OPINION
Before BURKE, C. J., and CONNOR, MATTHEWS and COMPTON, JJ.
MATTHEWS, Justice.
On April 2, 1979, Jeffrey Knaebel, one of three major shareholders of Resource Associates of Alaska, Inc. (RAA), made an agreement with the company and its other two major shareholders to exchange all of his RAA shares for all the shares of a wholly-owned RAA subsidiary. Soon after-wards, Knaebel filed suit to rescind the agreement in the Superior Court at Fairbanks. Trial in the case, which was docketed case No. 79-1104, was scheduled for early March of 1981. Discovery was to close on January 30, 1981.
On October 23, 1980, Knaebel made written demand under AS 10.05.240
for inspection of specified RAA records. The demand stated that Knaebel would be present with his attorney and accountant at the Fairbanks office of RAA on October 30, at 10:00
a. m. to begin inspection. On October 28, 1980, Lawrence Heiner, the RAA officer with custody and control of the corporate records, notified Knaebel that his request would be denied because RAA’s counsel would be unavailable for an October 30 inspection. On the following day, October 29, Heiner notified Knaebel that his RAA shares were “voided effective October 16, 1980” pursuant to the April 1979 share exchange agreement.
On October 31, 1980, Russell Pritchett, Knaebel’s attorney, sent a letter stating the following to John Strachan, Heiner’s attorney:
Please be advised that on November 3, 1980 at approximately 3:00 o’clock p. m. counsel for Jeffrey J. Knaebel will apply to the Superior Court in Fairbanks for an order temporarily restraining Lawrence E. Heiner from denying Mr. Knaebel his rights as a shareholder to inspect the books and records of Resource Associates of Alaska, Inc.
On November 3, Strachan and Russell Winner, Pritchett’s associate, flew from Anchorage to Fairbanks.
Assuming that any hearing for a temporary restraining order would be before the trial judge in pending case No. 79-1104, Strachan went to the courthouse and inquired of the judge and the clerk of court whether a hearing had been scheduled or any documents filed in that case. At approximately 3:20 p. m., when he had received negative responses to both inquiries, Strachan left the courthouse. Winner arrived at the clerk’s office at about 3:10 p. m. He filed a new complaint against Heiner, seeking both a preliminary and a permanent injunction compelling production of the requested documents and the ten percent penalty for failure to make production prescribed by AS 10.05.243.
The complaint was separately docketed as cause No. 80-1867. Winner also filed a motion for a temporary restraining order at that time, along with supporting documents. Later that afternoon, the trial judge denied the motion for a temporary restraining order.
In November of 1980, Heiner moved to dismiss cause No. 80-1867, alleging that Knaebel was splitting a cause of action by bringing the new lawsuit separately from the pending suit for rescission. He also moved for sanctions against Pritchett “for his failure to appear at or properly schedule a hearing before the Superior Court in Fairbanks, Alaska.” Over opposition, both motions were granted. The trial court dismissed the complaint as “unnecessary litigation,” stating that “everything that’s sought to be accomplished [in case No. 80-1867] can be accomplished [in case No. 79-1104].” The order imposing sanctions levied the sum of $1,232.00 against Pritchett.
Knaebel has appealed both rulings, and the appeals have been consolidated.
I
The Motion To Dismiss
As previously indicated, Heiner based his motion to dismiss on the ground that Knaebel had split a cause of action by
filing a second suit. A single cause of action cannot be divided and made the subject of separate lawsuits.
If a cause of action has been split, the second suit may be abated.
We conclude, however, that Knae-bel’s claim for rescission of the agreement and his claim for inspection under AS 10.-05.240 are not the same cause of action.
The trial court granted the motion to dismiss on the ground that the shareholder inspection sought in cause No. 80-1867 could be achieved by application of the discovery rules in cause No. 79-1104. Though this is true in terms of the eventual production of documents, there is a timing difference between the two options for gaining access to corporate records. Under the discovery provisions of the Alaska Rules of Civil Procedure, a party has thirty days within which to respond to a request for production. Alaska R.Civ.P. 34(b). If production is refused, the requesting party may move for an order to compel under Alaska R.Civ.P. 37(a).
