Topic: Corporate

THIS CAUSE comes before the court on the class defendant’s motion for summary judgment. The present case involves the interpretation of Section 5(a) of the Alaska Native Claims Settlement Act, 43 U.S.C. § 1604(a), (hereinafter ANCSA or Act) as amended by Pub. L. 94-204, 89 Stat. 1145. The central issues presented by this motion are whether the Secretary of the Interior has the power to disenroll Natives included on the roll he was required to prepare by December 17, 1973, and his further disenrollment power over applicants who were given an additional year to enroll by the 1976 amendments to the Act. As the court holds that the Secretary does have this disenrollment power several subsidiary issues are raised which will be considered in the latter portion of this memorandum.

This case is in the nature of an interpleader action. Plaintiff Sealaska Corporation is one of twelve Regional Corporations organized pursuant to the ANCSA. The action was filed because plaintiff was being subjected to conflicting legal claims. Certain Alaska Natives who had been enrolled in plaintiff corporation were suing plaintiff in State Court to compel distributions to them as shareholders. The Secretary, however, had placed the plaintiff on notice that he intended to challenge the eligibility of the members of defendant class and that distributions to defendant class would be at plaintiff’s risk.

Disenrollment Power — 1973 Roll

The starting point for resolution of this case is Section 5(a) of the Act. 43 U.S.C. § 1604(a). That section provides:

“The Secretary shall prepare within two years from December 18, 1971, a roll of all Natives who were born on or before, and who are living on, December 18, 1971. Any decision of the Secretary regarding eligibility for enrollment shall be final.”

Pursuant to this statutory authorization the Secretary prepared a roll which was certified to Congress, but with the proviso that “it was subject to appeal decisions and other legal determinations.” Congress reopened the enrollment period for a period of one year in 1976. Those amendments and the regulations promulgated thereunder are considered at a later point in this memorandum.

Defendant class and plaintiff join in the position that the Secretary is without the power to disenroll any member of the roll certified to Congress on December 17, 1973. Their position is based on two separate contentions. They first rely on the statutory language itself which states that the decision of the Secretary “shall be final.” These parties maintain that the language of finality relates inter alia to the ability of the Secretary to alter the roll. As the second basis for their conclusion the parties maintain that the crucial role of the roll in administering the Act is persuasive evidence of the Congressional intent that no changes should be allowed after December 17, 1973. In opposition the Secretary has cited several cases which he maintains limit the affect of the finality language. He also points to countervailing policies which would appear to support disenrollment.

With one exception the court has found little aid in the cases cited by the Secretary. Those cases, which dealt with similar finality language in other Acts generally stand for a point of law which is not contested herein, or are factually and legally distinguishable. Many of the cases merely stand for the proposition that the finality language creates a decision of the Secretary which is not subject to judicial review. See Attocknie v. Udall, 390 F.2d 636, 637 (10th Cir. 1968), cert. den. 393 U.S. 833, 21 L. Ed. 2d 104, 89 S. Ct. 104, Heffelman v. Udall, 378 F.2d 109, 112 (10th Cir. 1967). Neither defendant class nor plaintiff dispute this affect of the finality language in the present statute.

A second line of cases relied on by the Secretary are not persuasive. Lowe v. Fisher, 223 U.S. 95, 56 L. Ed. 364, 32 S. Ct. 196 (1912) involved a situation where under circumstances similar to those in the present case, the Secretary removed an Indian from a roll prior to the date set by Congress for the final roll. Id. at 106-07. Indeed, the case has been cited as suggesting the proposition that removal after the date for the final roll would have been improper. Duncan Townsite Co. v. Lane, 245 U.S. 308, 311, 62 L. Ed. 309, 38 S. Ct. 99 (1917). Stookey v. Wilbur, 61 App. D.C. 117, 58 F.2d 522 (1932) which upon first glance appears to be directly on point is based to a significant extent on a misreading of Lowe, supra.

The one case which does provide support for the Secretary’s position is Lane v. Mickadiet, 241 U.S. 201, 208-09, 60 L. Ed. 956, 36 S. Ct. 599 (1916), see also Hanson v. Hoffman, 113 F.2d 780, 790 (10th Cir. 1940). In Lane the Secretary was to determine who was the proper heir of an Indian under an allotment statute. Such a determination was to be “final and conclusive.” Id. at 206 n.1. Following such a determination the Secretary reopened the administrative hearing. This reopening was challenged and the court held that as long as the Secretary had the duty to administer the land in question as a trust that he had the concomitant power to reevaluate any prior determinations. Id. at 208-10. The “final” language was held only to preclude judicial review.

There are several differences between the Lane case and the present case. The first is that in Lane there was a trust relationship but such a relationship has been specifically disavowed in the ANCSA. 43 U.S.C. § 1601(b). However, the Secretary still maintains administrative authority over portions of the Alaska Native Fund. 43 U.S.C. § 1605. As the Court in Lane stated, it would be anomalous to give the Secretary authority over the fund yet deny him the power to correct his errors.

A second distinction of much greater consequence is the fact that in Lane the re-evaluation had only a minimal impact on a few individuals. Here the roll was to be prepared by a specified date and other significant duties were based on the roll which had an effect on the entire operation of the Act. While Congress has specifically shielded the land distribution under the Act from disruption due to disenrollment, 43 U.S.C. § 1604, Pub. L. 94-204, § 8(d), see slip op. pages 8-9, infra, this has not been done as to monetary distributions. Accordingly, the court must turn to the differing policies of purity and finality in an attempt to ascertain which of these should be given greater weight. If finality is more important under the Act then Lane, supra, would not be of significant value as the importance of finality was not accorded great weight in that case. If, however, purity is more important then Lane is considerably more persuasive as that factor was central to the holding therein. In addition, of course, the two opposing considerations of finality and purity which may affect the applicability of Lane are precisely the same considerations which both sides mount as their Congressional intent argument.

The Congressional intent on this issue must be divined through an overview of the Act rather than through any specific references to the legislative history. Defendants class suggests that the change from an earlier bill which provided a six month non-reviewable temporary roll and a five year reviewable final roll to the present scheme is evidence of the Congressional intent to opt for finality. To a certain extent the court agrees. This change clearly reflects Congress’s intent to give the Secretary the final word and preclude judicial review. Beyond that, however, the intent of Congress in rejecting the two-step plan presents the same issue with which the court now deals, i.e., what is the Secretary’s power after the roll is Certified.

The arguments on either side can easily be summarized. The parties urging finality point to the central importance of the roll in the Act and urge that it must have been necessary to have a fixed roll at an early stage. The opponent points to the fact that it would be contrary to the purposes of the Act to continue to pay benefits to those who are not entitled to them. The court finds this latter consideration to be more important under the Act.

The ANCSA was passed to provide the Alaska Natives with a just and equitable compensation for land claims based on aboriginal title. 43 U.S.C. § 1601(a). It would clearly work against the very essence of the Act to provide benefits to those who are not entitled to them under the Act. In this scheme where a fixed amount of compensation has been awarded the parties hurt by the inclusion of non-eligible Natives would be those who are eligible to receive benefits. Thus purity of the rolls is exceedingly important under the ANCSA.

As a direct attack on this reasoning plaintiff and defendant class maintain that those who are on the rolls due to fraud could be removed in an independent court action. These parties would have the roll of the Secretary be final subject to judicial disenrollment on the basis of fraud. The court finds several difficulties with such a proposal. Initially the court is not as certain as the parties that a final agency action where there is generally no right to judicial review can be set aside on the basis of fraud. See Davis, Administrative Law Treatise, 28.01 et seq., Schilling v. Rogers, 363 U.S. 666, 676-77, 4 L. Ed. 2d 1478, 80 S. Ct. 1288 (1960). Although some older cases have so held they predated the APA. See e.g. Campbell v. Wadsworth, 248 U.S. 169, 174, 63 L. Ed. 192, 39 S. Ct. 63 (1918).

Moving beyond this threshold question, however, the court finds significant problems with the avenue suggested. By concluding that a person could be removed from the roll in cases of fraud the parties concede that there may be some changes in the final roll. The question then becomes who may do the disenrolling. If jurisdiction were removed from the Secretary on December 17, 1973, the removal would only be at the end of a judicial proceeding. This would further complicate what has become one of the major sources of litigation in the Alaska Federal Courts. It would also run counter to the express desire of Congress which was to have those who are entitled to benefits under the Act obtain them “without litigation.” 43 U.S.C. § 1601(b).

Additionally, the removal of names for fraud does not allow removal of an individual for mistake or other possible reasons. Plaintiff and defendant class adopt a position that would allow such individuals to remain on rolls. While again older cases have allowed such removal by the court, see e.g. Campbell v. Wadsworth, supra, those cases are also open to much doubt under the APA. See Schilling v. Rogers, supra. It seems entirely contrary to the Act to allow such persons to continue to receive benefits and thereby reduce the benefits of other qualified recipients.

The main thrust of the argument of the parties which assert the need for finality is that the Native roll plays an important part in the administration of the ANCSA. In the context of this case the problem is more apparent than real. The parties are certainly correct that the roll is an essential part of the Act in terms of the distribution of land and money. With respect to land Congress amended the Act in 1976 to avoid any affects of disenrollment.[1] 43 U.S.C. § 1604, Pub. L. 94-204 § 8(d). With respect to monetary benefits future payments can easily be adjusted to reflect the revised roll. The effect on past monetary benefits is dealt with at a later point in this memorandum.

While it is true that Congress expressed the desire to make awards under the Act “with certainty,” 43 U.S.C. § 1601(b), this disenrollment procedure does not violate that mandate. The awards under the Act will continue to be paid by the federal government for quite some time. See 43 U.S.C. § 1605(a). The Secretary has adopted a regulation which will end the disenrollment by July 31, 1977, for those improperly included on the first roll. 25 C.F.R. § 43h. 15(c). This period seems reasonable and as it appears that plaintiff Sealaska has been able to operate successfully even if with some uncertainty during the pendency of this action it does not seem that the interests of finality will be subverted by waiting the few remaining months.

As the court finds that purity is more important under the Act than is finality the Lane decision applies to this case to add judicial support to the perceived legislative intent. The one area where Lane does not apply is in the area of benefits previously paid which are being held by plaintiff pending resolution of this suit. As to those funds the Secretary has relinquished administrative control and, hence, the rationale of Lane is inapplicable. As to these funds, however, the court finds other support for the conclusion that they are subject to retroactive change.

The amendments to the Act in 1976 specifically stated that disenrollment was to have no effect on land entitlements,[2] 43 U.S.C. § 1604, Pub. L. 94-204, § 8(d). Although argued to the contrary by defendant class one can only assume from this enactment that disenrollment was to affect monetary distributions. It is an old maxim that “inclusio unius est exclusio alterius.” By specifically disallowing the effect of disenrollment to the lands benefits it must be assumed that if disenrollment is possible it has a retroactive affect on other benefits. Based on the principle of purity and this subsequent enactment the court finds that absent some other factor the disenrollment is to have a retroactive effect on monetary benefits. As to the effect of the Secretary’s regulation attempting to nullify this problem, see slip op. pages 10-12, infra.

Disenrollment Power — 1976-1977 Applications.

By amendment Congress reopened the application period for the Alaska Natives from January 2, 1976, to January 2, 1977. 43 U.S.C. § 1604, Pub. L. 94-204, § 1(a). The Secretary wishes to conduct disenrollment proceedings on these applications until January 2, 1978.[3] 25 CFR § 43h.15(c). For all the reasons stated previously the disenrollment proceedings on these applications will be allowed. With these enrollees, however, the Secretary’s position is even stronger.

With these Natives the Secretary was to accept all applications submitted by January 2, 1977. There was no date set, as in the original Act, for the certification of a roll. By adoption of certain regulations the Secretary has created a self-imposed burden of certifying a final roll soon after one year after the final application date. 25 CFR 43h. 15(c). This time period is entirely reasonable as all contests to this roll will be initiated within a year of the final application. As to this roll, therefore, the Secretary’s power is on a substantially sounder basis than it was on the earlier roll, and disenrollment is clearly proper.

Interim Payments

The next issue which arises is whether the Regional Corporations must at the present time make payments to those individuals whose enrollment may be challenged. Under section 7(j) of the Act, 43 U.S.C. § 1606(j), the Regional Corporations are directed to distribute certain funds to their shareholders. Plaintiff has withheld distribution of these funds to those who the Secretary has indicated may be subject to disenrollment.

At the outset of this litigation the plaintiff apparently based this withholding of funds on two lines of argument. The first was that to distribute these funds to persons who might be later disenrolled would be unfair to those who were entitled to the funds. The second theory was that the Regional Corporation might face some type of liability if it wrongfully paid funds to subsequently removed shareholders. As will be developed infra the second basis has been substantially altered by the 1976 amendments to the Act and regulations promulgated thereunder.

The argument for withholding funds pending disenrollment on the basis that distribution to those not qualified would be unfair to those who are qualified tracks very closely with the Congressional intent issue, supra. Under the Act there is a certain finite sum which will be distributed. Each payment to an ineligible person decreases the amount paid to those who are eligible. Thus payment of such funds would clearly violate Congress’s intent in passing the Act.

Defendant class asserts, however, that as they presently are shareholders they are entitled to the funds. Such an argument overlooks one essential point. The status of these persons as shareholders presently is being challenged. While it is true that plaintiff admitted that members of the defendant class were shareholders that admission apparently has not been made by the Secretary. As plaintiff joined in the contention of defendant class that disenrollment was not allowed under the Act, it is natural that it would contend that these persons were shareholders.

The court concludes, therefore, that when the status of the shareholders are properly subject to challenge the intent of the Act counsels against payment to the parties questioned. Those who are properly on the rolls will soon be receiving their share under the Secretary’s deadlines and their inconvenience is outweighed by the damage that would be caused by a contrary ruling.

It was apparently plaintiff’s position at the outset of this litigation that payment to those who were subsequently removed would subject them to liability for those funds and that accordingly payment should be withheld. With the passage of the 1976 amendments to the Act the Secretary promulgated a regulation removing any threat of liability for past payments to those subsequently removed. 43 CFR § 4.1011(b). Plaintiff now maintains that this regulation is invalid and that it may still be subject to liability for such payments.

The 1976 amendments to the Act provided that land distributions would not be affected by disenrollment. 43 U.S.C. § 1604, Pub. L. 94-204, § 8(d). Apparently in response to this section the Secretary passed the regulation in question extending similar protection to monetary distributions. The court has previously held that the passage of the 1976 amendments protecting only land distributions from the effects of disenrollment evidences a Congressional intent to allow past monetary distributions to be affected by disenrollment. See slip op. pg. 9, supra. Thus, the regulation promulgated by the Secretary is contrary to the intent of the Act and is a nullity.[4] Dixon v. United States, 381 U.S. 68, 74, 14 L. Ed. 2d 223, 85 S. Ct. 1301 (1965), Morton v. Ruiz, 415 U.S. 199, 232, 39 L. Ed. 2d 270, 94 S. Ct. 1055 (1974).

The contention of defendant class that if the Secretary has the power to disenroll he must have the concomitant power to regulate the effects of disenrollment is not well taken. The power to disenroll is mandated by the Congressional intent of purity of the rolls. The desire to establish purity does not give the Secretary unfettered discretion over all aspects of disenrollment. Quite the contrary, the Secretary’s actions must be in conformity with the intent of Congress and the regulation in question does not fulfill that command.

Accordingly, the plaintiff’s initial fear that it might be exposed to liability for payments to subsequently disenrolled Natives remains a possibility.[5] Based on this possibility and the Congressional intent of distributing funds only to those who qualify under the Act the court holds that plaintiff may withhold the funds pending resolution of disenrollment proceedings.[6]

Disenrollment — Solicitor’s Roll

Defendant class asserts that even if the Secretary has the power to disenroll those certified by himself, he does not have the authority to disenroll those enrolled in another fashion. 25 CFR 43h.8(e) provides that certain enrollment decisions may be made by “. . . the Regional Solicitor on behalf of the Secretary and shall be final.” Defendant class again seizes upon the “shall be final” language in an attempt to assert that the Secretary cannot now alter these rolls. The court finds that this language should be interpreted in the same fashion as the same language previously discussed and that it relates only to the availability of judicial review. As the regulation expressly states that the Regional Solicitor is acting for the Secretary, the Secretary has the same power to disenroll these persons as he has over the persons on rolls prepared by himself.

Disenrollment Procedure.

The final contention of defendant class is that the regulations prescribing the procedure for disenrollment, 43 CFR 4.1000 et seq., violate the Due Process Clause of the Constitution. In this respect the defendant class challenges what it views as the “overly arbitrary and formalistic” requirement of the regulations. The essence of defendant class’s attack is upon the formality of the proceeding. In this respect this case is somewhat unique. Most of the cases dealing with this type of challenge have presented a situation in which the proceeding challenged was either non-existent or did not provide an impartial fact-finding process. See e.g. Goldberg v. Kelly, 397 U.S. 254, 25 L. Ed. 2d 287, 90 S. Ct. 1011 (1970), Pence v. Kleppe, 529 F.2d 135 (9th Cir. 1976). The present regulations, however, provide for an administrative hearing that is in most respects identical to a civil trial. It would indeed be anomalous for the court to hold that Due Process is violated by these procedures which virtually parallel the normal civil case. As has previously been stated, there is no right to judicial review of the Secretary’s findings. It is accordingly extremely important that the individual who is to be disenrolled is given an ample opportunity to defend his position. These regulations provide that opportunity,[7] and fully satisfy Due Process considerations. As is pointed out by the Secretary all of the requirements mentioned by the Supreme Court in Goldberg are provided in these regulations.

