December 11, 2008

More Limitation Of Liability And Tribal Sovereign Immunity

This post is a follow-up to a couple of prior postings. I realize this makes it look like I lack creativity since I’m not saying anything new. But I can’t help it. The fascist running dog who is the Virtual Managing Editor of the has insisted that I do more linking back to prior blog postings. He says this is necessary for “search engine optimization.” I don’t even know what that means. Goofy legal stuff -- like maiden rents or the fertile octogenarian -- I understand. Website technospeak, I don’t get.

In any event, updating of a couple of earlier blog postings is my attempt at keeping the e-tyrant at bay.

On the first of October, I wrote about limitation of liability clauses in this post. I ran into a problem with one of these horrid clauses a week or two ago and had to forcibly cut its heart out. In the process, though, I found a 2008 Colorado case that I think illustrates the points I was making in the earlier post.

In the Colorado case, a retail merchandise distributor, Core-Mark, had a large warehouse where it stored inventory. Core-Mark entered into a contract with a security company, Sonitrol, to install and monitor an alarm system in the warehouse. The alarm system utilized sound detectors. If sound over a certain level was detected, the system recorded it and alerted a central monitoring facility. The operators at the central monitoring facility were then supposed to listen in live to determine if anything underhanded was afoot and call the authorities if necessary.

521402_burn_baby_burn.jpgOne night three miscreants broke into Core-Mark’s warehouse. They spent hours inside, making a heckuva racket, looting the place. The alarm company’s sound detectors picked it all up and repeatedly alerted the central monitoring facility. The operators there (who must have been busy updating their blogs) just kept turning the alarm off. When the burglars finally left they set the warehouse on fire. The alarm company never called the police or the fire department. The warehouse and everything in it burned to the ground. The total loss amounted to about $20 million.

Core-Mark sued the alarm company since – Gee! – Sonitrol was hired to protect the warehouse and did not actually do it. Sonitrol pulled the “can’t touch this” dance, pointing to the limitation of liability clause in its contract. The clause said Sonitrol’s “liability shall be limited to a sum equal to the total of one-half year’s monitoring payments, or five hundred dollars ($500) whichever is less.” So Sonitrol argued that it was A-OK to pay Core-Mark a grand total of $500 for its loss.

The trial court judge -- who was apparently a platinum level member of the Adam Smith fan club -- accepted the alarm company’s position. Core-Mark appealed and the Colorado Court of Appeals reversed. The appellate court paid lip service to freedom of contract but dug around in the dusty corners of the law library to find a restriction that applied. Judge Ney’s opinion said it was against public policy (in Colorado, anyway) to have a contract provision that exonerated a party from its own “willful and wanton” conduct. So the appellate court sent the case back – some six years after the fire occurred and about five years after the lawsuit started -- for a jury trial on whether Sonitrol’s actions were “willful and wanton.”

(By the way, isn’t “Ney” just a great name for a judge, especially if Monty Python were the outfit doing the judicial appointments? “We are the judges who say NEY.” )

The Core-Mark case demonstrates my original point. You can put these things in contracts but you better not count on them as always covering your southern quadrant. The case also points up the reason I detest these clauses. I mean, who wants to hire a burglar alarm company who says we can’t really be responsible for calling the cops when the burglars break in? You’re better off doing business with someone who will actually stand behind their promises. Or just putting the fake "Protected By" stickers on the windows and doors.

One other follow-up note I need to squeeze in. After writing about tribal sovereign immunity in this post a couple weeks back, I found that some people were thinking I was referring to ANCSA corporations. (OK, OK, I only know of this one guy who actually got confused.) ANCSA corporations are formed under state law and do not get the benefit of sovereign immunity. I was talking about federally recognized Indian tribes and the entities that the tribes set up as authorized under federal Indian law. ANCSA corporations and tribes are different organizations, although the shareholders/members of the two overlap.

Hey, it’s an easy mistake to make. As one of my esteemed colleagues is fond of saying: “The law is tricky she-it.”

April 5, 2008

A Called Shot

The Alaska Supreme Court yesterday ruled that two elders' benefit programs of an ANCSA Regional Corporation were valid. Atkinson, Conway & Gagnon handled the case for the winning side. The case is Bodkin v. Cook Inlet Region, Inc. The Court held that CIRI's elders' programs were authorized under Section 7(r) of ANCSA and that no constitutional challenges to the programs could be sustained.

