RBG Bush Planes, LLC v. Alaska Public Offices Commission ( 2015 )

Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
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THE SUPREME COURT OF THE STATE OF ALASKA
RBG BUSH PLANES, LLC, )
) Supreme Court No. S-15397
Appellant, )
) Superior Court No. 3AN-11-13052 CI
v. )
) OPINION
ALASKA PUBLIC OFFICES )
COMMISSION, ) No. 7063 – November 25, 2015
)
Appellee. )
_______________________________ )
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Catherine M. Easter, Judge.
Appearances: Timothy A. McKeever and 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.
Before: Winfree, Stowers, and Bolger, Justices. [Fabe, Chief
Justice, and Maassen, Justice, not participating.]
STOWERS, Justice.
I. INTRODUCTION
Alaska law forbids corporations from making direct contributions to
candidates for public office.1 And in 2010 a corporation that provided a service to a
candidate for less than a “commercially reasonable rate” or the “normal charge . . . in the
1
AS 15.13.074(f).
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 pre­
existing 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
2
2 Alaska Administrative Code (AAC) 50.250(a)(3)(G), (c) (2006). We note
that 2 AAC 50.250 has since been amended, but this appeal concerns the pre-amendment
language in effect in 2010.
3
General Operating and Flight Rules, 14 C.F.R. pt. 91 (2015). As a Part 91
(continued...)
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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.4
Ravenmoon 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
3
(...continued)
operator Bush Planes may only charge a candidate for public office an amount that does
not “exceed the amount required under the applicable state or local
law.” 14 C.F.R. § 91.321(a)(3).
4
Bush Planes intended to bill the candidates for half of the fuel used on each
flight. Bush Planes actually billed the candidates more than one-half of the fuel costs due
to an accounting error. That discrepancy does not affect our decision.
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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 15.13.400 and 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 rate within a commercially reasonable time.”6 The 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
5
The complaint also included allegations against Gillam, McKinley Capital
Management, Ravenmoon, and Kalmakoff. Only the charges against Bush Planes are
relevant to this appeal.
6
2 AAC 50.250(a)(3)(G) (2006) (emphasis added).
7
2 AAC 50.250(c) (2006) (emphasis added).
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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.8 O’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.
8
It appears McKinely Capital handles certain accounting functions for Bush
Planes.
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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 fares9 for 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,11 testified 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
9
As used in the hearing, a seat fare is the amount a carrier would charge
someone who wanted to purchase a seat on a pre-existing charter flight.
10
Using Alsworth’s seat fares, Kalmakoff should have paid $1,125 for her
participation in the first trip and $560 for her participation in the second trip. Kalmakoff
paid Bush Planes $1,184.60. Similarly, Alsworth’s seat fares indicate Ravenmoon
should have paid $1,040 for her participation in the first trip and $100 for her
participation in the second trip, but Ravenmoon only paid $351.55.
11
Wilder was also a member of the Lake and Peninsula Borough Assembly
until he lost his seat to Ravenmoon in the 2010 election.
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approximately $700. When asked about charging $30612 for 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,13 but 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.”
12
Bush Planes charged Ravenmoon $306.21 for the first set of flights.
13
See STATE OF ALASKA, DEP’T OF ADMIN., ALASKA PUB. OFFICES COMM’N
ADVISORY OP., AO 06-03-CD, at 5 (Oct. 31, 2006), available at
http://aws.state.ak.us/ApocReports/Paper/Download.aspx?ID=4877 (hereinafter PEREZ
OP.).
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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 2010
related to alleged campaign disclosure violations. The Commission found that Bush
Planes had “substantial assets and . . . sophisticated management” and that its conduct
had “great potential to alter the outcome of elections to the detriment of candidates not
so favored.” The Commission further found that Bush Planes “engaged in a questionable
practice without adequately exploring its legality, . . . embroil[ing] two unsophisticated
candidates in its wrongdoing.” Therefore, the Commission concluded “a strong deterrent
fine [was] necessary” and imposed a penalty of $25,500.14
The Commission also imposed $10,668 in investigation and adjudication
costs and $19,100 in attorney’s fees.15 Thus, the Commission’s final award against Bush
Planes was for $55,268: $25,500 in fines, $10,668 in adjudication and investigation
costs, and $19,100 in attorney’s fees.