Id.
His opponent then has ten days after service to respond. Alaska R.Civ.P. 77(c). Under AS 10.05.240, production must be made within a “reasonable time,” and the period contemplated will in many circumstances be considerably shorter than the time for production prescribed by the civil rules.
The most important difference between the discovery rules and the statutory shareholder inspection right, however, is the penalty for nonproduction available under the latter. Under AS 10.05.243,
the penalty for refusing to allow inspection is ten percent of the value of the shares owned by the party making the inspection demand. This can be a very significant sanction. By contrast, the only possible liability incurred for objecting or failing to respond to a discovery request is the reasonable cost incurred by the requesting party in obtaining an order compelling production. Alaska R.Civ.P. 37(a)(4).
The legislature has given shareholders of record inspection rights under the statute. The fact that a shareholder may also have discovery rights when engaged in a lawsuit with a particular corporation does not eliminate his statutory right.
We conclude, therefore, that the court erred in dismissing case No. 80-1867.
II
The Imposition Of Sanctions
A court is authorized to assess costs and attorney’s fees against an offending attorney or party for infractions of the civil rules.
We can perceive no infraction here and therefore the sanctions must be reversed.
(a) For any infraction of these rules, the court may withhold or assess costs or attorney’s fees as the circumstances of the case and discouragement of like conduct in the future may require; and such costs and attorney’s fees may be imposed upon offending attorneys or parties.
Alaska R.Civ.P. 65(b) requires that one seeking a temporary restraining order
Free access — add to your briefcase to read the full text and ask questions with AI
OPINION
Before BURKE, C. J., and CONNOR, MATTHEWS and COMPTON, JJ.
MATTHEWS, Justice.
On April 2, 1979, Jeffrey Knaebel, one of three major shareholders of Resource Associates of Alaska, Inc. (RAA), made an agreement with the company and its other two major shareholders to exchange all of his RAA shares for all the shares of a wholly-owned RAA subsidiary. Soon after-wards, Knaebel filed suit to rescind the agreement in the Superior Court at Fairbanks. Trial in the case, which was docketed case No. 79-1104, was scheduled for early March of 1981. Discovery was to close on January 30, 1981.
On October 23, 1980, Knaebel made written demand under AS 10.05.240
for inspection of specified RAA records. The demand stated that Knaebel would be present with his attorney and accountant at the Fairbanks office of RAA on October 30, at 10:00
a. m. to begin inspection. On October 28, 1980, Lawrence Heiner, the RAA officer with custody and control of the corporate records, notified Knaebel that his request would be denied because RAA’s counsel would be unavailable for an October 30 inspection. On the following day, October 29, Heiner notified Knaebel that his RAA shares were “voided effective October 16, 1980” pursuant to the April 1979 share exchange agreement.
On October 31, 1980, Russell Pritchett, Knaebel’s attorney, sent a letter stating the following to John Strachan, Heiner’s attorney:
Please be advised that on November 3, 1980 at approximately 3:00 o’clock p. m. counsel for Jeffrey J. Knaebel will apply to the Superior Court in Fairbanks for an order temporarily restraining Lawrence E. Heiner from denying Mr. Knaebel his rights as a shareholder to inspect the books and records of Resource Associates of Alaska, Inc.
On November 3, Strachan and Russell Winner, Pritchett’s associate, flew from Anchorage to Fairbanks.
Assuming that any hearing for a temporary restraining order would be before the trial judge in pending case No. 79-1104, Strachan went to the courthouse and inquired of the judge and the clerk of court whether a hearing had been scheduled or any documents filed in that case. At approximately 3:20 p. m., when he had received negative responses to both inquiries, Strachan left the courthouse. Winner arrived at the clerk’s office at about 3:10 p. m. He filed a new complaint against Heiner, seeking both a preliminary and a permanent injunction compelling production of the requested documents and the ten percent penalty for failure to make production prescribed by AS 10.05.243.
The complaint was separately docketed as cause No. 80-1867. Winner also filed a motion for a temporary restraining order at that time, along with supporting documents. Later that afternoon, the trial judge denied the motion for a temporary restraining order.