The ruling gives me a chance to toot my own horn over a job well done in the appellate court because I wrote the brief and argued the case. BLAAAPPP! (Sorry. My horn is strained a bit from driving around with all the other knuckleheads out there this winter.)

babe%2Bruth.jpg The Court's decision was especially gratifying since I was already on record as saying the Court would rule this way. I spoke about the case at the November 2007 meeting of the Alaska Native Law Section of the Alaska Bar Association. I boldly predicted that the Alaska Supreme Court would affirm the lower court's decision and uphold CIRI's programs. I even made this prediction with the lawyer on the other side of the case, Fred Triem, sitting there, participating in the discussion. Yes, that's right my friends. Just like Babe Ruth and Joe Namath, I have successfully called my own shot.

[Since I've wandered into the sports area, I thought I would add a side note for the Dear and Esteemed Wife that, upon my passing, I think it would be great idea to have Dave Niehaus, the Hall of Fame announcer for the Seattle Mariners, make the "call" at my memorial service. Something like the following would be nice:

"The designated hitter, Grim Reaper, steps up to the plate now. Grim carries an astonishing, perfect 1.000 batting average, as his long uppercut swing eventually catches up to every pitch thrown his way. Here's Jerome's pitch now . . . and its BELTED deep towards center! Its going, going, going . . . The center fielder, Moe "Darn" Medicine, gives chase but he's not going to bring this one back . . . ITS OVER THE WALL, far, far out there in dead center field, straight above the 'eternity' sign! FLY AWAY! My, Oh, My!" (Wild cheering ensues.)

Just an idea, D.E.W. With any luck, you and Dave will have about three decades or so to work on it.]

Anyhow, the Bodkin case was really not difficult to predict. Fred Triem had made essentially the same arguments in a series of other cases filed in the federal and state courts over the years. He'd lost on every one, ever since Congress amended ANCSA to cut the Native Corporations some slack to honor their cultures. So it was no surprise the Alaska Supreme Court ruled the way it did in Bodkin, and my predicting the outcome was not much of an achievement.

I teased Fred at the Alaska Native Law Section meeting about running a "cottage industry" in these cases over elders' benefits. The decision in Bodkin should just about shut down Fred's little industry for good. Although you can never be 100% sure about these things, the door to Fred's "cottage" should be pretty well barricaded now and the windows shuttered, more or less nailed tight. BLAAAPPP! (Wild cheering ensues.)

February 1, 2008

Law Professor With Square Head Rounding Into Form?

Because we work with Native corporations all the time, the lawyers at Atkinson, Conway & Gagnon like to keep up with what is going on in the world of ANCSA. I have just read an interesting article by Douglas Branson, a law professor from Pittsburgh who has often pontificated on ANCSA corporations. .

Professor Branson's new article appears in the Alaska Law Journal. The title of the article is ridiculously long, but the first part of it is Still Square Pegs in Round Holes? (The article can be found here: Alaska Law Review Current Issue) This title harkens back to Professor Branson's original ANCSA law review article of 1979, which was called Square Pegs in Round Holes: Alaska Native Claims Settlement Corporations Under Corporate Law. The original article was notable for its position that ANCSA corporations should be viewed as business corporations under the law first, last and always.

The new article is full of detail that means nothing in the real world. And there are even a few inadvertently humorous points where he demostrates the great distance between Pittsburgh and Alaska. For example, he writes about filing corporate amendments with the "Alaska Secretary of State." Real Alaskans know that, while there is an official First Dude of the State, there is no Secretary of State.

The most interesting part of the new article to me was Professor Branson's concession that perhaps he needed to soften his stance a bit. While various parts of the article show that Professor Branson is still willing to grind that old axe, he has backed off enough to concede that "continued adherence to a single form of entity" is no longer crucial.

Yet Professor Branson misses the larger picture by continuing to insist that ANCSA corporations are bound to follow rules of organizational governance that have been developed in other contexts. He seemingly cannot grasp that ANCSA corporations are unique entities governed by their own unique law that was pulled from various places, not exclusively from the law of business corporations. ANCSA corporations were understood as being unique at the time Congress provided for their creation in 1971, and each time Congress has revisited ANCSA it has done so to reaffirm that ANCSA corporations are unique. It is not possible to be a little unique, any more than it is possible to be a little pregnant.

But buried in the article is a truly frightening paragraph and footnote. Professor Branson writes that, in his view, Section 7(r) of ANCSA only applies to Regional Corporations and not to Village Corporations. Section 7(r) authorizes an ANCSA corporation to provide health, education and welfare benefits to Alaska Natives on a basis other than share ownership. The ANCSA corporations have fought through decades of litigation over elders benefit programs. Section 7(r) was meant to put an end to this litigation. In fact, this past fall I argued in the Alaska Supreme Court the most recent case over elders benefit programs, Bodkin v. Cook Inlet Region, Inc. I had hoped that the Bodkin case was going to be last of its kind.

I fear that Professor Branson's comments on Section 7(r) mean there are more lawsuits to come directed at the elders benefit programs of Village Corporations.