3. The superior court’s ruling
Bush Planes appealed the Commission’s decisions to the superior court, and
the parties completed their briefing in November 2012. Approximately six months later,
shortly before the scheduled oral argument, Bush Planes filed a motion to supplement
the record arguing that it had recently obtained “clear evidence that [the Commission]
14
The maximum statutory penalty is $50 per day per violation until the
violation is remedied. AS 15.13.390(a). Despite each candidate participating in two
separate itineraries, the Commission based the fine on a single violation for each
candidate and calculated the number of days since the violation until the violation was
remedied as 255 days. Thus, $50 x 255 days x 2 violations = $25,500.
15
Alaska Statute 15.13.390(b) states that when the Commission finds a
violation “the commission shall assess . . . the commission’s costs of investigation and
adjudication[] and . . . reasonable attorney fees.”
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and the [Commission’s] Staff . . . were biased and prejudiced against it.” Bush Planes
argued that the new evidence demonstrated that Bush Planes was denied “its fundamental
due process right to an impartial tribunal.”
Bush Planes claimed that it only obtained the new evidence after the close
of the briefing and that the importance of the evidence, along with its unavailability to
Bush Planes during the earlier briefing, justified supplementing the record and its
briefing. The Commission opposed the motion, noting that Bush Planes had obtained
much of the evidence it wanted to introduce approximately four months earlier and that
none of the evidence was sufficient to demonstrate impermissible bias or prejudice.
Superior Court Judge Catherine M. Easter affirmed the Commission’s
decision regarding Bush Planes’ liability. She also held that the fine was not
unconstitutionally excessive and that it was not an abuse of discretion. Judge Easter
denied the motion to supplement the record without comment and did not reach the
merits of Bush Planes’ due process argument.
Bush Planes now appeals the Commission’s finding of liability and the
penalty it imposed, as well as the superior court’s denial of its motion to supplement the
record and file a supplemental brief.
III. STANDARD OF REVIEW
“Where the superior court is acting as an intermediate court of appeals, we
directly review the agency decision”16 using one of four standards of review depending
on the issues on appeal:
The “substantial evidence” test is used for questions of fact.
The “reasonable basis” test is used for questions of law
16
Alaska Police Standards Council v. Parcell, 348 P.3d 882, 886 (Alaska
2015) (quoting West v. Municipality of Anchorage, 174 P.3d 224, 226 (Alaska 2007))
(internal quotation marks omitted).
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involving agency expertise. The “substitution of judgment”
test is used for questions of law where no expertise is
involved. The “reasonable and not arbitrary” test is used for
review of administrative regulations.[17]
We review a superior court’s ruling on a motion to supplement the record
for abuse of discretion.18 The superior court abuses its discretion when it acts in a
manifestly unreasonable manner.19
IV. DISCUSSION
Bush Planes argues that (1) the Commission erred in finding that Bush
Planes made an illegal corporate contribution to a candidate; (2) the Commission
imposed an unconstitutionally excessive fine on Bush Planes; and (3) the superior court
abused its discretion when it denied Bush Planes’ motion to supplement the record and
allow its supplemental brief. We conclude that none of these decisions was erroneous
and affirm.
A. The Commission Did Not Err When It Found That Bush Planes Made
An Illegal Corporate Contribution.
Bush Planes challenges the Commission’s determination that Bush Planes
violated the prohibition on corporate contributions to candidates. Bush Planes argues
that (1) the phrase “commercially reasonable rate” is ambiguous; (2) because
“commercially reasonable rate” is ambiguous, the Commission should have deferred to
17
Skvorc v. State, Pers. Bd., 996 P.2d 1192, 1196-97 (Alaska 2000) (quoting
Handley v. State, Dep’t of Revenue, 838 P.2d 1231, 1233 (Alaska 1992)).
18
Southwest Marine, Inc. v. State, Dep’t of Transp. & Pub. Facilities, Div. of
Alaska Marine Highway Sys., 941 P.2d 166, 172 (Alaska 1997).
19
Tobeluk v. Lind, 589 P.2d 873, 878 (Alaska 1979) (“We will not
interfere . . . unless it is shown that the court abused its discretion by issuing a decision
which is arbitrary, capricious, manifestly unreasonable, or which stems from an improper
motive.”).
