Burton v. Fountainhead Development, Inc. , 393 P.3d 387 ( 2017 )

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
RONALD M. BURTON, )
) Supreme Court No. S-15990
Appellant, )
) Superior Court No. 4FA-12-01642 CI
v. )
) OPINION
FOUNTAINHEAD DEVELOPMENT, )
INC., ) No. 7158 – March 17, 2017
)
Appellee. )
)
Appeal from the Superior Court of the State of Alaska,
Fourth Judicial District, Fairbanks, Jane F. Kauvar, Judge.
Appearances: James M. Hackett, Law Office of James M.
Hackett, Fairbanks, for Appellant. David H. Bundy,
David H. Bundy, P.C., Anchorage, for Appellee.
Before: Stowers, Chief Justice, Winfree, Maassen, Bolger,
and Carney, Justices.
MAASSEN, Justice.
I. INTRODUCTION
A tour company hired an employee to work the tourist season as one of its
representatives at a Fairbanks hotel where he had worked seasonally in the past. During
training, hotel management recalled that the employee had been difficult to work with.
They told the tour company they did not want him working at their hotel and, in
explaining their decision, made several unfounded statements about him. When the tour
company was unable to place the employee at a different hotel because of his limited
transportation, it terminated his employment.
The employee sued the hotel for defamation and for tortious interference
with his prospective business relationship with his employer. Following a bench trial the
superior court rejected the tortious interference claim based on lack of causation but
found that several of the hotel’s statements were defamatory per se, justifying an award
of general damages but not special or punitive damages. The court also denied the
employee’s motion to amend his complaint to add a new defamation claim based on
events that arose mid-trial. The employee appeals.
We conclude that: (1) the superior court did not abuse its discretion in
denying the employee’s post-trial motion to amend his complaint; (2) the court did not
clearly err in its application of a conditional business privilege or in its finding that the
defamation did not cause the employee’s damages; and (3) the court did not clearly err
in its award of damages. We therefore affirm the judgment of the superior court.
II. FACTS AND PROCEEDINGS
A. Facts
Princess Tours hired Ronald Burton to work the 2011 tourist season as a
“guest service host.” Guest service hosts are stationed at hotels where Princess houses
its tour groups; they help hotel employees greet and serve the large numbers of Princess
guests as they arrive and require various services. Burton was hired to work primarily
at Bear Lodge, owned by Fountainhead Development, Inc., because it was within
walking distance of his home and he lacked alternative transportation; however, he also
agreed to work as needed at other Princess-affiliated hotels in Fairbanks. Burton had
worked seasonally for Princess Tours before, from 1999 to 2004, and at Bear Lodge
from 2000 to 2003.
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Burton completed several weeks of training in the spring of 2011, including
a visit to Bear Lodge. There, in the presence of his Princess supervisor, Jonathan
Bradish, and a Fountainhead manager, Stuart Campbell, Burton criticized the traffic flow
in the hotel’s parking lot. Campbell relayed the criticism to Fountainhead’s general
manager, Shane Arnold, who passed it on to the personnel and operations manager,
Kathleen Lanning. The criticism reminded the management team of other complaints
Burton had made while working on Fountainhead’s property years before. Lanning and
Timothy Cerny, Fountainhead’s president, decided they did not want Burton as a guest
service host at Bear Lodge, and they asked Arnold to speak to Princess about their
decision.
Arnold told Bradish of Fountainhead’s decision on May 13. The two men
later recalled the conversation differently, but the superior court found that Arnold told
Bradish that Burton was “not allowed” on Fountainhead’s property. When Bradish
asked why, Arnold said that Burton had once been involved in an altercation with a guest
and that he had “defaced” Fountainhead property.1
Burton was scheduled to begin work at a different hotel on May 16.
Bradish pulled Burton from the schedule and told him about Fountainhead’s allegations.
Burton denied them, and Bradish granted him a “grace period” to sort things out with
Fountainhead. Over the next several days Burton exchanged emails and phone calls with
Lanning, and on May 24 she sent him a letter “to recap [a] phone conversation of last
week.” According to the letter, Burton was not “banned” from Fountainhead’s property;
1
Bradish’s testimony implies that the “defacing property” comment may
have had to do with damage to the Fountainhead “brand’s image” rather than physical
property, though it is not entirely clear. Bradish testified that Arnold was hesitant to “go
into it” and that the “defacing property” comment could have been taken “multiple
ways.”
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he was welcome there “anytime as a guest,” but he would not be welcome as an
employee. Fountainhead’s decision was based on its impression that Burton was “never
happy with [the hotel’s] policies and procedures” when working there in the past.
Lanning also mentioned a different incident when Burton “had not been supportive of
a management decision while in the presence of guests,” though she had heard the story
second-hand and lacked any other details. Lanning’s letter concluded that employing
Burton at Bear Lodge would not be “in the best interest of [Fountainhead] or that of
Princess’s guests.”
On May 28 Burton emailed Bradish, reminding him that he could not easily
“work at any other location than Bear Lodge except on rare occasions” because of his
transportation issues. Anticipating that this meant the end of his Princess employment,
he asked “that any action for [his] separation from employment be in writing and address
the cause.” Bradish emailed back, confirming that Princess had hired Burton “hoping
to place [him] at Bear Lodge” and that it could “no longer have [him] on [its] team [due]
to schedule parameters.” Princess documented Burton’s termination internally with a
note that said he “[w]as banned from Fountainhead Properties by their management,
which meant he couldn’t work where we wanted him to.” Princess also marked Burton
as ineligible for rehire.
B. Proceedings
In May 2012 Burton filed a complaint against Fountainhead alleging two
causes of action: (1) tortious interference with a prospective business relationship, for
causing Princess to terminate his employment; and (2) defamation based on Arnold’s
statements to Bradish about “Burton’s past performance as a [Fountainhead] employee.”
