ROSEMARIE HOTCH, Plaintiff,
KLUKWAN, INC. et al., Defendant.
FILED in the Trial Courts State of Alaska First Judicial District Petersburg
April 17, 2012
Case No. 1PE-09-76 CI
MEMORANDUM AND ORDER RE: MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM
Defendants Klukwan, Inc. (KLI) and the Trustee Defendants (collectively KLI Defendants) move to dismiss certain of Ms. Hotch’s claims for failing to state a claim for which relief can be granted. Ms. Hotch opposes the KLI Defendants’ motion. The KLI Defendants’ motion is, for the following reasons, GRANTED IN PART and DENIED IN PART.
The KLI Defendants’ motion to dismiss presents four issues:
a. Whether the court has the legal authority to remove KLI Trust Trustees from office.
b. Whether the court has the legal authority to reform the KLI Trust instruments to provide that KLI Trust Trustees cannot also be members of the KLI Board of Directors.
c. Whether the court has the legal authority to terminate the General Income Trust (GIT).
d. Whether the court has the legal authority to issue an injunction enjoining any further distributions from the GIT.
Ms. Hotch alleges in her Second Amended Complaint, in pertinent part, that:
a. KLI is an Alaska Native Claims Settlement Act (ANCSA) corporation.
b. KLI chartered and registered 3 ANCSA Settlement Trusts in 1995: the GIT, LIT, and ET. Klukwan, Inc. funded the Trusts. KLI is the settlor for each Trust. The Trust documents provide that the Trustees of all 3 Trusts are the Directors of KLI.
c. The individual Defendants were all KLI Trust Trustees and KLI Board members “during the times relevant to this suit.”
d. The KLI Defendants ”have been looting the three [KLI] Trusts” to provide income for KLI by means of an illegal loan from the GIT to CIV, charging exorbitant fees and collecting advances under the Service Agreements, and using KLI Trust funds to pay for KLI annual meetings.
e. The GIT Trustees breached their fiduciary duties by approving the CIV loan.
f. KLI was out of funds by 2005. The KLI Directors (KLI Trusts’ Trustees) devised a scheme to use Service Agreements as vehicle for charging the KLI Trusts exorbitant amounts for managements services performed by KLI employees and to collect from the KLI Trusts $3.6 million in advance payments for services to be performed under the Service Agreements.
g. The Trustees breached their fiduciary duties by approving the transfers of funds per the Service Agreements, or by not knowing about the transfers.
h. The Trustees are “looting” the KLI Trusts by improperly having the Trusts pay for KLI’s expenses.
i. The Trustees interpreted the GIT Trust Agreement as requiring that the principal balance not be below the 1998 level of $28,666,417 until 2009. The Trustees reiterated this policy in 2008, when the balance was approximately $17.5 million by maintaining that there would be no distributions until the balance was returned to $28,666,417 or greater. The Trustees suddenly changed course in 2009 and authorized distributions. The Trustees voted 5-4 on December 2, 2010 to approve a distribution of at least $2.22 million.
j. The GIT Trustees violated the Alaska Uniform Prudent Investor Act by leaving $2.27 million of the GIT’s funds in a money market account after they decided not proceed with the 2010 beneficiary distribution.
k. The Trustees violated their fiduciary duties by: not “employing the ordinary safeguards available to them”; withholding information from minority Trustees; and, failing to provide required monthly financial reports to all of the Trustees.
l. KLI conveyed timberland to the LIT in 2004. KLI illegally amended the conveyance in 2007 so that it retained the right to harvest timber on the conveyed lands. KLI entered into a Timber Agreement with Alcan in 2007 for the harvesting of trees on the conveyed land. KLI has retained the contract payments. KLI unlawfully extended the Timber Agreement. Alcan gave a promissory note in the amount of $875,000 to a KLI subsidiary (K-Ply, Inc.) in 2007. The note was sold to the LIT in 2007 in violation of section 13.2 of the LIT Trust Agreement. The LIT has not received any of the interest paid on the note. The Trustees breached their fiduciary duties by purchasing the note.
m. The KLI Trusts are improperly indemnifying the individual Defendants by paying attorney’s fees and other costs associated with this case.