While the various courts that have dealt with this problem have stated that the precise requirements of any hearing must be determined by the circumstances, such a statement generally would be interpreted to allow the Secretary to adopt less formal procedures. This language, however, should not be interpreted to require less formal procedures when the Secretary has determined that a quasi-judicial proceeding is appropriate.

The parties have stated that there are no material issues of fact remaining in this case. However, only one summary judgment motion has been submitted and it must be denied. If the parties desire that a judgment be entered herein they should present a summary judgment motion and a judgment form in conformity with this memorandum.

Accordingly IT IS ORDERED.

THAT defendant’s motion for summary judgment is denied.

DATED at Anchorage, Alaska, this 17th day of March, 1977.

James A. von der Heydt / United States District Judge

The plaintiffs, eleven Native Alaskan villages, filed this action to challenge decisions of the Secretary of Interior which found each of them ineligible to take land and revenues under the Alaska Native Claims Settlement Act (ANCSA), 43 U.S.C. § 1601 et seq.

The Alaska area director of the Bureau of Indian Affairs (BIA) had determined initially that all eleven villages were eligible under ANCSA but on administrative appeal the Secretary of the Interior ruled to the contrary. Granting summary judgment to the villages[1] the District Court vacated the Secretary’s determinations and ordered the BIA decisions reinstated. Koniag, Inc. v. Kleppe, 405 F. Supp. 1360 (D.D.C. 1975). The District Court did so in four of the cases on the ground that the BIA decisions had been appealed to the Secretary by a party without standing to do so; the appeals were therefore unauthorized and invalid, and under Department of the Interior regulations, the BIA decision, if unappealed, constituted the final decision of the Secretary. In the other seven cases, the court held the procedure followed to determine the appeals failed to comply with due process and further, that congressional interference had infected the determinations. The court ordered the BIA decisions reinstated in these seven cases because the effects of the congressional interference lingered and the BIA decisions were the last untainted decisions of the Secretary’s delegate.

On appeal the Secretary attacks each of the District Court’s rulings on the merits and argues that the proper remedy under any circumstance is a remand to him rather than reinstatement of the BIA decisions. We conclude that the District Court erred on the standing and congressional interference issues. We agree with the District Court, however, that the appeal procedure used here does not meet the requirements of due process. Accordingly, we hold that the proper remedy is a remand to the Secretary to redetermine these cases.

THE ACT AND THE REGULATIONS

Claims of Native Alaskans have long created obstacles to development of Alaska’s oil and other natural resources and have raised questions of the state’s ability to take dominion over public lands that it might otherwise select under provisions of the Alaska Statehood Act. To deal with this problem Congress intended ANCSA to accomplish a fair, rapid settlement of all aboriginal land claims by Natives and Native groups without litigation. The District Court’s opinion contains an excellent summary of ANCSA, 405 F. Supp. 1364-67; for our purposes here, however, the complexities of the Act can be simplified. Under ANCSA, 40 million acres of land and $962,000,000 are to be distributed to Native villages and regional corporations; in exchange, all aboriginal titles and claims are to be extinguished. The funds and lands made available through the Act are to be divided among 13 regional corporations, in which the Natives hold stock, and whatever villages are found to be eligible. Depending upon their population, eligible villages may select between 69,120 and 161,280 acres from the public lands in their vicinity. The village will receive a patent to the surface estate and the regional corporation will receive a patent to the subsurface estate. Village eligibility requirements are set forth in the Act. 43 U.S.C. § 1610(b)(2), (3). The Secretary of the Interior is charged with making village eligibility determinations and with implementing the Act.

The Secretary adopted regulations to govern the decision-making process. 43 C.F.R. Part 2650 (1973). These regulations were applied in deciding the cases of the eleven villages. The Alaska area director of the BIA made initial eligibility determinations on all applicant Native villages. He published his proposed decision in the Federal Register and it became the final decision of the Secretary unless protested by “any interested party” within thirty days. Upon receipt of a protest, the area director evaluated it and rendered his final decision within thirty days. This decision, in turn was appealed to the Secretary by an “aggrieved party” filing notice with the Alaska Native Claims Appeal Board.[2] 43 C.F.R. § 2651.2 (1973); id. § 4.700 (1973). Although the regulations did not require a particular type of hearing on appeals, the Board referred all appeals to a Department of the Interior Administrative Law Judge (ALJ) who conducted a full de novo hearing on the record. The parties were permitted to submit proposed findings and conclusions to the ALJ.

At this point the procedure veered from the usual course of administrative law. The recommended decision of the ALJ was forwarded to the Board without being served on the villages concerned. The Board made formal decisions based on the hearing record in each case and forwarded its recommended decisions to the Secretary, also without service on the villages. Only after the Secretary personally decided to accept the Board’s decisions were the recommended decisions of the ALJ and the Board revealed to the parties.

STANDING

The first issue we must resolve is whether appeals from the BIA decisions were properly taken. The BIA area director determined that all ten of the villages before us here, see note 1 supra, were eligible under ANCSA. The U.S. Fish and Wildlife Service, the Forest Service, and the State of Alaska appealed one or another of the decisions, arguing that the villages did not meet the requirements of the Act. After separate de novo proceedings before an ALJ and review as described above, the Secretary ruled that the villages were not eligible under the Act.

In the District Court the villages renewed the argument which they had pressed before the ALJ that neither the federal agencies nor the State had standing to appeal from the BIA decisions. The District Court rejected the argument with respect to six of the villages because of the possibility that they might select land from a Wildlife Refuge or National Forest. The court noted:

some presently immeasurable degree of disadvantage may result if an unqualified village obtains authority over a portion of the lands now in the exclusive care of the United States and that this is sufficient to provide standing. . . . Moreover, the Forest Service and the Fish and Wildlife Service have broad mandates to protect our forests and wildlife, e.g., 16 U.S.C. §§ 551, 553; 16 U.S.C. § 742a et seq. The Court is particularly reluctant to deny standing to those most likely in fact to have a legitimate concern about these lands and to come forward to protect the public interest, especially where the effect of finding standing is simply to allow adversary proceedings to be held which, if properly conducted, could contribute to fair and informed decision making.

405 F. Supp. at 1368-69.

We agree with the District Court’s reasoning here and adopt it.[3] However the District Court went on to hold that the appeals from the BIA decisions in four other cases were invalid because as to two, Anton Larsen Bay and Bells Flats, the federal agencies had no standing to take the appeals, and as to two others, Alexander Creek and Solomon, the State of Alaska had no standing.

The Federal Agencies

The District Court ruled against the standing of the agencies to appeal the cases of Anton Larsen Bay and Bells Flats because

each of these two villages had made extensive good-faith commitments not to take land from a wildlife refuge or national forest. Even the most theoretical harm was removed by these commitments . . .

 405 F. Supp. at 1369.

The issue is whether the Secretary has violated his regulations in permitting the Fish and Wildlife Service and the Forest Service to appeal administratively the decision on the eligibility of the two villages. Under the regulations, “any interested party” may protest the BIA initial decision, 43 C.F.R. § 2651.2(a)(3) (1973), and “any party aggrieved” by the BIA final decision may appeal to the Board. 43 C.F.R. § 4.700 (1973). The villages concede that these agencies were “interested parties” for purposes of protest but argue that they were not “parties aggrieved” to appeal. Citing Office of Communication of the United Church of Christ v. FCC, 123 U.S.App.D.C. 328, 334, 359 F.2d 994, 1000 (1966) and National Welfare Rights Organization v. Finch, 139 U.S.App.D.C. 46, 53 n.27, 429 F.2d 725, 732 n.27 (1970) for the proposition that “the concept of standing at the administrative level and in the courts is essentially interchangeable,” brief at 15, the villages argue that the agencies are not “parties aggrieved” because they have not demonstrated the kind of concrete injury necessary for standing to obtain judicial review. Neither case stands for so broad a proposition.

In the Church of Christ case the court assumed that the same standards apply to determining standing before an agency and standing to obtain judicial review and went on to hold that the FCC must permit listeners to participate in broadcast relicensing proceedings. In the National Welfare Rights Organization case the court reasoned that a party with an interest sufficient to obtain judicial review of agency action should be permitted to participate before the agency to ensure it meaningful judicial review on all the issues. But it does not follow from either case that a party must be excluded from participation before the agency if it does not have a sufficient interest to meet Article III requirements for judicial review. Indeed, as we pointed out in the National Welfare Rights Organization case, “standing to sue depend[s] on more restrictive criteria than standing to appear before administrative agencies. . . .” 139 U.S.App.D.C. at 53 n.27, 429 F.2d at 732 n.27; see Gardner v. FCC, 174 U.S.App.D.C. 234, 238, 530 F.2d 1086, 1090 (1976). See also 3 K. Davis, Administrative Law Treatise § 22.08, at 240 (1958). To determine what a party must show to qualify as aggrieved under the regulations, we look to the scheme intended and devised by the Congress and the Secretary. See Office of Communication of the United Church of Christ v. FCC, supra 123 U.S.App.D.C. at 334-36, 359 F.2d at 1000-02.

Congress sought to quiet the Native land claims in Alaska justly and expeditiously, so that the State’s development could proceed. At the same time Congress took care to assure that grants of public lands would be made only to eligible Native groups by requiring the Secretary to review the eligibility of each village. Over two hundred villages were involved. Although many findings could be perfunctory because eligibility was clear, the eligibility of some villages was in dispute. It is apparent that the Secretary intended the area director of the BIA to settle the easy, undisputed cases, but when a party was adversely affected by the area director’s determination, the Secretary would make his own eligibility determination after more elaborate factfinding in the three-tiered appeal process. A necessary corollary to this scheme is that the term “party aggrieved” must be construed generously to achieve the congressional objective that determinations be careful as well as quick. We conclude, therefore, that grafting strict judicial standing requirements onto these regulations would be inconsistent with the Act and the Secretary’s plan to implement it.

Both the ALJ and the Board determined that the Forest Service and the Fish and Wildlife Service were parties aggrieved within the meaning of 43 C.F.R. § 4.700 (1973). Because he approved the Board’s decisions the Secretary is presumed to have concurred. This interpretation of the regulation is entitled to great deference. Udall v. Tallman, 380 U.S. 1, 16, 13 L. Ed. 2d 616, 85 S. Ct. 792 (1965).

The District Court found it determinative that the two villages “had made extensive good-faith commitments not to take land from a wildlife refuge or a national forest”. 405 F. Supp. at 1369. However, the ALJ and the Board had held that this did not vitiate the standing of the agencies to appeal. We agree. These villages are located on Kodiak and Afognak Islands, large parts of which are included in Chugach National Forest and Kodiak National Wildlife Refuge. Available public land is thus limited and numerous villages appear to be eligible to select from it. If the two villages make all their selections from the limited unrestricted acreage, other villages may be compelled to choose land within the refuge or forest. The adverse effect on the Forest Service or the Fish and Wildlife Service would be plain. Ample testimony in the records of these two cases, credited by the ALJ, supports the likelihood of this occurring. Bells Flats ALJ Recommended Decision at 9-10; Anton Larsen Bay ALJ Recommended Decision at 9-10. At best, therefore, the commitments of the two villages not to select forest or refuge land attenuate the likelihood of harm to these agencies, but they do not negate it. We cannot say that the rationale of the ALJ, or of the Board in adopting it, amounts to a “plainly erroneous” interpretation of the term “party aggrieved” as it is used in the regulations. Udall v. Tallman, supra 380 U.S. at 17. Thus we must sustain that interpretation and reverse the District Court’s holding that the appeals from the BIA decision on Anton Larsen Bay and Bells Flats were invalid.

The State of Alaska

Alaska was the only party to appeal the decision on the eligibility of Solomon and Alexander Creek.[4] The District Court held that Alaska had no standing to do so because “the State’s only interest was the speculative possibility that at some later time for some undisclosed reason it might, under the Alaska Statehood Act, seek to have land patented to it that would be claimed by these villages.” 405 F. Supp. at 1369. We think this possibility is enough to confer standing upon Alaska under the regulations.

The Alaska Statehood Act, 72 Stat. 339 (1958), gives Alaska until 1984 to select more than 103 million acres from federal lands in the state not already reserved for another purpose. Id. § 6(a), (b), 72 Stat. 340. Putting aside minor exceptions not relevant here, ANCSA reserves 25 townships immediately surrounding a Native village from which the village must select its lands. The regional corporations may fill their land entitlements only with land surrounding a village, and the land patented to the villages and regional corporations cannot be selected by the State. Thus it is in the interest of the regional corporations to establish the existence of eligible villages on valuable mineral-bearing lands, and it is in the interest of the State to prove that such villages are ineligible.

The District Court was persuaded that Congress already accounted for the State’s interests in the Act when it

excluded from the definition of “public lands” that could be taken by the villages any “land selections of the State of Alaska which have been patented or tentatively approved under section 6(g) of the Alaska Statehood Act, as amended (72 Stat. 341, 77 Stat. 223), or identified for selection by the State prior to January 17, 1969,” 43 U.S.C. § 1602(e) (Supp. III, 1973). The failure of the State to bring itself within this statutory provision underscores the conjectural and attenuated nature of its interest here. Alaska had ample opportunity to select land but did not do so, and one does not have standing merely by appearing in a case for the purpose of keeping one’s options open an indefinite period in the future.

 405 F. Supp. at 1369.

The provision cited by the District Court protects lands in which Alaska already had expressed interest; but we do not infer from it a congressional intention to negate any interest Alaska might have elsewhere. At the time of statehood, and even now, the value of much of the land was not and has not been established. We think Alaska has been reasonable in exercising its right under the Statehood Act to wait until 1984 to complete its land selections.[5] As in the case of the federal agencies, our inquiry is limited to determining whether the Secretary has violated his regulations in permitting Alaska to take these appeals as a party aggrieved.

The regulations provide that the BIA decisions are to be served on the village affected, all villages within the region, all regional corporations and the State of Alaska. 43 C.F.R. § 2651.2(a)(2), (4), (8). We interpret this requirement as evidence that the Secretary regarded these parties as potentially aggrieved if a village were wrongfully determined to be eligible or ineligible. We agree with the District Court that the interest of Alaska in these two cases is conjectural at best but we emphasize we are not dealing with Article III considerations here; rather, the inquiry is whether the Secretary has violated his own regulations. In light of the broad reading which the Secretary has given the term “party aggrieved” we cannot say that permitting Alaska to appeal in the cases of Solomon and Alexander Creek was a plainly erroneous interpretation of the regulations.

We hold therefore that all ten of the administrative appeals taken in these cases were valid and we turn to the question whether the procedure followed comported with principles of due process.

THE ADMINISTRATIVE APPEAL PROCEDURE

The District Court held that the administrative process used here was improper because the

Secretary, who reserved final decision to himself, was prevented from making a rational decision on the records developed because the decisions of both the administrative law judges and the Ad Hoc Board were kept in camera and remained undisclosed to the parties until the Secretary had already reached his final decision. This process denied the villages the opportunity to bring to the Secretary’s attention any exceptions or objections they might have had to the determinations below.[6]

 405 F. Supp. at 1370 (footnote omitted).

The Secretary argues that the administrative decisionmaking was institutional. Relying upon the Morgan cases[7] the Secretary asserts that he was not required to circulate to the parties “recommended decisions prepared by subordinates for approval by the Secretary.” Under this analysis the ALJ and the Board are mere assistants who aided the Secretary in making his decision by tendering recommendations in the nature of draft decisions. The institutional process used here, in the Secretary’s view, met whatever due process requirements there were by affording all parties an opportunity to present their cases and confront their opponents before the ALJ.[8] We do not agree.

At the outset we affirm the District Court’s holdings that the villages have a sufficient property interest to come within the due process clause. 405 F. Supp. at 1370. Indeed the Secretary concedes as much. The issue is what process is due under the circumstances. The Secretary argues that the opportunity to present a case and to confront opponents before the ALJ was enough. The difficulty with this position is that it overlooks the mandate of Congress in ANCSA which declares that “the settlement should be accomplished . . . with maximum participation by Natives in decisions affecting their rights and property.” 43 U.S.C. § 1601(b). We are unable to reconcile the Secretary’s “institutional” approach with so clear an expression of Congress’ will.

The only conceivable purpose of the secret review procedure was to expedite the resolution of the claims. This is a valid purpose, responsive to Congress’ instruction that the settlement be accomplished rapidly; nevertheless, affording the villages an opportunity to see the recommended decisions and to brief exceptions to them would cause only a slight delay in the proceedings. At the same time that opportunity would greatly enhance the participation of the Natives as well as the appearance of fairness so critical to the administrative process.