Fountainhead raised defenses of truth and privilege, among others. The superior court
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held a bench trial over three days in December 2014, then scheduled closing arguments
for February 2015.
Before closing arguments, Burton moved pursuant to Alaska Civil
Rule 15(b) to amend his complaint to add an additional defamation claim based on
conduct that “occurred . . . during the course of the court trial.” The court had suggested
mid-trial that Fountainhead talk to Princess and attempt to correct any misimpression
Princess might have about why Burton was barred from working at Bear Lodge. That
evening Fountainhead wrote a letter to Princess asking the company to correct the
“termination paperwork” in Burton’s personnel file to reflect that he “was never ‘banned’
from [Fountainhead’s] properties.” To help explain why it had not wanted Burton to
work at Bear Lodge, it attached a copy of Lanning’s 2011 letter to Burton. Burton’s
amended complaint alleged that this mid-trial correspondence was a separate publication
and libel that caused him additional harm and entitled him to additional damages.
Fountainhead did not oppose Burton’s motion to amend, and it filed an answer to the
amended complaint.
In February 2015, while hearing the parties’ closing arguments, the superior
court noted that Burton’s motion to amend was not yet ripe for decision. But the court
said it would take Fountainhead’s mid-trial letter into consideration in crafting any
damages award.
A few weeks later the court issued its written decision on the merits. It
found against Burton on his claim for tortious interference with a prospective business
relationship on the ground that his employment ended because of his “refusal to work at
Princess locations besides Bear Lodge,” not because of what Fountainhead said about
him to Princess. The court concluded that Fountainhead had a “conditional privilege to
publish defamatory statements” because of its shared business relationship with Princess,
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but that it abused this privilege with two statements to Princess that were defamatory per
se: “that [Burton] had an altercation with a guest, and that [Burton] defaced
[Fountainhead’s] property.” The court awarded Burton $15,000 in general damages on
the defamation claim but denied special and punitive damages. In a separate written
order the court denied Burton’s motion to amend his complaint, though it reiterated in
its decision that it had taken Fountainhead’s mid-trial letter into account “in fashioning
[Burton’s] award in this case.”
Burton requested a new trial or additur, both of which were denied. The
court awarded attorney’s fees to Fountainhead as the prevailing party because Burton
had failed to accept an Alaska Civil Rule 68 offer of judgment in an amount greater than
the award of damages.2
Burton appeals. He argues that the superior court abused its discretion
when it denied his post-trial motion to amend his complaint; that it erred in determining
that Fountainhead was privileged to interfere with his employment relationship; that it
misstated the legal standard for causation and erred in finding that he failed to prove this
element of his tortious interference claims; that it erred in failing to include lost wages
and benefits in its award of general damages; and that it erred in failing to award punitive
damages.3
2
See Alaska R. Civ. P. 68(b) (“If the judgment finally rendered by the court
is at least 5 percent less favorable to the offeree than the offer, . . . the offeree . . . shall
pay [a portion of ] reasonable actual attorney’s fees incurred by the offeror from the date
the offer was made.”).
3
Burton also asserts that the superior court “erred and abused its discretion
in denying [his] motion for new trial and additur,” but he does not expand on this
argument. “[W]here a point is given only a cursory statement in the argument portion
of a brief, the point will not be considered on appeal.” Burts v. Burts, 266 P.3d 337, 344
(continued...)
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III. STANDARDS OF REVIEW
We review a trial court’s “decision to permit or deny an amendment to the
pleadings . . . for abuse of discretion.”4 Abuse of discretion exists “when the decision
on review is manifestly unreasonable.”5
“In a bench trial, the judge is the trier of fact . . . .”6 We review the trial
court’s factual findings for clear error, as “[i]t is the function of the trial court, not of this
court, to judge witnesses’ credibility and to weigh conflicting evidence.”7 Clear error
exists “when ‘after a thorough review of the record, we come to a definite and firm
conviction that a mistake has been made.’ ”8 “[W]hether the superior court applied the
correct legal standard is a question of law to which we apply our independent
judgment.”9
3
(...continued)
(Alaska 2011) (quoting Adamson v. Univ. of Alaska, 819 P.2d 886, 889 n.3 (Alaska
1991)).
4
Ranes & Shine, LLC v. MacDonald Miller Alaska, Inc., 355 P.3d 503, 508
(Alaska 2015) (citing Miller v. Safeway, Inc., 102 P.3d 282, 288 (Alaska 2004)).
5
Id. (citing Tufco, Inc. v. Pac. Envtl. Corp., 113 P.3d 688, 671 (Alaska
2005)).
6
Wasserman v. Bartholomew, 38 P.3d 1162, 1166 (Alaska 2002) (citing
Alaska R. Civ. P. 52(a)).
7
Lentine v. State, 282 P.3d 369, 375-76 (Alaska 2012) (quoting In re
Adoption of A.F.M., 15 P.3d 258, 262 (Alaska 2001)).
8
Laybourn v. City of Wasilla, 362 P.3d 447, 453 (Alaska 2015) (quoting 3–D
& Co. v. Tew’s Excavating, Inc., 258 P.3d 819, 824 (Alaska 2011)).
9
Ayuluk v. Red Oaks Assisted Living, Inc., 201 P.3d 1183, 1194 (Alaska
2009) (citing Landers v. Municipality of Anchorage, 915 P.2d 614, 616 n.1 (Alaska
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We note some inconsistency in how we have formulated our standard of
review of a damage award made by a judge sitting as the finder of fact. In Breck v.
