Borer v. Eyak Corp., Supreme Court No. S-17805

CourtSupreme Court of Alaska (US)
Writing for the CourtBORGHESAN, Justice.
Citation507 P.3d 49
Parties Lucas BORER, Appellant, v. The EYAK CORPORATION, Appellee.
Docket NumberSupreme Court No. S-17805
Decision Date01 April 2022

507 P.3d 49

Lucas BORER, Appellant,
v.
The EYAK CORPORATION, Appellee.

Supreme Court No. S-17805

Supreme Court of Alaska.

April 1, 2022
Rehearing Denied May 25, 2022


Lucas Borer, pro se, Cordova, Appellant.

Matt Mead and Andrew Erickson, Landye Bennett Blumstein LLP, Anchorage, for Appellee.

Before: Winfree, Chief Justice, Maassen, and Borghesan, Justices. [Carney, Justice, not participating.]

OPINION

BORGHESAN, Justice.

I. INTRODUCTION

A winning candidate for a seat on the board of directors of an Alaska Native Corporation declined to sign the corporation's confidentiality agreement and code of conduct. When the corporation denied him a seat on the board, he sought a declaratory judgment that these agreements are unlawful and an injunction that he be seated on the board. He argues that the scope of the confidentiality agreement is so broad, and the code of conduct so apt to be used to suppress dissenting directors, that they are inconsistent with directors’ fiduciary duties to the corporation. Because he does not challenge the application of these agreements to any concrete factual situations, we conclude that his claims are not ripe for adjudication. We therefore affirm the judgment and the award of attorney's fees against him.

507 P.3d 54

II. FACTS AND PROCEEDINGS

A. Facts

The Eyak Corporation is the Alaska Native Village Corporation for Cordova, formed pursuant to the Alaska Native Claims Settlement Act.1 Eyak's board is made up of nine members who serve staggered three-year terms; each year, three directors are up for election. Eyak's bylaws require several qualifications to serve on the board. Only one qualification is in dispute here: "Any person who is elected or selected to be a Director shall be seated as a Director only after he or she executes an acknowledgment agreeing to comply with the Corporation's code of conduct and executes the Corporation's confidentiality agreement." The requirement to execute these two documents (collectively referred to as the Agreements) has been in place since 2012.

Lucas Borer previously served on the Eyak board from 1985-1989 and ran for the board again unsuccessfully in 2012, 2015, 2017, and 2018. In 2015 Borer corresponded with the chair of Eyak's board of directors, criticizing Eyak's bylaws and the Agreements. Eyak declined to amend its governing documents at that time.

Borer ran again in 2019. At the top of the candidate application form, the qualifications for directors were clearly stated. Borer signed the form, right below a statement that read: "I understand that the information set forth above will be relied upon by The Eyak Corporation in the preparation of its election materials for the upcoming Annual Meeting of Shareholders."

Borer received enough votes in the election to win one of the three available seats on the board. At a board meeting following the election Borer and the two other winning candidates were asked to execute the Agreements before they were seated. Borer asked for more time to review the Agreements with his counsel before he signed them. Because Borer did not execute the Agreements at the meeting, Eyak did not allow him to be seated as a director at that time.

The chair of Eyak's board of directors sent Borer a letter congratulating him on his election, attaching the Agreements, and advising him that he must execute the Agreements to qualify to be seated as a director under the bylaws. The chair emphasized that the board wanted "to make sure the shareholders who voted for [Borer] are not disenfranchised while timely-seating elected directors and avoiding vacant seats on the Board." The chair requested that Borer execute the Agreements by May 28, 2019, or else Eyak would "proceed to fill the vacancy."

Four days before the execution deadline, Borer responded with a letter addressed to the board. Borer claimed that he had been pressured to sign the Agreements and that, "[h]aving seen ... a similar document in the past, [he] suspected that this one would similarly attempt to take away or reduce [his] rights as a board member."

