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Brooks Range Petroleum Corp. v. Shearer

Supreme Court of Alaska

July 27, 2018

BROOKS RANGE PETROLEUM CORPORATION, Petitioner,
v.
DANIEL P. SHEARER, Respondent.

          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 ...


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