Moore we said that we “review[] an award of damages for an abuse of discretion and
independently review[] the law applied by the trial court,”10 and some later cases relied
on Breck for this abuse-of-discretion standard.11 But Breck cited only Johnson v. Alaska
State Department of Fish & Game,12 which states, consistent with earlier cases, that the
applicable standard is clear error except with regard to questions of law:
“[A] determination of damages by the trial court is a finding
of fact which will not be disturbed on appeal unless clearly
erroneous.” State v. Guinn, 555 P.2d 530, 544-45 (Alaska
1976). We have reviewed the record in this case and[] we do
not find clear error in any of the superior court’s factual
findings. However, we do not limit our review of the
superior court’s damages decision to simply an evidentiary
review. “[T]his court will also intervene when the trial
court’s calculations are in disregard of a rule of law
pertaining to damage measures.” Id. at 545.[13]
9
(...continued)
1996)).
10
910 P.2d 599, 606 (Alaska 1996) (citing Johnson v. Alaska State Dep’t of
Fish & Game, 836 P.2d 896, 910 (Alaska 1991)) (remanding for redetermination of
damages measured by cost of removing plat restriction or diminution in property value
caused by restriction, in case involving failure to disclose water and sewage disposal
restrictions in real estate sale).
11
See, e.g., 3–D & Co., 258 P.3d at 829; State, Commercial Fisheries Entry
Comm’n v. Carlson, 191 P.3d 137, 141 (Alaska 2008); Fyffe v. Wright, 93 P.3d 444, 451
(Alaska 2004).
12
836 P.2d at 910.
13
Id.
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Notwithstanding Breck, we again applied the clear error standard a year
later. In Pluid v. B.K. we held that “[t]he determination by a trial court sitting as a finder
of fact as to the proper amount to be awarded as compensatory damages is not to be
disturbed on appeal unless it is clearly erroneous”;14 we went on to say that as long as the
trial court “follows the correct rules of law, and [its] estimation appears reasonable and
is grounded upon the evidence, [its] finding will remain undisturbed.”15 We applied the
same standard in other cases.16
Even while applying the clear error standard of review, however, we have
recognized that the fact-finder necessarily has some latitude in determining the amount
of damages to award. “Certainly in many cases . . . some items of damage cannot be
fixed with mathematical precision,” and “[i]n those instances the trial judge is necessarily
forced to estimate.”17 Reviewing an award of general damages in another defamation
case, we observed that “the trier of fact [is permitted] a great deal of latitude in
determining the magnitude of . . . damage awards,” and “[s]ince proof of damages is not
required if words are deemed actionable per se, they clearly cannot be computed with
mathematical certainty.”18 We quoted a California case for the proposition that fixing
14
948 P.2d 981, 983 (Alaska 1997) (citing Morrison v. State, 516 P.2d 402,
405 (Alaska 1973)).
15
Id. (quoting Morrison, 516 P.2d at 405).
16
Brandner v. Hudson, 171 P.3d 83, 86 (Alaska 2007) (citing Pluid, 948 P.2d
at 983); Peterson v. Ek, 93 P.3d 458, 463 (Alaska 2004) (citing Beaux v. Jacob, 30 P.3d
90, 97 (Alaska 2001)); MAPCO Express, Inc. v. Faulk, 24 P.3d 531, 536 (Alaska 2001)
(citing Pluid, 948 P.2d at 983).
17
Morrison, 516 P.2d at 405.
18
Alaska Statebank v. Fairco, 674 P.2d 288, 295 (Alaska 1983) (citing
(continued...)
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“damages [for harm suffered to intangible interests such as reputation] has long been
vested in the sound discretion of the trier of fact . . . subject only to the passion and
prejudice standard.”19 In short, a damages award, and particularly a general damages
award, will often require the fact-finder to exercise some discretion along an acceptable
continuum — unlike, for example, a finding about whether the traffic signal was red or
green.
At bottom, however, deciding the amount of compensatory damages is the
job of the finder of fact, whether a jury or the judge in a bench trial; as such it is subject
to the clear error standard of review. We do not review jury awards for an abuse of
discretion, and we see no reason to review judges’ awards differently when judges are
performing the same fact-finder role. We take this opportunity to reaffirm that “[a] trial
court’s determination of damages is a finding of fact which we affirm unless it is clearly
erroneous[, b]ut we apply our independent judgment in deciding whether the trial court’s
award of damages is based on an erroneous application of law.”20
18
(...continued)
Eslinger v. Henderson, 457 P.2d 998, 1000 (N.M. 1969)).
19
Id. at 295-96 (alterations in original) (quoting Bertero v. Nat’l Gen. Corp.,
529 P.2d 608, 624 (Cal. 1974)).
20
Beaux, 30 P.3d at 97 (citing Curt’s Trucking Co. v. City of Anchorage, 578
P.2d 975, 977 (Alaska 1978)). We accordingly disavow inconsistent language in Breck
v. Moore, 910 P.2d 599, 606 (Alaska 1996); Fyffe v. Wright, 93 P.3d 444, 451 (Alaska
2004); State, Commercial Fisheries Entry Commission v. Carlson, 191 P.3d 137, 141
(Alaska 2008); and 3–D & Co. v. Tew’s Excavating, Inc., 258 P.3d 819, 829 (Alaska
2011).
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IV. DISCUSSION
A. The Superior Court Did Not Abuse Its Discretion By Denying Burton’s
Post-Trial Motion To Amend His Complaint.
Burton contends that Fountainhead’s decision to republish Lanning’s 2011
letter in its mid-trial correspondence with Princess was a new instance of defamation that
the parties then litigated by consent. He argues that the superior court therefore abused
its discretion when it denied his post-trial motion to amend his complaint to include a
new defamation claim. But the record does not support the contention that the re­
publication, though raised as an issue toward the end of trial, was then litigated as a
separate claim.
