DocketNumber: Supreme Court No. S-16908
Citation Numbers: 446 P.3d 341
Judges: Bolger, Carney, Maassen, Stowers, Winfree
Filed Date: 8/9/2019
Status: Precedential
Modified Date: 7/19/2022
*343I. INTRODUCTION
John Diamond III was assaulted and sustained severe injuries while a patron at Platinum Jaxx, a restaurant and bar. He filed suit against Platinum Jaxx, Inc., its landlord, and his assailant, Noel Bungay. A default was entered against Bungay, and the landlord was later granted summary judgment on the claims against it. Diamond proceeded to trial on his remaining claims against Platinum Jaxx. After an eight-day trial, the jury returned a special verdict finding Platinum Jaxx criminally negligent. The jury awarded Diamond $1.85 million in damages and apportioned fault between Platinum Jaxx and Bungay. Platinum Jaxx was found to be 20% at fault for the injuries Diamond received, and Bungay was found 80% at fault. Diamond appeals the superior court's pre-trial order that precluded him from proceeding on a piercing the corporate veil theory. He asks us to reverse the order and remand to allow the superior court to make findings of fact and conclusions of law on the veil piercing issue. He also appeals other pre-trial orders excluding evidence, as well as the superior court's post-judgment cost award allocation.
Because Diamond did not plead the veil piercing issue, we affirm the superior court's order. The superior court also did not abuse its discretion by excluding the challenged evidence and by allocating costs according to the percentage of fault of each defendant. We therefore affirm the court's pre-trial orders and post-judgment cost award.
II. FACTS AND PROCEEDINGS
In October 2013 John Diamond, III and his girlfriend were patrons at Platinum Jaxx, a restaurant and bar in downtown Anchorage. While the two were sitting at the bar, another patron, Noel Bungay, hit Diamond in the head with a pint glass, causing severe disfigurement. In June 2015 Diamond and his girlfriend filed suit against Platinum Jaxx, Inc., its landlord, La Mexicana, Inc., and Bungay. Diamond alleged that (1) Platinum Jaxx violated the dram shop statute by serving alcohol to a "drunken person,"
In May 2016 the superior court entered a default against Bungay. In June 2017 the court granted summary judgment against the girlfriend's claims for emotional distress and loss of consortium. In July the court granted La Mexicana's motion for summary judgment on the landlord liability claim, and the remaining parties - Diamond and Platinum Jaxx - proceeded to a jury trial.
Prior to trial, in February 2017, Diamond's attorney sent a letter to Platinum Jaxx's attorney, stating: "Plaintiffs did not plead piercing the corporate veil as a count in the Complaint.[
The jury returned a special verdict in favor of Diamond, finding that (1) Platinum Jaxx, with criminal negligence, violated the dram shop statute; (2) Platinum Jaxx was negligent as a possessor of land; (3) Platinum Jaxx's negligence was a legal cause of harm to Diamond; (4) Diamond suffered severe disfigurement and damages of $1.85 million; and (5) Platinum Jaxx was 20% at fault and Bungay was 80% at fault. Final judgment was entered against Bungay and Platinum Jaxx in September 2017, with costs awarded in October. The judgment against Platinum Jaxx was for $331,332.93 in damages (20% of Diamond's total damage award)
Diamond appeals pre-trial orders by the superior court that (1) precluded him from proceeding on a piercing the corporate veil theory, (2) excluded evidence related to the veil piercing theory, and (3) excluded evidence related to Platinum Jaxx's reputation that Diamond argues might have increased the jury's percent allocation of fault to Platinum Jaxx. Diamond also appeals the superior court's award of costs based on a percentage-of-fault formula. Diamond requests that we reverse the aforementioned orders and remand for specific findings relating to his veil piercing theory. Platinum Jaxx did not participate in this appeal.
III. STANDARDS OF REVIEW
The superior court precluded Diamond from proceeding on a piercing the corporate veil theory because it was not pleaded. Whether a party provided adequate notice to argue a claim is a question of law we review de novo,
The superior court excluded evidence related to Diamond's veil piercing theory and to Platinum Jaxx's reputation. We review trial court "decisions to admit or exclude evidence under the abuse of discretion standard."
The superior court denied Diamond's requested reallocation of costs. "We review a trial court's cost award for abuse of discretion."
IV. DISCUSSION
A. The Superior Court Did Not Err By Precluding Diamond From Proceeding On A Piercing The Corporate Veil Theory.
In its July 2017 pre-trial order the superior court stated that it would "not allow [Diamond] to proceed on a piercing the corporate veil [theory] to pursue claims against the individual, non-named officers or shareholders of Platinum Jaxx, Inc." Diamond argues that "[i]n ordering that [he] was precluded from proceeding on a veil piercing theory, the trial court did not analyze the veil piercing factors on the record," and that the court "failed to make any findings of fact or conclusions of law related to its corporate veil piercing order." He requests that we "reverse the trial court's order related to corporate veil piercing ... [and] remand this case to the trial court for the purpose of making detailed and explicit findings."
