involving
negotiations or a contract, the reliance element will involve
the use of misrepresentation to influence what a party
consents to do or not do. Equating a compromised bargaining
position with actual loss would thus cause the loss and
reliance elements of the tort to collapse into a single
element. Every time a party could show that it acted in
reliance on a fraudulent misrepresentation (the fourth
element of the tort), it could automatically assert the
misrepresentation harmed its bargaining power and caused a
loss (the fifth element).[48]
Rejecting
the dealership's argument that reliance itself equaled
loss, we concluded that "[t]he loss in fraudulent
misrepresentation must be a pecuniary loss that is caused
by the plaintiffs reliance on the
misrepresentation."[49] Under this reasoning, we cannot
accept Shearer's argument - adopted by the superior court
- that the "harmful force" of BRPC's alleged
tort took effect in Nuiqsut, when Shearer relied on the
alleged misrepresentations to his later detriment.
It was
therefore error for the superior court to conclude that
Shearer's misrepresentation claims arose in the Second
Judicial District.
C.
The Second Judicial District Is Not A Proper Venue For
Shearer's Contract Claims Because ...