Bachner Company Incorporated v. State, Dept. of Administration

387 P.3d 16, 2016 Alas. LEXIS 134, 2016 WL 7176581
CourtAlaska Supreme Court
DecidedDecember 9, 2016
Docket7138 S-15860
StatusPublished
Cited by12 cases

This text of 387 P.3d 16 (Bachner Company Incorporated v. State, Dept. of Administration) is published on Counsel Stack Legal Research, covering Alaska Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bachner Company Incorporated v. State, Dept. of Administration, 387 P.3d 16, 2016 Alas. LEXIS 134, 2016 WL 7176581 (Ala. 2016).

Opinion

OPINION

MAASSEN, Justice.

I. INTRODUCTION

This case involves a breach of contract claim brought by a contractor that leased office space to the State of Alaska. After a ten-year lease term and a one-year renewal, the contractor alleged that the State was in default on its rent payments, and it filed suit in superior court. The State moved to dismiss the complaint, arguing that the claim was governed by the Alaska State Procurement Code and that the contractor had failed to exhaust its remedies under the code before filing suit. The superior court agreed and granted the State’s motion to dismiss. The contractor appealed.

We conclude that the procurement code covers a rent dispute over an ongoing lease, that the contractor’s claim falls under the procurement code, and that the contractor must exhaust its administrative remedies before filing suit in superior court. We therefore affirm the superior court’s dismissal of the contractor’s complaint.

II. FACTS AND PROCEEDINGS

A. Facts

In September 2003 Bachner Company Inc. entered into a contract with the State of Alaska, Department of Administration, to lease portions of the Denali Building in Fairbanks. Under the contract Bachner leased 15,730 square feet of office space and 40 parking spaces to the State for use by the Department of Natural Resources, The lease was issued through the State’s Request for Proposal (RFP) process, and the terms of the RFP were incorporated into the lease.

The lease had a “firm term” of ten years beginning September 26, 2003 and ending September 30, 2013. The lease gave the State the option at the end of the firm term “to renew this lease for Ten (10) additional one (1) year periods to be exercised by giving [Bachner] written notice prior to the expiration of each term." The lease set monthly rent on most of the occupied space, but it also provided that 1,400 square feet was rent-free for the duration of the ten-year firm term; upon renewal the State was required to either pay rent on this space or vacate it. Although the full lease is not in the record before us, Bachner' asserts that it also provided that “[a]ny dispute arising out of the lease shall be resolved under the laws of Alaska” and contained a forum selection clause providing that “[a]ny appeal of an administrative order and any original action to enforce any provision of this lease or to obtain any relief from or remedy in connection with this lease may be brought only in the Superior Court for the Third Judicial District of Alaska.”

In May 2013, four months before the end of the firm term, the State exercised its first one-year renewal option by signing an amendment to the original lease. The amendment provided that “[a]ll other terms and conditions of the lease remained] the same.” *19 The State signed another lease amendment in September 2013, this one adjusting the monthly rent for inflation as of October 1, 2013. The amendment did not mention rent for the 1,400 square feet that was being provided rent-free.

Once the first renewal period began on October 1, 2013, the State continued occupying the property but did not pay rent on the previously rent-free portion. Bachner brought this issue to the State’s attention, and the State agreed to hire a third party to determine the appropriate rental rate for the space, as provided in the lease. The State also confirmed that “[t]he rate adjustment for the 1,400 square feet of space [would] be retroactive to the start of this first renewal option as indicated in the lease (October 1, 2013).”

Following a real estate broker’s independent evaluation, the parties agreed to value the previously rent-free space at $ 2.35 per square foot per month. According to Ba-chner, however, the State failed to include this amount in its rent payments. In April 2014 Bachner sent a letter notifying the State that it was in default on its rent. 1 The State subsequently signed a lease amendment—referred to as Amendment No. 13— on August 5, 2014, which adopted the $ 2.35 per-square-foot valuation of the additional 1,400 square feet and added this amount to the rent owed under the lease.

Bachner contended that Amendment No. 13 was invalid because it had been signed on the State’s behalf by a contracting officer who lacked the requisite authority. Bachner therefore notified the State that it had failed to cure its default within 60 days of receiving notice and that it remained in breach of the lease. The State denied that it was in breach, rejecting Bachner’s contention that Amendment No. 13 had not been properly signed. The State also informed Bachner of the right, if Bachner disagreed, to “file a contract claim in accordance with [AS] 36.30.620” under the procurement code.

B. Proceedings

In September 2014, rather than filing a claim under the procurement code, Bachner filed a breach of contract claim in Fairbanks superior court. Bachner’s complaint gave a partial factual history of the lease agreement and amendments but did not include the lease as an attachment. Bachner alleged that “[o]n August 4, 2014, [the State] may have amended [the lease] to pay for 1,400 ... square feet of occupied space retroactive to October 1, 2013, but has yet to pay any rent for any of this space.” It further alleged that the State’s “[f]aüure to pay rent on the 1,400 square feet of formerly free space since October 1, 2013 constituted] a material breach” of the lease agreement, that Bachner had notified the State of the breach, and that the State had failed to cure the breach within 60 days of notice. Bachner asserted that “[ale-cording to the lease terms, if a breach is not cured within 60 days, the lease is terminated.” Therefore, Bachner contended, the State had lost any right it had under the lease to exercise another renewal option and instead “must vacate the premises, negotiate another long-term lease by October 1, 2Q14, [and] agree to pay market rate o[f] [$ ]2.35 [per] square foot on the 18,194 square feet they occupy or they will be in trespass on the property.” Bachner asked the court for an order evicting the State, “[a]ll available contract damages,” and its costs and attorney’s fees.

The State moved to dismiss the case under Alaska Civil Rule 12(b)(6) on the ground that the face of the complaint showed that Ba-chner was not entitled to relief in court. The State argued that the lease plainly fell under the Alaska procurement code, that the code “provides the exclusive remedy for claims arising out of contracts awarded under the code,” and that Bachner “ha[d] not exhausted the statutorily required administrative process” before filing suit. The State argued that Bachner’s suit was therefore barred by the code’s exclusive remedy provision.

In opposition, Bachner characterized the case as “a simple breach of contract ease *20 between a landlord and tenant for failure to pay rent.” It argued that the case was a “payment dispute” within the meaning of AS 37.05.285 and thus was exempt from the exclusive remedy provision of the procurement code.

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387 P.3d 16, 2016 Alas. LEXIS 134, 2016 WL 7176581, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bachner-company-incorporated-v-state-dept-of-administration-alaska-2016.