Determinations of village eligibility need not comply with the Administrative Procedure Act (APA) requirements for adjudications because ANCSA does not require that they be made “on the record after an opportunity for an agency hearing.” 5 U.S.C. § 554(a); see 43 U.S.C. § 1610(b)(2), (3). Nonetheless, we are guided by its requirements in a case such as this which entails due process rights but has no controlling statutory procedures. See Wong Yang Sung v. McGrath, 339 U.S. 33, 50-51, 94 L. Ed. 616, 70 S. Ct. 445 (1950); Riss & Co. v. United States, 341 U.S. 907, 71 S. Ct. 620, 95 L. Ed. 1345 (1951), rev’d per curiam, 96 F. Supp. 452 (W.D.Mo. 1950) (3 judge court). Section 557(c) of the APA provides that parties be given an opportunity to submit proposed findings and conclusions, or exceptions to decisions before a recommended, initial, or tentative decision of an agency is reviewed within the agency. In these cases there were two intermediate decisions in the administrative review process, the ALJs’ initial decisions and the Board’s recommended decisions. The villages had an opportunity to submit, and did submit, proposed findings and conclusions to the ALJs before the initial decisions were made. The villages were not, however, permitted to see the ALJs’ decisions nor were they permitted to submit exceptions before the Board made its recommended decisions. We believe that ANCSA’s requirement of maximum participation by the Natives required the Secretary to extend the full measure of procedural rights suggested by section 557(c). Considering the great importance to the Natives of these potential property rights (the quid pro quo for the extinguishment of their aboriginal titles), the congressional requirement of maximum participation by the Natives, and the minimal cost to administrative expediency, see Mathews v. Eldridge, 424 U.S. 319, 335, 47 L. Ed. 2d 18, 96 S. Ct. 893 (1976), we hold that on remand the Secretary must permit the parties to take exceptions to the ALJs’ decisions[9] and to submit briefs thereon to the Board.

The Supreme Court’s recent decision in Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 98 S. Ct. 1197, 55 L. Ed. 2d 460, 46 U.S.L.W. 4301 (1978) does not require a different result. In that case, the Court held that a reviewing court may not dictate to an agency the methods and procedures to be followed to develop an adequate record for judicial review.

Absent constitutional constraints or extremely compelling circumstances “the administrative agencies ‘should be free to fashion their own rules of procedure and to pursue methods of inquiry capable of permitting them to discharge their multitudinous duties.'” Federal Communications Comm’n v. Schreiber, 381 U.S. 279, 290, 14 L. Ed. 2d 383, 85 S. Ct. 1459 (1965), quoting from Federal Communications Comm’n v. Pottsville Broadcasting Co., 309 U.S. 134, 143, 84 L. Ed. 656, 60 S. Ct. 437 (1940).

46 U.S.L.W. at 4307. Our holding today does not trench upon this principle. We hold only that the Secretary’s secret review process is inconsistent with both constitutional constraints and the mandate of ANCSA that Natives participate as fully as possible in the decisionmaking.

THE REMEDY

The District Court ordered the decisions of the BIA area director reinstated because hearings conducted by Congressman Dingell “constituted an impermissible congressional interference with the administrative process”, 405 F. Supp. at 1372, which destroyed the appearance of administrative impartiality and caused actual prejudice to the villages, denying them fundamental fairness required by the Fifth Amendment. See Pillsbury Co. v. FTC, 354 F.2d 952 (5th Cir. 1966). The court believed that the effects of the interference lingered making the usual remedy, remand to the Secretary for a redetermination, impossible. We disagree.

The hearings in question were called by Congressman Dingell in June of 1974 at the time the Board and the Secretary were considering most of these cases. Alaska Native Claims, Hearings Before the Subcomm. on Fisheries and Wildlife Conservation and the Environment of the Comm. on Merchant Marine and Fisheries, 93d Cong., 2d Sess. (1975). During the hearings Congressman Dingell made no secret of his displeasure with some of the initial BIA eligibility determinations. Nevertheless, we think the Pillsbury decision is not controlling here because none of the persons called before the subcommittee was a decisionmaker in these cases. One possible exception was Mr. Ken Brown, a close advisor to the Secretary who briefed him on the cases at the time he decided to approve the Board’s recommended decisions. However, even if we assume that the Pillsbury doctrine would reach advisors to the decisionmaker, Mr. Brown was not asked to prejudge any of the claims by characterizing their validity. See Pillsbury Co. v. FTC, supra at 964. The worst cast that can be put upon the hearings is that Brown was present when the subcommittee expressed its belief that certain villages had made fraudulent claims and that the BIA decisions were in error. This is not enough.

A more serious matter is a letter that Congressman Dingell sent to the Secretary two days before he determined that eight of these villages were ineligible. The letter requested the Secretary to postpone his decisions on the cases pending a review and opinion by the Comptroller General, because it “appears from the testimony [at the hearings] that village eligibility and Native enrollment requirements of ANCSA have been misinterpreted in the regulations and that certain villages should not have been certified as eligible for land selections under ANCSA.” The letter did not specify any particular villages, but we think it compromised the appearance of the Secretary’s impartiality.[10] D.C. Federation of Civic Ass’ns v. Volpe, 148 U.S.App.D.C. 207, 222, 459 F.2d 1231, 1246, cert. denied, 405 U.S 1030, 31 L. Ed. 2d 489, 92 S. Ct. 1290 (1972); see Pillsbury Co. v. FTC, supra at 964. Nevertheless, a remand to the Secretary, rather than a reinstatement of the BIA decisions, is the proper remedy in this case. Assuming the worst — that the letter contributed to the Secretary’s decision in these cases — we cannot say that 3 1/2 years later, a new Secretary in a new administration is thereby rendered incapable of giving these cases a fair and dispassionate treatment.

RESIDENCE DETERMINATION

One final matter remains to be considered. The villages challenge the District Court’s conclusion that because the residence of Natives is not established conclusively by the roll prepared by the Secretary pursuant to 43 U.S.C. § 1604 residence was open to redetermination in the village eligibility proceedings. The Secretary argues that this challenge is barred because no cross-appeal was filed. We reject this argument, see note 3 supra, but affirm the District Court’s interpretation of the statute for the reasons stated in its opinion.[11] 405 F. Supp. at 1373-74.

CONCLUSION

We hold the administrative appeals by the Fish and Wildlife Service, the Forest Service, and the State of Alaska were valid. The appeal process itself, however, should have permitted the parties to take exceptions to the ALJs’ recommended decisions and to submit briefs to the Board for its consideration. Therefore, these cases must be remanded to the District Court for remand to the Secretary for redetermination of the appeals. The judgment of the District Court is

Affirmed in part, reversed in part.

Concur by: BAZELON

Concur

---

BAZELON, Circuit Judge, concurring:

I join Judge Robb’s fine opinion for the court, but wish to highlight my reasons for concluding that appellants had standing to seek administrative review of the village eligibility decisions.

The decisions of this court and others on administrative standing have created not a little uncertainty.[1] It is unclear whether the limitations appurtenant to judicial standing apply in the administrative context. And if such limitations do not apply, it is unclear what standards should govern. For the reasons set forth below, I find no basis for importing judicial standing doctrines into the administrative area. In my view, administrative standing should be determined in light of the functions of an administrative agency, and whether a would-be participant would contribute to fulfilling those functions.

I.

An examination of the theoretical foundations of judicial standing reveals no reason to equate judicial and administrative standing. The Supreme Court has identified two general types of judicial standing limitations — constitutional limitations derived from the “case or controversy” requirement of Article III, and prudential limitations formulated by the Court in its supervisory capacity over the federal judiciary. See generally, Simon v. Eastern Kentucky Welfare Rights Org., 426 U.S. 26, 37-46, 48 L. Ed. 2d 450, 96 S. Ct. 1917 (1976); Warth v. Seldin, 422 U.S. 490, 498-502, 45 L. Ed. 2d 343, 95 S. Ct. 2197 (1975). Neither type of limitation is applicable in the administrative context.

The “case or controversy” requirement of Article III restricts federal courts to adjudication of disputes in which a plaintiff has a “personal stake” in the outcome. Baker v. Carr, 369 U.S. 186, 204, 7 L. Ed. 2d 663, 82 S. Ct. 691 (1962). This means, first and most fundamentally, that a plaintiff must allege “some threatened or actual injury resulting from the putatively illegal action. . . .” Linda R.S. v. Richard D., 410 U.S. 614, 617, 35 L. Ed. 2d 536, 93 S. Ct. 1146 (1973). In addition, the Supreme Court has ruled that a plaintiff must assert an injury that is likely to be “redressed by a favorable decision,” Eastern Kentucky, supra 426 U.S. at 38, and an injury that can fairly “be traced to the challenged action of the defendant, and not injury that results from the independent action of some third party not before the court.” Id.

Administrative agencies, like federal courts, frequently exercise adjudicatory or “quasi-judicial” functions. But administrative tribunals have few if any of the indicia of the “inferior courts” Congress is authorized to establish pursuant to Article III.[2] Even independent regulatory agencies do not share the two attributes of federal courts explicitly mentioned by the Constitution — secure compensation and life tenure. Hence, administrative agencies are not bound by the “case or controversy” limitation of Article III.[3] Congress, in its discretion, can require that any person be admitted to administrative proceedings, whether or not that person has alleged “injury in fact” or has satisfied the other constitutional standing requirements recognized by the Supreme Court.

Prudential rules of judicial standing, like Article III limitations, are “founded in concern about the proper — and properly limited — role of courts in a democratic society.” Warth, supra 422 U.S. at 498. The major prudential limitations recognized by the Supreme Court are the requirement that the plaintiff assert an interest “‘arguably within the zone of interests to be protected or regulated’ by the statutory framework within which his claim arises,” Eastern Kentucky, supra 426 U.S. at 39, n.19; that the plaintiff assert more than “a ‘generalized grievance’ shared in substantially equal measure by all or a large class of citizens,” Warth, supra 422 U.S. at 499; and that the plaintiff assert his own rights and interests, rather than those of third parties. Id.

The function of prudential standing rules, the Court has stressed, is to “limit the role of courts in resolving public disputes.” Warth, supra at 498; id. at 500. Prudential limitations serve to define “the proper judicial role relative to the other major governmental institutions in the society.” Tax Analysts and Advocates v. Blumenthal, 184 U.S. App. D.C. 238, 566 F.2d 130, 139 (D.C.Cir. 1977). In short, prudential limitations reflect a concern about the limited authority and competence of the judiciary in setting general policy.

As such, prudential limitations are no more applicable to administrative agencies than Article III limitations. The authority of federal courts to set general policy is restricted by Article III, which empowers courts to hear only “cases” and “controversies.” Administrative agencies, on the other hand, derive their powers from Congress, and thus indirectly from Article I. Although this delegation of power is subject to limitations,[4] an agency has unquestioned authority to set general policies affecting large numbers of people when it acts within the scope of its statutory mandate.

The competence of federal courts to formulate general policy is also severely limited by the method in which they reach decisions. Courts are confined to the resolution of particular disputes in an adversary setting. Administrative agencies, however, have unique resources for establishing broad, prospective policies. Unlike courts, administrative agencies can devote uninterrupted attention to relatively narrow problem areas, and can call upon technical staff assistance in formulating solutions. Unlike courts, they are not limited to the adjudicatory format, but have the flexibility to proceed by adjudication, legislative hearings, rulemaking, investigation or in other ways. And unlike courts, agencies do not have to wait for a plaintiff to file suit; they have the power to institute an investigation or an action on their own initiative.

The decisions of this circuit, as appellants acknowledge, are “not uniform” on the subject of whether judicial standing principles should be applied in administrative proceedings. App.Br. at 14 n.4. Admittedly, a number of decisions, including one by the author of this opinion, have applied judicial standing concepts in determining whether a party should have standing before an agency.[5] At the same time, however, nearly all courts that have considered the question have recognized at least a theoretical distinction between judicial and administrative standing.[6] Moreover, most decisions that apply judicial standing concepts stand only for the proposition that if a party would have standing to seek judicial review of administrative action, he should be allowed to appear before the agency, if only to assure the proper development of the record. See, e.g., National Welfare Rights Organization v. Finch, 139 U.S. App. D.C. 46, 429 F.2d 725, 736-37 (1970).[7] As such, these cases do not establish that administrative standing would necessarily be improper if a party would not have standing to obtain judicial review.

The fact that judicial and administrative standing are conceptually distinct does not, of course, mean that Congress could not require an administrative agency to apply judicial standing concepts in determining administrative standing. Nor does it mean that courts and agencies should never refer to judicial standing decisions, where helpful, by way of analogy. But absent a specific justification for invoking judicial standing decisions, I see no basis for interjecting the complex and restrictive law of judicial standing into the administrative process.

II.

What should be the standards for determining standing to appear before an agency? Generalizations are hazardous, for administrative standing questions arise in contexts as diverse as the methods and objectives of the agencies themselves. Nevertheless, the present case suggests some principles that may be broadly applicable.

The starting point in determining administrative standing should be the language of the statutes and regulations that provide for an administrative hearing, appeal or intervention. To be sure, these sources frequently provide no criteria for determining standing, or speak in vague terms of persons “aggrieved,” “affected,” or having an “interest” — in which case they are of little assistance. On occasion, however, the applicable statutes and regulations do supply specific criteria for determining standing, in which case they should of course be controlling.

An example of a regulation supplying relatively precise standards is 43 C.F.R. § 4.902 (1976), part of the new regulations on ANCSA hearing procedures promulgated after the hearings in the instant cases were completed.[8] This section provides:

Any party who claims a property interest in land affected by a determination from which an appeal to the Alaska Native Claims Appeal Board is allowed, or an agency of the Federal Government, may appeal as provided in this subpart. However, a regional corporation shall have the right of appeal in any case involving land selections.

This regulation quite clearly establishes three classes of persons who have standing: those asserting a property interest in land, federal agencies, and regional corporations in land selection cases. It thus provides fairly objective criteria that can be applied without recourse to a more refined analysis.[9]

More often, however, the statutes and regulations do not provide specific guidelines for determining administrative standing. The regulation actually applied in these cases, for example, refers only to “any party aggrieved. . . .” 43 C.F.R. § 4.700 (1976).[10] Such a general and indefinite provision suggests no concrete standards for determining who should have standing to appeal. In these circumstances, I believe a functional analysis of administrative standing is appropriate. Such an analysis would examine the nature of the asserted interest, the relationship of this interest to the functions of the agency, and whether an award of standing would contribute to the attainment of these functions.

There is nothing revolutionary about such an approach to administrative standing. Several commentators have suggested adoption of a functional standard.[11] Moreover, the elements of a functional approach can be discerned in our prior decisions — most prominently, in fact, in the very cases cited by appellees for the proposition that judicial standing limitations should govern.

The seminal decision on administrative standing pointing toward a functional approach is Office of Communication of United Church of Christ v. FCC, 123 U.S. App. D.C. 328, 359 F.2d 994 (1966). We held there that standing to intervene in a Federal Communications Commission license renewal proceeding is not limited to those alleging economic injury or electrical interference, but extends also to responsible representatives of the listening public. We ruled that “the concept of standing is a practical and functional one designed to insure that only those with a genuine and legitimate interest can participate in a proceeding.” Id. 359 F.2d at 1002. Given this standard, we could “see no reason to exclude those with such an obvious and acute concern as the listening audience.” Id. Moreover, we found that the Commission had insufficient resources to fulfill its obligation to assure balanced broadcast programming. Representatives of the listening public, acting as “private attorneys general” enforcing the Commission’s Fairness Doctrine, would therefore provide valuable assistance. Id. 359 F.2d at 1003-04. We specifically rejected the Commission’s argument that a broad rule of standing would overwhelm the Commission with “hosts” of protestors, and found that the Commission had authority to adopt rules to screen out spurious petitions and “limit public intervention to spokesmen who can be helpful.” Id. 359 F.2d at 1005.

In National Welfare Rights Organization v. Finch, 139 U.S. App. D.C. 46, 429 F.2d 725 (1970), we expanded the rationale of United Church of Christ, making the functional elements of the analysis even more explicit. We held that organizations of welfare recipients were entitled to take part in hearings conducted by the Department of Health, Education and Welfare to determine if state welfare programs were in conformance with federal standards. A functional-type analysis of the organizations’ standing served as an alternative ground for the decision:

As intervenors in conformity hearings appellants may serve the public interest in the maintenance of an efficient state-federal cooperative welfare system. Appellants’ role would be analogous to that of persons accorded standing, not for the protection of their own private interests, but because they are especially well suited to represent an element of the public interest. Thus they serve as “private attorneys general.”

Id. 429 F.2d at 738. As in United Church of Christ, supra, we noted that the “threat of hundreds of intervenors” was more apparent than real. The appropriate way to limit the possibility of abuse was “by controlling the proceeding so that all participants are required to adhere to the issues and to refrain from introducing cumulative or irrelevant evidence,” not by “excluding parties who have a right to participate.” Id., quoting Virginia Petroleum Jobbers Ass’n v. FPC, 105 U.S. App. D.C. 172, 265 F.2d 364 n.1 (1959).[12]

These authorities suggest a functional analysis composed of the following factors:

(1) The nature of the interest asserted by the potential participant.
(2) The relevance of this interest to the goals and purposes of the agency.
(3) The qualifications of the potential participant to represent this interest.
(4) Whether other persons could be expected to represent adequately this interest.
(5) Whether special considerations indicate that an award of standing would not be in the public interest.

Such a standard would have to be flexible, of course, and the appropriate variables might well vary from one context to another.[13] The important point is that administrative standing should be tailored to the functions of the agency, not to arcane doctrine from another area of the law.

Under such an approach, there can be little doubt that the Secretary acted properly in finding that the United States Fish and Wildlife Service, the National Forest Service, and the State of Alaska had standing to appeal the eligibility determinations of the BIA area director. In fact, although the standing discussion of the Alaska Native Claims Appeals Board, acting for the Secretary, relied in part on a consideration of judicial standing concepts, it also included an elementary functional analysis.

