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Alaska Supreme Court Eliminates Comparative Fault From Misrepresentation Claims

The Alaska Supreme Court recently issued an opinion in Asher v. Alkan Shelter, LLC, which is a case involving an employee’s embezzlement of funds from his employer. The Alaska Supreme Court reversed the trial court’s ruling that the employee and his girlfriend were jointly and severally liable to the employer for the stolen funds, holding that AS 09.17.080, Alaska’s allocation of fault statute, required the court to allocate fault and liability between the employee and his girlfriend.

Significantly, the court ruled that the trial court should not simply determine the total damages suffered by the employer and allocate fault for those damages between the employee and his girlfriend. Instead, the court ruled that the trial court should only allocate fault on those damages it found had been caused by both the employee and the girlfriend. The effect of the court’s ruling is that if a defendant is responsible for a part of, but not all of, a plaintiff’s damages, trial courts and juries must separate the plaintiff’s damages into their divisible parts and make separate allocations of fault for each category of damages.

Asher, however, is perhaps more significant in that it effectively ruled that comparative fault will not apply to fraud claims where the plaintiff proves he justifiably relied on a defendant’s misrepresentations. In Asher, the court held that the justifiable reliance element of the plaintiff’s fraudulent misrepresentation claim precluded an allocation of fault to the plaintiff. The court reasoned that if the plaintiff was at fault for relying on the defendant’s misrepresentation, he would not have been justified in relying on those misrepresentations. A priori, if the plaintiff was justified in relying on those misrepresentations, he was not at fault and no fault could be allocated to him.

The practical effect of Asher is to eliminate comparative fault from fraudulent misrepresentation claims. If a plaintiff prevails on a fraudulent misrepresentation claim, 100% of the fault must be allocated to the defendant(s) and no fault, as a matter of law, can be allocated to the plaintiff. It is unclear how Asher will apply in the context of the Alaska Supreme Court’s prior holdings that, in real estate transactions, a buyer is justified in relying on the seller’s misrepresentations unless it was utterly unreasonable for the buyer to do so.