Ms. Hotch’s Prayer for Relief in her Second Amended Complaint includes requests that:
a. The court declare that the individual Defendants have violated their fiduciary duties owed to the KLI Trusts.
b. The court find that “the LIT’s purchase of the Alcan Note was a violation of fiduciary duties.”
c. The court find that the Trustee defendants violated their fiduciary duties by improperly receiving indemnification from the KLI Trusts in the form of the KLI Trusts paying their attorney’s fees and costs herein.
d. The court remove the individual defendants from office as Trustees of the KLI Trusts and prohibit them from ever serving as Trustees of a KLI Trust in the future.
e. The court reform the KLI Trusts to provide that the Trustees will not also be members of the KLI Board of Directors.
f. The court require a vote of the KLI Trustees on whether to terminate the GIT and related full disclosure. In the alternative, that the court order the GIT terminated and the balance of its funds distributed to the Beneficiaries.
g. The court issue an injunction prohibiting the KLI Trusts from making any further disbursements to KLI unless the GIT is terminated per § 7 of the GIT Trust Agreement.
h. The court find that the individual Defendants are liable for the KLI Trusts’ losses causes by the “defendants” breach of fiduciary duties.
i. The court award her damages for the “defendants” breaches of “their” duties of disclosure per AS 10.06.450(d).
j. The court award damages for the losses incurred by the KLI Trusts.
k. The court award punitive damages to “compensate the plaintiff” for the “defendants” conduct.
l. The “defendants” be required to pay judgment damages, pre-judgment interest, “plaintiff’s litigation costs,” and attorney’s fees “that are incurred in this action.”
m. And such other relief as the court determines is just and proper.
a. Parties’ Positions
The KLI Defendants argue that Ms. Hotch, in requesting that the court remove KLI Trust Trustees from office, reform the KLI Trusts’ Trust Agreements, terminate the GIT and enjoin distributions from the GIT, is seeking relief which the court does not have the legal authority to provide because: the KLI Trusts are not parties; Ms. Hotch has not stated a claim for reformation under AS 13.36.345 or AS 13.36.350; and, in any event, federal law (ANCSA) preempts any authority the court may have under Alaska trust law to provide the relief requested.
Ms. Hotch counters that the KLI Defendants’ motion must be denied because: the motion focuses on her requests for relief and not on her underlying claims; she has sufficiently pled a claim for reformation; ANCSA does not preempt the Alaska Trust Code; and, the court has the authority under AS 10.06.463 to remove Trustee Defendants from their positions Directors of KLI.
The court issued a decision on March 30, 2012 which addressed the KLI Defendants’ claim that the KLI Trusts are indispensable parties. The same is incorporated herein by this reference.
Alaska Civil Rule 12(b)(6) provides that a defendant may present by way of motion the defense that the plaintiff has failed to state a claim upon with relief can be granted. “A complaint should not be dismissed [on this basis] ‘unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'”
“[I]t is enough that the complaint set forth allegations of fact consistent with some enforceable cause of action on any possible theory.” The court “must presume all factual allegations of the complaint to be true and [make] all reasonable inferences…in favor of the non-moving party.” “[M]otions to dismiss for failure to state a claim are disfavored and should rarely be granted.”
Alaska Statute 13.36.015(a), in part, provides:
By registering a trust, or accepting the trusteeship of a registered trust, the trustee submits personally to the jurisdiction of the court in any proceeding under AS 13.36.035 relating to the trust that may be initiated by any interested person while the trust remains registered…
Alaska Statute 13.36.035, in part, provides:
(a) The court has exclusive jurisdiction of proceedings initiated by interested parties concerning the internal affairs of trusts, including trusts covered by (c) of this section. Except as provided in (c) and (d) of this section, proceedings that may be maintained under this section are those concerning the administration and distribution of trusts, the declaration of rights, and the determination of other matters involving trustees and beneficiaries of trusts. These include proceedings to
(1) appoint or remove a trustee under AS 13.36.076;
(2) review trustee’s fees and to review and settle interim or final accounts;
(3) ascertain beneficiaries, determine any question arising in the administration or distribution of any trust including questions of construction of trust instruments, instruct trustees, and determine the existence or nonexistence of any immunity, power, privilege, or right; and
(4) release registration of a trust.