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Bush Planes’ actual-cost methodology; and (3) the Commission ignored Bush Planes’
evidence that it did not incur any costs other than the variable fuel costs it charged the
candidates.
1. The Commission’s Perez Opinion rendered the terms
“commercially reasonable rate” and “normal charge in the
market” ambiguous.
The Commission’s finding that Bush Planes is liable for campaign
violations centers on the proper interpretation of two phrases: (1) “commercially
reasonable rate” and (2) “normal charge in the market.”20 Bush Planes argues these
phrases are ambiguous while the Commission disagrees.
A regulation is ambiguous when “[it] is capable of two or more equally
logical interpretations.”21 And “ambiguous statutory or regulatory requirements must be
strictly construed in favor of the accused before an alleged breach may give rise to a civil
penalty.”22 This rule has its genesis in the doctrine of vagueness, which requires that the
law “give the ordinary citizen fair notice of what is and what is not prohibited.”23
“People should not be required to guess whether a certain course of conduct is one which
20
2 AAC 50.250(a)(3)(G), (c) (2006). Bush Planes briefly argues that using
two different phrases in the regulation makes the regulation inherently ambiguous, but
we disagree and interpret them similarly here.
21
State v. Bernard, 625 P.2d 311, 313 (Alaska 1981) (per curiam). Because
the question of regulatory ambiguity presented here is a question of law not involving
agency expertise, we review it under the substitution of judgment standard. See Alaska
Pub. Offices Comm’n v. Stevens, 205 P.3d 321, 324-26 (Alaska 2009).
22
Stevens, 205 P.3d at 326.
23
Id. at 325 (quoting VECO Int’l, Inc. v. Alaska Pub. Offices Comm’n,
753 P.2d 703, 714 (Alaska 1988)).
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is apt to subject them to criminal or serious civil penalties.”24 But to take advantage of
any regulatory ambiguity, the accused party’s interpretation may not be “strained or
outlandish.”25
In the abstract, “commercially reasonable rate” and “normal charge in the
market” do not appear ambiguous because they focus the analysis on the price available
on the open market. But the Commission injected ambiguity into these phrases when it
released a 2006 advisory opinion referred to as the Perez Opinion.26
The Perez Opinion considered whether Alaska law required the governor
to reimburse the state for travel on state aircraft when the governor engages in both state
business and campaign-related activities.27 The opinion noted that the state may not
make a contribution to a candidate and concluded that “if the governor’s reelection
campaign reimburses the state at a reasonably commercial rate . . . for state-provided
24
VECO Int’l, 753 P.2d at 714 (citing Gottschalk v. State, 575 P.2d 289, 290
(Alaska 1978)).
25
See Bernard, 625 P.2d at 313 (“That one [interpretation] is more logical
than the other does not cure the ambiguity of the regulation when the less logical method
is not strained or outlandish.”); see also Theodore v. State, 407 P.2d 182, 189 (Alaska
1965) (“We agree with appellant that a vague . . . regulation, the breach of which carries
a criminal penalty, should be strictly construed in favor of the accused. However, we
believe that a common sense, unstrained, reading of both descriptions provides a
reasonably concise description of the areas and leaves no room for the argument
advanced by appellant.”).
26
See PEREZ OP., supra note 13. The opinion is known as the “Perez
Opinion” because it was requested by Governor Frank Murkowski’s Administrative
Director, Linda Perez. Id. at 1.
27
Id. at 1.
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travel, state-provided travel would not be a prohibited contribution.”28 The opinion
continued:
Because reimbursement is required . . . , we must address
what constitutes a commercially reasonable rate for
reimbursement. There are probably many possibilities. One
obvious method might be to determine the state’s actual costs
and reimburse those costs. Another method is suggested in
federal regulation . . . . Using either of these methods for
determining the value of state-provided travel would satisfy
the requirement of payment at a commercially reasonable
rate.[29]
But “actual cost” is inconsistent with the market-based approach that
“commercially reasonable rate” and “normal charge in the market” seem to require.
Actual cost leaves no accounting for profit margin, an almost ever-present aspect of a
commercially reasonable rate. And an actual-cost methodology changes the regulation’s
focus from a broad, market-based analysis of available fares to identifying the costs
specific to an individual service provider. Thus, the Commission’s interpretation of the
regulation in the Perez Opinion inserted ambiguity into the regulation’s meaning. In
light of this ambiguity, we will strictly construe the regulatory language in Bush Planes’
favor so long as Bush Planes’ interpretation of the regulation is not strained.
