John Reeves v. Alyeska Pipeline Service Co.

John Reeves developed an idea to build a visitor center at a turnout
overlooking the Trans-Alaska Pipeline near Fairbanks. He described his idea to Alyeska's Fairbanks manager, Keith Burke, in return for Burke's promise not to use the
idea without allowing Reeves to participate in its implementation. Yet Alyeska
subsequently ceased dealing with Reeves and proceeded to build the visitor center on its
own. Reeves sued Alyeska, and a jury awarded him damages under various alternative
contract and tort theories. The questions presented here center on the validity of the
special verdict finding Alyeska liable for breaching its disclosure agreement with Reeves
and on the measure of damages for that breach. We hold that the special verdict
correctly established Alyeska's liability for breach. We also hold that the special verdict
on Reeves's implied contract claim correctly determined the issue of damages. But
because the superior court awarded damages on a different claim addressed in the special
verdict, we remand for entry of a modified judgment.

Our case law establishes that "[a] decision by an evenly divided court results
in an affirmance." Ward v. Lutheran Hosps. & Homes Soc'y of Am., Inc., 963 P.2d
1031, 1037 n.11 (Alaska 1998) (quoting Thoma v. Hickel, 947 P.2d 816, 824 (Alaska
1997)). Additionally, we have recognized that "an affirmance by an evenly divided court
is not precedent." Kenai v. Burnett, 860 P.2d 1233, 1246 (Alaska 1993) (Compton, J.,
concurring). In the present case, no member of the court favors outright affirmance. But
two justices would affirm the jury's special verdict on both liability and an alternative
theory of compensatory damages, whereas two would require a retrial on damages. In
these circumstances, our case law indicates that the votes favoring the greatest degree of
affirmance will determine the outcome of this case but that the decision on compensatory
damages will have no precedential effect.

II. FACTS AND PROCEEDINGS

We described the salient historical facts in Reeves v. Alyeska Pipeline
Service Co. (Reeves I):

In 1985 Alyeska created a visitor turnout at Mile 9 of
the Steese Highway between Fox and Fairbanks. The turnout
had informational signs and provided visitors a view of the
Trans-Alaska Pipeline. Before Alyeska constructed the
turnout, visitors gained access to the pipeline by a nearby
road and trespassed on the Trans-Alaska Pipeline right-of-way.

John Reeves, owner of Gold Dredge No. 8, a tourist
attraction outside Fairbanks and near the turnout, contacted
Alyeska in January 1991 to discuss a tourism idea he had. He
spoke with Keith Burke, Alyeska's Fairbanks Manager. After
receiving Burke's assurance that the tourism idea was
"between us," Reeves orally disclosed his idea to build a
visitor center at the turnout. He proposed that Alyeska lease
him the land and he build the center, sell Alyeska
merchandise, and display a "pig" and a cross-section of pipe.

Burke told him the idea "look[ed] good" and asked
Reeves to submit a written proposal, which Reeves did two
days later. The proposal explained Reeves'[s] idea of
operating a visitor center on land leased to him by Alyeska.
The proposal included plans to provide small tours, display a
"pig," pipe valve, and section of pipe, sell refreshments and
pipeline memorabilia, and plant corn and cabbage.

After submitting the proposal, Reeves met with Burke
once again. At this meeting Burke told Reeves the proposal
looked good and was exactly what he wanted. In Reeves'[s]
words, Burke told him, "We're going to do this deal, and I'm
going to have my Anchorage lawyers draw it." Reeves
claimed he and Burke envisioned that the visitor center would
be operating by the 1991 summer tourist season.

After submitting the proposal, Reeves met with Burke
once again. At this meeting Burke told Reeves the proposal
looked good and was exactly what he wanted. In Reeves'[s]
words, Burke told him, "We're going to do this deal, and I'm
going to have my Anchorage lawyers draw it." Reeves
claimed he and Burke envisioned that the visitor center would
be operating by the 1991 summer tourist season.

Reeves alleges that Alyeska agreed during this meeting
(1) to grant access to the turnout for twenty years; (2) to allow Reeves to construct and operate an information center;
and (3) to allow Reeves to sell merchandise and charge a
$2.00 admission fee. Reeves stated that, in exchange, he
agreed to pay Alyeska ten percent of gross receipts.

Over the next several months, Burke allegedly told
Reeves that the deal was "looking good" and not to worry
because it takes time for a large corporation to move.
However, in spring 1991, Burke told Reeves that the visitor
center was such a good idea that Alyeska was going to
implement it without Reeves. By August 1991 Alyeska had
installed a portable building at the turnout to serve as a visitor
center; it built a permanent log cabin structure in 1992.

The members of the Alyeska Pipeline Club North
(APCN) operated the visitor center and sold T-shirts, hats,
and other items. APCN does not charge admission. A
section of pipeline and a "pig" are on display. APCN
employees provide information and answer visitors'
questions. Members of APCN had suggested in 1987 that
Alyeska create a visitor center at the turnout. However,
Alyeska had rejected the idea at that time. Before meeting
with Reeves, Burke did not know that APCN's visitor center
idea had been raised and rejected by Alyeska in 1987.

Approximately 100,000 people visited the visitor center
each summer in 1992 and 1993. It grossed over $50,000 in
sales each year. The net profit for 1993 was calculated to be
$5,000-$15,000. APCN received all the profit.