Under Civil Rule 15(b), “[w]hen issues not raised by the pleadings are tried
by express or implied consent of the parties, they shall be treated in all respects as if they
had been raised in the pleadings.” But “[i]mplied consent . . . is . . . difficult to establish
and seems to depend on whether the parties recognized that an issue not presented by the
pleadings entered the case at trial. If they do not, there is no consent and the amendment
cannot be allowed.”21 We have recognized trial by consent when the new issue was
identified at the beginning of trial and litigated by both sides,22 but not when the parties
21
Tufco, Inc. v. Pac. Envtl. Corp., 113 P.3d 668, 673 (Alaska 2005) (ellipses
in original) (quoting 6A CHARLES A. WRIGHT, ARTHUR R. MILLER & MARY KAY KANE,
FEDERAL PRACTICE AND PROCEDURE § 1493 (2d ed. 1990)).
22
See Gold Dust Mines, Inc. v. Little Squaw Gold Mining Co., 299 P.3d 148,
164 (Alaska 2012) (noting that the claim was “generally covered in the pleadings” and
“actively litigated by both parties at trial”); Sparks v. Gustafson, 750 P.2d 338, 341-42
(Alaska 1988) (“Although the theories which plaintiffs presented for trial were murky
at best, [defendant’s] counsel indicated at the beginning of trial that he viewed plaintiffs’
claim as one for unjust enrichment and was prepared to try the case as such.”).
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failed to actively litigate the claim23 or when one party did not have the opportunity to
contest it.24
Here, though Fountainhead appears to concede on appeal that “the issues
raised by the amendment” were tried by consent,25 the record does not show that the
issues were litigated as a new and separate claim. The issue of re-publication arose mid-
trial when the superior court asked Fountainhead’s president whether his company had
ever informed Princess that Burton was not in fact “banned” from Fountainhead
property, giving Princess the opportunity to correct its internal records about the reason
for Burton’s termination. The court “invite[d] the parties, while we have a break tonight,
to look and see if they might not see how they could address this problem with what
Princess heard in 2011 and maybe what Princess should have heard.”
The next day Fountainhead recalled Lanning, its manager of operations and
personnel, to the stand as its last witness. Lanning testified that she had sent a letter to
Princess the night before “[b]ecause the [c]ourt asked us to.” The letter informed
23
See Tufco, 113 P.3d at 673-74; Sparks, 750 P.2d at 341 (noting that “the
court refused to find implied consent to try an issue on which the evidence was brief,
undeveloped, and one[-]sided” (citing Alaska Prot. Servs., Inc. v. Frontier Colorcable,
Inc., 680 P.2d 1119, 1124 (Alaska 1984))).
24
See Hill v. Ames, 606 P.2d 388, 390 (Alaska 1980) (concluding that the
“appellee did not have an opportunity to put in countervailing evidence on those
theories, . . . the court was not apprised that those questions were to be litigated,” and
the appellant failed to file a motion to amend); but see Sparks, 750 P.2d at 341
(concluding that, unlike in Hill, the defendant’s counsel was aware of the plaintiffs’
theory of the case from the beginning of trial “and was prepared to try the case” on that
theory (citing Hill, 602 P.2d at 390)).
25
Fountainhead’s brief notes that “failure to amend does not affect the
outcome when the issues raised by the amendment are tried anyway, as was the case
here.”
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Princess that Burton had never in fact been “banned” from Fountainhead properties, and
it included as an attachment the letter Lanning had sent Burton in May 2011 outlining
the company’s concerns about his attitude. The 2011 letter also mentioned “an incident
where [Burton was not] supportive of a management decision while in the presence of
guests,” while acknowledging that Fountainhead lacked any other details about that
incident.
The court interjected that it had intended something else: “[I]t wasn’t that
I said you should send any particular letter, the idea was to have you use the time to talk
among yourselves to see if, perhaps, there is a way that you could help overcome this
stigma on [Burton’s] record.” The court further observed, “I think actually this [new
letter] probably did more damage than good.”
Fountainhead’s new correspondence was admitted into evidence without
objection, and Burton’s attorney cross-examined Lanning about her 2011 letter. But
although Burton’s attorney stated that he did “not agree[]” that the new correspondence
was “a valid, proper retraction” of the earlier defamation, he did not suggest that it was
itself a new, separate instance of defamation. Nor did he address the new
correspondence during Burton’s brief rebuttal case.
Instead, it was only when Burton moved to amend his complaint in
February 2015, two months after the close of evidence, that he first asserted that the mid-
trial correspondence was a re-publication and hence a new libel. The superior court
heard closing arguments several days later and announced that “the motion to amend the
complaint is not ripe and won’t be considered as part of this oral argument” because the
court wanted to “go ahead [with its verdict] on the evidence that was presented at the
trial.” Burton nevertheless addressed his motion to amend in his closing argument,
arguing that the mid-trial letter further damaged him. Fountainhead did not respond to
that argument. The court reiterated at the end of the hearing that the motion to amend
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was not ripe and that the court did not want “another volume of post-trial litigation,” but
it said it would consider whether the new letter contributed to Burton’s damages. The
court’s later written order confirms that this is what it did.
This record does not support Burton’s contention that a new defamation
claim was tried by consent. The mid-trial correspondence was not entered into evidence
until the trial’s last day.26 Burton’s counsel did not call it a new instance of defamation
at the time. Without notice that a new claim had arisen, Fountainhead lacked the
opportunity or incentive to mount a defense to it as a separate claim.27 It was therefore
reasonable for the court, when considering Burton’s later motion to amend, to observe
that a new defamation claim could not be resolved without “another volume of post-trial
litigation” addressing the specific circumstances of the mid-trial letter.