(b) Neither registration of a trust nor a proceeding under this section results in continuing supervisory proceedings. The management and distribution of a trust estate, submission of accounts and reports to beneficiaries, payment of trustee’s fees and other obligations of a trust, acceptance and change of trusteeship, and other aspects of the administration of a trust shall proceed expeditiously consistently with the terms of the trust, free of judicial intervention and without order, approval, or other action of any court, subject to the jurisdiction of the court as involved by interested parties or as otherwise exercised as provided by law.
(c) A provision that the laws of this state govern the validity, construction, and administration of the trust and that the trust is subject to the jurisdiction of this state is valid, effective, and conclusive for the trust if
(1) some or all of the trust assets are deposited in this state and are being administered by a qualified person; in this paragraph, “deposited in this state” includes being held by a checking account, time deposit, certificate of deposit, brokerage account, trust company fiduciary account, or other similar account or deposit that is located in this state;
(2) a trustee is a qualified person who is designated as a trustee under the governing instrument or by a court having jurisdiction over the trust;
(3) the powers of the trustee identified under (2) of this subsection include or are limited to
(A) maintaining records for the trust on an exclusive or nonexclusive basis; and
(B) preparing or arranging for the preparation of, on an exclusive basis or a nonexclusive basis, an income tax return that must be filed by the trust; and
(4) part or all of the administration occurs in this state, including physically maintaining trust records in this state.
(d) The validity, construction, and administration of a trust with a state jurisdiction provision are determined by the laws of this state, including the
(1) capacity of the settlor;
(2) powers, obligations, liabilities, and rights of the trustees and the appointment and removal of the trustees under AS 13.36.076; and
(3) existence and extent of powers, conferred or retained, including a trustee’s discretionary powers, the powers retained by a beneficiary of the trust, and the validity of the exercise of a power.
Alaska Statute 13.36.076(a),(b) provide, in part, that:
Removal of trustee. (a) A trustee may be removed from office…
(3) under a procedure specified in the trust instrument;
(4) by a court on petition by the settlor, a co-trustee, a qualified beneficiary, or the court on its own initiative, if
(A) the court finds…a basis for removal under (b)… there is not a trust protector or another specified person who is currently acting and who may contacted by the settlor, trustee, or qualified beneficiary…, and there is not a procedure for removal specified in the trust instrument.
(B) notwithstanding the appointment of a trust protector under AS 13.36.070 or the existence of a procedure for trustee removal specified in the trust instrument, there has been a serious breach of trust as specified in (b)(1) of this section.
(b) A trustee may be removed from office under (a)(4)…if the court finds that removal would be in the best interests of all beneficiaries and,
(1) for (a)(4)(A) or (B)… the trustee has committed a serious breach of trust under the terms of the trust and AS 13.36.070 – 13.36.290; or
(2) for (a)(4)(A) of this section,
(A) a lack of cooperation among co-trustees substantially impairs the administration of the trust;
(B) a trustee is unfit, is unwilling, or persistently fails to administer the trust effectively; or
(C) there has been a substantial change of circumstances not anticipated by the settlor, removal is requested by all of the qualified beneficiaries, the court finds that removal of the trustee best serves the interests of all of the beneficiaries and is not inconsistent with a material purpose of the trust, and a suitable co-trustee or successor trustee is available.
Alaska Statute 13.36.095(b) provides: “Subject to AS 13.36.105 – 13.36.220, a trustee is personally liable for obligations arising from ownership or control of property of the trust estate of for torts committed in the course of administration of the trust estate only if personally at fault.”
Alaska Statute 13.36.180(a), (b) provides:
(a) A trustee who has incurred personal liability for a tort committed in the administration of the trust is entitled to exoneration for the liability from the trust property if the trustee has not discharged the claim, or to reimbursement… out of trust funds if the trustee has paid the claim, if the trustee… was not guilty of personal fault in incurring the liability.