2. Bush Planes’ interpretation of the actual-cost methodology
endorsed in the Perez Opinion is strained.
Bush Planes argues that the Perez Opinion “can reasonably be read as
contemplating that the primary purpose [of a flight] must pay for all costs the primary
28
Id. at 5.
29
Id. at 5-6 (emphasis added). The Perez Opinion went on to endorse a
valuation method involving first-class, coach, and charter fares depending on the
circumstances, but it specifically noted that the Commission was not precluding other
valuation methods. Id. at 6.
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purpose would otherwise incur, and candidates pay only those actual costs caused by
their additional activity.” Bush Planes asserts that the evidence before the Commission
was that the only additional costs Bush Planes incurred because of the candidates’
presence on its flights were for fuel and minor incidentals. Thus, Bush Planes contends,
these additional costs are all Bush Planes needed to charge the candidates under an
actual-cost methodology.
The Commission responds that an actual-cost methodology must account
for fixed costs and that other companies incorporate fixed costs into their fares. The
Commission argues that Bush Planes’ failure to include these costs renders its actual-cost
methodology invalid.30
We conclude that Bush Planes’ interpretation of “actual cost” is strained.
Bush Planes’ additional-costs methodology fails to recognize that Bush Planes is the
beneficiary of unique advantages: it does not pay for pilots or hangar fees. The idea that
Bush Planes could use its “actual costs” when it possesses these advantages is patently
unreasonable, especially considering that the Perez Opinion gave no indication that the
State enjoyed similar advantages when the Perez Opinion endorsed the actual-cost
methodology. As Gillam testified, “If you know anything about Alaska airplanes, there’s
a lot of expense.” That expense is not simply the cost of fuel. It is all of the costs that
surround the operation of the plane.
Bush Planes’ interpretation of the relevant language is clearly not what was
intended by “actual cost” in the Perez Opinion. The Perez Opinion was providing
30
Determining whether Bush Planes adopted a strained interpretation of the
regulations at issue here is a question of law that does not implicate agency expertise.
Therefore, we apply our independent judgment when reviewing this issue. Skvorc v.
State, Pers. Bd., 996 P.2d 1192, 1196-97 (Alaska 2000) (quoting Handley v. State, Dep’t
of Revenue, 838 P.2d 1231, 1233 (Alaska 1992)).
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guidance regarding what would be a commercially reasonable rate.31 No reasonable
person would read the Perez Opinion and believe that in trying to determine a
commercially reasonable rate, he could charge only his additional costs when he was the
recipient of significant cost reductions not generally available.
Bush Planes’ argument to the contrary is not persuasive. Its argument
ignores the regulation’s attempt to place all candidates in the same position by creating
a level playing field. This is best exemplified by the fact that the regulation requiring a
service provider to bill for the normal charge in the market did not apply if the
discounted charge was offered to all candidates.32 Additionally, the practical effect of
requiring a commercially reasonable rate is that it prevents one candidate from
benefitting from an advantage that other candidates may not have because they are not
as well connected.
Bush Planes also argues that its fuel-only approach was a reasonable
interpretation of its allegedly competing obligations under state and federal law. But
Bush Planes’ basic premise — that there is tension between state and federal law — is
incorrect. 14 C.F.R. § 91.321(a)(3) permits a private air carrier to charge candidates for
elected office an amount that does not “exceed the amount required under applicable
state or local law.” Bush Planes contends that to ensure compliance with this federal
regulation it must charge the candidates the lowest possible rate and to ensure
compliance with state law it must charge the highest possible rate.
31
PEREZ OP., supra note 13, at 5-6.
32
2 AAC 50.250(c) (2006).
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We read 14 C.F.R. § 91.321(a)(3) as a carve-out provision to allow private
air carriers to operate within the boundaries of state law.33 So long as Bush Planes
complies with state law, including the Commission’s regulations, it will not violate
14 C.F.R. § 91.321(a)(3).34 There is no reason to believe that a fuel-only approach was
necessary to avoid violating federal regulations.