In November of 1980, Heiner moved to dismiss cause No. 80-1867, alleging that Knaebel was splitting a cause of action by bringing the new lawsuit separately from the pending suit for rescission. He also moved for sanctions against Pritchett “for his failure to appear at or properly schedule a hearing before the Superior Court in Fairbanks, Alaska.” Over opposition, both motions were granted. The trial court dismissed the complaint as “unnecessary litigation,” stating that “everything that’s sought to be accomplished [in case No. 80-1867] can be accomplished [in case No. 79-1104].” The order imposing sanctions levied the sum of $1,232.00 against Pritchett.
Knaebel has appealed both rulings, and the appeals have been consolidated.
I
The Motion To Dismiss
As previously indicated, Heiner based his motion to dismiss on the ground that Knaebel had split a cause of action by
filing a second suit. A single cause of action cannot be divided and made the subject of separate lawsuits.
If a cause of action has been split, the second suit may be abated.
We conclude, however, that Knae-bel’s claim for rescission of the agreement and his claim for inspection under AS 10.-05.240 are not the same cause of action.
The trial court granted the motion to dismiss on the ground that the shareholder inspection sought in cause No. 80-1867 could be achieved by application of the discovery rules in cause No. 79-1104. Though this is true in terms of the eventual production of documents, there is a timing difference between the two options for gaining access to corporate records. Under the discovery provisions of the Alaska Rules of Civil Procedure, a party has thirty days within which to respond to a request for production. Alaska R.Civ.P. 34(b). If production is refused, the requesting party may move for an order to compel under Alaska R.Civ.P. 37(a).
Id.
His opponent then has ten days after service to respond. Alaska R.Civ.P. 77(c). Under AS 10.05.240, production must be made within a “reasonable time,” and the period contemplated will in many circumstances be considerably shorter than the time for production prescribed by the civil rules.
The most important difference between the discovery rules and the statutory shareholder inspection right, however, is the penalty for nonproduction available under the latter. Under AS 10.05.243,
the penalty for refusing to allow inspection is ten percent of the value of the shares owned by the party making the inspection demand. This can be a very significant sanction. By contrast, the only possible liability incurred for objecting or failing to respond to a discovery request is the reasonable cost incurred by the requesting party in obtaining an order compelling production. Alaska R.Civ.P. 37(a)(4).
The legislature has given shareholders of record inspection rights under the statute. The fact that a shareholder may also have discovery rights when engaged in a lawsuit with a particular corporation does not eliminate his statutory right.
We conclude, therefore, that the court erred in dismissing case No. 80-1867.
II
The Imposition Of Sanctions
A court is authorized to assess costs and attorney’s fees against an offending attorney or party for infractions of the civil rules.
We can perceive no infraction here and therefore the sanctions must be reversed.
(a) For any infraction of these rules, the court may withhold or assess costs or attorney’s fees as the circumstances of the case and discouragement of like conduct in the future may require; and such costs and attorney’s fees may be imposed upon offending attorneys or parties.
Alaska R.Civ.P. 65(b) requires that one seeking a temporary restraining order
give his adversary advance written or oral notice of his application except where specified circumstances exist which make notice impossible.
The intent of the rule is to require the best notice possible consistent with the exigencies giving rise to the need for the temporary restraining order. Pritchett’s October 31, 1980, notification to Strachan was in compliance with the language and the intent of the rule.
The exact details as to time and courtroom of the hearing were unavailable prior to November 3. On October 31, 1980, Pritchett’s secretary had attempted to schedule a hearing but was informed by the clerk of court in Fairbanks that a judge would not be assigned to the case until after it was filed. Without the name of a judge, she was unable to obtain a precise time or courtroom for a hearing arid, consequently, could not forward such information to Strachan.
The new complaint and accompanying motion were filed at 3:17 p. m. on November 3, clearly within the time period encompassed by the “approximately 3:00” language in the notification. Strachan’s departure from the court at about this time was based on his assumption that Knaebel was going to move in the existing case rather than file a new one. This assumption turned out to be mistaken, but the mistake was not produced by any deceptive conduct on the part of Knaebel’s counsel.
REVERSED AND REMANDED for further proceedings.
RABINOWITZ, J., not participating.