(b) If a trustee has incurred personal liability for a tort committed in the administration of the trust and that tort increases the value of the trust property, the trustee is entitled to exoneration or reimbursement to the extent of the increase in value as a result of the tort even though the trustee would not otherwise be entitled to exoneration or reimbursement.
Alaska Statute 13.36.190 provides that: “A trustee may be held personally liable for a tort committed by the trustee… subject to the rights of exoneration or reimbursement under AS 13.36.180.”
Alaska Statute 13.36.198 provides: “If a trustee violates a provision of AS 13.36.105 – 13.36.200, the trustee may be removed as a trustee under AS 13.36.076 and… a beneficiary, co-trustee, or successor trustee may retreat the violation as a breach of trust.”
Alaska Statute 13.36.345(a) provides: “On petition by a trustee, settlor, or beneficiary, a court may modify the administrative or dispositive terms of an irrevocable trust or terminate an irrevocable trust if, because of circumstances not anticipated by the settlor, modification or termination would substantially further the settlor’s purposes in creating the trust.“
Alaska Statute 13.36.350 provides:
(a) On petition by a trustee… a court may reform the terms of an irrevocable trust, even if the trust instrument is not ambiguous, to conform to the settlor’s intent if the failure to conform was due to a mistake of fact or law, whether in expression in the trust or inducement to create the trust, and if the settlor’s intent can be established by clear and convincing evidence.
(b) A court may consider evidence including direct evidence contradicting the plain meaning of the text, when determining the settlor’s intent or for any other purpose under this section.
Alaska Statute 13.36.390(1)(B) provides that a “party in interest” for an irrevocable trust means “each trustee serving at the time” and “each beneficiary entitled to receive a mandatory distribution of income or principal from a trust…”
Alaska Statute 10.06.463 provides that:
The superior court may, at the suit of the board or the shareholders holding at least 10 percent… remove from office a director for fraudulent or dishonest act, gross neglect of duty, or gross abuse of authority or discretion with reference to the corporation and may bar from reelection a director removed in that manner for a period prescribed by the court. The corporation shall be made a party to the suit.
The Alaska Supreme Court has stated:
There is a presumption against federal preemption of state law, and preemption doctrine “enjoin[s] seeking out conflicts between state and federal regulation where none clearly exists”…
There are three major types of federal preemption of state law: “express,” “field,” and “conflict” preemption. Express preemption occurs when Congress explicitly declares an intent to preempt state law in a particular area…
Field preemption is the term used when the federal law governing a particular area is so comprehensive and so complete that Congress is said to have completely occupied a field, leaving no room for state law…
Conflict preemption occurs when a state law and a federal law are in conflict, either because compliance with both state and federal law is impossible or because the state law “stands as an obstacle to accomplishment of the full purposes and objectives of Congress.”
The Alaska Supreme Court has also stated:
The law of federal preemption “is derived from the supremacy clause of… the federal Constitution”… Thus, state regulation that conflicts with federal law cannot stand.
To determine whether congress has preempted state action… we “look to the policy, intent, and context of the federal statute to determine whether application of the state law would frustrate operation of the federal one.” Generally, we apply a two-step analysis to preemption questions. First, we look to see whether Congress has overtly preempted the subject matter the state wishes to regulate, either explicitly, by declaring its intent to preempt all state authority, or implicitly, by occupying the entire field of regulation on the subject in question. Second, if neither kind of direct preemption is found, we look to whether federal and state law conflict in this particular instance. If state and federal regulations openly conflict of if state regulations obstruct the purpose of federal regulations, then the supremacy clause blocks the state regulation.
43 U.S.C. 1629e provides, in part:
(a) Conveyance of corporate assets
(1)(A) A Native Corporation may convey assets… to a Settlement Trust in accordance with the laws of the State (except to the extent that such laws are inconsistent with this section and section 1629b of this title).
