Appeal
from the Superior Court of the State of Alaska, No. 3
AN-15-07879 CI, Third Judicial District, Anchorage, Frank A.
Pfiffner, Judge.
Whitney A. Power, Power & Power Law, LLC, Anchorage, for
Appellant.
Before: Bolger, Chief Justice, Winfree, Stowers, Maassen, and
Carney, Justices.
OPINION
STOWERS, JUSTICE.
I.
INTRODUCTION
John
Diamond III was assaulted and sustained severe injuries while
a patron at Platinum Jaxx, a restaurant and bar. He filed
suit against Platinum Jaxx, Inc., its landlord, and his
assailant, Noel Bungay. A default was entered against Bungay,
and the landlord was later granted summary judgment on the
claims against it. Diamond proceeded to trial on his
remaining claims against Platinum Jaxx. After an eight-day
trial, the jury returned a special verdict finding Platinum
Jaxx criminally negligent. The jury awarded Diamond $1.85
million in damages and apportioned fault between Platinum
Jaxx and Bungay. Platinum Jaxx was found to be 20% at fault
for the injuries Diamond received, and Bungay was found 80%
at fault. Diamond appeals the superior court's pre-trial
order that precluded him from proceeding on a piercing the
corporate veil theory. He asks us to reverse the order and
remand to allow the superior court to make findings of fact
and conclusions of law on the veil piercing issue. He also
appeals other pre-trial orders excluding evidence, as well as
the superior court's post-judgment cost award allocation.
Because
Diamond did not plead the veil piercing issue, we affirm the
superior court's order. The superior court also did not
abuse its discretion by excluding the challenged evidence and
by allocating costs according to the percentage of fault of
each defendant. We therefore affirm the court's pre-trial
orders and post-judgment cost award.
II.
FACTS AND PROCEEDINGS
In
October 2013 John Diamond, III and his girlfriend were
patrons at Platinum Jaxx, a restaurant and bar in downtown
Anchorage. While the two were sitting at the bar, another
patron, Noel Bungay, hit Diamond in the head with a pint
glass, causing severe disfigurement. In June 2015 Diamond and
his girlfriend filed suit against Platinum Jaxx, Inc., its
landlord, La Mexicana, Inc., and Bungay. Diamond alleged that
(1) Platinum Jaxx violated the dram shop statute by serving
alcohol to a "drunken person, "[1] (2) Platinum Jaxx
was negligent in the operation of its premises and failed to
exercise reasonable care to protect its patrons, (3) La
Mexicana was negligent in its duties as landlord and owner of
the property, (4) Bungay assaulted Diamond causing serious
physical injury, and (5) all parties negligently caused the
girlfriend to suffer severe emotional distress and loss of
consortium. By the time suit was filed, the bar had been
closed for one year, and Platinum Jaxx, Inc. was subsequently
involuntarily dissolved in September 2015.
In May
2016 the superior court entered a default against Bungay. In
June 2017 the court granted summary judgment against the
girlfriend's claims for emotional distress and loss of
consortium. In July the court granted La Mexicana's
motion for summary judgment on the landlord liability claim,
and the remaining parties-Diamond and Platinum Jaxx -
proceeded to a jury trial.
Prior
to trial, in February 2017, Diamond's attorney sent a
letter to Platinum Jaxx's attorney, stating:
"Plaintiffs did not plead piercing the corporate veil as
a count in the Complaint.[2] Nevertheless, for notice purposes,
please be advised that Plaintiffs intend to argue at trial
that [the] corporate veil should be pierced." But
Diamond did not seek to amend his complaint to plead a veil
piercing theory or to join the individual owners of Platinum
Jaxx as defendants. Diamond later sought to introduce
evidence of Platinum Jaxx's lack of liability insurance
to show that Platinum Jaxx was undercapitalized and therefore
its corporate veil should be pierced. Platinum Jaxx moved to
preclude the evidence and argued that Diamond did not plead a
veil piercing theory. In two pre-trial orders the superior
court precluded Diamond from mentioning liability insurance
at trial and stated that it would "not allow [Diamond]
to proceed on a piercing the corporate veil [theory] to
pursue claims against the individual, non-named officers or
shareholders of Platinum Jaxx, Inc." The court
reiterated at trial that Diamond was precluded from
proceeding on a veil piercing theory because "it
wasn't pled" and "would be grossly prejudicial.
. . this late in time."
The
jury returned a special verdict in favor of Diamond, finding
that (1) Platinum Jaxx, with criminal negligence, violated
the dram shop statute; (2) Platinum Jaxx was negligent as a
possessor of land; (3) Platinum Jaxx's negligence was a
legal cause of harm to Diamond; (4) Diamond suffered severe
disfigurement and damages of $1.85 million; and (5) Platinum
Jaxx was 20% at fault and Bungay was 80% at fault. Final
judgment was entered against Bungay and Platinum Jaxx in
September 2017, with costs awarded in October. The judgment
against Platinum Jaxx was for $331, 332.93 in damages (20% of
Diamond's total damage award)[3] and $2, 619.34 in costs (20%
of Diamond's total allowable costs).
Diamond
appeals pre-trial orders by the superior court that (1)
precluded him from proceeding on a piercing the corporate
veil theory, (2) excluded evidence related to the veil
piercing theory, and (3) excluded evidence related to
Platinum Jaxx's reputation that Diamond argues might have
increased the jury's percent allocation of fault to
Platinum Jaxx. Diamond also appeals the superior court's
award of costs based on a percentage-of-fault formula.
Diamond requests that we reverse the aforementioned orders
and remand for specific findings relating to his veil
piercing theory. Platinum Jaxx did not participate in this
appeal.
