Ahmasuk v. State, 010821 AKSC, S-17414

Docket NºS-17414
Opinion JudgeWINFREE, JUSTICE.
Party NameAUSTIN AHMASUK, Appellant, v. STATE OF ALASKA, DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC DEVELOPMENT, DIVISION OF BANKING & SECURITIES, Appellee.
AttorneySusan Orlansky, Reeves Amodio LLC, Anchorage, for Appellant. Robert H. Schmidt, Assistant Attorney General, Anchorage, and Kevin G. Clarkson, Attorney General, Juneau, for Appellee. Jahna M. Lindemuth, Holmes Weddle & Barcott, PC, Anchorage, for Amici Curiae Bristol Bay Native Corporation; Calist...
Judge PanelBefore: Winfree, Stowers, Maassen, and Carney, Justices. [Bolger, Chief Justice, not participating.]
Case DateJanuary 08, 2021
CourtSupreme Court of Alaska

AUSTIN AHMASUK, Appellant,

v.

STATE OF ALASKA, DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC DEVELOPMENT, DIVISION OF BANKING & SECURITIES, Appellee.

No. S-17414

Supreme Court of Alaska

January 8, 2021

Appeal from the Superior Court of the State of Alaska No. 3AN-18-06035 CI, Third Judicial District, Anchorage, Andrew Peterson, Judge.

Susan Orlansky, Reeves Amodio LLC, Anchorage, for Appellant.

Robert H. Schmidt, Assistant Attorney General, Anchorage, and Kevin G. Clarkson, Attorney General, Juneau, for Appellee. Jahna M. Lindemuth, Holmes Weddle & Barcott, PC, Anchorage, for Amici Curiae Bristol Bay Native Corporation; Calista Corporation; Cook Inlet Region, Inc.; and Doyon Limited.

Before: Winfree, Stowers, Maassen, and Carney, Justices.

[Bolger, Chief Justice, not participating.]

OPINION

WINFREE, JUSTICE.

I.

INTRODUCTION

The Alaska Division of Banking and Securities civilly fined Sitnasuak Native Corporation shareholder Austin Ahmasuk for submitting a newspaper opinion letter about Sitnasuak's shareholder proxy voting procedures without filing that letter with the Division as a shareholder proxy solicitation. Ahmasuk filed an agency appeal, arguing that the Division wrongly interpreted its proxy solicitation regulation to cover his letter and violated his constitutional due process and free speech rights. An administrative law judge upheld the Division's sanction in an order that became the final agency decision, and the superior court upheld that decision in a subsequent appeal. Ahmasuk raises his same arguments on appeal to us. We conclude that Ahmasuk's opinion letter is not a proxy solicitation under the Division's controlling regulations, and we therefore reverse the superior court's decision upholding the Division's civil sanction against Ahmasuk without reaching the constitutional arguments.

II.

BACKGROUND

A. State Laws And Regulations Relevant To Alaska Native Corporations

Corporations authorized by the Alaska Native Claims Settlement Act (ANCSA)1 are incorporated under the Alaska Corporations Code.2 ANCSA explicitly exempts ANCSA corporations from federal securities regulation compliance, 3 and the Division therefore regulates certain activities of specified ANCSA corporations and their shareholders and investigates complaints of illegal conduct.[4]

The dispute in this appeal - involving ANCSA corporation shareholder voting and proxy solicitation - requires an initial consideration of relevant Alaska corporations code statutes, 5 Alaska securities regulation statutes, 6 and regulations promulgated by the Division in its role as regulator of ANCSA corporations' shareholder election activities.7 We begin with shareholder voting, move next to shareholder voting by proxy, and then conclude with solicitation of shareholder proxies.

1. Shareholder voting

Generally, subject to variation in a corporation's articles of incorporation, a shareholder has the right to one vote per share owned and to "vote on each matter submitted to a vote at a meeting of shareholders."[8] And with respect to electing members to a board of directors, again unless the articles of incorporation provide otherwise, a shareholder may "cumulate votes, "9 i.e., may vote "the number of shares owned by the shareholder for as many persons as there are directors to be elected," giving one candidate all votes or distributing votes among candidates as the shareholder deems appropriate.10 For example, a shareholder with 100 shares of stock voting in an election of 4 members to the board of directors would have 400 votes to cast, either all for 1 candidate or divided among the candidates in any way the shareholder chooses.

