RBG Bush Planes, LLC v. Alaska Pub. Offices Comm'n

• Decision Date: 25 November 2015
• Docket Number: No. S–15397.,S–15397.
• Citation: 361 P.3d 886
• Parties: RBG BUSH PLANES, LLC, Appellant, v. ALASKA PUBLIC OFFICES COMMISSION, Appellee.
• Court: Alaska Supreme Court

361 P.3d 886

RBG BUSH PLANES, LLC, Appellant,

v.ALASKA PUBLIC OFFICES COMMISSION, Appellee.

No. S–15397.

Supreme Court of Alaska.

Nov. 25, 2015.

Timothy A. McKeeverand Scott M. Kendall, Holmes Weddle & Barcott, PC, Anchorage, for Appellant.

Janell M. Hafner, Assistant Attorney General, and Michael C. Geraghty, Attorney General, Juneau, for Appellee.

OPINION

STOWERS, Justice.

I. INTRODUCTION

Alaska law forbids corporations from making direct contributions to candidates for public office.¹And in 2010 a corporation that provided a service to a candidate for less than a “commercially reasonable rate” or the “normal charge ... in the market” was deemed to have made a contribution to the candidate equal to the difference between the commercially reasonable rate and the amount charged.²

In September 2010 RBG Bush Planes, LLC (Bush Planes) allowed two candidates for the Lake and Peninsula Borough Assembly to travel on a series of preexisting flights throughout the borough. Bush Planes charged the candidates a fraction of the fuel costs associated with those flights. The Alaska Public Offices Commission (Commission) investigated these charges, determined that Bush Planes' fractional fuel-cost methodology did not represent a commercially reasonable rate, and assessed a $25,500 fine against Bush Planes for making illegal corporate contributions. Bush Planes appealed to the superior court, which affirmed the Commission.

Bush Planes again appeals, arguing (1) that the Commission erred when it found Bush Planes had violated Alaska law and (2) that the fine the Commission imposed was unconstitutionally excessive. Bush Planes also appeals the superior court's denial of Bush Planes' motion to supplement the record with allegedly recently discovered evidence and related briefing suggesting Commission bias against Bush Planes. We affirm the superior court's decisions for the reasons discussed below.

II. FACTS AND PROCEEDINGS

A. Facts

Bush Planes is a limited liability company that holds title to several airplanes. It is owned by a revocable trust created for Robert B. Gillam, and it operates as a private carrier under Part 91.³

Gillam is involved in the politics surrounding mining development in the Bristol Bay area, and he hired George Jacko to be his “eyes and ears in Bristol Bay.” Jacko traveled throughout the Lake and Peninsula Borough and flew on Bush Planes' aircraft for his travel. Jacko asked Gillam if he could offer flights to two candidates for the Lake and Peninsula Borough Assembly, Nana Kalmakoff and Michelle Ravenmoon. Gillam consulted counsel and later approved allowing the two candidates to fly with Jacko on Bush Planes' flights. But Gillam also required that the fuel costs for each flight be recorded.

In 2010 Jacko traveled with Kalmakoff and Ravenmoon on two separate trips: one from September 3 through September 6 and another from September 17 through September 18. While some of the flights included both candidates, on others only Kalmakoff or Ravenmoon was present. Bush Planes invoiced Ravenmoon and Kalmakoff for a fractional portion of the fuel costs related to the flights they took.⁴Ravenmoon paid a total of $351.55, and Kalmakoff paid $1,184.60.

After the election the Commission received two complaints from the Lake and Peninsula Borough regarding the trips Ravenmoon and Kalmakoff took with Jacko. The Commission dismissed the complaints without filing charges, but the Commission staff continued investigating the allegations.

By March 9, 2011, the investigation had produced sufficient information that the Commission's assistant director, Jerry Anderson, intended to have the Commission's staff file a complaint. By March 30, 2011, Anderson directed one of the Commission's staff attorneys to begin drafting a complaint. But the Commission's staff continued investigating the allegations into April, and the Commission's staff did not file a complaint until July 7, 2011.