III.
STANDARDS OF REVIEW
The
superior court precluded Diamond from proceeding on a
piercing the corporate veil theory because it was not
pleaded. Whether a party provided adequate notice to argue a
claim is a question of law we review de novo, [4] and "we will
adopt the rule of law that is most persuasive in light of
precedent, reason, and policy."[5]
The
superior court excluded evidence related to Diamond's
veil piercing theory and to Platinum Jaxx's reputation.
We review trial court "decisions to admit or exclude
evidence under the abuse of discretion
standard."[6] We will find that a trial court abused its
discretion if "the reasons for the exercise of
discretion are clearly untenable or
unreasonable."[7]
The
superior court denied Diamond's requested reallocation of
costs. "We review a trial court's cost award for
abuse of discretion."[8] "When a review of an award of . .
. costs requires an interpretation of the Alaska Civil Rules,
we apply our independent judgment."[9]
IV.
DISCUSSION
A.
The Superior Court Did Not Err By Precluding Diamond From
Proceeding On A Piercing The Corporate Veil Theory.
In its
July 2017 pre-trial order the superior court stated that it
would "not allow [Diamond] to proceed on a piercing the
corporate veil [theory] to pursue claims against the
individual, non-named officers or shareholders of Platinum
Jaxx, Inc." Diamond argues that "[i]n ordering that
[he] was precluded from proceeding on a veil piercing theory,
the trial court did not analyze the veil piercing factors on
the record," and that the court "failed to make any
findings of fact or conclusions of law related to its
corporate veil piercing order." He requests that we
"reverse the trial court's order related to
corporate veil piercing ... [and] remand this case to the
trial court for the purpose of making detailed and explicit
findings."
Diamond
is correct that the superior court did not make findings of
fact or conclusions of law in its order-but it did not need
to. The court's explanations at trial - that the theory
"wasn't pled" and that allowing the theory in
"would be grossly prejudicial... this late in time"
- are adequate to give us "a clear understanding of the
basis of the trial court's decision."[10] The question
before us instead is whether Diamond adequately raised the
veil piercing issue.
Diamond
did not plead a piercing the corporate veil theory in his
complaint, and he did not seek to file an amended complaint
asserting this claim at any point in the proceedings. Diamond
argues that his February 2017 letter to Platinum Jaxx
provided sufficient notice to overcome his failure to plead,
and he relies on L.D. G., Inc. v. Brown for the
proposition that "if a party has notice of the conduct
for which the opposing party is seeking relief, the opposing
party may recover under any theory supported by the
evidence."[11]
In
L.D. G we considered whether failure to plead the
veil piercing theory was "sufficient to keep the
question from going to the jury."[12] The plaintiff
in L.D.G. indicated "six months before the
start of trial[] that he was prepared to argue that
L.D.G.'s corporate veil should be pierced," and he
"submitted supplemental proposed jury instructions . . .
pertaining to piercing the corporate veil, accompanied by a
notice indicating that... he would also argue that the
corporate veil should be pierced."[13] We held that
the parties "were on sufficient notice of [the
plaintiffs] piercing the corporate veil
theory."[14] But L.D.G. is distinguishable
because the plaintiff originally filed suit against both
L.D.G. and the sole shareholder of the company
personally.[15] The sole shareholder was thus on notice
that the plaintiff sought to hold him personally liable.
Diamond's complaint did not name any of the individual
owners of Platinum Jaxx, and he never sought to join the
owners as parties to the suit. They therefore were not
required - nor did they have the opportunity - to defend
themselves individually.
We also
evaluated failure to plead in Alakayak v. British
Columbia Packers, Ltd., reviewing a superior court
ruling "that the plaintiffs did not properly plead
corporate 'alter ego' claims" and were therefore
precluded from conducting discovery on those
claims.[16] While we acknowledged that the complaint
"did not specifically request piercing of the corporate
veil," we also observed that "it did name the
[parent corporations] as defendants, and it stated that it
would seek recovery from those defendants for the actions of
the subsidiaries."[17] We concluded that because the parent
corporations had "notice of the conduct for which the
opposing party [was] seeking relief," the
plaintiffs' "alter ego" theory was therefore
adequately pleaded.[18] Alakayak is thus also
distinguishable because the parent corporations "were
independently sued . . . and the complaint expressly alleged
that they were 'responsible for the liabilities' of
their wholly owned subsidiaries."[19] Diamond's
complaint contains no such language that would put the
individual owners of Platinum Jaxx on notice that they might
be held personally liable.
In both
Z.D. G. and Alakayak we relied on McCormick v.
City of Dillingham for the proposition that notice can
be sufficient to overcome the failure to plead.[20] In
McCormick we considered whether a party who
originally brought suit on a de facto partnership theory
could later proceed on a piercing the corporate veil
theory.[21] We concluded that because the initial
complaint named McCormick as the sole defendant, he was on
notice that he might be held personally liable.[22] Accordingly,
L.D.G, Alakayak, and McCormick all involved
some form of actual notice - in the pleadings, to a party to
the case - that the plaintiff sought to hold the party
liable.
Here,
Diamond's complaint provides no notice to the individual
owners of Platinum Jaxx that they might be held personally
liable. And because the individual owners were not parties to
Diamond's suit against Platinum Jaxx, Diamond's
February 2017 letter to Platinum Jaxx's counsel did not
provide the owners notice of Diamond's intent to pierce
the corporate veil. Being actually named as a party is
important. A named party has the right to assert affirmative
defenses, counterclaims, and cross-claims and to conduct
discovery, file motions, and make its own defense at trial.
And a named party may be held personally liable for its share
of damages. It is difficult to understand how Diamond
...