(b) Authority and limitations of a Settlement Trust
(1) The purpose of a Settlement Trust shall be to promote the health, education, and welfare of its beneficiaries and preserve the heritage and culture of Natives. A Settlement Trust shall not —
(A) operate as a business;
(B) alienate land or any interest in land received from the Settlor Native Corporation (except if the recipient of the land is the settlor corporation…); or
(C) discriminate in favor of a group of individuals composed only or principally of employees, officers, or director of the settlor Native Corporation.
An alienation of land or an interest of land in violation of this paragraph shall be void ab initio and shall not be given effect by any court.
(2) A Native Corporation that has established a Settlement Trust shall have exclusive authority to —
(A) appoint the trustees of the trust; and
(B) remove the trustees of the trust for cause.
Only a natural person shall be appointed a trustee of a Settlement Trust. An appointment or removal of a trustee in violation of this paragraph should be void ab initio and shall not be given effect by any court.
The legislative history for 43 U.S.C. 1629e provides, in part:
The Settlement Trust section is intended to enable Native Corporations to convey assets to Settlement Trusts in which the assets may be better manage for the benefit of Alaska Natives. The provision is in recognition of the fact the corporate form of ownership, as mandated by the Act, has not always served the best interests of the Alaska Natives, and that in many cases the purposes of the Act may be carried out better by allowing Alaska Natives to alter their form of ownership.
Settlement Trusts are expected to serve two principal functions. They are intended to be permanent, Native-oriented institutions which shall hold and manage, in perpetuity, any historic or culturally significant surface lands… for the benefit of the beneficiary populations. It shall manage any other surface lands conveyed or culturally significant assets in like fashion. The Trusts will require income generated from assets conveyed to it, or other sources, to carry out these responsibilities.
The other prime function relates to the health, education and economic welfare of its beneficiaries. Trusts may receive conveyances… or other assets which it must manage prudently, and passively, in the interests of its beneficiaries, and in conformance with the terms and conditions set forth in the trust instrument and this Act…
Subsection (b)(1) establishes certain requirements and characteristics of the Settlement Trust. By doing so, Congress expressly intends to preempt State law with regard to these elements of Settlement Trusts. By requiring that these trusts be registered with the State of Alaska, Congress seeks to establish that the laws of the State of Alaska, rather than any other State, apply and that the State is the proper venue and jurisdiction. Congress does not, however, intend to prohibit diversity jurisdiction in the federal courts.
While setting forth Settlement Trust characteristics, Congress intentionally left discretion to the Native Corporations to formulate and state the terms and conditions governing the Trust through the trust instrument, consistent with the provisions of this Act and State law. Specifically, the settler Native corporation shall have the authority to set forth the terms and conditions contained in the trust instrument, including but not limited to the employment of agents and professionals, investment standards, bonding requirements, indemnities, accumulations, distributions, or restrictions on alienation of beneficial interests. State courts will retain their traditional authority to determine question as to trust validity, administration, and construction. Enforcement of trust terms, application of prudent man requirements, and other conventional trust oversight functions will remain within the purview of State courts, to the extent they would be governed by those courts under existing law.
The Alaska Supreme Court has not addressed the extent to which the Settlement Trust provisions of ANCSA preempt Alaska trust law.
The 9th Circuit Court of Appeals in Broad v. Sealaska Corp. held that the provision in 43 U.S.C. § 1629e prohibiting Settlement Trusts from engaging in certain types of discrimination preempted application of provisions of the Alaska corporation code which prohibited other types of discrimination. The Court found that:
According to its plain language, then, ANCSA prohibits settlement trusts that discriminate in favor of corporate insiders, but does not otherwise prohibit trusts that discriminate in favor of other groups of shareholders. This statutory section suggests that ANCSA anticipates that trusts may discriminate in favor of this particular class of shareholders. As a result, a state law that prohibits discriminatory trusts conflicts with ANCSA. When federal and state laws actually conflict, the state law is preempted.
The Court also noted that: “Finally, ANCSA specifies that Alaska state law govern settlement trusts in many instances, insofar as state laws do not conflict with ANCSA. For example, Alaska trust law governs the creation and managements of the trust…”
1. Removal of Trustee Defendants
The KLI Defendants’ motion to dismiss is denied with respect to Hotch’s request that the court remove the present Defendant Trustees from office for three reasons.