B. Proceedings

The Commission staff's complaint alleged that Bush Planes had violated AS 15.13.074(f), which prohibits a corporation from making a contribution to a candidate.⁵“Contribution” is defined in both AS 15.13.400and former 2 AAC 50.250. Relevant here are two definitions previously contained in 2 AAC 50.250. The first definition specifically excluded from the meaning of “contribution” the “provision of a service ... to a candidate ... if the entity providing the service ... is paid at a commercially reasonable ratewithin a commercially reasonable time.”⁶The second definition stated:

The provision of goods or services without charge, or at a charge that is less than the normal charge for the goods and services in the market,is a contribution unless a lower rate is extended to all campaigns. If goods or services are provided at less than the normal charge in the market, the amount of the nonmonetary contribution is the difference between the normal charge for the goods or services at the time of the contribution and the amount charged.^[[[^7]

The staff alleged that charging Ravenmoon and Kalmakoff fractional fuel costs alone was not commercially reasonable. The staff also alleged that a fuel-only valuation “ignore[d] all of the other normal and customary expenses associated with aircraft use” and noted the following additional expenses: “[o]il, maintenance, an engine reserve ..., a propeller reserve ..., insurance, hang [a]r fees, ... inspection fees,” and the pilot's salary. Thus, the staff claimed that Bush Planes had not charged a commercially reasonable rate and had made a prohibited corporate contribution to both candidates.

1. The Commission hearing

The Commission members heard the case against Bush Planes during one day of testimony presided over by an administrative law judge. One of the main issues during the hearing was whether Bush Planes had charged the candidates a commercially reasonable rate.

Gillam testified regarding Bush Planes' costs. He stated that he owned the hangar in Anchorage where Bush Planes stored its aircraft and personally paid for the “heat, lights, taxes, [and] maintenance” related to the hangar. He did not testify as to how much he paid, nor did he provide Bush Planes' maintenance costs or the cost to run each of Bush Planes' aircraft on a per-hour basis. Gillam noted that McKinley Capital paid the pilots' salaries and benefits in exchange for Bush Planes making its aircraft available to McKinley Capital when it needed them for its business.

Greg O'Keefe, McKinley Capital's chief financial officer, testified regarding Bush Planes' costs.⁸O'Keefe testified that the amount of time Bush Planes' aircraft spent in the air did not affect Bush Planes' fixed costs. But he did not provide values for these fixed costs or the agreement between McKinley Capital and Bush Planes regarding piloting services.

O'Keefe further testified that Bush Planes does not set aside money for maintenance reserves or propeller reserves and that Bush Planes' maintenance costs do not depend on the number of hours flown other than “a hundred-hour annual” maintenance. He testified that the variable costs, the ones “you would incur as a result of operating the plane,” would be “the fuel, perhaps a little bit of oil, maybe some Windex ... and maybe some minor supplies like air sickness bags, things like that.”

Glen Alsworth testified regarding airfare. Alsworth, the mayor of the Lake and Peninsula Borough, was also the president of a for-profit air carrier, Lake Clark Air. Alsworth was provided with the flight plan for the trips the candidates took, and he asserted that it would cost $950 per hour multiplied by the flight hours to charter these flights and that there would be standby and overnight charges.

Alsworth also provided seat fares⁹for each leg of the two itineraries. These fees ranged from $60 to $400. Alsworth stated that $1,240 “would be just a ... screaming deal” for a passenger taking all of the flights in the first trip and that $500 for the entire second trip was possible but would be “the steal of the century.”¹⁰

David Wilder, owner of Lake and Peninsula Airlines,¹¹testified that the charter cost for the first trip would be approximately $10,450 and the seat fare would be $2,500. For the second trip, Wilder estimated a charter cost of $2,800 and a seat fare of approximately $700. When asked about charging $306¹²for a seat fare on the first itinerary, Wilder indicated that it would be “impossible for us.... It doesn't make economic sense ... when somebody else is paying $9,000 for a charter and you go well, we're going to let two more people hop on for 300 bucks, ... I wouldn't do that.” He noted that $306 was “not in the ballpark.”

2. The Commission's decision

The Commission, with the administrative law judge's assistance, found that the lowest commercially reasonable rates supported by the evidence presented were the seat fares to which Alsworth had testified. Comparing those seat fares with the amounts Bush Planes charged the candidates, the Commission found that Bush Planes had undercharged Ravenmoon by $788.45 and Kalmakoff by $500.40.

The Commission specifically addressed whether Bush Planes' fuel-only methodology represented a commercially reasonable rate. It noted that one of the Commission's advisory opinions had indicated that it might be sufficient to charge a candidate the “actual cost” of a flight,¹³but it (1) disavowed the concept of using actual costs when a candidate flies on a company plane “in an area where market rates for seat fares can be ascertained” and (2) held that even under an actual-cost methodology, Bush Planes needed to account for both its variable and fixed costs. But the Commission found that Bush Planes had failed to provide a “credible cost-based valuation taking all costs into account.”

The Commission next considered the penalty to impose on Bush Planes and discussed several factors. It noted that Gillam was Bush Planes' principal and that he had previous experience with the Commission, including a $100,000 settlement in 20...