The federal agencies and the State of Alaska maintained that if certain villages were eligible to take public lands, their own flexibility in selecting such lands would be impaired. The Board found that this interest established “a nexus with the village sufficient to assure the presentation of factual evidence relevant to the village’s eligibility.” State of Alaska v. Village of Solomon, Final Decision of Board and Secretary (Sept. 16, 1974) at 4. Thus, the Board found that the asserted interest was relevant to one of the principal purposes of the Act — determination of eligibility “with the fullest possible command of the relevant facts.” Id. the board concluded that it was proper to recognize appellants’ standing, “particularly when the Secretary’s factfinding obligation would be thwarted by a more restrictive approach.” Id. No suggestion was made by the Board that appellants were not qualified to represent the interest they asserted, that affording them an appeal would result in duplicative presentations, or that there were any considerations of public policy militating against recognizing their standing.[14]

Under these circumstances, the Board was amply justified in finding that appellants had standing. Further analysis of standing concepts, judicial or otherwise, was unwarranted and unnecessary.

Congress enacted the Alaska Native Claims Settlement Act, 43 U.S.C. §§ 1601-1629a, (ANCSA) to settle the land claims of Alaska Natives and Native groups. 43 U.S.C. § 1601(a). ANCSA authorizes the Secretary of the Interior to convey certain public lands to Native groups that are incorporated under Alaska law but that do not qualify as Native villages. 43 U.S.C. § 1613(h)(2). We consider whether the Secretary’s regulations regarding the qualification of Native groups, 43 C.F.R. §§ 2653.6(a)(4), (a)(5), are consistent with the statutory definition, 43 U.S.C. § 1602(d).

Facts

In 1976 the Grouse Creek Corporation applied as a Native group for a conveyance of 6720 acres of National Forest land.[1] Under the applicable regulations, a group qualifies as a Native group only if a majority of the residents of the locality are members. The Bureau of Indian Affairs found that the Grouse Creek group did not qualify: Only eleven of thirty-one residents were members of the Grouse Creek group. The Grouse Creek group appealed, and the administrative law judge redrew the boundaries of the locality. Nonetheless, he found that the Grouse Creek group fell just short of meeting the majority requirement even within the new boundaries: Fifteen of thirty residents were members. Because less than a majority of the residents of the locality were members of the Grouse Creek group, it did not qualify as a Native group.

Critical to this determination was the Secretary’s decision to count one family of five, the Munsons, as residents of the locality but not as members of the Grouse Creek group. The Munsons are Alaska Natives enrolled in the Native Village of Eklutna. Nonetheless, they have lived in the Grouse Creek locality at all relevant times.[2]

The Grouse Creek Corporation appealed the ALJ’s decision to the Interior Board of Land Appeals, which affirmed. Because the IBLA concluded that, even within the more favorable boundaries, less than a majority of residents were members of the Grouse Creek group, it did not review the boundary determination.

The district court reversed. It agreed that, because the Munsons are not enrolled in the Grouse Creek locality, they could not be members of the Grouse Creek group. However, the court also held that the Munsons’ enrollment in another locality precluded them from being residents of the Grouse Creek locality. It therefore concluded that there were twenty-five residents, not thirty. Because fifteen out of twenty-five residents were members, the district court concluded that the members would constitute a majority of the residents if the ALJ’s boundaries were correct. The court remanded to allow the IBLA to consider the boundary issue.[3]

The Secretary appeals.

Discussion

I

Because the district court remanded to the agency, it is not clear that we have jurisdiction over the appeal. Under 28 U.S.C. § 1291, we have jurisdiction only over appeals from final orders; in general, remand orders are not considered final. See, e.g., Eluska v. Andrus, 587 F.2d 996, 999-1001 (9th Cir. 1978); see also 15 C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure § 3914, at 550-51 (1976). However, a remand order is considered final where (1) the district court conclusively resolves a separable legal issue, (2) the remand order forces the agency to apply a potentially erroneous rule which may result in a wasted proceeding, and (3) review would, as a practical matter, be foreclosed if an immediate appeal were unavailable. See Stone v. Heckler, 722 F.2d 464, 466-67 (9th Cir. 1983); Kaho v. Ilchert, 765 F.2d 877, 880-81 (9th Cir. 1985); Regents of Univ. of Cal. v. Heckler, 771 F.2d 1182, 1186-87 (9th Cir. 1985).

The district court here invalidated the Secretary’s interpretation of the statute, conclusively resolving that separable legal issue. On remand, the IBLA was to set the locality’s boundaries and apply the district court’s interpretation to determine whether the Grouse Creek group met the majority requirement; this proceeding would be a waste if the district court’s interpretation proved erroneous. And, failure to permit immediate appeal might foreclose review altogether: Should the Secretary lose on remand, there would be no appeal, for the Secretary cannot appeal his own agency’s determinations. We therefore conclude that the order is final and appealable under 28 U.S.C. § 1291.

II

Neither the Secretary’s interpretation of the regulations nor the regulations themselves may stand if manifestly contrary to the statute. See Chevron USA, Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843- 44, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984). However, the Secretary’s interpretation is entitled to great deference; even if we would adopt a different interpretation, we must uphold the Secretary’s as long as it is reasonable. Seldovia Native Ass’n v. Lujan, 904 F.2d 1335, 1342 (9th Cir. 1990); Haynes v. United States, 891 F.2d 235, 238-39 (9th Cir. 1989); see Chevron USA, Inc., 467 U.S. at 842-44.[4]

Under the regulations, the BIA must determine whether a Native group meets the majority requirement in two steps. First, it must count the members of the Native group who reside and are enrolled in the locality, 43 C.F.R. §§ 2653.6(a)(4), (a)(5); then it must count all the residents. If more than half of the residents are Native group members, the group is eligible; if half of the residents or fewer are members, it is not. Plaintiffs challenge both the regulation defining who counts toward the majority and who counts as a resident.

A.

According to plaintiffs, Native groups are eligible for conveyances so long as a majority of the residents are Natives; under the Secretary’s regulations, however, Native groups are eligible only if a majority of the residents are members of the Native group seeking the conveyance. 43 C.F.R. §§ 2653.6(a)(4), (a)(5). Whether we count all Natives or members only is critical here. Twenty of thirty residents – a majority – are Natives. But only fifteen residents – less than a majority – are members. This difference arises because one family of five, the Munsons, are Natives, but are not members of the Grouse Creek group.

The statute provides that:

“Native group” means any tribe, band, clan, village, community, or village association of Natives in Alaska composed of less than twenty-five Natives, who comprise a majority of the residents of the locality.

43 U.S.C. § 1602(d).

Plaintiffs argue that because the clause “who comprise a majority of the residents” modifies the word “Natives,” the statute requires that a majority of the residents be Natives and doesn’t require that a majority be members. Admittedly, the clause dangles a bit – it is not entirely clear to whom the word “who” refers. One plausible reading, however, is that the clause modifies the entire preceding phrase – “tribe, band, clan, village, community or village association of Natives” – not just the word “Natives,” thus requiring that a majority of the residents be members of the tribe, band, clan, village, community or village association that seeks the conveyance.

Even if we were to read “who comprise a majority” as modifying Natives, we would still have to rely on the preceding half of the definition in determining to which Natives it refers; the context indicates that the Natives who must comprise a majority of the residents are the twenty-five or fewer Natives who make up the tribe, band, clan, village, community or village association. It is one of these interpretations, neither of which is unreasonable, that the Secretary adopted in his regulations.

As plaintiffs point out, other sections of ANCSA do require Natives, not group members, to constitute a majority of the residents. For example, section 1610(b)(3), which determines the eligibility of certain Native villages for ANCSA benefits, requires “a majority of the residents [to be] Natives.” 43 U.S.C. § 1610(b)(3)(B). Had Congress used identical language in spelling out the criteria for Native groups, 43 U.S.C. § 1602(d), the Secretary would have been required to count all Natives toward the majority requirement. But Congress used different language here, language that is readily susceptible to the Secretary’s interpretation. If anything, Congress’ use of different language in different parts of ANCSA suggests that it meant the provisions to function differently.

The Secretary’s interpretation of 43 U.S.C. § 1602(d) makes sense. The statute takes land out of the public domain and places it in the hands of private groups. See 43 U.S.C. § 1613(h)(2). Residents who are not members will cease to have any rights to use or enjoy the transferred land. Under the plaintiffs’ construction of the statute, the Munsons would count in favor of the transfer even though they, along with the rest of the public, may lose rights as a result. Requiring the recipients of the land – the group members – to make up a majority of the residents ensures that a non-member majority is not denied access to public lands for the benefit of a group-member minority.

We have little difficulty concluding that 43 C.F.R. § 2653.6(a)(4) is not only a permissible, but a sensible, interpretation of 43 U.S.C. § 1602(d). The district court correctly concluded that the Munsons could not count toward the majority because they were not members of the Grouse Creek group.

B.

Having resolved who counts toward the majority, we must now determine who is a resident of the locality. Once again we find the Munsons in the limelight. If the Munsons count as residents, there are thirty residents and the fifteen Grouse Creek group members do not make up a majority; if the Munsons do not, there are only twenty-five residents, and the fifteen Grouse Creek group members constitute a majority.

Neither the statute nor the regulations define resident. The Secretary interpreted it as having its ordinary legal meaning, which is a “person who occupies a dwelling within” the boundary who manifests “a present intent to remain.” Black’s Law Dictionary 1177 (5th ed. 1979). The Munsons have at all relevant times lived within the locality; there is no indication that they have ever planned to leave. The Secretary therefore counted them as residents.

Plaintiffs argue that because the Munsons are enrolled in the Village of Eklutna, they are residents of that village, not of Grouse Creek. They cite 43 U.S.C. § 1604(b), which requires the Secretary of the Interior to enroll Natives in the locality where they reside.

Plaintiffs fail to read section 1604 in its entirety. Section 1604 does make residency as of the 1970 census one basis for enrollment, but it provides exceptions. One allows “the Secretary [to] enroll a Native in a different region when necessary to avoid enrolling members of the same family in different regions. . . .” 43 U.S.C. § 1604(b). Another provides for the enrollment of Natives who weren’t residents of any of the twelve regions when the roll was prepared. See 43 U.S.C. §§ 1604(b)(1)-(b)(4). Thus, the statute does not equate enrollment with residency, and it certainly does not provide that, once enrolled in a locality, Natives are tied to the land like serfs.[5]

The district court was troubled that the Munsons not only didn’t count for the Grouse Creek group, but actually counted against it. The court thought that the presence of one group of Natives – the Munsons – should not deprive another group of Natives of ANCSA land grants to which they would otherwise be entitled. We disagree. Members of Native groups, no less than anyone else, have the right to reside wherever they please and, while there, to enjoy the rights of citizenship. After a conveyance under ANCSA, the Munsons’ legal rights to use the conveyed land would be eliminated in the same way as the rights of non-Native citizens. Thus, considering the Munsons’ presence the same way we consider the presence of non-Natives is entirely sensible.

Conclusion

Although membership has its privileges, under ANCSA and the applicable regulations, those privileges are carefully circumscribed. We conclude that 43 C.F.R. §§ 2653.6(a)(4), (a)(5), which count only members of the Native group toward the required majority, are a reasonable and sensible interpretation of ANCSA’s definition of Native group, 43 U.S.C. § 1602(d). We also conclude that the Secretary’s interpretation of resident as including all persons who live in and intend to remain in the region, regardless of their enrollment, is reasonable and consistent with the statutory scheme.

Because the Secretary properly interpreted valid regulations, the judgment of the district court is affirmed in part and reversed in part. The case is remanded for entry of judgment for the defendants. Defendants shall recover their costs.

I. INTRODUCTION

In this appeal we consider claims arising out of the solicitation of proxies by shareholders of an Alaska Native regional corporation. Because we conclude that certain proxy solicitation statements by the shareholders were materially false as a matter of law, we affirm the superior court’s grant of summary judgment as to those statements. But because the corporation voluntarily dismissed its remaining claims for materially false or misleading proxy solicitation statements, we do not reach the merits of the corporation’s cross-appeal challenging the superior court’s denial of summary judgment as to those claims.

II. FACTS AND PROCEEDINGS

Koniag, Inc. is an Alaska corporation, incorporated under the Alaska Native Claims Settlement Act[1] (ANCSA) as a regional corporation. In December 1997 Koniag held its annual shareholders meeting in Kodiak (1) to elect three directors to the board of directors for three-year terms; and (2) to vote on Proposition 1, which provided for the establishment of a permanent fund as a settlement trust under the provisions of ANCSA.

Koniag shareholders Diane Cooper, Jana Larsen-Horne, and Judy Meidinger sought election to Koniag’s board and solicited proxies in October and November 1997. These three candidates (the Meidinger slate) opposed the adoption of Proposition 1, and their proxy solicitation statements urged voters to reject the trust proposal.

In December 1997 Koniag sued the Meidinger slate for proxy solicitation violations and defamation. Koniag’s complaint alleged that the Meidinger slate made numerous materially false or misleading proxy solicitation statements. The Meidinger slate counterclaimed for breach of fiduciary duty, intended consequences, intentional infliction of emotional distress, and abuse of process.

In May 1999 Koniag moved for summary judgment on each of its claims for materially false or misleading proxy solicitation statements by the Meidinger slate. The Meidinger slate opposed Koniag’s motion and cross-moved for summary judgment on Koniag’s claims. On August 23 the superior court granted Koniag summary judgment on two of its claims for materially false or misleading proxy solicitation statements. But the superior court ruled that genuine factual issues precluded the grant of summary judgment on Koniag’s remaining claims for proxy solicitation violations.[2] The superior court also ruled on the Meidinger slate’s cross-motion for summary judgment, concluding as a matter of law that Larsen-Horne had not misrepresented her status as an associate with the Jamin law firm, but denying the motion as to all other issues.

After the superior court expressed its willingness to grant Koniag injunctive relief based upon the statements the court found to be materially false as a matter of law, Koniag filed a notice of intent not to seek further trial of claims; this notice dismissed Koniag’s remaining claims, but purported to reserve Koniag’s right to argue on cross-appeal that the superior court erred to the extent it failed to grant Koniag summary judgment on its claims of false or misleading proxy.

On September 29 the superior court entered an injunction (1) directing the Meidinger slate to cease and desist from further violations of the law; (2) directing the Meidinger slate, for a period of three years, to file proxy statements and other proxy solicitation materials with the State Division of Banking, Securities, and Corporations for examination and review at least ten working days before a distribution to shareholders; and (3) voiding the proxies obtained by the Meidinger slate.

In July 1999 Koniag moved for summary judgment on the Meidinger slate’s counterclaims. The Meidinger slate opposed Koniag’s motion. On September 27 the superior court dismissed the Meidinger slate’s remaining counterclaims for abuse of process, intentional infliction of emotional distress, and breach of fiduciary duty on summary judgment.[3]

The superior court entered final judgment for Koniag on December 17, 1999. Judy Meidinger appeals.[4] Koniag cross-appeals.

III. DISCUSSION

A. Standard of Review

We review an award of summary judgment de novo and affirm “‘if the evidence in the record fails to disclose a genuine issue of material fact and the moving party is entitled to judgment as a matter of law.'”[5] We draw all reasonable inferences of fact in favor of the nonmoving party.[6] We apply our independent judgment to any questions of law and adopt the rule of law that is most persuasive in light of precedent, reason, and policy.[7]

B. It Was Not Error to Grant Koniag Summary Judgment on Two of Its Claims for Materially False or Misleading Proxy Solicitation Statements by the Meidinger Slate.

The proxy solicitation statements the Meidinger slate distributed in October 1997 opposed the adoption of Proposition 1, which provided for the establishment of a permanent fund as a settlement trust under the provisions of ANCSA. A statement circulated by the Meidinger slate in opposition to the trust asserted: “This proposal gives [Koniag’s] Board way more power than they currently possess. They would be able to appoint themselves as trustees, (more directors fees and compensation), change the terms of the trust and the number of trustees as they see fit.” Another Meidinger slate proxy solicitation statement asserted: “THE PROPOSAL ALSO GRANTS IRREVOCABLE DELEGATION FROM THE SHAREHOLDERS TO THE CURRENT BOARD TO APPOINT AND REMOVE TRUSTEES.”

Koniag argued in its summary judgment motion that these statements were materially false or misleading as a matter of law. The superior court agreed and granted Koniag summary judgment as to these statements. Meidinger appeals this ruling.

The Alaska Securities Act prohibits misrepresentations of material fact in proxy solicitations.[8] Alaska Statute 45.55.160 provides:

A person may not, in a document filed with the Administrator or in a proceeding under this chapter, make or cause to be made an untrue statement of material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading.

