Reust v. Alaska Petroleum Contractors, Inc., S-10910.

• Decision Date: 17 February 2006
• Docket Number: No. S-10910.,No. S-10919.,S-10910.,S-10919.
• Parties: Dan K. REUST, Appellant/Cross-Appellee, v. ALASKA PETROLEUM CONTRACTORS, INC., Appellee/Cross-Appellant, and State of Alaska, Intervenor.
• Court: Alaska Supreme Court

Page 807

127 P.3d 807

Dan K. REUST, Appellant/Cross-Appellee, v. ALASKA PETROLEUM CONTRACTORS, INC., Appellee/Cross-Appellant, and State of Alaska, Intervenor.

No. S-10910.

No. S-10919.

Supreme Court of Alaska.

October 28, 2005.

Rehearing Denied February 17, 2006.

COPYRIGHT MATERIAL OMITTED

Arthur S. Robinson and Eric Derleth, Robinson & Associates, Soldotna, for Appellant/Cross-Appellee.

Douglas S. Parker, Preston Gates & Ellis, LLP, Anchorage, for Appellee/Cross-Appellant.

Jason T. Mogel and Christopher M. Kennedy, Assistant Attorneys General, Anchorage, and Gregg D. Renkes, Attorney General, Juneau, for Intervenor State of Alaska.

Before: BRYNER, Chief Justice, MATTHEWS, EASTAUGH, FABE, and CARPENETI, Justices.

OPINION

EASTAUGH, Justice.

I. INTRODUCTION

A jury awarded Dan Reust compensatory and punitive damages after finding that Alaska Petroleum Contractors (APC) wrongfully terminated him in retaliation for testifying in previous litigation between APC and another former APC employee. APC and Reust both appeal.

As to the jury instructions to which APC preserved its objections, we discern no reversible error. We also hold that witness retaliation is against the public policy of this state, that APC failed to preserve its arguments against the emotional distress award, and that sufficient evidence supported an award of punitive damages. But because no reasonable jury could have found that the likely duration of Reust's employment would exceed three years, we remand for reduction of the lost wages awards. We reject Reust's challenges to the constitutionality of the statutes capping punitive damages awards and allocating half of such awards to the state and hold that the superior court did not err in allowing the State of Alaska to intervene, or in the timing of entry of judgment. But because the court applied the wrong punitive damages cap, we also remand for application of the correct cap.

II. FACTS AND PROCEEDINGS

Dan Reust sued Alaska Petroleum Contractors for wrongful termination, claiming his discharge violated the public policy of protecting witnesses. APC contends on appeal that Reust was never actually hired. We view the evidence in the light most favorable to Reust as the party who prevailed at trial.¹

In April 1998 APC invited Dan Reust to interview for a project manager position. It had intermittently employed Reust in the past. Reust testified at trial that at the conclusion of the interview with APC manager Todd Pizzuto he was offered the job and was given a "hire packet" to complete. Reust returned the completed packet the next day, and Pizzuto asked him to report to the field the following morning. Reust testified that he believed he had been hired when he returned the hire packet. Pizzuto, however, testified that he never offered Reust a job, did not hire him (and did not have the authority to do so), and did not give him a hire packet.

The evening before Reust was to report to the field he received a telephone message from Pizzuto that instructed him to instead meet with Pizzuto the next day. Reust testified that at that meeting he was informed that he was, in his words, being "let go" due to his participation in previous litigation between APC and another former employee. Reust had testified adversely to APC in a 1997 deposition in litigation brought by Richard Jantz.

Pizzuto testified that he did not "recall" whether he told Reust that the Jantz lawsuit was the basis for APC's decision. According to the testimony of Michael Bailey, Pizzuto's superior, it was Bailey who made the adverse decision regarding Reust, and Bailey's decision was based on a conversation Bailey had had with Gary Buchanan in which Buchanan (according to Bailey) stated that Reust was "badmouthing" APC. At trial, however, Buchanan denied making this statement and asserted that he did not even know Reust.

The trial jury found for Reust, finding that he had been hired by APC and that it subsequently terminated him unlawfully. The jury awarded Reust damages of $132,200 for past wage loss, $156,800 for future wage loss, and $100,000 for non-economic losses for "[e]motional [d]istress, [m]ental [a]nguish and [a]nxiety." It also found that Reust was entitled to recover punitive damages.