Diamond is correct that the superior court did not make findings of fact or conclusions of law in its order - but it did not need to. The court's explanations at trial - that the theory "wasn't pled" and that allowing the theory in "would be grossly prejudicial ... this late in time" - are adequate to give us "a clear understanding of the basis of the trial court's decision."
Diamond did not plead a piercing the corporate veil theory in his complaint, and he did not seek to file an amended complaint asserting this claim at any point in the proceedings. Diamond argues that his February 2017 letter to Platinum Jaxx provided sufficient notice to overcome his failure to plead, and he relies on L.D.G., Inc. v. Brown for the proposition that "if a party has notice of the conduct for which the opposing party is seeking relief, the opposing party may recover under any theory supported by the evidence."
In L.D.G. we considered whether failure to plead the veil piercing theory was "sufficient to keep the question from going to the jury."
We also evaluated failure to plead in Alakayak v. British Columbia Packers, Ltd. , reviewing a superior court ruling "that the plaintiffs did not properly plead corporate 'alter ego' claims" and were therefore precluded from conducting discovery on those claims.
In both L.D.G. and Alakayak we relied on McCormick v. City of Dillingham for the proposition that notice can be sufficient to overcome the failure to plead.
Here, Diamond's complaint provides no notice to the individual owners of Platinum Jaxx that they might be held personally liable. And because the individual owners were not parties to Diamond's suit against Platinum Jaxx, Diamond's February 2017 letter to Platinum Jaxx's counsel did not provide the owners notice of Diamond's intent to pierce the corporate veil. Being actually named as a party is important. A named party has the right to assert affirmative defenses, counterclaims, and cross-claims and to conduct discovery, file motions, and make its own defense at trial. And a named party may be held personally liable for its share of damages. It is difficult to understand how Diamond believes he could pierce Platinum Jaxx's corporate veil and obtain a judgment against Platinum Jaxx's individual owners when they were not joined as parties to the action.
Diamond also did not pursue other opportunities to raise his veil piercing theory. He presumably became aware of the need to pierce the corporate veil by at least February 2017, the date his attorney sent the letter, yet he did not seek to amend his complaint to plead a veil piercing theory or to join the individual owners of Platinum Jaxx as defendants.
Because Diamond did not plead a veil piercing claim, the claim was not adequately raised. The individual owners of Platinum Jaxx were not parties to the case and therefore did not receive notice that they might be held personally liable. The superior court did not err in precluding this claim for failure to plead. We also conclude that the superior court did not abuse its discretion in concluding it would be "grossly prejudicial" to allow Diamond to introduce this theory so late in the proceedings.
*347B. The Superior Court Did Not Abuse Its Discretion By Excluding Evidence Related To Piercing The Corporate Veil.
Diamond argues that the superior court erred by (1) precluding mention of liability insurance and (2) precluding mention of Wallie Scott Vierra, a former owner of Platinum Jaxx.
Under Alaska Evidence Rule 411, evidence of liability insurance "is not admissible upon the issue whether the person acted negligently or otherwise wrongfully."
Vierra was a former owner of Platinum Jaxx who was convicted in 2008 of money laundering and drug distribution and forced to forfeit his 25% ownership interest in the corporation. Diamond intended to use evidence related to Vierra, the history of Platinum Jaxx's operation, and its ownership structure to pierce the corporate veil. But again, Diamond did not plead this claim and therefore this evidence was not relevant under Evidence Rule 402 and was unfairly prejudicial under Rule 403. The superior court did not abuse its discretion by excluding this evidence.
We affirm the superior court's orders excluding evidence related to piercing Platinum Jaxx's corporate veil because this evidence was not relevant to the trial on Platinum Jaxx's negligence.
C. The Superior Court Did Not Abuse Its Discretion By Excluding Evidence Related To Platinum Jaxx's Reputation .
1. Media coverage of shootings outside Platinum Jaxx
Diamond argues that the superior court erred by excluding media evidence regarding the reputation of Platinum Jaxx. He asserts that media coverage of prior shootings outside Platinum Jaxx demonstrates (1) that Platinum Jaxx had notice that violent acts had occurred, (2) that it was foreseeable that such acts might occur again, and (3) that Platinum Jaxx had a duty to take precautions and provide reasonable protections to its patrons. Diamond argues this "evidence would likely have increased the jury's allocation of fault to Platinum Jaxx" and that we should reverse the superior court's exclusion of this evidence and remand for the court to make specific findings under Alaska Civil Rule 52.
The two shootings in question occurred in 2011 and 2012, and both took place outside and off the premises of Platinum Jaxx. This evidence would not be relevant to the security measures in place inside Platinum Jaxx over a year later or to the propensity for violence inside the bar, which is where Diamond's assault took place. And Evidence Rule 404 specifically excludes evidence of prior bad acts to show a general propensity to act in conformity therewith.