Thus, we hold that Bush Planes’ interpretation of the actual-cost
methodology approved in the Perez Opinion was strained. As a result, we affirm the
Commission’s decision because the Commission was not required to defer to Bush
Planes’ interpretation and could enforce its own reasonable interpretation of
“commercially reasonable rate.”35
B. The Fine The Commission Imposed Against Bush Planes Was Not
Unconstitutionally Excessive.
The Commission assessed a $25,500 fine against Bush Planes, as well as
$29,768 in investigation and adjudication costs and attorney’s fees. Noting that its total
contribution was $1,288.25 — the amount the candidates underpaid for the flights using
the Commission’s calculations — Bush Planes argues that the award against it is
33
The Federal Aviation Administration’s public notice regarding
promulgation of 14 C.F.R. § 91.321(a) stated that the regulation permitted the carrier “to
accept payment in accordance with state or local law.” Carrying Candidates in Elections,
70 Fed. Reg. 4980-01 (Jan. 31, 2005) (emphasis added) (codified at 14 C.F.R. §
91.321(a)).
34
Bush Planes cites no cases where a Part 91 carrier was found to have acted
permissibly under state law and impermissibly under 14 C.F.R. § 91.321(a)(3), nor has
our independent research identified such a case.
35
Because we conclude the Commission did not need to defer to Bush Planes’
interpretation of “commercially reasonable rate” and “normal charge in the market,” we
do not address Bush Planes’ claim that the Commission ignored evidence regarding its
actual costs.
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unconstitutionally excessive and cites to our punitive damages cases for support.36 Bush
Planes also discusses a number of factors that it believes demonstrates the
unreasonableness of the penalty. These factors include (1) that Bush Planes made a good
faith effort to comply with ambiguous regulations; (2) that this was Bush Planes’ first
violation; (3) that the violation was a “one-time event”; (4) that Bush Planes was trying
to comply with the Perez Opinion and federal law; (5) that this was not a particularly
serious violation; (6) that the amount of the illegal contribution was not so large as to
imply corruption; and (7) that there was no special harm because there was no indication
that the candidates would not have taken these flights if charged the seat fare the
Commission endorsed.
Bush Planes additionally argues that the Commission’s fine calculation,
which relied on the number of days between the offense and when the violation was
remedied, was not reasonably related to the offense and that the Commission was
actually ready to file a complaint in March but chose to wait to file to trigger a higher
fine. Bush Planes contends that the days after March should not have been counted
against it when calculating the fine.
36
Bush Planes argues that we should consider both the fine and the costs and
fees awarded against it when determining whether the penalty was excessive. We
disagree. The costs and fees awarded here appear similar to those awarded under Alaska
Rule of Civil Procedure 82, which are intended “to partially compensate a prevailing
party for the costs to which he has been put in the litigation in which he was involved.”
De Witt v. Liberty Leasing Co. of Alaska, 499 P.2d 599, 602 (Alaska 1972) (discussing
attorney’s fees under Alaska Rule of Civil Procedure 82). The compensatory nature of
these costs and fees means that they are not intended to penalize a person who commits
a violation of Alaska’s campaign finance laws and are imposed without specific regard
for the seriousness of the offense. Thus, we hold that the costs and fees awarded against
Bush Planes are not part of the excessive-penalty analysis.
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The Commission asserts that the fine is constitutional because Bush Planes
“committed a serious campaign violation with the potential to significantly harm the
electoral process” and argues that comparisons to punitive damages cases are not on
point. The Commission also argues that it fairly considered Bush Planes’ assets,
experience, and filing history and that a substantial fine was appropriate considering that
Bush Planes’ principal is a sophisticated participant in Alaska’s election process and
Bush Planes’ actions caused two novice candidates to violate the Commission’s
regulations. The Commission contends that its inclusion of the days between the end of
March and when the complaint was filed in July was reasonable because (1) Bush Planes
“knew or should have known it was charging far less than a commercially reasonable
rate for the services it offered” and (2) the Commission was still investigating and
seeking documents in April.
1. The Commission did not impose an unconstitutionally excessive
fine.