Alaska’s regulations further provide:

A solicitation may not be made by means of a proxy statement . . . that contains a material misrepresentation. A misrepresentation is a statement that, at the time and under the circumstances in which it is made (1) is false or misleading with respect to a material fact; (2) omits a material fact necessary in order to make a statement made in the solicitation not false or misleading; or (3) omits a material fact necessary to correct a statement, in an earlier communication regarding the solicitation of a proxy for the same meeting or subject matter, which has become false or misleading. [9]

A misrepresentation is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote. Subjective proof that one or more shareholders actually granted a proxy because of a falsehood is not required; only the objective standard encompassed in the definition of materiality need be met.[10]

Materiality is a mixed question of law and fact, “involving as it does the application of a legal standard to a particular set of facts.”[11] In considering whether summary judgment on the issue of materiality is appropriate, we must bear in mind that the determination of materiality involves assessments that are peculiarly ones for the trier of fact:

the underlying objective facts, which will often be free from dispute, are merely the starting point for the ultimate determination of materiality. The determination requires delicate assessments of the inferences a “reasonable shareholder” would draw from a given set of facts and the significance of those inferences to him, and these assessments are peculiarly ones for the trier of fact.[12]

Nevertheless, the issue of materiality may be resolved as a matter of law on summary judgment “if the established [misrepresentations] are ‘so obviously important to an investor, that reasonable minds cannot differ on the question of materiality’ . . . .”[13]

Meidinger first argues on appeal that the statement that the trust proposal gave Koniag’s board the “authority to change the terms of the trust and the number of trustees as they see fit” is not false or misleading under the provisions of the trust proposal. Meidinger cites section 8.5 of the trust agreement, which provides in relevant part: “At any time within ten (10) years of the funding of the trust, the Trustees may reduce the number of Trustees to not fewer than five (5) Trustees.” Meidinger also cites section 18.1(a) of the trust agreement, which provides in part: “At any time during the first three years of the Trust, the Trustees, without the consent of the Beneficiaries, but with the agreement of Koniag, Inc. (acting with approval of its Board of Directors and through its duly elected officers), may amend any technical aspect of the Trust . . . .”

But Meidinger’s argument that the trust agreement grants Koniag’s board the authority to change the terms of the trust and the number of trustees “as they see fit” is contradicted by other sections of the trust agreement and is therefore not persuasive. Section 8.5 of the trust agreement provides that the number of trustees may be reduced only within ten years of the funding of the trust, and the number of trustees may not be reduced to fewer than five. Furthermore, section 18.1 provides trustees with discretion to make only “limited amendments” to the trust agreement, and section 18.3 further limits trustees’ power to amend the trust agreement.[14] We therefore conclude, as did the superior court, that the authority-to-change statement is untrue as a matter of law.

Meidinger next argues that the statement that the trust proposal “grants irrevocable delegation from the shareholders to the current board to appoint or remove trustees” is not false or misleading under the provisions of the trust agreement. Meidinger cites section 8.6 of the trust agreement, which provides in part: “By approving this Trust Agreement, the Board of Directors and shareholders do consent to and ratify the irrevocable delegation by Koniag, Inc. of its authority to appoint and remove the Trustees, to the extent provided by this Trust Agreement.”[15] But section 8.6 addresses the delegation of Koniag’s authority to appoint and remove trustees, and does not purport to delegate the authority of its shareholders. 43 U.S.C. § 1629e(b)(2) grants Native corporations exclusive authority to appoint and remove trustees of a settlement trust; shareholders of a Native corporation do not have any authority to appoint or remove the trustees of a settlement trust. We therefore affirm the superior court’s conclusion that the irrevocable delegation statement is untrue as a matter of law.

Finally, Meidinger argues that summary judgment on the issue of materiality was inappropriate. She contends that because Koniag mailed its shareholders a copy of the proposed trust agreement, the question whether the statements regarding the trust agreement altered the “total mix” of information available to Koniag’s shareholders is one for the trier of fact. Meidinger cites TSC Industries, Inc. v. Northway, Inc., where the U.S. Supreme Court held that an omitted fact is material if there is “a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.”[16]

We assume for purposes of discussion here that the “total mix” standard applies to cases involving affirmative misrepresentations (as distinguished from omissions of material facts) in proxy solicitation statements. We nonetheless find Meidinger’s argument unpersuasive. As the United States Supreme Court noted in Virginia Bankshares, Inc. v. Sandberg:

[N]ot every mixture with the true will neutralize the deceptive. If it would take a financial analyst to spot the tension between the one and the other, whatever is misleading will remain materially so, and liability should follow. The point of a proxy statement, after all, should be to inform, not to challenge the reader’s critical wits.[17]

Similarly, Koniag’s shareholders cannot be expected to interpret and understand the terms of a trust proposal that even Meidinger’s brief describes as “complex.” Indeed, a proxy solicitation statement that Meidinger distributed in opposing the trust stated: “You must vote no on Proposition 1. . . . If you are thinking about voting yes, first get a lawyer, an accountant so you understand enough to make an informed choice . . . .” (Emphasis added.)

The Meidinger slate’s misrepresentations pertained to the merits of the only proposition scheduled to be considered at Koniag’s 1997 annual meeting. Indeed, Meidinger’s appellate brief describes the trust proposal as “important.” We conclude that the misrepresentations were so obviously important to an investor, that reasonable minds cannot differ on the question of materiality. We therefore affirm the superior court’s grant of summary judgment on the issue of materiality.

C. Meidinger Has Not Established that Alaska’s Proxy Solicitation Regulations Violate the Right to Free Speech Under Article I, Section 5 of the Alaska Constitution.

Meidinger next argues that Alaska’s proxy solicitation regulations are vague and overbroad, and hence violate the right to free speech under article I, section 5 of the Alaska Constitution. But Meidinger’s argument is unsupported by any case law involving proxy solicitations. We therefore reject Meidinger’s constitutional argument.[18]

D. It Was Not Error to Grant Koniag Injunctive Relief Without Conducting an Evidentiary Hearing.

In September 1999 the superior court entered an injunction (1) directing the Meidinger slate to cease and desist from further violations of the law; (2) directing the Meidinger slate, for a period of three years, to file proxy statements and other proxy solicitation materials with the State Division of Banking, Securities, and Corporations (division) for examination and review at least ten working days before a distribution to shareholders; and (3) voiding the proxies obtained by the Meidinger slate. Meidinger contends that it was error for the superior court to grant Koniag injunctive relief without first conducting an evidentiary hearing. Meidinger cites AS 45.55.920(d), which provides that “before issuing an order under . . . this section [for injunctive relief or a civil penalty], the administrator shall give reasonable notice of and an opportunity for a hearing.” We are unpersuaded.

Alaska Statute 45.55.920(d) applies by its terms only to administrative proceedings in the Department of Commerce and Economic Development.[19] It does not apply to judicial proceedings. We have held that an evidentiary hearing is not required in a judicial proceeding in the absence of a genuine issue of material fact.[20] Because we conclude that no genuine fact dispute precluded the grant of summary judgment on two of Koniag’s claims for materially false or misleading proxy solicitation statements by the Meidinger slate,[21] we hold that it was not error to grant Koniag injunctive relief based on those statements without conducting an evidentiary hearing.

E. It Was Not an Abuse of Discretion to Grant Injunctive Relief.

Meidinger next argues that it was an abuse of discretion for the superior court to require the Meidinger slate, for a period of three years, to file proxy statements and other proxy solicitation materials with the division for examination and review before distributing them to shareholders. Meidinger notes that under AS 45.55.920(a)(1)(B), three years is the maximum period that an individual can be required to file proxy statements and other proxy solicitation materials with the division. Meidinger contends that the proxy solicitation violations upon which the superior court based the injunction do not warrant the maximum penalty allowed by AS 45.55.920(a)(1)(B).

We review a grant of injunctive relief for abuse of discretion.[22] Here, the injunction the superior court entered borrowed heavily from the remedies listed in AS 45.55.920(a)(1).[23] As we recognized above, that statute applies by its terms to administrative and not judicial proceedings.[24] But it nevertheless illustrates the types of remedies that the legislature believed to be reasonable upon a violation of Alaska’s proxy solicitation laws. Furthermore, the Meidinger slate distributed the proxy solicitation statements that the superior court found to be materially false and misleading only one year after the division had warned Meidinger “to take more care in future election contests to provide complete disclosure pursuant to the regulations.” The injunctive relief granted by the superior court was therefore not an abuse of discretion.

F. It Was Not Error to Dismiss the Meidinger Slate’s Counterclaims on Summary Judgment.

1. Abuse of process

The Meidinger slate counterclaimed for abuse of process, alleging that “Koniag’s lawsuit was . . . filed to obtain an unfair advantage in pending and future [shareholders’] elections and to intimidate the Meidinger slate from further participation in shareholder elections or from running for office in the future.” The superior court dismissed the abuse of process counterclaim on summary judgment. Meidinger appeals.

The tort of abuse of process consists of two elements: (1) an ulterior purpose; and (2) a willful act in the use of the process not proper in the regular conduct of the proceeding.[25] The second element “contemplates some overt act done in addition to the initiating of the suit. The mere filing or maintenance of a lawsuit — even for an improper purpose — is not a proper basis for an abuse of process action.”[26] “Some definite act or threat not authorized by the process, or aimed at an objective not legitimate in the use of the process, is required . . . .”[27]

The superior court found that there was a genuine factual dispute regarding Koniag’s ulterior purpose.[28] But the superior court dismissed the abuse-of-process counterclaim on summary judgment because it concluded as a matter of law that the Meidinger slate’s allegations did not satisfy the second element of the tort. 

Meidinger argues that a genuine factual dispute regarding the second element of abuse of process — an overt act in addition to the act of initiating a lawsuit — precludes dismissal of the counterclaim on summary judgment. Meidinger contends that Koniag performed the necessary overt act when it (1) sought compensatory and punitive damages from the Meidinger slate; (2) requested injunctive relief denying Jana Larsen-Horne her seat on the board; (3) requested injunctive relief directing a counting of misled shareholders’ votes in favor of Koniag; (4) threatened the Meidinger slate with a large attorney’s fee award; (5) publicized the lawsuit to gain advantage in future shareholder elections; and (6) sent a flyer to its shareholders prior to the election alleging violations of Alaska securities law by the Meidinger slate.

Meidinger’s first four allegations of overt acts are examples of actions taken in the regular course of litigation and therefore cannot be a proper basis for an abuse of process claim.[29] Furthermore, the publicity Koniag accorded the lawsuit was a permissible exercise, if not an obligation, of a corporation about to spend money on litigation expense. We therefore affirm the superior court’s dismissal of the abuse of process counterclaim on summary judgment.

2. Intentional infliction of emotional distress

The Meidinger slate also counterclaimed for intentional infliction of emotional distress (IIED), alleging that Koniag “subjected them to a deliberate campaign of harassment, intimidation, and humiliation designed with the purpose of improving Koniag’s board and management election prospects.” The superior court dismissed the IIED counterclaim on summary judgment.

An IIED claim requires evidence that “‘the offending party, through extreme or outrageous conduct, intentionally or recklessly caused severe emotional distress or bodily harm to another.'”[30] Liability is found “‘only where the conduct [is] so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.'”[31] The trial court must make a threshold determination “whether the severity of the emotional distress and the conduct of the offending party warrant an instruction on intentional infliction of emotional distress.”[32] We will not overturn this threshold determination absent an abuse of discretion.[33]

Meidinger argues that it was extreme and outrageous for Koniag to (1) file suit three days before the election seeking damages it could not prove and did not want; and (2) send its shareholders before the election a flyer alleging violations of Alaska securities law by the Meidinger slate. Because Koniag’s conduct was not “so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency,”[34] the superior court did not abuse its discretion by making this threshold determination. Furthermore, to the extent that the IIED claim is based on Koniag’s lawsuit against the Meidinger slate, filing that lawsuit is privileged and cannot be the basis of IIED liability.[35] We therefore affirm the grant of summary judgment.

3. Breach of fiduciary duty

The Meidinger slate’s breach-of-fiduciary-duty counterclaim alleged that “Koniag owed a duty to Judy Meidinger, Jana Larsen[-Horne], and Diane Cooper not to initiate any lawsuit against them that would not be in the overall interest of shareholders.” The superior court dismissed the counterclaim on summary judgment, stating that “the evidence and arguments presented do not justify the maintenance of this cause of action.”

“Directors, officers, and possibly controlling shareholders, owe fiduciary duties to their corporation and possibly to other shareholders.”[36] But Meidinger cites, and we have found, no authority for the proposition that a corporation, such as Koniag, owes its shareholders fiduciary duties. Because we are not persuaded that a corporation owes its shareholders fiduciary duties, we conclude that the superior court properly dismissed the breach-of-fiduciary-duty counterclaim on summary judgment.

G. It Was Not Error to Award Koniag Attorney’s Fees and Costs.

The superior court awarded Koniag, as the prevailing party, costs of $ 10,773 and partial attorney’s fees of $37,784 under Alaska Civil Rules 79 and 82. Meidinger argues that it was an abuse of discretion to characterize Koniag as the prevailing party for purposes of awarding attorney’s fees and costs, because (1) the superior court dismissed Koniag’s defamation cause of action on summary judgment; and (2) the superior court did not award Koniag compensatory or punitive damages, although Koniag had originally requested such damages.[37]

The superior court has discretion to determine which party is the prevailing party for purposes of awarding attorney’s fees and costs, and we will reverse only for an abuse of discretion.[38] The prevailing party is the one “who has successfully prosecuted or defended against the action, the one who is successful on the ‘main issue’ of the action and ‘in whose favor the decision or verdict is rendered and the judgment entered.'”[39] A party need not prevail on all the issues in a case to be the prevailing party.[40]

The main issue in this case was whether the Meidinger slate’s proxy solicitations contained materially false and misleading statements. The superior court ruled that two statements were materially false and misleading as a matter of law, and the court granted Koniag injunctive relief. It was therefore not an abuse of discretion to characterize Koniag as the prevailing party for purposes of awarding attorney’s fees and costs.

H. The Issues Raised in Koniag’s Cross-Appeal Have Not Been Properly Preserved.

In its cross-appeal, Koniag contends that the superior court erroneously denied Koniag’s summary judgment motion (or granted only partial summary judgment) with respect to a number of its claims alleging materially false or misleading proxy solicitation statements by the Meidinger slate. Koniag argues that the Meidinger slate made materially false or misleading statements regarding (1) the taxability of assets distributed to the proposed trust; (2) the removal of trustees; (3) the accountability of trustees to Koniag’s shareholders; (4) the return of certain lands to the villages of Karluk and Larsen Bay; (5) the withholding of information by Koniag’s management from the corporation’s shareholders; and (6) Koniag’s lack of profitability.

But Koniag has not preserved these issues for review in its cross-appeal. After the superior court expressed its willingness to grant Koniag injunctive relief based upon the statements the court found to be materially false and misleading as a matter of law, Koniag dismissed its remaining claims against the Meidinger slate. Although Koniag’s notice of intent not to seek further trial of claims purported to reserve its remaining claims for our review by cross-appeal, such a reservation is ineffective. By dismissing these claims voluntarily, Koniag gave up any right to have their merits considered on appeal. It is also not necessary for us to consider Koniag’s cross-appeal arguments as alternative grounds for affirmance. We therefore do not reach the merits of Koniag’s cross-appeal.

IV. CONCLUSION

For these reasons, we AFFIRM the judgment of the superior court in all respects.

I. INTRODUCTION

Gertrude Demmert and Jessie Jim appeal the superior court’s denial of their claims that Kootznoowoo, Inc., distributed corporate wealth and benefits in a discriminatory manner, that the corporation attempted to conceal its discriminatory practices from its shareholders, and that director conflicts of interest invalidated certain corporate programs. Because the superior court made findings of fact supported by the evidence that resolve these issues in favor of Kootznoowoo, we affirm the superior court’s denial of appellants’ claims.

II. FACTS AND PROCEEDINGS

Kootznoowoo is the Native village corporation for the village of Angoon. Its primary business is managing approximately 21,440 acres of timberlands selected pursuant to Section 506 of the Alaska National Interest Lands Conservation Act. Appellants are shareholders of the corporation.

One of Kootznoowoo’s major activities respecting its lands is cutting timber. This activity presented a unique challenge, as the corporation was unable to select the lands surrounding Angoon for resource development. Kootznoowoo was forced to exchange its rights to land surrounding Angoon, on Admiralty Island, for lands on distant Prince of Wales Island. For some time, this meant that Kootznoowoo hired others to transport, process, and load its logs. Southeast Stevedoring Corporation provided the longshoring and stevedoring services necessary to load Kootznoowoo’s logs.

In the summer of 1988 the management of Southeast Stevedoring approached Pat Joensuu of Kootznoowoo with a proposal for loading logs at a site in Dora Bay located near Kootznoowoo’s timberlands. Southeast Stevedoring recognized that if Kootznoowoo could establish a mooring system and log loading facility near its timberlands, it could avoid the costs and risks involved in towing log rafts to remote locations. Eventually, the two parties agreed to establish such a log loading facility, with Kootznoowoo providing the camp facilities and work force and Southeast Stevedoring providing management expertise and mooring buoys for the ships.

Kootznoowoo established a shareholder hiring preference for the longshoring work, and in order to gather the necessary labor force, the corporation helped to pay workers’ transportation costs. While Kootznoowoo understood the payment of travel costs for laborers working at remote sites to be standard industry practice,[1] the corporation could not afford to pay the entirety of the costs. Thus, Kootznoowoo paid for about half of the longshore workers’ transportation costs.[2] While the longshoring positions were open to all Kootznoowoo shareholders, Kootznoowoo would only pay travel costs for group trips originating in Angoon. The corporation believed that this ensured a more fully available, flexible, and coordinated crew of workers.

Meanwhile, Southeast Stevedoring managed the labor force, selected and trained workers for “skilled” positions, and negotiated with customers rates for loading logs “which recognized that transportation for longshore workers was a cost that should be passed through to the log owner.”