2. Cherie Lee Burno's testimony
Diamond also challenges the superior court's preclusion of testimony by Cherie Lee Burno, an employee of Platinum Jaxx during the time period when Diamond was assaulted by Bungay. Diamond sought to admit Burno's testimony to demonstrate that (1) Platinum Jaxx was a dangerous place, (2) it was on notice of the violence within its bar, and (3) its management of the bar was negligent given the foreseeability of harm to a patron. He asserts that her testimony "would likely have increased the jury's allocation of percentage of fault to Platinum Jaxx."
But Burno was not present at the time of Diamond's assault and therefore did not have "personal knowledge of the matter" as required by Evidence Rule 602,
D. The Superior Court Did Not Abuse Its Discretion By Awarding Diamond's Costs Based On Percentage Of Fault .
Diamond argues that the superior court abused its discretion by awarding his costs against Bungay and Platinum Jaxx in accordance with each tortfeasor's percentage of fault. He posits that equitable apportionment in fact "would require only that Bungay be responsible for costs incurred in proving damages, not those incurred in proving Platinum Jaxx's liability." Because the majority of Diamond's litigation costs were associated with proving Platinum Jaxx's liability, not Bungay's, he argues it would be unjust to require the defaulted defendant to subsidize the defendant which litigated the case. Diamond requests that we reverse the superior court's order denying his motion for review of the clerk's costs award and allocate the majority of costs to Platinum Jaxx.
While Diamond's motion to reallocate costs was filed late and failed to meet the standard for excusable neglect, the superior court nevertheless *349reviewed the motion on the merits before denying it; the court found that the clerk properly allocated costs based on the jury award. Under Civil Rule 79, "[i]n a case in which damages are apportioned among the parties ... costs must be apportioned and awarded according to the provisions of Civil Rule 82(e)."
Diamond argues that Civil Rule 94 "permits the relaxation of the [civil] rules to advance justice"
V. CONCLUSION
The superior court's pre-trial orders and its post-judgment costs award are AFFIRMED.
See AS 04.16.030(a) ("A licensee, an agent, or employee may not with criminal negligence (1) sell, give, or barter alcoholic beverages to a drunken person; .... [or] (3) allow a drunken person ... to consume an alcoholic beverage within licensed premises ....").
Generally, "courts seek to recognize and uphold 'the principles that the corporation exists as a separate legal entity and that owner liability for the debts of the corporation is limited.' " L.D.G., Inc. v. Brown ,
This amount is based on 20% of $1,567,750 - the damages award was reduced from $1.85 million based on statutory tort caps - plus prejudgment interest of $17,782.93. See generally AS 09.17.010.
Alakayak v. British Columbia Packers, Ltd. ,
Healy Lake Vill. v. Mt. McKinley Bank ,
Loncar v. Gray ,
Burke v. Maka ,
Alexander v. State, Dep't of Corr. ,
Kozevnikoff v. Tanana Vill. Council ,
Beaulieu v. Elliott ,
Id. at 1124-25.
Id. at 1125.
Id. at 1116.
McCormick ,
Cf. Alaska R. Civ. P. 19 ("A person ... shall be joined as a party in the action if ... the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may ... as a practical matter impair or impede the person's ability to protect that interest ....").
See Alaska R. Civ. P. 15(a) ("[A] party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.").
While Diamond first asserted his veil piercing theory in the February 2017 letter to Platinum Jaxx, it does not appear that he argued this theory before the superior court until June 2017 - only a month and a half before trial - in his opposition to Platinum Jaxx's motion to preclude evidence of liability insurance.
Alaska R. Evid. 411.
Alaska R. Evid. 402 ("Evidence which is not relevant is not admissible.").
Alaska R. Evid. 411 ("Evidence that a person was or was not insured against liability is not admissible upon the issue whether the person acted negligently or otherwise wrongfully.").
Alaska R. Evid. 403 ("Although relevant, evidence may be excluded if its probative value is outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury ....").
We do not understand why Diamond asks us to remand for the superior court to make specific findings of fact. The relief Diamond would actually need would be for us to reverse the court's orders and judgment and remand for a new trial.
Alaska R. Evid. 404(b)(1).
Alaska R. Evid. 403.
Cf. Oakly Enters., LLC v. NPI, LLC ,
Alaska R. Evid. 602 ("A witness may not testify to a matter unless evidence is introduced sufficient to support a finding that the witness has personal knowledge of the matter.").
Alaska R. Evid. 701 ("If the witness is not testifying as an expert, the witness's testimony in the form of opinions or inferences is limited to those opinions or inferences which are (a) rationally based on the perception of the witness and (b) helpful to a clear understanding of the witness's testimony or the determination of a fact in issue.").
If what Diamond really hoped for was to inflame the jury's passion against Platinum Jaxx, that is precisely the type of improper effect the Evidence Rules are intended to prohibit. See Alaska R. Evid. 403.
Alaska R. Civ. P. 79(h).
Alaska R. Civ. P. 82(e).
Alaska R. Civ. P. 94 ("These rules are designed to facilitate business and advance justice. They may be relaxed or dispensed with by the court in any case where it shall be manifest to the court that a strict adherence to them will work injustice.").
Circle De Lumber Co. v. Humphrey ,