First, applying the Alaska Civil Rule 12(b)(6) standards, Ms. Hotch has stated a claim for which relief can be granted if Alaska law is not preempted by federal law. Alaska trust law (AS 13.36.035(a)(1), AS 13.36.076) authorizes a court to remove a trustee under certain limited circumstances. Ms. Hotch has pled, and conceivably could prove, a set of facts that would warrant a removal order.
Second, ANCSA has not preempted the related Alaska trust law. Congress did not expressly preempt Alaska trust law with respect to the removal of ANCSA Settlement Trust trustees. Congress has not entirely occupied the field. To the contrary, Congress intended that State trust law, in many circumstances, would apply to ANCSA Settlement Trusts. Alaska trust law does not impermissibly conflict with 43 U.S.C. § 1629e(b)(2)(A),(B). It is presumed that Congress did not intend to preempt Alaska law. The related legislative history specifically states that Congress intended preemption with respect to the “Authority and Limitations of a Settlement Trust” provisions set forth in 43 U.S.C. § 1629e(b)(1). The legislative history does not reference preemption with respect to 43 U.S.C. § 1629e(b)(2). The legislative history does reflect that Congress intended that Alaska courts would otherwise “retain their traditional authority to determine questions[s] as to trust…administration…”
43 U.S.C. § 1629e(b)(2)(A),(B), read in context, provides that ANCSA corporation settlors retain the exclusive authority to appoint and remove ANCSA Settlement Trust trustees until a need arises for state court intervention under the narrow circumstances authorized by the Alaska Trust Code. So compliance with both federal and state law is not impossible and Alaska law does not stand as an obstacle to the accomplishment of the full purposes and objectives of Congress.
Third, per the court’s March 30, 2012 decision, the KLI Trusts are not indispensable parties.
2. Reform KLI Trust Agreements
The KLI Defendants’ motion is granted with respect to Ms. Hotch’s claim for relief in the form of the court reforming the KLI Trusts’ trust instruments to provide that the KLI Trust Beneficiaries will henceforth elect the KLI Trust Trustees and that the Trustees cannot also be members of the KLI Board of Directors.
The court has the authority in limited circumstances under Alaska law to order such relief per AS 13.36.345(a) and AS 13.36.050.
But the Alaska trust law on this point is preempted by federal law. 43 U.S.C. § 1629e(b)(2)(A),(B) specifically provides that the ANCSA corporation settlor shall have the “exclusive authority” to appoint Settlement Trust trustees. The court has determined above that this “exclusive authority” does not conflict with Alaska trust law with respect to the removal of a Settlement Trust trustee. But that ruling does not involve reforming Settlement Trust instruments to provide for a permanent change in the method of selecting Settlement Trust trustees in a manner which directly conflicts with federal law. It would be impossible to comply both with the federal law (43 U.S.C. § 1629e(b)(2)(A), appointment to be made by the ANCSA corporation settlor, KLI) and Alaska trust law as embodied in a court order granting Ms. Hotch this relief (appointment to be made by the KLI Trust beneficiaries). This same rationale would also prevent the court from issuing an order that any Trustee Defendant removed by the court could not be re-elected or re-appointed by KLI.
3. Terminate GIT/ET
The KLI Defendants’ motion is denied with respect to Ms. Hotch’s claim for relief that the court require the GIT Trustees to vote on terminating the GIT, and the court itself terminating the GIT if the Trustees do not vote to do so, for four reasons. First, the court has the authority under AS 13.36.045(a) to grant the relief requested in very limited circumstances. Second, Ms. Hotch could conceivably prove a set of facts which would support the court finding that this is the very rare case in which such relief is warranted. Third, ANCSA does not preempt Alaska law on this point. This involves a matter of trust management and/or validity which ANCSA provides is the subject of Alaska trust law. Congress has not expressly preempted this area of Alaska law, it has expressly not occupied this field, and there is no conflict between ANCSA and Alaska law in this regard. Fourth, the KLI Trusts are not indispensable parties.