Longshore workers could perform one of two types of work for the joint venture: skilled or unskilled. Southeast Stevedoring maintained an “active skilled working list” of people that would be dispatched to fill skilled positions in upcoming jobs. Southeast Stevedoring decided who to place on this list, who to dispatch for work, and who to consider for advancement. For unskilled positions, Kootznoowoo kept a rotation list of shareholders eighteen years or older who were capable of and willing to perform longshoring work. Southeast Stevedoring informed Kootznoowoo of the need for unskilled workers as it arose, and Kootznoowoo notified individuals whose names came up on the rotation list.

Appellants brought suit to challenge several aspects of Kootznoowoo’s longshoring program, as well as the corporation’s partial payment of longshore workers’ travel costs. The superior court found for Kootznoowoo, upholding both its participation in the joint venture longshoring program and its practice of paying longshore workers’ travel costs.

III. DISCUSSION

A. Neither Kootznoowoo’s Distribution of Longshoring Employment Opportunities nor the Corporation’s Payment of Longshore Workers’ Travel Costs Constituted Discriminatory Distribution of Corporate Wealth or Dividends.

Appellants contest Kootznoowoo’s distribution of longshoring opportunities as well as its payment of “travel subsidies” for longshore workers. They argue that by paying for longshore workers’ transportation and lodging, Kootznoowoo is distributing corporate wealth in a manner that discriminates among its shareholders. Appellants also argue that because the corporation only subsidizes travel to and from Angoon, it excludes shareholders outside of Angoon from its pool of qualified workers. They claim that the opportunity to work as a longshore worker and the payment of travel subsidies constitute a form of wealth “not available to the 63.1% of Kootznoowoo’s shareholders who reside elsewhere.” Thus Kootznoowoo’s operation of its longshoring program treats corporate shares in a discriminatory manner, violating the corporation’s contract with its shareholders, as well as the Equal Treatment Rule codified in AS 10.06.305 -.308, and -.313,[3] applicable to the Alaska Native Village Corporation through the Alaska Native Claims Settlement Act §§ 7(h)(1)(A) and 8(c).[4]

Kootznoowoo responds that its decision to enter into the joint venture with Southeast Stevedoring, its resulting employment of Kootznoowoo shareholders in longshoring positions, and its partial payment of those longshore workers’ transportation costs[5] were all directed at maximizing the financial and employment opportunities of its general shareholder population. Because of the unique placement of its timberlands – remote from Kootznoowoo’s headquarters in Angoon – the corporation faced a special challenge in finding a profitable way to process and load its logs. Kootznoowoo thus hoped to profit by processing its logs in a location convenient to its timberlands and by providing the labor for that work. As stated by the corporation’s comptroller: “If you could provide for the profit motive and hire shareholders, why not? It was a …good practice for the corporation.”

While appellants contend that Kootznoowoo’s payment of transportation costs caused the corporation losses and imply that this demonstrates an intent to merely distribute benefits to selected shareholders, Kootznoowoo argues that achieving a coordinated and productive labor force demanded that it pay some of the longshore workers’ costs. Otherwise, many shareholders could not afford to travel to the remote Dora Bay site, and Kootznoowoo’s plan to save money by utilizing its own worksite and labor force would fail. Kootznoowoo additionally asserts that it chose to pay transportation costs only to and from Angoon, because efficiency and maximum profit demanded that it have coordinated teams of workers ready to fly out together to work. Kootznoowoo thus maintains that its actions were in the best interests of all of its shareholders and that its contributions toward travel costs were not discriminatory dividends, but instead necessary and ordinary business expenses.[6]

The superior court’s findings of fact support Kootznoowoo’s claims. These findings confirmed the existence of the Kootznoowoo/Southeast Stevedoring joint venture and concluded that both parties “believed that the …joint venture could develop Dora Bay into a major log port/ship loading facility to handle not only Kootznoowoo’s logs, but also logs for Sealaska Corporation, ITT-Rainier, Reid Brothers Timber, Klukwan Forest Products, Ketchikan Pulp Company, Cape Fox, etc.” The superior court recognized that Pat Joensuu “projected Kootznoowoo’s share of the potential log loading revenues at over $ 2 million.” These findings are based on the testimony of several Kootznoowoo board members as well as internal memoranda and correspondence between members of the board and indicate the board’s intent to benefit Kootznoowoo and its general population of shareholders.

Regarding Kootznoowoo’s payment of travel costs for its labor force, the superior court found that “Kootznoowoo and Southeast Stevedoring considered transportation of longshore workers to and from the remote work site at Dora Bay to be an ordinary and necessary business expense,” and that Southeast Stevedoring accounted for this expense by negotiating rates with the joint venture’s outside customers “which recognized that transportation for longshore workers was a cost that should be passed through to the log owner.” These findings are based in part on testimonial evidence. Both Gerald Engel (Kootznoowoo’s Lands and Resources Manager) and James Taro (President of Southeast Stevedoring) testified that it was common practice for log owners or stevedoring companies to pay transportation costs for longshore workers. In fact, one of the joint venture’s competitors, West Coast Stevedoring, paid the entirety of transportation and lodging costs when it had employed Kootznoowoo shareholders as longshore workers. Moreover, Kootznoowoo was able to deduct its transportation payments as a business expense on its federal income tax returns. In addition, the superior court points out that “there was no transfer of corporate assets without consideration. Kootznoowoo received consideration for the expense of transportation of longshorepersons between Angoon and Dora Bay in the form of work and increased profits.”

Regarding Kootznoowoo’s decision to only subsidize charter flights to and from Angoon, the court found credible the corporation’s explanation that it was attempting to maximize efficiency and productivity by maintaining well-organized and prepared teams of workers. The court decided that “hiring from Angoon assured an available pool of full complement longshoring gangs to timely meet the needs of the ship loading joint venture.”

On the whole, the superior court concluded that “Kootznoowoo’s policy of paying a portion of the travel costs of shareholders between Angoon and Dora Bay was not adopted as a distribution to its shareholders, but as a program that would increase Kootznoowoo’s profits and encourage shareholder employment.” The court thus affirmed Kootznoowoo’s motives and practices and rejected appellants’ claims that the corporation was distributing corporate wealth and benefits in a discriminatory manner. The superior court based its finding upon a great deal of documentary and testimonial evidence. We do not think that its findings are clearly erroneous,[7] and thus we uphold its findings and resulting conclusions.

B. Kootznoowoo Did Not Attempt to Hide or Fail to Provide Necessary Information to Its Shareholders.

Appellants also contend that Kootznoowoo failed to inform all of its shareholders of the longshoring employment opportunities and travel subsidies available. Kootznoowoo responds that it did indeed inform its shareholders of the longshoring and travel subsidy programs. The corporation claims to have posted longshoring lists and its Longshore Assignment Policy conspicuously around Angoon, as well as publishing general information about the longshoring program in corporation newsletters.

Once again, based upon documentary and testimonial evidence, the superior court’s findings of fact support Kootznoowoo. The court found that “Kootznoowoo’s Longshore Assignment Policy was conspicuously posted in Angoon and sent to all longshorepersons” and that “Kootznoowoo’s management and its board of directors made no attempt to hide or conceal any aspect of Kootznoowoo’s Longshore Assignment Policy, including what has been referred to as the ‘travel subsidy. ‘”The court also noted in its findings that “the large number of shareholders participating in the longshoring program (approximately 155) creates the very strong inference that important aspects of Kootznoowoo’s Longshore Assignment Policy, including what has been referred to as the ‘travel subsidy, ‘were known by many shareholders throughout the Native corporation.” As the superior court’s findings are not clearly erroneous, we uphold its conclusion that Kootznoowoo neither failed to provide necessary information to its shareholders, nor hid such information from them.

C. There Was No Conflict of Interest among the Kootznoowoo Directors as to the Joint Venture Longshoring Program.

Finally, appellants claim that Kootznoowoo’s participation in the longshoring and “travel subsidy” programs is improper, because this participation was never approved by a majority of disinterested directors or shareholders. Appellants claim that most of the directors who approved the programs were “interested” in that they used the longshoring employment opportunities and travel subsidies to benefit themselves and selected shareholders.

Kootznoowoo argues that it broadly distributed information about the longshoring and “travel subsidy” programs to all – not just selected – shareholders and furthermore that it had no control over who got called to take advantage of these programs. The corporation explains that Southeast Stevedoring determined the number of workers needed for joint venture projects and selected those qualified to be on the active skilled workers list. Kootznoowoo asserts that it merely maintained a rotation list of unskilled workers and notified those workers when their names came up on rotation. Kootznoowoo also notes that only one person – Frank Jack, Jr., – ever served as both a Kootznoowoo director and a longshore worker at the same time, and that Mr. Jack was a skilled and experienced longshore worker before he ever became a director; he became a director well after the longshoring and “travel subsidy” programs were instituted. 

The superior court again made findings of fact consistent with Kootznoowoo’s position. With regard to the process of assigning longshoring work, the court agreed that Kootznoowoo had no control over who qualified for the skilled worker list or how many workers would be designated for a job; Southeast Stevedoring controlled this. Thus the court found no systemic way in which Kootznoowoo directors manipulated longshoring assignments to benefit themselves or other shareholders. The court reinforced this point by noting that Southeast Stevedoring selected individuals for the skilled worker list based on individual merit, not share ownership. While appellants alleged that many members of the Jack family especially benefitted from the programs, the court stated that “the evidence supports the finding that members of the Jack family attained their ‘skilled’ positions on the basis of individual merit,” and that “the frequency of their dispatch reflects their willingness to accept dispatch assignments.”

Once again, these findings, based on the totality of the evidence, are not clearly erroneous. They support the superior court’s conclusion that Kootznoowoo’s longshoring and travel subsidy programs were not illegally adopted or maintained by the board based on director conflicts of interest.

IV. CONCLUSION

Based on the foregoing reasons, the judgment is AFFIRMED.

Concur by: FABE

Concur

FABE, Chief Justice, concurring.

Although I continue to believe that plaintiffs’ allegations should have proceeded as derivative actions,[1] I agree with the court that Judge Weeks correctly decided this case on the merits.

OPINION [*]

I. INTRODUCTION

This appeal concerns attorney’s fees and indemnification disputes arising after the superior court dismissed a derivative suit brought by shareholders of an Alaska Native Claims Settlement Act (ANCSA) village corporation. The plaintiffs sued without first making the pre-suit demand Alaska law requires. After the superior court dismissed the complaint for mootness, both sides sought attorney’s fees and costs. Concluding that the shareholders did not prove that a pre-suit demand was excused, the superior court held that they were not prevailing parties and denied their attorney’s fees motion. Finding that the defendant directors were prevailing parties, the court awarded them Alaska Civil Rule 82 attorney’s fees against the plaintiff shareholders, and ordered the corporation to indemnify them under AS 10.06.490(c). Because the superior court did not err in holding that the shareholders did not prove that a demand was excused, we affirm the denial of the plaintiffs’ fees request. But because the directors did not establish that they were Rule 82 prevailing parties, we vacate their attorney’s fees award. And because they did not establish that they were “successful” litigants, we hold that they were not entitled to indemnification under AS 10.06.490(c).

II. FACTS AND PROCEEDINGS

Carl J. Jerue, Jr. and Ernie Demoski, Sr. (“plaintiff shareholders”) are shareholders of Ingalik, Incorporated, the ANCSA village corporation for the Native village of Anvik. Gloria Millett, Kenneth Chase, Shannon Chase, and Ted Kruger, Jr. (“defendant directors”) were members of Ingalik’s board of directors as of January 1998. On January 12, 1998 the Alaska Department of Commerce and Economic Development issued the corporation a Certificate of Involuntary Dissolution, citing the corporation’s failure to file a biennial report or pay taxes.

On January 22, 1998 the plaintiff shareholders filed a derivative complaint against the defendant directors, alleging financial mismanagement and other wrongdoing. The complaint asked the court to compel the defendant directors to hold an annual shareholders’ meeting to elect a new board of directors; to appoint Jerue as an interim director with authority to take whatever action was necessary to reinstate the corporation; and to issue a temporary restraining order prohibiting the defendant directors from “winding up” the corporation’s affairs and distributing any corporate assets. Summonses were issued for the individual defendants on January 22, 1998.

In January Ingalik made reinstatement efforts; it returned to good standing with the state and was reinstated on February 6, 1998.

On April 6 the directors moved to dismiss. They argued that the plaintiff shareholders had not demonstrated that their failure to make a demand on the board was excused. They also argued that the complaint was moot because the corporation had been reinstated, it had scheduled an annual meeting, and its reinstatement meant its assets would not be distributed.

Ingalik held an annual shareholders’ meeting on April 25. The shareholders reorganized the board by electing new directors, including both plaintiff shareholders; only one incumbent, defendant Kruger, was reelected. The new board met the next day and passed resolutions authorizing the corporation to join the lawsuit as a party plaintiff and denying indemnification to the defendant directors.

The plaintiff shareholders then asked the superior court to join Ingalik as a party plaintiff; the court did so on June 8. But on the same day, it also entered an order dismissing the derivative suit with prejudice. It retained jurisdiction for the purpose of determining prevailing party status and awarding costs and attorney’s fees.

The defendant directors moved for a Civil Rule 82 fees award against the plaintiff shareholders individually; they also sought an order requiring Ingalik to indemnify their litigation costs under AS 10.06.490(c). The plaintiff shareholders and Ingalik (the “plaintiffs”) opposed these requests and, claiming that they were the prevailing parties because the requested relief was achieved, cross-moved for an award of fees against the defendant directors under Civil Rules 23.1(j) and 82(a). Both sides relied on numerous documents in addition to their pleadings.

Following oral argument, the superior court ruled for the defendant directors on the fees and costs motions. It reasoned that the plaintiff shareholders had the burden of proving that they were excused from making the formal pre-suit demand Civil Rule 23.1(c) requires; it also reasoned that the directors’ alleged practices gave rise to “any number of conflicting inferences” and “by no means” demonstrated that a majority of the directors were implicated in an injury to the corporation. It therefore concluded that a demand was not excused, that the defendant directors were entitled to dismissal under Civil Rule 23.1(d), and that the defendant directors were the prevailing parties under Civil Rule 82. It also concluded that the defendant directors’ prevailing party status entitled them to full indemnification from the corporation under AS 10.06.490(c).

The judgment awarded the defendant directors $ 26,656.96 against Ingalik under AS 10.06.490(c) to indemnify their attorney’s fees and costs, and $ 3,804.16 against Jerue and Demoski individually as costs and Rule 82 attorney’s fees. The award against Ingalik included the amount awarded against the individual plaintiff shareholders, and the judgment prevented the directors from recovering more than the total amount awarded against Ingalik.

Ingalik and the plaintiff shareholders argue on appeal that the superior court erred by (1) failing to award them costs and fees under Civil Rules 82 and 23.1(j) and AS 10.06.435(j); (2) granting costs and Civil Rule 82 attorney’s fees to the defendant directors against the plaintiff shareholders; and (3) requiring the corporation to indemnify the defendant directors under AS 10.06.490(c).

III. DISCUSSION

A. Standard of Review

We apply our independent judgment to questions of statutory interpretation[1] and must “adopt the rule of law that is most persuasive in light of precedent, reason, and policy.”[2]

For reasons we discuss in Part III.B.2, we review for abuse of discretion the superior court’s fact-based determination that the plaintiff shareholders did not prove that a pre-suit demand was excused.[3] The legal effect of that finding on the plaintiffs’ motion for an award of litigation expenses presents a question of law which we review by applying our independent judgment.

Because it presents questions of law, we apply our independent judgment in reviewing the ruling that, because the plaintiff shareholders failed to prove that a demand was excused, the defendant directors were the prevailing parties under Rule 82(a).[4] A determination of prevailing party status under Rule 82(a) will not be overturned unless it is manifestly unreasonable.[5] We apply our independent judgment in reviewing the ruling that the defendant directors’ prevailing party status entitled them to AS 10.06.490(c) indemnification, because this ruling presents a question of law.

B. Denial of Costs and Attorney’s Fees to the Plaintiffs

Jerue, Demoski, and Ingalik first argue that it was error not to award them costs and attorney’s fees against the defendant directors.[6] They reason that they secured the relief their complaint sought, rendering the derivative suit “successful”; this made them, not the directors, the prevailing parties, entitling them to recover costs and fees from the defendant directors under Civil Rules 82(a) and 23.1(j) and AS 10.06.435(j).[7]

Alaska Statute 10.06.435(j) and Alaska Civil Rule 23.1(j) permit awards of expenses, including attorney’s fees, to derivative suit plaintiffs. The statute and the rule are identical. They provide in pertinent part that “if the derivative action is successful, in whole or in part, or if anything is received as a result of the judgment, compromise, or settlement of that action, the court may award to the plaintiff or plaintiffs reasonable expenses, including reasonable attorney fees.”[8]

Civil Rule 23.1(j) is a fee-sharing rule. It requires the corporation benefitted by a derivative suit to share the expense incurred by the plaintiff shareholders in achieving the benefit for the corporation. [9] It reaches this result by requiring the corporation to reimburse the plaintiff shareholders. Because it is a fee-sharing rule, Rule 23.1(j) does not give the corporation itself a claim for fees or provide for an award against individual defendants.[10] Moreover, here Ingalik’s successor board adopted a resolution authorizing Ingalik to reimburse “all legal fees and costs” incurred in behalf of Jerue and Demoski. Because the corporation has voluntarily agreed to share any litigation expense incurred by or for Jerue and Demoski individually, Rule 23.1(j) has no further direct application to this case: Its fee-sharing purpose was achieved without court order.