Instead of a separate claim for defamation, the letter was treated at trial as
evidence of Fountainhead’s failure to properly remedy the defamation that Burton had
pleaded at the outset; the court accordingly considered the letter in calculating Burton’s
damages. The court thus treated the alleged re-publication just as the parties had at trial
— as evidence relevant to the claims already pleaded. No amendment of the complaint
was necessary for this purpose.
Nor was Burton entitled to an amendment to conform the pleadings to a
new, mutually litigated claim of defamation. Trial by implied consent is “difficult to
establish,” and the record supports a conclusion that it was not established here.28 The
26
Cf. Sparks, 750 P.2d at 341-42 (noting that issue tried by consent was raised
at the beginning of trial).
27
See Tufco, 113 P.3d at 673.
28
Id. (quoting WRIGHT, MILLER & KANE, supra note 21, § 1493).
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superior court did not abuse its discretion when it denied Burton’s motion to amend his
complaint.29
B. The Superior Court Did Not Err In Finding That Fountainhead Was
Protected By A Conditional Business Privilege.
The superior court found that Fountainhead “was within its rights” when
it decided to reject Burton’s employment at Bear Lodge and that it was protected by a
business privilege when it reported this decision to Princess. The court decided that
Fountainhead’s only potential liability could be for its abuse of that privilege when it
made the two unsubstantiated claims: that Burton had an altercation with a guest and
that he had defaced hotel property. Burton argues that the court applied the wrong legal
standard in analyzing whether Fountainhead’s decision was privileged, clearly erred in
finding that the decision was made in good faith, and abused its discretion by failing to
adequately explain its finding.
One of the necessary elements of a claim for tortious interference with a
prospective business relationship30 is the “absence of privilege or justification for the
29
Burton also challenges the superior court’s “refus[al] to rule that
[Fountainhead’s] December 10, 2014 written publications to Princess libeled Burton.”
But as discussed above, the superior court did not abuse its discretion when it declined
to consider a separate claim of libel. And since the question whether the December 2014
correspondence constituted defamation involves factual issues which were not decided
below, the question is not properly before us.
30
On appeal Burton identifies his claim as one for tortious interference with
an employment contract. We address his argument instead as he framed it in the trial
court — as one for tortious interference with a prospective business relationship — but
we note that the law governing the two claims often overlaps. See, e.g., Cornelison v.
TIG Ins., 376 P.3d 1255, 1269 (Alaska 2016) (noting that “[t]he superior court analyzed
[the plaintiff’s] claim as either a tortious interference with contract claim or a tortious
interference with a prospective economic advantage claim” but deciding to consider the
claim “to be one for tortious interference with contract because no prospective business
(continued...)
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defendant’s conduct.”31 We agree with the superior court’s decision that Fountainhead’s
conduct in this case was subject to a conditional business privilege. When considering
claims of tortious interference, we recognize a clear distinction between persons who
interfere with the contracts of competitors and those who interfere with contracts in
which they have a direct interest themselves — and “where a direct interest in a contract
is involved, there is reason to be more liberal in granting the privilege to interfere.”32
Accordingly, “where there is a direct financial interest in a contract, the essential
question in determining if interference is justified is whether the person’s conduct is
motivated by a desire to protect his economic interest, or whether it is motivated by spite,
malice, or some other improper objective.”33
30
(...continued)
relationship [was] at issue.”).
31
K & K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702, 717 (Alaska 2003)
(citing Odom v. Fairbanks Mem’l Hosp., 999 P.2d 123, 132 (Alaska 2000)). The claim’s
elements are: “(1) an existing prospective business relationship between [the plaintiff]
and a third party; (2) defendant’s knowledge of the relationship and intent to prevent its
fruition; (3) failure of the prospective relationship to culminate in pecuniary benefit to
the plaintiff; (4) conduct of the defendant interfering with the prospective relationship;
(5) damages caused by the defendant; and (6) absence of privilege or justification for the
defendant’s conduct.” Id. (citing Odom, 999 P.2d at 132).
32
Bendix Corp. v. Adams, 610 P.2d 24, 30 (Alaska 1980).
33
Id. at 31. In Bendix we recognized a parent company’s privilege to interfere
in contractual relations between its subsidiary and a third party. Id. In Waldroup v.
Lindman we recognized an insurance company’s privilege to interfere with a physician-
patient relationship by denying a claim for medical payments. 28 P.3d 293, 297-99
(Alaska 2001).
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Burton argues that Fountainhead’s decision to reject his employment at
Bear Lodge was “motivated by animus, malice, and a desire to injure Burton.”34 But a
party’s motivation “for invading the [prospective business relationship] of another is
normally [an issue] for the trier of fact, particularly when the evidence is in conflict.”35
We give the trial court’s factual determinations “particular deference” when they are
based on oral testimony, “because the trial court, not this court, performs the function of
judging the credibility of witnesses and weighing conflicting evidence.”36 Here, the
superior court found that Fountainhead acted “within its rights” except with regard to the
two defamatory statements, implicitly concluding that the privilege was not otherwise
abused. That Fountainhead was motivated to protect its legitimate business interests,
rather than by malice or spite, has ample support in the record.37
34
See RAN Corp. v. Hudesman, 823 P.2d 646, 648 (Alaska 1991) (observing
that an interested party retains the privilege only so long as he acts in good faith, and
“not where he is motivated by spite, malice, or some other improper objective”); Alyeska
Pipeline Serv. Co. v. Aurora Air Serv., Inc., 604 P.2d 1090, 1094 (Alaska 1979).