Borer then outlined numerous issues with the Agreements that he claimed would result in breach of fiduciary duty and violation of Alaska law — including many that are now the basis for his appeal. Borer stated that although he "completely underst[ood] the need for a reasonable Code of Conduct" he claimed that the Agreements "effectively prohibit any communication between a director and a shareholder."2 He maintained that he was not required to sign the Agreements to qualify for the board, asserting that he had "legitimate and legal reasons for not signing the [Agreements]" and that executing the Agreements "would represent an abdication of [his] responsibilities as a director."

Eyak responded in a June 27 letter to Borer stating that it had revised the Agreements in response to his concerns. Eyak gave Borer a new deadline of July 11 to execute the revised Agreements and again notified him that if he failed to do so, the board would give his seat to someone else.

Borer did not sign the Agreements prior to the July 11 deadline; it appears that he never responded at all. On July 17 Eyak notified Borer that it had seated another eligible candidate as director to fill the vacancy.

507 P.3d 55

Borer's attorney sent a letter to Eyak demanding that Borer be seated on the board. The letter stated that "[i]nviting shareholders to vote for an ineligible candidate is a misleading proxy solicitation" and reiterated many of Borer's concerns from his earlier letter to the board. He also proposed further revisions to the Agreements.

Eyak refused Borer's demand. Citing its bylaws, Eyak stated that it had "been clear with its shareholders and Mr. Borer at every step of the nominations and election process that only eligible candidates who execute [the Agreements] will be qualified to be seated as directors."

B. Proceedings

Borer filed a complaint for declaratory and injunctive relief in the superior court. Borer sought "a declaratory judgment stating he remains a duly elected [Eyak] director and an injunction requiring [Eyak] to seat him on its board." He claimed that he was validly elected and that signing the Agreements "would reduce or eliminate his ability to exercise his fiduciary duty to the corporation." Borer also took issue with various enforcement provisions of the Agreements, including provisions that he claimed would "eliminate the director's ability to participate in board meetings and eliminate the director's statutory right to inspect corporate information." Borer also filed a motion for preliminary injunction directing that Eyak seat him as director. In that motion, Borer stated "he had just been handed [the Agreements] th[e] morning" of the board election.

Eyak opposed the motion for preliminary injunction and disputed Borer's characterization of the facts. Eyak argued that Borer had "full knowledge of the Code of Conduct and Confidentiality Agreement's provisions and purpose," pointing to several pieces of evidence: a newsletter issued to shareholders describing Eyak's director confidentiality agreement; Borer's previous campaigns for the director seat; correspondence between Borer and the chair of the board regarding the Agreements in 2015; and the fact that Borer had "affirmatively represented his agreement to be bound by those documents in the event he was elected when he signed and returned the 2019 Candidate Application Form."

The superior court denied Borer's motion for preliminary injunction. The court first noted that "[w]hen this court read Mr. Borer's opening motion, this court was left with the impression that Mr. Borer had no prior notice of the Code of Conduct, that the document was essentially thrust upon him minutes before the vote, and that the document may even have been drafted or at least revised specifically to limit him if he won," but that Eyak's opposition and attached exhibits "ma[de] clear that that was not the case." The court ruled that Borer had not met his legal burden of demonstrating either a "clear showing of probable success on the merits" or "substantial questions going to the merits of the case." It found that "Borer [had] not shown that he will suffer irreparable harm, or that [Eyak] won't." It also found that Eyak could be irreparably harmed if Borer were seated without signing the code of conduct because the code "insures against a director improperly disclosing ... confidential corporate business opportunities." Borer moved for reconsideration, which the superior court denied.

Eyak then moved for summary judgment, arguing that Borer was not qualified to be seated as a director due to his failure to sign the Agreements and that its code of conduct and confidentiality agreement do not violate Alaska law. Eyak argued that Borer "asks for the extraordinary: invalidation of a corporation's bylaws based on a series of hypothetical events and the removal of a qualified, sitting director to seat an unqualified director."

The superior court heard oral argument and subsequently granted summary judgment to Eyak in a decision on the record. The court stated without elaboration that "[e]verything is ripe"...

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