2. Shareholder proxy voting

Generally, a "person entitled to vote shares may authorize another person or persons to act by proxy with respect to the shares."11 The term "proxy" is statutorily defined in simple fashion as "a written authorization . . . signed by a shareholder . . . giving another person power to vote with respect to the shares of the shareholder."12

By statute the Division regulates certain ANCSA corporation and shareholder election activities.13 The Division has promulgated two relevant regulations about proxies. First, the Division has construed "proxy" more expansively than the corporations code by defining it as "a written authorization which may take the form of a consent, revocation of authority, or failure to act or dissent, signed by a shareholder... and giving another person power to vote with respect to the shares of the shareholder."14Second, the Division has established specific substantive proxy rules.15 For example, the relevant regulation provides that one who holds a proxy "shall vote in accordance with any choices made by the shareholder or in the manner provided by the proxy when the shareholder has not specified a choice."16 With respect to electing directors, that regulation also describes how a proxy document must present the shareholder with voting choices17 and provides that "if the shareholders have cumulative voting rights, a proxy may confer discretionary authority to cumulate votes."18

Discretionary cumulative proxy voting is the underlying issue of this litigation. As described above, if a corporation allows cumulative voting in director elections, a shareholder will have the same multiple of votes per share as there are director candidates; the shareholder may, in the shareholder's sole discretion, allocate those votes among the director candidates in any manner.[19] How does this work with respect to proxy voting in ANCSA corporations' director elections? A proxy holder ultimately must vote the shareholder's shares as directed by the shareholder.20 But a proxy form may provide for a shareholder to grant the proxy holder the same discretionary cumulative voting authority held by the shareholder.21 The proxy form must set out options and instructions for the shareholder to direct the proxy holder how the shares should be voted for individual director candidates.22 And the proxy form must set out the proxy holder's authority to vote the shareholder's shares in the event the shareholder fails to designate how the shares are to be voted.23

3. Proxy solicitation regulation

Particularly relevant to this appeal, the Division regulates shareholder proxy solicitations for some ANCSA corporations: proxy solicitation materials, including proxies and proxy statements, 24 must be filed with the Division and may not contain false material facts (or omit facts necessary to keep a statement from being misleading).[25] The Division defines "solicitation" as "a request to execute or not to execute, or to revoke a proxy" and alternatively as the "distributing of a proxy or other communication to shareholders under circumstances reasonably calculated to result in the procurement, withholding, or revocation of a proxy."26

B. Sitnasuak Proxy Voting

Sitnasuak, headquartered in Nome, is the largest ANCSA village corporation in the Bering Straits region and is subject to Division regulation. Sitnasuak has almost 2, 900 shareholders and an 11-member board of directors. Sitnasuak allows cumulative voting - shareholders thus may cast their cumulated votes for one director candidate or distribute votes among some or all director candidates[27] - and its shareholders may vote for directors either in person or by proxy.28 Accordingly, Sitnasuak may, and does, allow discretionary proxy voting.29

Discretionary proxy voting in director elections has been the subject of Sitnasuak shareholder debate for at least the last few years. Sitnasuak's bylaws provide for a special shareholders' meeting when holders of 10% of its voting stock request it, and in 2015 a sufficient number of Sitnasuak shareholders petitioned for a special shareholders' meeting to discuss eliminating discretionary proxy voting. Notice of the special shareholders' meeting was given in December 2015, and the meeting convened in early January 2016. A proposal to amend Sitnasuak's articles of incorporation to eliminate discretionary proxy voting in director elections was explained to the attendees. But a required voting quorum could not be established; the remainder of the meeting was considered informational only, and the parliamentarian made a presentation about cumulative and proxy voting.

Soon thereafter Sitnasuak issued a newsletter discussing the special shareholders' meeting and setting out a written version of the parliamentarian's discussion of cumulative and proxy voting. Sitnasuak's newsletter advocated for discretionary proxy voting, with the following statements: Many shareholders believe that the Board of Directors use discretionary and cumulative voting to keep their power by reelecting themselves or others. While a discretionary proxy can have that result, it is also used by shareholders who believe they are in a minority to elect someone to voice their interests on the board....

However, electing a minority member to a board can be difficult. Most shareholders can only attend a meeting by proxy. This means that they won't know which candidates running for a board will have enough votes to be elected. This happens when shareholders . . . vote directed proxies and others vote discretionary proxies. Directed votes can't be changed. A candidate who does not get enough directed votes to win still uses up the directed vote. It can't be transferred to another candidate.

. . . Shareholders who are able to attend a meeting in person have the opportunity to change their votes and help a candidate who doesn't have enough proxy votes to potentially be elected to a board seat. That's also what a proxy holder can do with a discretionary proxy. If four candidates run together on one proxy, and...

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