35
Aurora Air, 604 P.2d at 1094 (citing Am. Sur. Co. v. Schottenbauer, 257
F.2d 6, 12-13 (8th Cir. 1958); Cal. Beverage & Supply Co. v. Distillers Distrib. Corp.,
323 P.2d 517, 524 (Cal. Dist. App. 1958); Barlow v. Int’l Harvester Co., 522 P.2d 1102(Idaho 1974); Owen v. Williams, 77 N.E.2d 318 (Mass. 1948)).
36
Ebertz v. Ebertz, 113 P.3d 643, 646 (Alaska 2005) (quoting In re Adoption
of A.F.M., 15 P.3d 258, 262 (Alaska 2001)).
37
Because the court’s finding that Fountainhead did not act with an unlawful
motivation is implicit in its other conclusions and its discussion of the evidence, we also
reject Burton’s argument that the court abused its discretion when it failed to make
express findings about Fountainhead’s motivations. See MAPCO Express, Inc. v. Faulk,
24 P.3d 531, 537-38 (Alaska 2001) (“A trial court’s findings are sufficiently ‘clear and
explicit’ if they (i) allow for meaningful appellate review and (ii) resolve all critical
issues and disputes between the parties.” (citing Sullivan v. Subramanian, 2 P.3d 66, 69­
72 (Alaska 2000); Beaulieu v. Elliott, 434 P.2d 665, 670 (Alaska 1967))).
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We affirm the trial court’s determination that Fountainhead was protected
by the conditional business privilege and that it did not abuse the privilege except with
regard to the two defamatory statements Arnold made to Bradish.38
C. The Superior Court Did Not Clearly Err In Deciding That
Fountainhead’s Defamatory Statements Did Not Cause Burton’s
Termination By Princess.
The question remains whether Fountainhead tortiously interfered with
Burton’s prospective business relationship with Princess through its two defamatory and
therefore unprivileged statements: that Burton had an altercation with a guest and that
he defaced hotel property. The superior court concluded that Burton failed to prove
causation, finding that his termination was caused not by Fountainhead’s defamatory
statements to Princess but rather by Burton’s “refusal to work at Princess locations
besides Bear Lodge.” Burton contends this was clear error, but we disagree.
Bradish, Burton’s supervisor at Princess, testified that Burton advised him
throughout the 2011 hiring process that he “could only work at Bear Lodge, as opposed
38
By discussing whether Fountainhead’s actions were subject to a qualified
business privilege we do not mean to overlook the possibility that Fountainhead was not
liable for tortious interference with a contract because it was in effect a party to the
contract. Compare Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons
Local No. 395 Pension Tr. Fund, 38 P.3d 12, 31 n.19 (Ariz. 2002) (en banc) (declining
to decide “whether a party to a tripartite contract can be liable in tort for interfering with
rights as between the other parties to the agreement”), with Atlanta Mkt. Ctr. Mgmt. Co.
v. McLane, 503 S.E.2d 278, 283 (Ga. 1998) (“The intended third-party beneficiary of a
contract, legally authorized to enforce the contract, cannot be held liable for tortious
interference since he is not a stranger to the contract.” (citing Cohen v. William Goldberg
& Co., 413 S.E.2d 759 (Ga. 1991))). See also K & K Recycling, Inc. v. Alaska Gold Co.,
80 P.3d 702, 716 (Alaska 2003) (holding that because a contractual assignment
“essentially gave [the defendant] the rights of a party, [the defendant] was not a true
outsider to the contract, and thus [a claim for tortious interference with a contract] could
not lie against him”). We decide the issue as the superior court and the parties framed
it, as one of privilege.
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to other Princess locations, due to [his] lack of transportation.” Bradish testified that
although Burton was scheduled to work at a non-Fountainhead hotel the first few days
after training, Burton told him that “due to transportation, he [couldn’t] reliably commit
to showing up to those locations on a continuous basis.” Bradish testified that he offered
Burton work at other locations after Bear Lodge turned him away but “it was still the
same case . . . he had no transportation still.” According to Bradish, this was ultimately
why Burton was terminated.
Burton conceded at trial that his only dependable means of transportation
were walking and taking taxis. His May 28, 2011 email to Bradish, anticipating his
termination, reminded Bradish that “[s]ince the first day we talked, you already know
that it is not . . . practical for me to work at any other location than Bear Lodge except
on rare occasions.” And when the court questioned him persistently on this point during
trial, Burton said repeatedly that he did not tell Bradish he was open to working at other
locations because it would be “embarrassing,” given his view that Princess would not
consider him for those other assignments unless he first “cleared up” the issues with
Fountainhead. After considering this evidence the court concluded that while
Fountainhead prevented Burton “from having his ideal job at Bear Lodge,” it was
Burton’s own “refusal to work at Princess locations besides Bear Lodge” on anything
other than a short-term and occasional basis that caused Princess to terminate his
employment.
Arguing that this was error, Burton relies in part on Bradish’s deposition
testimony, which Bradish reaffirmed at trial. Bradish testified that when Arnold told him
why Fountainhead did not want Burton working at Bear Lodge, Bradish trusted Arnold’s
information a “[h]undred percent” and was glad he learned it early in the season; he
testified that he did not “want to have someone on [the Princess] team that potentially
would have, you know, had these issues with defacing property or altercations with
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guests.” According to Burton, this proves that Arnold’s defamatory statements were
necessarily a “substantial part” of the causal chain leading to his termination and
therefore must have been a legal cause of his harm as a matter of law.
But Bradish’s trial testimony, taken overall, was equivocal. He testified
repeatedly that he felt “caught in the middle” and did not know what really happened,
which is why he gave Burton a “grace period” to work things out with Fountainhead.