In response to Alyeska's decision to use his idea for the visitor center
without allowing him to participate in the venture, Reeves filed suit against Alyeska in In response to Alyeska's decision to use his idea for the visitor center
without allowing him to participate in the venture, Reeves filed suit against Alyeska in May 1993. He alleged breach of oral contract, promissory estoppel, breach of implied 3
contract, quasi-contract (unjust enrichment and quantum meruit), breach of the covenant
of good faith and fair dealing, breach of license or lease agreement, and various torts
related to the alleged contractual relationships. In pressing these claims, Reeves basically 4
asserted two distinct theories: (1) that Alyeska had verbally given him a lease to develop
the visitor center - or at least had entered into a binding contract to memorialize the
terms of a lease; and (2) that, in return for disclosing his idea to Burke, Alyeska had
promised not to implement or further disclose Reeves's idea without allowing him to
participate in the implementation.

Superior Court Judge Charles R. Pengilly granted Alyeska's motion for
summary judgment on all claims as to both theories; Reeves appealed. In Reeves I, we 6
affirmed the summary judgment order as to all claims asserted under Reeves's first
theory, holding that the statute of frauds barred enforcement of any oral lease agreement
or any agreement to memorialize in writing the alleged contract to implement Reeves's
participation in the visitor center. But we reversed and remanded as to claims under 7
Reeves's theory that Alyeska breached an alleged disclosure agreement - that is,
Alyeska's alleged promise that if Reeves disclosed his idea, Alyeska would not use it without including Reeves in the venture. In support of this theory on remand, Reeves 8
asserted claims for breach of express contract, breach of implied contract, promissory
estoppel, quasi-contract/unjust enrichment, and various related torts.

After a two-week trial, the superior court submitted five alternative claims
to the jury: (1) express contract, (2) implied-in-fact contract, (3) promissory estoppel,
(4) quasi-contract/unjust enrichment, and (5) misrepresentation. Judge Pengilly gave the
jury special verdict questions on each of the claims for relief. The jury returned a verdict
finding on the issue of liability that

C Alyeska promised not to use Reeves's idea without allowing him to
participate in its implementation;

Alyeska broke this promise;

Alyeska used Reeves's idea; and

Alyeska derived actual benefit from Reeves's disclosure of his idea.

The special verdict then separately addressed Reeves's alternative claims
for breach of express and implied contract, promissory estoppel, quasi-contract/unjust
enrichment, and misrepresentation. The court's instructions on damages as to each of
the alternative claims, and the jury's respective awards on those claims, are as follows:

On the express contract claim, the trial court instructed the jury to
base its compensatory damages award on the amount necessary to
place Reeves "in the same position that he would have been in had
Alyeska kept its promise" to allow him to participate in implementing
the visitor center. The jury returned an award of $2,989,000.

As to the implied contract claim, the court asked the jury to
determine damages "in the amount of the value of the idea to
Alyeska." The jury returned a verdict of $1,820,000.

On Reeves's promissory estoppel claim, the court gave an
instruction similar to its implied contract instruction, directing the
jury to measure damages "in the amount of the value of any benefit
[Reeves] conferred upon Alyeska." The jury returned a verdict
identical to its implied contract verdict: $1,820,000.

On Reeves's quasi-contract/unjust enrichment claim, the court
instructed the jury to determine "the amount of the value of the
benefit which Alyeska has unjustly retained." The jury returned a
verdict for $4,809,000.

Last, the court instructed the jury on Reeves's claim for
misrepresentation. The instructions required the jury to find that
Alyeska had engaged in intentional misrepresentation, asking the jury
to decide, "did [Burke] intend to break that promise at the time he
made it?" The verdict form provided for both compensatory and
punitive damages. To determine compensatory damages for
misrepresentation, the court used a standard similar to the one it
employed for Reeves's express contract claim, instructing the jury,
"as nearly as possible, [to] place [Reeves] in the position he would
have occupied had it not been for [Alyeska's] misrepresentation."
The jury declined to award compensatory damages, finding that
Reeves had failed to prove intentional misrepresentation. But the
jury nevertheless awarded Reeves $7,500,000 in punitive damages.

After the jury returned these verdicts, Reeves moved for entry of judgment
reflecting the compensatory awards on both his express contract claim - $2,989,000 -
and his unjust enrichment claim - $4,809,000 - as well as the award of punitive
damages for misrepresentation - $7,500,000. The superior court only awarded
compensatory damages on Reeves's express contract claim - $2,989,000 - and struck
the punitive damages award.

* * *

Click the case caption above for the full text of the Court's opinion.

We AFFIRM the superior court’s order striking punitive damages. Because
the special verdict on the express contract claim incorporates an improper measure of
damages and because the judgment entered by the superior court based its award of
compensatory damages on the express contract verdict, we VACATE the judgment. The
proper measure of damages for breach of the disclosure agreement in this case is the
value of the benefit that Alyeska enjoyed as a result of its breach. The jury’s alternative
special verdict on the implied contract claim establishes compensatory damages under this
measure, is supported by the evidence, and is not affected by any procedural error.
Accordingly, we REMAND for entry of a modified judgment on the implied contract
claim.

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