4. Enjoin GIT Distrubutions
The KLI Defendants’ motion is denied with respect to Ms. Hotch’s claim for relief that the court enjoin distributions from the GIT until it is terminated for the same four reasons stated above with respect to her termination claim for relief.
The KLI Defendants’ Civil Rule 12(b)(6) motion is granted with respect to Ms. Hotch’s claims for relief that: the court modify the KLI Trusts’ beneficiaries: and, the Trustees cannot also be members of the KLI Board of Directors. And the motion is granted with respect to Ms. Hotch’s claim for relief that the court order that any Trustee Defendant removed from office by the court could not subsequently be reappointed (elected) by KLI. The remainder of the KLI Defendants’ motion is denied.
The court recognizes that a court order removing one or more Trustee Defendants from office may be a hollow remedy as federal law provides that it is KLI who appoints the KLI Trust Trustees and KLI has provided that the KLI Trust Trustees are the KLI Board of Directors, which such a Trustee presumably would continue to be, which would, in essence, result in automatic reappointment.
IT IS SO ORDERED.
Dated at Ketchikan, Alaska this 17th day of April 2012.
Trevor N. Stephens
Superior Court Judge
Footnote 1 – Long Island Trust.↑
Footnote 2 – Paragraph 8.↑
Footnote 3 – Paragraphs 18, 19.↑
Footnote 4 – Paragraph 55.↑
Footnote 5 – Paragraphs 57-64, 95.↑
Footnote 6 – Paragraph 65.↑
Footnote 7 – Paragraphs 66-68.↑
Footnote 8 – Paragraphs 69-76.↑
Footnote 9 – Paragraphs 77-78.↑
Footnote 10 – Paragraphs 79-81.↑
Footnote 11 – Paragraphs 83-94.↑
Footnote 12 – Paragraphs 96-99.↑
Footnote 13 – Shooshanian v. Wagner, 672 P.2d 455, 461 (Alaska 1983) (quoting Comley v. Gibson, 355 U.S. 41, 45-46 (1957)), See also, Adkins v. Stansel, 204 P.3d 1031, 1033 (Alaska 2009) (And “[e]ven if the relief demanded is unavailable, the claim should not be dismissed as long as some relief might be available on the basis of the alleged facts.”).↑
Footnote 14 – Reed v. Municipality of Anchorage, 741 P.2d 1181, 1184 (Alaska 1987).↑
Footnote 15 – Krause v. Matanuska-Susitna Borough, 229 P.3d 168, 174 (Alaska 2010) (quoting Belluomini v. Fred Meyer of Alaska, Inc. 993 P.3d 283, 286 (Alaska 2008).↑
Footnote 16 – Vanek v. State, Board of Fisheries, 193 P.3d 283, 286 (Alaska 2008).↑
Footnote 17 – All emphasis, other than in headings, is added unless otherwise noted.↑
Footnote 18 – AS 13.36.390(2) provides that a “qualified beneficiary” is a beneficiary who: “(A) on the date the beneficiary’s qualification is determined, is entitled or eligible to receive a distribution of trust income or principal; or (B) would be entitled to receive a distribution of trust or principal if the event causing the trust’s determination occurs.”↑
Footnote 19 – See generally Restatement (Third) of Trusts, § 66(1) (2003).↑
Footnote 20 – Allen v. State, Department of Health & Social Services, Division of Public Assistance, 203 P.3d 1155, 1160-62 (Alaska 2009) (quoting Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 130 (1978) (quoting Huron Portland Cement Co. v. City of Detroit, 362 U.S. 440, 446 (1960)) and quoting Roberts v. State, Department of Revenue, 162 P.2d 1214, 1223 (Alaska 2007)) (other citations omitted); See also, Malabed v. North Slope Borough, 335 F.3d 864, 869 (9th Cir. 2003):
In determining whether a federal statute preempts state law, our “sole task is to ascertain the intent of Congress.” Cal Fed. Sav. & Loan Ass’n v. Guerra, 479 U.S. 272, 280… (1987) (plurality opinion)… We must begin with the presumption that Congress did not intend to preempt state law. See, New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 654… (1995). If we have any doubt about congressional intent, we are to error on the side of caution, finding no preemption…↑