The superior court noted that Princess did not terminate Burton until 13 days after
Fountainhead’s defamatory statements, following Burton’s May 28 email “reiterat[ing]
his inability to work at Princess locations besides Bear Lodge.” The court specifically
found that “had [Burton] told Bradish that [he] was willing to work at Princess locations
besides Bear Lodge, Princess would not have terminated [Burton’s] employment.” It
was up to the superior court to resolve apparent inconsistencies in witness testimony
when making its finding about causation, and we cannot say it clearly erred in doing so.39
D. The Superior Court Did Not Err In Its Award Of Damages.
We have recently reiterated that “[a] defamation claim requires proof of
four elements: ‘(1) a false and defamatory statement; (2) unprivileged publication to a
third party; (3) fault amounting at least to negligence; and (4) either per se actionability
or special damages.’ ”40 The superior court found that Burton proved the first three
elements plus per se actionability, because the allegations that he had an altercation with
a guest and defaced hotel property were “only susceptible to an interpretation that
injure[d] [Burton’s] reputation, particularly in light of [his] work in the tourism
39
Lentine v. State, 282 P.3d 369, 375-76 (Alaska 2012) (“[I]t is the function
of the trial court, not of this court, to judge witnesses’ credibility and to weigh conflicting
evidence.” (alteration in original) (quoting In re A.F.M., 15 P.3d at 262)).
40
Alaskasland.com, LLC v. Cross, 357 P.3d 805, 820 (Alaska 2015) (quoting
State v. Carpenter, 171 P.3d 41, 51 (Alaska 2007)).
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industry.”41 The court awarded Burton $15,000 in general damages for the defamation
per se but decided that he was not entitled to special or punitive damages.
Burton challenges this award on three grounds. First, he argues that the
court should have included lost wages and benefits in his general damages award;
second, he argues that the court should have awarded special damages because the
defamation was a substantial factor in causing him special harm; and third, he argues that
the superior court should have awarded punitive damages. We reject these arguments.
1. General damages
The superior court’s $15,000 general damages award was intended as
compensation for “the mental anguish and humiliation that [Burton] suffered as a result
of [Fountainhead’s] defamatory per se statements to Princess, in addition to the harm
[Fountainhead’s] statements caused to [Burton’s] reputation in the Fairbanks tourism
industry.” Burton argues that this general damages award should also have included the
value of his lost wages and benefits. But general damages in defamation cases
compensate only for reputational harm.42 In contrast, “[c]oncrete financial losses, such
as . . . lost wages . . . , are considered special damages.”43
41
See Alaska Statebank v. Fairco, 674 P.2d 288, 295 (Alaska 1983) (“It has
been held that statements injurious to plaintiff’s business reputation are defamatory per
se . . . .” (citing Cook v. Safeway Stores, Inc., 511 P.2d 375, 378 (Or. 1973) (en banc))).
42
RESTATEMENT (SECOND) OF TORTS § 621 cmt. a (AM. LAW. INST. 1977).
43
Galarneau v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 504 F.3d 189,
203 (1st Cir. 2007); see also RESTATEMENT (SECOND) OF TORTS § 621 cmt. a (AM. LAW.
INST. 1977) (defining special harm as “the loss of something having economic or
pecuniary value”).
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As for the amount of general damages, trial courts are permitted “a great
deal of latitude.”44 “Since proof of damages is not required if words are deemed
actionable per se, they clearly cannot be computed with mathematical certainty.”45
Burton argues that the December 2014 letter to Princess, as a re-publication of
Fountainhead’s previous libel, justified “an increase in Burton’s general damages as an
aggravating factor.” But the superior court expressly took the mid-trial letter into
account, and its general damages award must therefore reflect any increase the court
believed was warranted by this evidence. We see no clear error in the award of general
damages.
2. Special damages
The superior court found that Fountainhead’s defamatory statements did not
cause Burton special harm because, as explained above, he was terminated because of
his “refusal to work at alternative Princess locations,” not because of the defamation.
Burton appeals this finding, arguing that the court failed to apply the “substantial factor”
test of legal causation and that under this test, as properly applied, “Arnold’s slanderous
per se statements about Burton constituted a legal cause of Burton’s special harm as a
matter of law.”
The “substantial factor test” generally requires both “but for” causation —
that the injury would not have occurred “but for” the tortious act — and that the tortious
act “was so important in bringing about the injury that reasonable individuals would
regard it as a cause and attach responsibility to it.”46 The determination of proximate
44
Alaska Statebank, 674 P.2d at 295.
45
Id. (citing Eslinger v. Henderson, 457 P.2d 998, 1000 (N.M. 1969)).
46
Winschel v. Brown, 171 P.3d 142, 148 (Alaska 2007) (citing Vincent by
(continued...)
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cause usually requires the resolution of questions of fact by the fact-finder; it “becomes
a matter of law only where reasonable minds cannot differ.”47
To the extent Burton argues that the superior court failed to apply the
substantial factor test, we disagree. Although the court did not elaborate on the legal
standard for causation in its discussion of tortious interference, where it first concluded
that Burton failed to prove causation, we see no reason to believe that the court
misunderstood the basic legal concepts it employed.
As explained above, the superior court decided in the context of the claim
for tortious interference that Fountainhead’s defamatory statements “did not interfere
with [Burton’s] relationship with Princess” or cause Burton’s “termination from Princess
and resulting damages.” Indeed, the trial court found that “the evidence overwhelmingly
shows” that Fountainhead did not terminate Burton’s employment upon hearing the
defamatory statements but only later, and the court plainly credited Bradish’s testimony
“that he would not refuse to hire a prospective employee based on unconfirmed
accusations” like those at issue here. (Emphasis added.) As noted above, we cannot say
that these findings of fact are clearly erroneous. And based on this view of the facts, the
court did not clearly err in finding no “but for” causation.