We have held that the a penalty is unconstitutionally excessive when it is
obviously unreasonable.37 “The penalty cannot be ‘so severe and oppressive as to be
wholly [disproportionate] to the offense and obviously unreasonable.’ ”38 The federal
case both parties cite, United States v. Bajakajian, similarly holds that a fine “must bear
some relationship to the gravity of the offense that it is designed to punish.”39
37
VECO Int’l, Inc. v. Alaska Pub. Offices Comm’n, 753 P.2d 703, 716
(Alaska 1988). We note that because this is a question of constitutional law “[we] apply
our independent judgment.” State, Dep’t of Revenue v. Andrade, 23 P.3d 58, 65
(Alaska 2001).
38
VECO Int’l, 753 P.2d at 716 (quoting St. Louis Iron Mountain &
Southern Ry .Co. v. Williams, 251 U.S. 63, 67 (1919)).
39
524 U.S. 321, 334 (1998).
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The prohibition on corporate contributions was part of a broad campaign finance
reform bill in 1996.40 That reform had several purposes. Relevant here is the
legislature’s finding that “organized special interests are responsible for raising a
significant portion of all election campaign funds and may thereby gain an undue
influence over . . . elected officials.”41 The legislature was also concerned that “penalties
for violations of the existing campaign finance laws [were] far too lenient to deter
misconduct.”42 The legislature intended “to substantially revise Alaska’s campaign
finance laws in order to restore the public’s trust in the electoral process and to foster
good government.”43 In so doing, it also increased the per-day statutory penalty from
$10 to $50.44
Bush Planes attacks the fine imposed as unconstitutionally excessive
because the amount of its contribution was substantially less than the amount of the fine.
Bush Planes also asserts that its violation “was not particularly grave” because it gave
“only slightly more than double what an individual could have contributed to one
candidate.”45 Bush Planes notes that candidates who expect to raise or spend less than
$5,000 may seek an exemption from reporting contributions to their campaigns,46 which
40
See ch. 48, § 1, SLA 1996.
41
Ch. 48, § 1(a)(3), SLA 1996.
42
Ch. 48, § 1(a)(6), SLA 1996.
43
Ch. 48, § 1(b), SLA 1996.
44
Ch. 48, § 22, SLA 1996.
45
See AS 15.13.070(b)(1) (limiting individual contributions to certain
individuals and organizations to $500 per year).
46
AS 15.13.040(g); see also 2 AAC 50.286(a).
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Bush Planes argues demonstrates that the legislature would not consider its contributions
to Ravenmoon and Kalmakoff a threat to the democratic process.
But Bush Planes’ focus on the amount of the fine compared to the amount
of the improper contribution fails to account for the problems the legislature was
attempting to solve. The legislature believed that the public had lost faith in the electoral
process and that organized special interests, which ostensibly included corporations, had
gained undue influence over elected officials by contributing substantial sums of money
to them.47 And the legislature appears to have decided to ban direct corporate
contributions to individual candidates for these reasons.
In this context Bush Planes did not simply donate approximately $1,200
illegally. Bush Planes’ actions called into question the fairness of the Lake and
Peninsula Borough’s 2010 election and the impartiality of these newly elected assembly
members. Bush Planes flew the candidates throughout the borough, a borough where
many communities can only be accessed by plane. And this travel allowed the
candidates to promote themselves to individual voters face-to-face.
Moreover, the fine both punishes Bush Planes and serves as a deterrent to
other corporations that might consider flouting the prohibition on direct contribution.
Absent a substantial fine, a corporation may be tempted to provide illegal direct
contributions and write off those contributions and any associated fine as a cost of doing
business. A substantial fine sends the signal that the Commission treats these violations
seriously. Given these concerns, the fine was not obviously unreasonable and thus not
unconstitutionally excessive.
47
Ch. 48, § 1(a)(1), (a)(3), (b), SLA 1996.
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2. Punitive damages case law is either irrelevant or supports the
fine.
Bush Planes argues that we should look to punitive damages case law for
guidance and that the fine imposed here would be impermissible if this were a punitive
damages case. But our prior discussions of punitive damages case law does not support
Bush Planes’ argument.