Footnote 21 – Tlingit-Haida Regional Electrical Authority v. State, 15 P.3d 754, 766-67 (Alaska 2001) (quoting Webster v. Bechtel, Inc., 621 P.2d 890, 897 (Alaska 1980) (quoting Bald v. RCA Alascom, 569 P.2d 1328, 1331 (Alaska 1977)) (other citations omitted).↑
Footnote 22 – House Explanatory Statement, 133 Congressional Record H11933, December 21, 1987 at pp. 3307-09. The subsection references are to the subsections in PL 100-241, which are the same as appear in 43 U.S.C. 1629e.↑
Footnote 23 – 85 F.3d 422, 426 (9th Cir. 1996); See also, Sierra v. Goldbelt, Inc., 25 P.3d 697, 702 (Alaska 2001) and Bodkin v. Cook Inlet Region, Inc., 182 P.3d 1072, 1077-78 (Alaska 2008).↑
Footnote 24 – Id.↑
Footnote 25 – Id. at 429.↑
Footnote 26 – The court does not agree with Ms. Hotch’s assertion that the KLI Defendants’ motion should be denied because it focuses on her requests for relief and not legal claims. This case differs from the circumstances present in Miller v. Johnson, 370 P.2d 171 (Alaska 1962). The relief placed at issue by the KLI Defendants’ motion (removal, reformation, termination) is inextricably intertwined with the related legal claim (breach of fiduciary duties etc.). The court also disagrees with Ms. Hotch concerning the applicability of AS 10.06.463 as she does not allege in her Second Amended complaint (and the record does not otherwise reflect) that the KLI Shareholders or KLI Board are suing to remove the Trustee Defendants from office.↑
Footnote 27 – For example, Settlement Trust trustees and/or Settlement Trust beneficiaries could not appoint or remove Settlement Trust trustees.↑
Footnote 28 – The court notes the Alaska Supreme Court has referenced the 9th Circuit’s Broad decision and that the general preemption analysis employed in Broad could support a different conclusion. The court is not relying on Broad for three reasons. First, the court does not find its analysis persuasive for the reasons argued by the dissent therein. It appears to the undersigned that the majority in Broad did not apply the applicable preemption standards (i.e. presumption against preemption, erring on the side of not finding preemption, Congressional intent must be clear and manifest). Second, Broad did not involve the section of 43 U.S.C. § 1629e at issue. In fact, the Court in Broad did not note that Alaska trust law does apply to matters of ANCSA Settlement Trust “management.” Third, the Alaska Supreme Court has not analyzed Broad in detail, and not in the context of the issues presented in this case.↑
Footnote 29 – See, Meidinger v. Koniag, Inc., 31 P.3d 77, 84 (Alaska 2001). The court also notes that it does not find persuasive the KLI Defendants’ argument that this portion of their motion to dismiss must be granted because Ms. Hotch did not specifically state in her Second Amended Complaint that her claim is based on AS 13.36.345 and/or AS 13.36.350. Such specificity is not require by Alaska law.↑
Footnote 30 – The court also notes that the Alaska Supreme Court in Meidinger v. Koniag, Inc. stated that: “43 U.S.C. § 1629e(b)(2) grants Native corporations exclusive authority to appoint and remove trustees of settlement trusts’ shareholders of a Native corporation do not have any authority to appoint or remove the trustees of a settlement trust.” 31 P.3d at 84. So it appears that KLI’s method of selecting the KLI Trust Trustees (KLI shareholder election of KLI Board members) may violate 43 U.S.C. § 1629e(b)(2). As a result it may be necessary for KLI to itself reform the KLI Trust trust instruments to provide for the selection of the KLI Trust Trustees to be made by the KLI Board of Directors, which could result in their having to select persons other than the current KLI Board members. That may be a desired outcome in this case given the evidence in the record that reflects that it may be very difficult, if not impossible, under current circumstances for a person to be a KLI Board Member (and fulfill one’s fiduciary duties to KLI) and a KLI Trust Trustee (and fulfill one’s fiduciary duties to the KLI Trusts).↑