Burton also argues that the superior court clearly erred when it failed to find
that Princess identified Burton as ineligible for rehire because of Fountainhead’s
defamatory statements. The superior court found it could not make this causal
connection because there was “insufficient evidence . . . as to the source, timing, or
46
(...continued)
Staton v. Fairbanks Mem’l Hosp., 862 P.2d 847, 851 (Alaska 1993)).
47
Id. (citing P.G. & R.G. v. State, Dep’t of Health & Human Servs., Div of
Family & Youth Servs., 4 P.3d 326, 334 (Alaska 2000); Turnbull v. LaRose, 702 P.2d
1331, 1336 (Alaska 1985)).
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impact of such labeling.” The one Princess witness who was asked about the ineligibility
label, a division manager, could not explain it. And contrary to Burton’s argument, the
defamation was not the only possible explanation for the ineligibility label; it could have
been Fountainhead’s privileged decision to exclude Burton from working at its hotel
properties or Burton’s unwillingness to work wherever Princess wanted to station him.
It was not clear error to find no “but for” causation in this context either.
Given the evidence at trial, reasonable minds could differ as to whether the
defamatory statements were a substantial factor in bringing about Princess’s termination
of Burton’s employment and its identification of Burton as ineligible for rehire. Because
the only special damages Burton sought were those related to his termination and his
ineligibility for rehire, we do not disturb the superior court’s finding that Burton “failed
to prove that [he] suffered special harm as a result of [Fountainhead’s] defamatory
statements.”
3. Punitive damages
Finally, Burton argues that the superior court erred when it found he was
not entitled to punitive damages. To recover punitive damages he had to prove by clear
and convincing evidence “that the defendant’s conduct (1) was outrageous, including
acts done with malice or bad motives; or (2) evidenced reckless indifference to the
interest of another person.”48 Though the superior court “found by a preponderance of
the evidence that [Fountainhead] was reckless in making defamatory statements about
48
AS 09.17.020(b). Clear and convincing evidence is characterized as
“greater than a preponderance, but less than proof beyond a reasonable doubt.”
Theresa L. v. State, Dep’t of Health & Soc. Servs., Office of Children’s Servs., 353 P.3d
831, 838 (Alaska 2015) (quoting Bigley v. Alaska Psychiatric Inst., 208 P.3d 168, 187
(Alaska 2009)).
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[Burton],” it “refuse[d] to find such recklessness by clear and convincing evidence.”49
Burton now contends that “[t]he entire record contains clear and convincing evidence
that [Fountainhead] management consciously and deliberately disregarded Burton’s
rights,” and that the superior court “overlook[ed] additional, uncontradicted evidence”
that raised Burton’s proof to the level of clear and convincing.
But “[i]n a bench trial, the judge . . . determin[es] . . . how to weigh the
evidence presented.”50 In this case the superior court was required to assess the
testimony and credibility of Fountainhead’s witnesses, including Arnold’s recollection
of his conversation with Bradish and Fountainhead’s subsequent handling of the issue.
The superior court explicitly considered many of the facts Burton claims it failed to
consider. The court recognized that “[a]ll of [Fountainhead’s] agents . . . have . . . denied
knowing of any incident” that would suggest the conduct described in the defamatory
statements actually occurred. The court noted Fountainhead’s failure to respond
adequately to several of Burton’s communications during the time he was attempting to
set the record straight. The court observed that Fountainhead “had several opportunities
to ameliorate the effects of [its] defamatory statements about [Burton] to Princess both
in 2011 as well as during trial” but “refused to properly cure their defamatory statements,
even when provided an opportunity to do so during trial.”
49
See Spenard Action Comm. v. Lot 3, Block 1, Evergreen Subdivision,
902 P.2d 766, 774 n.15 (Alaska 1995) (“Where one has the burden of proving asserted
facts by a preponderance of the evidence, he must induce a belief in the minds of the
jurors that the asserted facts are probably true. If clear and convincing proof is required,
there must be induced a belief that the truth of the asserted facts is highly probable.”
(quoting Curran v. Mount, 657 P.2d 389, 391 n.4 (Alaska 1982))).
50
Wasserman v. Bartholomew, 38 P.3d 1162, 1166-67 (Alaska 2002) (citing
Alaska R. Civ. P. 52(a)).
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But the superior court ultimately decided that the evidence of recklessness,
while satisfying the preponderance-of-the-evidence burden, fell short of clear and
convincing. We recognize that the question is a close one, but the court’s determination
finds support in the evidence.51 The court could have considered the fact that Arnold did
not volunteer the unfounded examples of Burton’s past conduct but gave them only when
Bradish pressed him for an explanation of Fountainhead’s decision. Bradish testified that
Arnold “was being fairly professional about it and said, you know, . . . I can’t really go
into it.” And because Arnold himself testified he had no recollection of making the
defamatory statements and Bradish’s recollection of them was vague and inconsistent,
the court could have had some reservations about what Arnold actually said or intended.
With regard to the allegation that Burton had defaced hotel property, Bradish testified
that what Arnold said could be taken “multiple ways.” Bradish testified, “[I]n the back
of my mind, I’m not 100 percent sure” whether Arnold meant damage to physical
property or damage to “the reputation of the property. I couldn’t tell you.”
We appreciate the difficulty the superior court faced in having to draw a
line between what it believed Burton had proven to be more likely true than not true and
what remained to be proven by clear and convincing evidence. We cannot say the court
clearly erred in drawing the line where it did. We therefore affirm the court’s denial of
punitive damages.
V. CONCLUSION
The judgment of the superior court is AFFIRMED.
51
See Nelson v. Progressive Corp., 976 P.2d 859, 865 (Alaska 1999)
(affirming jury’s decision not to award punitive damages “even though it found knowing
misrepresentation” in part because the jury could have found knowing misrepresentation
by a preponderance but not by clear and convincing evidence).
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