To illustrate the true nature of Ingalik’s fees claim, we assume that a Rule 23.1(j) fees award could indirectly give rise to a corporate claim against derivative suit defendants. Thus, perhaps a corporation ordered under Rule 23.1(j) to reimburse successful derivative-suit plaintiffs could seek indemnification, possibly on a subrogation theory, from the defendant officers or directors whose acts were the basis for the derivative suit and the Rule 23.1(j) award. But the court did not order Ingalik to pay those expenses; the corporation voluntarily agreed to pay them by resolution of April 26, 1998. And a subrogated claim would give the corporation no greater rights than the plaintiff shareholders had. In short, no plaintiff in this case has a claim against these defendants under Rule 23.1(j).

Unlike Rule 23.1(j), Rule 82(a) is a fee-shifting rule.[11] Rule 82(a) provides for an award of attorney’s fees to “the prevailing party.” It is the proper framework for considering whether the defendant directors should reimburse attorney’s fees directly incurred by Ingalik and attorney’s fees incurred by or for Jerue and Demoski and potentially recoverable by Ingalik under an assignment or subrogation theory.

Because this is a shareholder derivative action, the question whether the plaintiffs were “prevailing parties” under Rule 82(a) ultimately depends at least in part on the principles that determine whether a shareholder derivative suit has been “successful.” As we will see, this question turns on whether the superior court erred in concluding that the shareholders did not establish that their failure to make a demand on the board before suing was excused. This is so because, even though the plaintiff shareholders’ litigation goals were achieved, there was a dispute about why they were achieved.

The shareholders filed suit in late January 1998 seeking reinstatement of the corporation and a shareholders’ meeting at which new directors could be elected. The state reinstated the corporation in early February 1998. This prevented dissolution and distribution of corporate assets. The corporation held a shareholders’ meeting to elect directors in April 1998. The relief the complaint sought was thus achieved, and in June the superior court dismissed the complaint with prejudice, apparently because the complaint was mooted by the corporation’s reinstatement and the annual meeting.[12] 

We assume that derivative suit plaintiffs may not necessarily be ineligible to recover litigation expenses under Rule 23.1(j) even though a court dismisses their lawsuit after the board’s remedial actions moot their derivative suit claims.[13] Filing suit may force a recalcitrant board to act, securing a valuable benefit to the corporation. This may also be sufficient to make plaintiff shareholders (and a plaintiff corporation for whom they acted) “prevailing parties” for Rule 82(a) purposes.

We think that whether plaintiff shareholders are “prevailing parties” in a shareholder derivative action should turn on whether their lawsuit is “successful in whole or in part.”[14] If a corporate benefit is achieved, the focus is on the causal relationship between the lawsuit and the benefit.[15]

We assume here that the individual plaintiffs and Ingalik were benefitted by actions — reinstating the corporation and holding the annual meeting–taken after the plaintiff shareholders sued. But were these actions the result of the suit? Or would they have been taken if the shareholders had made a formal demand before suing? Or, indeed, would they have been taken even absent either a pre-suit demand or any suit at all?

As we will see, the superior court’s rejection of Jerue and Demoski’s assertion that a demand was excused resolves these questions for purposes of the plaintiffs’ motion for costs and attorney’s fees.

1. The requirement of a pre-suit formal demand

Before filing a shareholder derivative suit, a plaintiff is required by AS 10.06.435(c) and Civil Rule 23.1(c) to make a formal demand on the board “to secure the action the plaintiff desires,” unless that demand is “excused.”[16] The statute and the rule excuse the demand requirement if “a majority of the directors is implicated in or under the direct or indirect control of a person who is implicated in the injury to the corporation.”[17]

The statute and the rule require a shareholder who fails to make a formal demand to plead “with particularity” the facts establishing excuse.[18] The statute and the rule also impose on a shareholder opposing a motion to dismiss the burden of establishing excuse: “In a motion to dismiss for failure to make demand on the board the shareholder shall have the burden to establish excuse.”[19]

Jerue and Demoski argue that they satisfied these requirements, despite their failure to make any pre-suit demand on the board; they assert that a demand would have been “futile.”

The demand requirement is an important aspect of corporate democracy. Among other things, it gives the corporation a fair opportunity to decide whether to take action directly and to receive the proceeds of any recovery.[20] And it gives the corporation an opportunity to remedy problems internally, without exposing it to avoidable litigation expense.[21] The FLETCHER CYCLOPEDIA discusses the demand requirement:

The particularized pleading requirements are designed to strike a balance between a shareholder’s claim of right to assert a derivative claim and a board of director[s’] duty to decide whether to invest resources of the corporation in pursuit of the shareholder’s claim of corporate wrong. But the requirements of demand futility and refusal of demand are predicated upon and inextricably bound to issues of business judgment and standards of that doctrine’s applicability. The demand requirement in derivative proceedings serves as a form of notice to the corporation. It is designed to assure that the shareholder affords the corporation the opportunity to address the alleged wrong without litigation and to control any litigation which does occur. It also provides a safeguard against abuse that could undermine the basic principle of corporate governance that the decisions of a corporation, including the decision to initiate litigation, should be made by the board of directors. A determination on a motion to dismiss, whether based on demand refused or demand excused, involves essentially a discretionary ruling on a predominantly factual issue. The demand should provide the directors with sufficient information regarding the standing of the plaintiff, the relief sought, and the grounds for relief. In some states, the demand must be in written form. The directors have a reasonable time within which to investigate the claim and to make a decision, although some state statutes set forth a final time period. The demand inquiry and authority to respond may be delegated to a special litigation committee.[22]

2. Applicable standard of review

We have never before addressed the demand requirement of AS 10.06.435(c) and Civil Rule 23.1(c), and have consequently never adopted a standard for reviewing a conclusion that shareholders did not meet their burden of establishing excuse.

Most appellate courts review for an abuse of discretion a trial court’s determination that the demand requirement was not excused.[23] They typically apply that standard because determining the necessity of a demand is a fact-based inquiry. For example, in Lewis v. Graves, the United States Court of Appeals for the Second Circuit, applying the federal analog to Alaska Civil Rule 23.1,[24] held that “the decision as to whether a plaintiff’s allegations of futility are sufficient to excuse demand depends on the particular facts of each case and lies within the discretion of the district court.”[25]

Until recently, the mother court of corporate law,[26] the Delaware Supreme Court, followed the same approach.[27] But in Brehm v. Eisner, that court, applying the Delaware counterpart to Alaska Civil Rule 23.1, held that this issue is subject to de novo review.[28] The court stated that “in a Rule 23.1 determination of pleading sufficiency . . . this Court[] is merely reading the English language of a pleading and applying to that pleading statutes, case law and Rule 23.1 requirements. To that extent, our scope of review is analogous to that accorded a ruling under Rule 12(b)(6).”[29]

In comparison, the United States Court of Appeals for the Third Circuit applies a mixed standard of review. In Garber v. Lego it stated: 

To the extent that we are reviewing the district court’s determination of demand futility based upon the facts of this case, the scope of our review is for abuse of discretion. Our review of the legal precepts employed by the district court and of its interpretation of those legal precepts is plenary.[30]

We choose to follow the Third Circuit, and therefore adopt a mixed standard of review. We agree with the Delaware Supreme Court that it is a question of law whether pleadings satisfy a legal standard, such as the demand requirement. But the question of demand excuse potentially also involves fact-based analysis which is better reviewed under the abuse of discretion standard. This case demonstrates the factual nature of these disputes. A mixed standard of review recognizes that the superior court made both legal and factual determinations when it ruled, after considering materials beyond the pleadings, that the shareholders did not prove that demand was excused.

3. Excusing the failure to make a pre-suit demand

The pre-suit demand required by AS 10.06.435(c) and Alaska Civil Rule 23.1(c) is excused if “a majority of the directors is implicated in or under the direct or indirect control of a person who is implicated in the injury to the corporation.”[31]

Delaware and the federal courts frame the exception to the demand requirement in terms of futility.[32] In those courts, making a demand is considered futile and thus excused where corporate officers and directors are under an influence rendering them incapable of making decisions for the corporation.[33] Courts following the futility-of-demand principle apply procedural rules that differ from Alaska Civil Rule 23.1. Federal Civil Rule 23.1 and Delaware Chancery Court Rule 23.1 are very similar to each other[34] and with regard to the demand requirement are nearly identical. Their pleading requirements implicitly address futility, but do not specify criteria for deciding when futility excuses a failure to make a demand: 

The complaint shall also allege with particularity the efforts, if any, made by the plaintiff to obtain the action the plaintiff desires from the directors or comparable authority . . . and the reasons for the plaintiff’s failure to obtain the action or for not making the effort.[35]

It is not necessary in this case to decide whether excuse in Alaska is the same as excuse elsewhere. Alaska Statute 10.06.435(c) and Alaska Civil Rule 23.1(c) were not modeled after a specific state provision or model code.[36] Although our standard is similar to that applied in some other jurisdictions to discern when demand would be futile,[37] the plain text of our rule provides a specific test for excuse: establishing that a majority of the directors are “implicated in the injury to the corporation.”[38] The Alaska Code Revision Commission’s study of Alaska’s proposed revised Corporations Code before it was enacted in 1988 supports this interpretation: 

Section .435c requires that a qualified shareholder make a demand upon the board to secure such action as the plaintiff desires, unless the shareholder can show that such demand would be futile. Under Section .435(d), the burden to establish excuse is upon the plaintiff-shareholder. If a demand on the board is not excused, Section .435(e) provides that a decision by the board, consonant with its duties of care and loyalty, that in its business judgment such litigation would not be in the best interest of the corporation, terminates the right created by Section .435(a). A shareholder is thereafter precluded from offering evidence that any or all of the directors who have decided that the litigation not go forward are implicated in the wrong complained of.[39]

4. Demand in this case

Because the superior court did not base its denial of the shareholders’ fees motion on the sufficiency of their complaint, it is unnecessary to decide whether their complaint satisfied the requirement that it “state with particularity the facts establishing excuse . . . .”[40] The court instead ruled after it reviewed the documents the parties submitted or discussed when they briefed the excuse issue in their competing motions for attorney’s fees. The superior court held that “the practices complained of give rise to any number of conflicting inferences — but by no means demonstrate that ‘a majority of the directors [were] . . . implicated in [an] injury to the corporation.’ “

Moreover, because there was no injury to the corporation, the superior court did not abuse its discretion by so holding. The plaintiff shareholders submitted numerous documents to support their request for attorney’s fees and to oppose the defendant directors’ requests for attorney’s fees and indemnification. But these materials and the remainder of the undisputed record did not establish that the board would have rejected a demand to reinstate the corporation and hold the annual meeting. Nor did they establish that the lawsuit achieved these benefits. Instead, the record contains evidence that would have permitted a finding that the board would have reinstated the corporation and held the meeting whether or not there was a demand or a lawsuit. This included evidence (attached to the plaintiffs’ complaint or found in affidavits they submitted to the superior court) that the defendant directors had attempted to hold the annual meeting as recently as the prior fall; that they had met only thirty-six days before the plaintiffs filed suit; that even before the plaintiffs sued, the defendant directors had written the corporation’s shareholders to encourage them to fill vacancies on the board until the next annual meeting and election; that they had already scheduled a shareholders’ meeting for June; and that when the corporation had failed to pay its taxes in the past, on each occasion it was reinstated and its assets were not liquidated. Moreover, plaintiffs’ exhibits listed corporate checking account transactions; one is for a January 7, 1998 check payable to the State of Alaska for “biennal [sic] filing fee,” suggesting that the directors had taken steps to reinstate the corporation weeks before plaintiffs filed suit.[41]

5. How the unexcused failure to make demand affects plaintiffs’ attorney’s fees motion.

The plaintiff shareholders cannot recover litigation expenses because their case was dismissed for mootness before they either made a demand or proved that demand was excused. Failure to prove that demand was excused necessarily means that they did not show that the corporation would not have been reinstated and that the annual meeting would not have been held if they had not sued. Because the court dismissed their action for mootness, the plaintiffs could not recover litigation expenses unless they showed that their suit was “successful,” i.e., that it conferred some measurable benefit on the corporation even though the court dismissed their complaint. But by failing to prove that a demand was excused, they necessarily failed to establish that the board would not have reinstated the corporation and held the annual meeting but for the lawsuit.

In the narrow context of derivative suits, failure to make a demand or prove that demand was excused is fatal to an award of attorney’s fees and costs because a pre-suit demand might have prompted remedial action without need for litigation. The policy rationale of the demand requirement dictates this result. Demand is required to give a corporation the opportunity to rectify an alleged wrong without litigation and to control any litigation which does arise.[42] Awarding litigation expenses without a demand or proof of demand excuse would undermine the demand requirement and these policy objectives. Moreover, the modern reality of large corporations requires this result. At any given moment a large corporation may be the subject of a number of derivative suits filed by shareholders. In this context, almost any action taken by a corporate board could arguably satisfy some plaintiff’s lawsuit. Awarding fees without requiring demand or proof of demand excuse would open corporations to unwarranted fees claims predicated on unrelated corporate actions.

In this case, without proof of demand excuse, and particularly given Ingalik’s past course of corporate events, the trial court permissibly might have found that this corporation would have been reinstated and the meeting held even without a demand or a lawsuit. Therefore, the shareholders’ failure to prove that demand was excused meant that they did not prove that the derivative suit was “successful.”[43] This meant that Jerue and Demoski were not entitled to an award of attorney’s fees and costs.

An inverse hypothetical helps demonstrate the significance of failing to make a demand or prove demand excuse. Consider a dissenting shareholder whose attorney makes a timely demand upon directors before filing a derivative suit. If the directors promptly take curative action that satisfies the shareholder’s concerns, there would be no suit and clearly no attorney’s fees awarded to the shareholder. This illustrates the importance of the demand requirement and explains why we must affirm the denial of fees to Jerue and Demoski. The reasoning is twofold: First, if the hypothetical shareholder who satisfies the demand procedure is not entitled to attorney’s fees, it is inequitable to award fees to shareholders who failed to make a demand or prove that it was excused. Second, awarding fees to Jerue and Demoski would undermine successful operation of the demand requirement as illustrated above, and encourage wasteful litigation that could have been avoided if demand were properly made.

Ingalik has not clearly explained on what theory it should be awarded fees. It must demonstrate its prevailing party status to recover fees under Rule 82(a). But if the plaintiff shareholders who asserted claims in the corporation’s behalf are not prevailing parties, we do not see how the corporation can be a prevailing party as to those claims, either. Any attorney’s fees claim Ingalik could pursue under subrogation or assignment theories to recover its voluntary payment of Jerue and Demoski’s fees would be subject to the considerations that bar Jerue and Demoski’s fees motion. Ingalik apparently also seeks an award for the post-joinder fees it incurred directly. But because Ingalik did not become a party plaintiff until after the events occurred that mooted the derivative suit, it is not a prevailing party for purposes of recovering those fees, either.

We therefore conclude that the superior court did not err in denying the plaintiffs’ attorney’s fees motion.

3. The Defendant Directors’ Rule 82 Attorney’s Fees Award

The superior court awarded the defendant directors Rule 82 prevailing party attorney’s fees against Jerue and Demoski. In arguing that this was error, Jerue and Demoski contend in part that they, not the directors, were the prevailing parties because their complaint was dismissed for mootness and because they “accomplished what they had hoped to with this litigation.” They assert that the “burden was on the former management to argue and show that the annual meeting . . . would have happened without the suit.”

A litigant seeking Rule 82 attorney’s fees must show that it is the prevailing party.

We first reject the directors’ assertion that, because the superior court granted their motion to dismiss with prejudice, they were the prevailing parties.[44] Because the court dismissed the complaint for mootness, it is no more likely that the directors achieved their litigation goals than the plaintiffs.

The court apparently based its finding that the directors were the prevailing parties on its October conclusion that the shareholders had not proved that demand was excused. This conclusion did not alter the reason for the June dismissal or turn the dismissal order into a ruling on the merits. Dismissing for mootness did not explicitly or implicitly resolve the issue of who prevailed, and indeed, the court stated it was retaining jurisdiction to decide “prevailing party status.” That question turned on an issue — whether demand was excused — the court had not resolved in June.

We assume for discussion’s sake that if a shareholder derivative lawsuit were the only reason directors took remedial actions benefitting a corporation and mooting the complaint, the directors would not be the prevailing parties.[45] And as we noted in Part III.B, under some circumstances plaintiffs may be able to recover attorney’s fees in at least some types of cases dismissed for mootness.[46] But the ruling that these plaintiffs did not bear their burden of proving excuse did not amount to a finding that the board would have heeded a pre-suit demand or that its remedial actions were unrelated to the lawsuit.

In general, we are reluctant to encourage parties in a lawsuit dismissed for mootness to litigate the merits only to establish for Rule 82 purposes who would have been the hypothetical prevailing party. Rule 82 is only intended to partially compensate prevailing parties, not to provide an incentive for merits litigation that would not otherwise take place.[47]

Evidence, discussed in Part III.B.4, would have permitted a finding that the directors would have cured the corporate deficiencies absent the lawsuit. But the memorandum opinion awarding fees did not refer to this evidence. And it did not find that the directors would have remedied the deficiencies either spontaneously or in response to a pre-suit demand. Nor did it find that the actions that mooted the complaint and benefitted the corporation were not attributable to the lawsuit. The evidence would not have compelled such findings. The directors provided no direct evidence why they acted, and no director offered an affidavit explaining why the old board acted. The superior court recognized when it denied the shareholders’ Rule 23.1(j) attorney’s fees motion that there were conflicting inferences about whether a majority of the directors were implicated in an injury to the corporation. These conflicting inferences were also relevant to the reasons the board acted.