Following the second phase of the trial, the jury awarded Reust punitive damages of $4.3 million. After Superior Court Judge Jonathan H. Link permitted the State of Alaska to intervene, Reust moved to have parts of the Alaska tort reform legislation² declared unconstitutional. Judge Link denied Reust's motion, reduced the punitive damages award to $500,000 per AS 09.17.020(h), and directed that fifty percent of the award be allocated to the state under AS 09.17.020(j).

APC and Reust appeal.

III. DISCUSSION

A. Contract Formation Issues

1. There was no reversible error in the failure to explicitly instruct the jury that consideration is an element of contract formation.

The superior court gave the jury the following instruction concerning contract formation:

In order to find that an employment contract existed between Dan Reust and APC in April of 1998 you must find that each of the following propositions is more likely true than not true: (1) that APC made an offer of employment encompassing the essential terms of employment, (2) that Dan Reust agreed to the essential terms of employment offered by APC and accepted APC's offer of employment, and (3) that both parties intended to be bound by the offer and acceptance.

APC argues that the instruction failed to include the necessary element of consideration.³ It apparently urges us to reverse the jury's contract formation findings, contending that the jury could not have found that Reust accepted the offer and supplied return consideration because he did not actually commence work. APC's view is dependent on its conception of at-will employment as a form of unilateral contract. Reust responds that by returning the completed "hire packet" and thereby promising to work for APC, he accepted the offer and provided sufficient consideration; the jury instruction was therefore correct.⁴

We do not need to resolve this instructional dispute because any possible error was harmless. Even if the instruction's failure to explicitly list the element of consideration tainted the jury's finding that APC hired Reust, it would not have affected the jury's preliminary finding that APC had offered Reust a position. Similarly, it would not have affected the jury's finding that APC's decision to terminate (or per APC's view, "not to hire") was motivated by Reust's participation in the Jantz litigation. For reasons we discuss in Part III.B.1, such retaliatory conduct violates public policy in Alaska. Therefore, any possible instructional error regarding contract formation would not have affected the finding that APC made Reust an employment offer and then withdrew it for an illegal reason. In effect, APC is relying on the fact Reust never actually started work, a circumstance caused by APC's illegal conduct in preventing him from commencing work.

APC conceded at oral argument on appeal that, under its view, a wrongfully terminated employee fired after one minute on the job would have a claim but the same employee would have no recourse if termination occurred one minute before work was to begin. We fail to see any value in this distinction and note that at least one other court has ruled that public policy violations can sustain an at-will employee's cause of action even if work was never actually commenced.⁵ Moreover, the contract law principle of prevention supports our conclusion.⁶ APC was free to withdraw its at-will employment offer for a legitimate reason but cannot now rely on Reust's lack of performance caused by APC's own illegal conduct as a shield against liability.

Accordingly, APC would still be liable even if it were necessary for Reust to have actually commenced work in order to accept the offer and supply consideration. We therefore perceive no reversible error because APC has not demonstrated that the failure to instruct on the consideration element was prejudicial.

B. Reust's Claim of Public Policy Violation

APC contends that "[i]f a public policy against witness retaliation is to be adopted in Alaska as a basis for a wrongful discharge tort, it should not extend to those instances where an individual has testified falsely or with a reckless disregard for whether his testimony is true or false." Before turning to APC's truthfulness argument, we first address whether the State of Alaska has an explicit public policy against witness retaliation.

1. Witness retaliation is against the public policy of Alaska.

In Kinzel v. Discovery Drilling, Inc., we recognized that "a retaliatory discharge in violation of an explicit public policy gives rise to a tort as well as a contract claim."⁷ We concluded that the State of Alaska has explicit public policies that protect employees who make workers' compensation claims and who serve as whistleblowers.⁸

Several Alaska statutes demonstrate that the state also has an explicit policy of protecting witnesses from retaliation. This protective policy is most clearly stated in AS 11.56.510, which makes it a crime to retaliate against a witness by using force, damaging property, or making threats.⁹ Other statutes contain witness protection provisions, including the Alaska Occupational Safety and Health Act,¹⁰ the Alaska Human Rights Law,¹¹ and the Alaska Assisted Living Homes Act.¹² Through these laws, the state has clearly stated a public policy of protecting witnesses from retaliation. Even though APC's alleged conduct probably does not violate the letter of any of these laws,¹³ its actions are contrary to the policy reflected in the statutes. Thus, we hold that there is an actionable public policy tort in Alaska for retaliation against witnesses in legal proceedings.

In reaching this conclusion, we are persuaded by cases from other...