The federal due process analysis that guides the determination of when
punitive damages are unconstitutional flows from the concept that the tortfeasor should
have some “notice of the magnitude of the sanction that a state might employ.”48 Here,
Bush Planes had notice of the magnitude of the sanction the State might employ because
the sanction the Commission employed was the maximum statutory penalty.49
And we have never endorsed a particular “fixed ratio, or range of ratios,
between punitive and compensatory damages” under Alaska law.50 We have approved
48
Casciola v. F.S. Air Serv., Inc., 120 P.3d 1059, 1067 (Alaska 2005) (citing
BMW of North Am., Inc. v. Gore, 517 U.S. 559, 574-75 (1996)).
49
Hutton v. Realty Execs., Inc., 14 P.3d 977, 980 (Alaska 2000) (“As a
general rule, people are presumed to know the law.”).
50
Casciola, 120 P.3d at 1064 (citing Fyffe v. Wright, 93 P.3d 444, 457
(Alaska 2004)).
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previous punitive damages awards with ratios of approximately 26:1,51 18:1,52 and 50:1.53
The ratio in this case is approximately 20:1. Our case law does not indicate that a 20:1
ratio is inherently impermissible.
Instead of taking a strict mathematical approach, we have considered the
seven factors listed in AS 09.17.020(c).54 These factors involve considerations similar
to those the Commission discussed in this case, including the likelihood of harm, the
defendant’s awareness of the likely harm, the duration of the conduct, the defendant’s
financial condition, and deterrence.55
A review of those factors supports the Commission’s imposition of a
significant fine. Bush Planes is a sophisticated entity with substantial assets and
knowledgeable management. Its actions called into question the fairness of the Lake and
Peninsula Borough’s 2010 election. A $25,500 fine sends a message that the
Commission takes these kinds of violations seriously and helps deter other corporations
from engaging in similar misconduct. In sum, the award is not so excessive that it would
violate Alaska or federal law regarding punitive damages.
51
Laidlaw Transit, Inc. v. Crouse ex rel Crouse, 53 P.3d 1093, 1096-97
(Alaska 2002) (affirming an award of $500,000 in punitive damages and $19,259 in
compensatory damages).
52
IBEW, Local 1547 v. Alaska Util. Constr., Inc., 976 P.2d 852, 853-55
(Alaska 1999) (affirming an award of $212,500 in punitive damages and compensatory
damages of $11,622.05).
53
Norcon, Inc. v. Kotowski, 971 P.2d 158, 161, 174-77 (Alaska 1999)
(remitting a $3,000,000 punitive damages award to $500,000 on a compensatory
damages award of $10,000).
54
Casciola, 120 P.3d at 1065.
55
AS 09.17.020(c)(1)-(c)(2), (c)(4), (c)(6)-(c)(7).
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3. The Commission’s fine bore a reasonable relationship to Bush
Planes’ offense.
Bush Planes also argues that the method the Commission used to calculate
the fine bears no reasonable relationship to the offense. Bush Planes contends that the
fine served a minimal deterrent and remedial function because for at least the first 90
days after the violations, Bush Planes was unaware, and could not have known, that the
Commission’s staff was investigating it. Bush Planes also alleges that the Commission’s
staff purposely waited almost 120 days after they began drafting a complaint in March
2011 before filing it as a way of increasing the penalty.
First, we find no support in the record for Bush Planes’ latter assertion.
While the record indicates that the Commission’s staff may have begun drafting a
complaint as early as the end of March 2011, the evidence also indicates that the
Commission’s staff was continuing to investigate the allegations. Moreover, there are
no allegations of bias against the attorney who was involved in drafting the complaint;
nor has Bush Planes presented any evidence that suggests a deliberate delay.
Second, Bush Planes’ contention that the Commission improperly included
days before Bush Planes became aware that the Commission’s staff thought Bush Planes
had violated the law in calculating the fine is unpersuasive. Bush Planes argues that
imposing a fine before it became aware of the staff’s concerns “achieves no reasonable
deterrent or remedial goal.” But there is no requirement that a violator of campaign laws
must be made aware that it violated the law before a fine can be imposed. Even if Bush
Planes were unaware, a fine calculated based on the time Bush Planes was unaware of
the violation still serves a punitive function even if it does not serve a remedial function.
And while including the time when Bush Planes was not aware that the Commission’s
staff believed there was a violation may not have a short-term deterrent effect, it may
have a long-term deterrent effect on Bush Planes and other actors that Bush Planes’
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argument does not take into account. Thus, we hold that the fine bore a reasonable
relationship to the alleged offense.56
C. The Superior Court Did Not Abuse Its Discretion When It Denied
Bush Planes’ Motion To Supplement The Record And Briefing.