In summary, the plaintiffs’ failure to meet their burden of proving that a formal demand was excused did not necessarily mean that the directors were the prevailing parties. Because the complaint was dismissed as moot shortly after its filing as a result of the defendants’ apparently responsive actions, it would be unrealistic to treat the directors as prevailing parties unless they demonstrated why the suit became moot, i.e., why the corporation was reinstated and the annual meeting was accelerated. Notwithstanding other evidence permitting conflicting factual inferences, the directors offered no direct evidence why things were done that gave the plaintiffs the relief they requested. Because we conclude as a matter of law that the directors did not meet their burden of proof on the issue of prevailing party status, we vacate their Rule 82 attorney’s fees award and remand for entry of a corrected judgment.[48]

D. The Directors’ Statutory Indemnification Award

The superior court ruled that the directors’ “prevailing party status also” entitled them under AS 10.06.490(c) to full indemnification from Ingalik.[49] The plaintiff shareholders and Ingalik argue that because the court did not find the election and all subsequent board action to be invalid, the business judgment rule required the court to enforce the new board’s resolution that denied indemnification to the defendant directors.[50] The defendant directors respond that because indemnification under AS 10.06.490(c) was mandatory, the board had no authority to adopt a resolution denying them indemnification.[51]

This issue turns on whether the defendant directors satisfied their burden of demonstrating that they were entitled to indemnification under AS 10.06.490(c). We conclude that they did not. We therefore vacate the indemnification award and remand for entry of a corrected judgment.

It appears that indemnification is mandatory if the conditions of AS 10.06.490(c) are met, because that subsection provides that a corporate director who “has been successful on the merits or otherwise” in defense of certain lawsuits — including derivative suits — “shall be indemnified.”[52] We assume that if this subsection applies, mandating indemnification, the board has no discretion to adopt a resolution denying indemnification.

But to be eligible for mandatory indemnification under AS 10.06.490(c), these defendant directors had to have “been successful on the merits or otherwise in defense of an action . . . .”[53] The defendant directors did not demonstrate that they successfully defended the litigation on its “merits or otherwise”; they simply obtained dismissal of the complaint, apparently by providing the relief the complaint sought. As discussed in Part III.C, above, the defendant directors did not establish why the remedial actions were taken. The conflicting inferences about how the lawsuit came to be mooted also pertain to the issue whether the directors successfully defended the litigation. Because the defendant directors did not establish why action was taken that mooted the complaint, they did not meet their burden of establishing a right to mandatory indemnification under AS 10.06.490(c). The plaintiffs’ failure to prove that a demand was excused does not mean that the defendant directors must have been “successful” in defending the suit. The complaint was dismissed for mootness, not on a theory demand was unexcused.

Few cases discuss equivalent situations. Courts requiring mandatory indemnification under substantially identical statutes do so when the defendant achieves success on the merits or otherwise, including termination of claims by agreement without any payment or assumption of liability.[54] Courts are reluctant to ask why the result was achieved.[55] But in those cases, it appears that the defendants did nothing to achieve the dismissal; they certainly paid no consideration, and they took no corrective action that mooted the lawsuits.

Because the superior court did not apply the statutory standard for determining whether the defendant directors were entitled to indemnification under AS 10.06.490(c), we must vacate the indemnification award. And because the directors simply asserted below that the dismissal with prejudice entitled them to indemnification, they failed to establish that the dismissal was not attributable at least in part to a desire to resolve the lawsuit. We therefore remand for entry of a corrected judgment that deletes the indemnification award.

IV. CONCLUSION

The plaintiff shareholders are not prevailing parties because the court found that their failure to make a demand was not excused. In the absence of a demand, it is uncertain whether the defendant directors would have responded to a demand as they responded to the lawsuit, affording the plaintiffs the relief they sought. Although the suit might factually have brought about the relief, this is not enough. Plaintiffs must show that a demand would not have resulted in the same relief. Because this is difficult to show and the difficulty is a product of their failure to make a demand, they can not be regarded as prevailing parties.

The defendant directors are not prevailing parties because they did not prove that the lawsuit was not a cause of the remedial action they took, or that if a demand had been made they would have taken the remedial action.

For these reasons, we (1) AFFIRM the superior court’s holding that the plaintiff shareholders were not prevailing parties and were consequently not entitled to attorney’s fees under Civil Rules 23.1 and 82; (2) VACATE the award of costs and Civil Rule 82 attorney’s fees to the defendant directors against the plaintiff shareholders; (3) VACATE the defendant directors’ award of indemnification under AS 10.06.490(c); and (4) REMAND for entry of a corrected judgment reflecting that all parties are to bear their own costs and attorney’s fees.[56] 

Dissent by: CARPENETI

Dissent

CARPENETI, Justice, dissenting.

I agree with the court’s conclusion that the plaintiffs were not excused from the requirement that they make a demand on the corporation before filing suit, and that their failure to make a demand precludes their recovery of attorney’s fees. But because a review of the record shows that the superior court dismissed the complaint precisely because the plaintiffs failed to carry their burden of showing that their failure to make a demand was excused, I dissent from Parts III.C. and III.D of today’s ruling.

In vacating the superior court’s award of attorney’s fees to the defendant directors, today’s opinion assumes that the superior court dismissed the complaint for mootness: “In June the superior court dismissed the complaint with prejudice, apparently because the complaint was mooted by the corporation’s reinstatement and the annual meeting.”[1] It concludes that a dismissal for mootness did not establish that the defendant directors were the prevailing parties. The court’s assumption that the complaint was dismissed for mootness is incorrect.

A review of the record shows that, at the time the case was dismissed, the superior court did not specify a reason for its action. Under our well-established case law, when a trial court does not specify a reason for its decision, we may review the record and affirm if any basis for the court’s action is supported by the record.[2] Moreover, by the time of its final ruling,[3] the superior court unmistakably based its decision on the plaintiffs’ unexcused failure to make a demand on the corporation.

Although unspoken, the court’s opinion today suggests that, once a superior court announces a rationale for its decision, it may not change it. But this is not the law. We have consistently upheld the proposition that one superior court judge who inherits a case from another superior court judge is free to reexamine and reverse an earlier decision in that case if convinced that it is erroneous: “It [is] entirely reasonable for a judge whose responsibility it is to try a case to reconsider and reverse an earlier ruling if convinced that that ruling was erroneous.”[4]

If one judge may reconsider and reverse a predecessor judge’s ruling in a case, then a fortiori a single judge may reconsider and modify the basis for his or her own earlier ruling in a case. That is what happened in this case, as a review of the record shows.

The record establishes: (1) that the defendants proposed three reasons to dismiss the case; (2) that the superior court dismissed the case without specifying the reason for the dismissal; (3) that at the same time the court declined to award attorney’s fees to either side but set the matter on for a hearing; (4) that at the beginning of the hearing the court suggested one basis for the dismissal, mootness; but (5) during the hearing the court suggested a different basis for the dismissal; and (6) that by the time of its written order shortly thereafter the superior court unambiguously held that it dismissed the case because demand was not excused. I examine each of these events in turn.

Defendant directors offered three reasons for dismissing the case. The first, and most extensively argued, was that the plaintiffs had not shown that their failure to make a demand on the corporation was excused. Accordingly, we can uphold the dismissal on this ground. Indeed, the court today rests its affirmance of the superior court’s denial of attorney’s fees to plaintiffs on this very ground.[5]

It is true that, at the time the superior court granted the motion for dismissal, it did not state a reason for its decision; it even modified the defendant’s proposed order by striking language awarding fees to the defendants. Rather, in what can only be described as a cautious approach to a difficult issue, the court “retained jurisdiction to determine prevailing party status and to award costs and fees as may be appropriate.”

At the commencement of the hearing to address the question of attorney’s fees, it is also true that the superior court suggested that mootness might be the grounds for its action.[6] But during the course of the hearing the superior court, through its probing of counsel for both sides, made quite clear that it considered the plaintiffs’ failure to make a demand, and the lack of excuse for that failure, to be critical to its earlier decision to dismiss. For example, the court stated, “Rule 23.1 says [the plaintiffs] bear the burden of proving that the demand was excused.” Later, the court noted that “the demand is the part of this case that’s giving me the biggest problem right now. What have you done to bear the burden of proving that the demand was excused in this case?” Finally, the court observed, if the plaintiffs were alleging inaction “on the part of the directors, isn’t it just commonsensical that you would first ask them to take the action you want?”

All of these statements call into question this court’s conclusion that the superior court dismissed the case on mootness grounds. And, by the end of the hearing and the filing six days later of the superior court’s written decision, it is quite clear that the court had dismissed the case on the basis of the plaintiffs’ failure to show that their lack of demand was excused: 

Under Alaska R. Civ. P. 23.1(d), a shareholder who files suit without having made the formal demand contemplated by Rule 23.1(c) bears the burden of proving that demand was excused. . . . Demand was not excused and defendants were thus entitled to dismissal pursuant to Alaska R. Civ. P. 23.1(d). Consequently, they must be recognized as the “prevailing party” entitled to recover attorney’s fees.

Thus, while the superior court’s original order of dismissal did not specify the grounds for dismissal, the court plainly stated in its final order after the hearing to determine the prevailing party that the plaintiffs’ failure to make a demand “was not excused and defendants were thus entitled to dismissal pursuant to Alaska R. Civ. P. 23.1(d).“

In sum, the whole record establishes that the superior court dismissed the case due to the plaintiffs’ failure to make a formal demand. Because the superior court’s ruling on the merits was that the plaintiffs failed to show that the demand requirement was excused, the director defendants were successful on the merits and were the prevailing party. Also, because the director defendants were successful on the merits, they are entitled to mandatory indemnification. I would, therefore, affirm the judgment of the superior court in its entirety. At the very least, given our demonstrated uncertainty concerning the basis for the superior court’s decision, we ought, in fairness to the superior court, to remand the case and allow the superior court to make clear the basis upon which it dismissed the case.

I. INTRODUCTION

Plaintiffs seek to enforce a settlement agreement. The superior court determined that the agreement is unenforceable because the agreement’s stock repurchase provision violates the Alaska Native Claims Settlement Act’s (ANCSA) prohibition on the alienation of shares. Because we conclude that transfer of ANCSA stock back to a Native corporation in exchange for stock in a newly created corporation violates ANCSA, we affirm.

II. FACTS AND PROCEEDINGS

The Tetlin Native Corporation (TNC) is a village corporation formed pursuant to ANCSA and organized as an Alaska business corporation. On July 17, 1996, TNC transferred approximately 643,174 acres of its land to the Tetlin Tribal Council.[1] This left TNC with 100,000 acres of land.

Subsequently, the appellants, Shirley Jimerson and Ramona David, conducted a campaign to recall TNC’s board of directors. The campaign was successful, and on January 12, 1999, Jimerson and David were elected to the board.

On March 15, 1999, TNC and Jimerson and David, as directors and individual shareholders (collectively Jimerson),[2] filed a complaint in Alaska Superior Court in Fairbanks against certain shareholders and directors of TNC. The complaint alleged breach of fiduciary duties and wrongful transfer of TNC land, and requested $ 257,200,000 in damages and declaratory and injunctive relief. On April 20, 1999, the case was removed to the United States District Court for the District of Alaska.

On August 6, 1999, the Jimerson board was recalled. The new board passed a resolution that TNC dismiss all law suits brought by the Jimerson board. On October 6, 1999, TNC moved to dismiss without prejudice all claims it had against the shareholders and former and current directors of TNC. The district court denied TNC’s motion to dismiss and urged the parties to reach a settlement.

The court’s advice bore fruit, and the parties reached a settlement agreement. In August 2001 the district court approved the agreement and entered judgment on it.[3] The settlement agreement acknowledged that TNC shareholders may not have been fully informed regarding dissenters’ rights in the 1996 land transfer and provided for

[a] transfer of a portion of Tetlin Native Corporation’s remaining lands . . . to a new corporation to be formed by dissenting shareholders . . . who elect to transfer their shares of Tetlin Native Corporation ANCSA stock back to the corporation in exchange for shares in the new corporation.

In May 2003 Jimerson filed a motion in district court to enforce the settlement agreement. TNC opposed the motion and moved for relief from the judgment, contending that the district court lacked subject-matter jurisdiction. The district court concluded that the case presented no substantial federal question and declared the judgment based on the settlement agreement void for lack of jurisdiction. The case was then remanded to the superior court.

On February 23, 2004, Jimerson filed a motion in the superior court to enforce the settlement agreement. TNC opposed the motion, arguing that the settlement agreement was unenforceable as against public policy for three reasons: (1) the agreement provided for an exchange of shares in violation of ANCSA’s prohibition on alienation, (2) the agreement violated the Alaska Corporations Code, and (3) the attorney for plaintiffs had a conflict of interest.

On June 18, 2004, the superior court denied Jimerson’s motion to enforce the settlement agreement on the grounds that the agreement was unenforceable because it violated ANCSA’s prohibition on alienation.[4] 

Jimerson appeals this denial.

III. DISCUSSION

We have adopted the Restatement principle that “[a] promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable . . . .”[5] This court has “no power, either in law or in equity, to enforce an agreement which directly contravenes a legislative enactment.”[6]

The issue before this court is whether the transaction contemplated by the settlement agreement is prohibited by ANCSA. The settlement agreement transferred a portion of TNC’s remaining land to a new corporation and then allowed “dissenting shareholders” to “transfer their shares of Tetlin Native Corporation ANCSA stock back to the corporation in exchange for shares in the new corporation.”

Issues of statutory interpretation are questions of law which we review de novo.[7]

ANCSA section 7(h)(1)(B) prohibits ANCSA stock from being sold, pledged, assigned, or otherwise alienated, subject to exceptions set out in section 7(h)(1)(C).[8] ANCSA does not define the term “alienated,” and this court has not had occasion to interpret the term. “[U]nless words have acquired a peculiar meaning, by virtue of statutory definition or judicial construction, they are to be construed in accordance with their common usage.”[9] Black’s Law Dictionary defines “alienate”: “To transfer or convey (property or a property right) to another.”[10] Webster’s defines “alienate”: “to convey or transfer (as property or a right) [usually] by a specific act rather than the due course of law.”[11] The settlement agreement contemplates that dissenting shareholders “transfer” their ANCSA shares to TNC. Dissenting shareholders do not retain any right or interest in their ANCSA shares. The language of the statute suggests that the term “alienate” includes transfer of ANCSA stock back to a village corporation in exchange for stock in a newly created corporation.

Jimerson argues that the specific prohibitions listed in subsection 7(h)(1)(B)(i)-(v) do not apply to organic changes such as the share exchange contemplated in the settlement agreement. Jimerson argues that under the principle of ejusdem generis the general term “otherwise alienate” refers only to the same kinds of transactions specifically listed in subsection 7(h)(1)(B)(i)-(v) and therefore does not refer to a share exchange made during an organic change.

We do not find Jimerson’s argument persuasive for two reasons. First, Jimerson points to no authority for the proposition that subsection 7(h)(1)(B)(i)-(v) does not apply to organic changes. As we discussed above, the language of the statute suggests that an individual shareholder alienates her stock by transferring it back to a village corporation in exchange for stock in another corporation.[12] We see no reason why the same principle would not apply to situations where many or all shareholders act at once. Whether shares are alienated by a single shareholder or by many shareholders pursuant to a formal plan for organic change, there is no indication that Congress intended to eliminate statutory protections by allowing ANCSA shareholders to exchange their shares for those of another corporation. Second, ANCSA provides specific exceptions to the section 7(h)(1)(B) restrictions. When Congress enumerates exceptions to a rule, we can infer that no other exceptions apply. Section 7(h)(1)(C) lists three exceptions that allow stock to be transferred to a Native or a descendent of a Native: (1) pursuant to a court decree of separation, divorce, or child support, (2) if the stock limits the holder’s ability to practice his or her profession, or (3) as an inter vivos gift to certain relatives.[13] Section 7(h)(2) permits shares to escheat to the corporation if the holder has no heirs, and permits a corporation to repurchase shares transferred by the laws of intestate succession to a person who is not a Native or descendant of a Native.[14] The transaction contemplated by the settlement agreement does not fall within any of these exceptions. We therefore infer that no exception applies for transfer of ANCSA stock back to a Native corporation in exchange for stock in a newly created corporation.

Jimerson argues that the legislative history of the 1987 ANCSA amendments shows that section 7(h)(1)(B) does not prevent holders from transferring shares back to a Native corporation. While Jimerson argues that allowing holders tosell their shares back to a Native corporation is not necessarily inconsistent with the legislative history, she has not shown a contrary legislative purpose to a plain language interpretation of the statute.[15] The legislative history available is sparse and equivocal.[16] In fact, portions of the legislative history suggest that a Native corporation does not have the power to repurchase its own shares.[17]

The language of section 7(h)(1)(B) indicates that the transaction contemplated by the settlement agreement violates ANCSA. That the transaction does not fall within ANCSA enumerated exceptions confirms this interpretation. Jimerson has failed to demonstrate through the use of legislative history a contrary legislative purpose. We therefore hold that the settlement agreement is unenforceable because it directly contravenes the section 7(h)(1)(B) restrictions on ANCSA stock.

IV. CONCLUSION

We AFFIRM the superior court’s denial of Jimerson’s motion for enforcement of the settlement agreement.