Finally, Bush Planes argues that its due process rights were violated
because the Commission and its staff were biased against it. But the evidence of any
potential due process violation is not properly before us because the superior court
denied Bush Planes’ motion to supplement the record with the materials Bush Planes
alleges shows evidence of bias. Bush Planes claims that the superior court abused its
discretion in denying the motion, but we disagree.57
First, the motion was not timely. Briefing on Bush Planes’ appeal to the
superior court ended in early November 2012. Bush Planes then learned of and appears
to have obtained much of the information it sought to add to the superior court record by
the end of January 2013. Despite that, Bush Planes waited approximately three months
until it moved to supplement the record shortly before oral argument.
56
Our approval of the fine imposed in this case should not be considered
blanket approval of the statutory penalty. While we hold the total fine imposed here was
not excessive, we can envision a case where the application of the $50 per day maximum
fine would be unconstitutionally excessive. The determination is fact-intensive and an
individualized assessment of the penalty is the correct analysis.
57
We review the denial of a motion to supplement the record for abuse of
discretion. Southwest Marine, Inc. v. State, Dep’t of Transp. & Pub. Facilities, Div. of
Alaska Marine Highway Sys., 941 P.2d 166, 172 (Alaska 1997). We may affirm the
superior court’s denial on any basis supported by the record. Smith v. Stafford, 189 P.3d
1065, 1070 (Alaska 2008).
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Second, it does not appear that the evidence Bush Planes wanted to submit
would have changed the outcome of the liability determination.58 Whether Bush Planes
violated Alaska’s campaign finance laws ultimately depended on the proper
determination of “commercially reasonable rate,” and we have reviewed that issue using
a standard that not only granted no deference to the Commission’s interpretation but
actually favored Bush Planes. Thus, any bias that the Commission or its staff may have
had against Bush Planes would have had no effect on the liability issue.
Finally, the State persuasively argues that the evidence Bush Planes sought
to introduce was irrelevant given the context and the timing of the case. We note that the
majority of the material Bush Planes wanted to introduce alleged that staff members
Anderson and Dauphinais — and to a lesser extent Commission Chair Hickerson —
were biased against Bush Planes. The allegations against the other Commissioners —
all of whom concurred in the liability, fine, and costs and fees decisions — were based
mainly on an affidavit from a former staff member. That staff member recalled specific
interactions with Anderson, Dauphinais, and Hickerson that caused him to believe those
three were biased against Gillam and his companies. The staff member’s affadavit
complained that the Commission had rejected an advisory opinion he drafted “without
a legal basis and primarily because of who requested it,” but Bush Planes never provided
any foundation for that allegation. The same lack of specificity significantly weakens
the staff member’s claim that it would be “impossible for [Gillam] . . . to get a fair shake
from . . . certain members of the Commission.”59 Overall, there was little, if any, reliable
58
Southwest Marine, Inc., 941 P.2d at 179-80.
59
We recognize the parties continue to litigate issues of bias in other
proceedings. See, e.g., RBG Bush Planes LLC, et al. v. Alaska Pub. Offices Comm’n,
Case No. 3AN-14-06497 CI. Our discussion here should in no way be interpreted as
(continued...)
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evidence that the other members of the Commission were biased individually or even
that the alleged bias of Hickenson or the staff members affected the proceeding.
Furthermore, Dauphinais’s allegedly biased statement was made nine months after the
administrative decision was issued, suggesting that the allegations have little weight
given the timing of this case.
Therefore, we hold that the superior court did not abuse its discretion when
it denied Bush Planes’ motion to supplement the record. Given the delay in filing the
motion to supplement, the standard of review we applied to the liability determination,
and the lack of specificity regarding the allegations against the Commissioners, the
superior court’s decision was not manifestly unreasonable.
V. CONCLUSION
For the reasons stated above, we AFFIRM the superior court’s decision to
affirm the Commission’s determination that Bush Planes made illegal corporate
contributions to candidates for elected office, AFFIRM the fine the Commission
imposed, and AFFIRM the superior court’s denial of Bush Planes’ motion to supplement
the record.
59
(...continued)
expressing an opinion regarding the evidence in those other matters.
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