Opinion ID: 2585937
Heading Depth: 3
Heading Rank: 2

Heading: Proceedings Before the Arbitrator

Text: In December 2002 Alaska Sales and Service brought an action against Kinn and Singletary, asserting a number of claims, including misrepresentation and breach of contract. Alaska Sales and Service's complaint also sought enforcement of the real estate contract's arbitration provision, and in March 2003 Kinn and Alaska Sales and Service agreed to arbitration. [2] Singletary did not sign the stipulation regarding arbitration, but he was a party to the original contract providing for arbitration. Kinn and Singletary brought a third-party claim against Hagen in May 2003, but this claim was not included in the arbitration. The arbitrator who heard the case was Paul Davis, an Anchorage attorney.
The dispute was arbitrated in 2003, and the arbitrator issued findings of fact, conclusions of law, and a final award. He subsequently issued supplemental findings of fact and conclusions of law, a revised final award, and a summary of all awards. The initial findings of fact stated that both lots had been contaminated in violation of federal and state environmental laws, and that Kinn and Singletary had intentionally misrepresented substantial and material historical environmental events that Mr. Singletary had direct, personal knowledge of . . . for the purpose of causing [Alaska Sales and Service] to enter into the transactions. The arbitrator further found that both the real estate contract and the asset purchase agreement contained misrepresentations about whether the property was contaminated, and that Alaska Sales and Service reasonably relied on the misrepresentations. In addition to liability under contract, the arbitrator found that each of the defendants had violated AS 46.03.822(a), which imposes strict liability for the costs resulting from an unpermitted release of a hazardous substance. As the arbitrator's opinion noted, the actions of Mr. Singletary in directing employees to shovel up the oiled gravel, place it into opaque bags, deposit[] the bags at the dump and replac[e] the removed gravel with clean gravel taken from a river bed represent[] an intentional violation of state, federal, and, probably, local environmental laws.
The arbitrator found that Mr. Kinn's sins were more of omission rather than commission, but noted that Kinn and Singletary were equally irresponsible in their management of the land because neither of them made any effort whatsoever to understand the functioning of what they owned or what the infrastructure's capabilities and weak points were. Although Kinn and Singletary denied the existence of a partnership, the arbitrator found that they had been partners during their ownership of the property, and that, [a]s partners[,] . . . Mr. Kinn and Mr. Singletary are individually jointly and severally liable for Mr. Singletary's acts and omissions. [3] But elsewhere in the opinion, the arbitrator noted that each had the right to pursue a contribution claim from the other in superior court. [4]
Noting that rescission is available for a party who enters a contract based on justifiable reliance on a misrepresentation, the arbitrator discussed the merits of this remedy: Although I would have the power to reject rescission and award that the defendants [Kinn and Singletary] pay all future clean-up costs, I believe doing so would create an almost unmanageable situation where the defendants would challenge many of the decisions made by [Alaska Sales and Service]. . . . Should that be so, we could confidently expect that the parties would have to again and again return to the court to seek enforcement of my award, all the while generating even more attorney['s] fees and costs. Because a legal remedy is uncertain, I find rescission to be the better course. Rescission seems to be the only fair relief that can be given because of the degree of speculation that all of the parties have had to engage in up to this point in the litigation. There are a number of significant unknowns concerning the extent of contamination and the amount of future costs for investigation, evaluation, and remediation and monitoring. The arbitrator also noted that, insofar as the defendants are concerned, rescission will allow them to take over the remediation of the land on their own terms. The arbitrator therefore rescinded the real estate contract and ordered the defendants to repay . . . the purchase price of the property, less the reasonable rental rate for [Alaska Sales and Service's] use of the property since January 1, 2001 for a total of $1,211,928.00. As noted in the summary of all awards, the defendants were also required to pay several other types of damages: (1) [r]escission [t]ransactional [d]amages of $67,060.00; (2) ongoing rescission damages of interest, which amounted to $308,209.70 as of July 15, 2003; (3) 100% of the ongoing costs of cleaning up Lot 3; (4) eighty percent of the ongoing costs of cleaning up Lot 7; (5) Alaska Sales and Service's costs in bringing the action, including but not limited to litigation attorney's fees of $181,782.50; (6) additional post-award litigation and cleanup costs incurred by Alaska Sales and Service; (7) pre- and post-award interest; and (8) the arbitrator's fee. Alaska Sales and Service was ordered to pay rent of $15,968.00 a month and all utilities while it continued to occupy the land, and was also required to pay twenty percent of the cleanup costs of Lot 7.
In August 2003, shortly after arbitrator Paul Davis issued his supplemental findings, attorney Susan Reeves sent Davis a letter claiming that she had recently learned of undisclosed ties between Davis and Bill Bankston, counsel for Alaska Sales and Service. In her capacity as counsel to Kinn and Singletary, Reeves requested that Davis disclose and describe any business dealings that you presently have, have had in the past year, or anticipate in the next 6 months, with Mr. Bankston or his law firm. Davis sent a letter to Reeves and Bankston stating that he had had prior dealings with the firms representing both sides. He and Bankston had both been involved in Veco Alaska, Inc. v. Alaska Electric Generation & Transmission, Inc., a case that was settled in January 2003. Davis explained that he acted as counsel for a codefendant to Mr. Bankston's client, and noted that [a]lthough our clients were aligned, there were independent interests of my client that were separate from the interest[s] of Mr. Bankston's client. [5] He pointed out that there was one remaining collateral matter, and that if that matter developed into litigation, Mr. Bankston and I will be representing opponents. In addition, Davis noted that he referred bankruptcy cases to a partner of Bankston from time to time, and that Davis's partner, Ron Black, had recently referred a case to Bankston's office because of a conflict of interest. Davis maintained that he d[id] not have reason to anticipate that Mr. Bankston will refer any other cases to me during the next six months. Davis's letter also discussed his dealings with Tom Amodio, a member of Reeves's firm. Davis described Amodio as a friend of mine, in much the same manner that Mr. Bankston has been, and noted that Amodio's wife, Debra Fitzgerald, has performed substantial (and uniformly excellent) legal work for me on and off for close to twenty years, and I hold her as a close friend, even closer than either Mr. Amodio or Mr. Bankston. Amodio had referred several cases to Davis in the past, including one that had settled in the previous year, and Davis ha[d] no reason to think that either Mr. Amodio will or will not refer cases to me within the next year. Davis also asserted that he had used space in Reeves's and Amodio's firm to prepare for a trial when his own firm was in the process of moving. Finally, Davis maintained that he had been approached to handle the present case by both Bankston and Amodio, and that, although he was long time friends with both attorneys, had referred and/or been referred by both, and had personal dealings with both, neither side had raised doubts about his partiality at the outset. In response to this letter, Reeves requested additional information about Davis's work in Veco, including the amount that Davis's firm had billed in that case, and whether Davis had spoken with Bankston about Veco during the arbitration of the present case. Although Reeves claims never to have received a response, the excerpt contains a letter from Davis answering Reeves's questions. In addition to discussing his work in Veco in greater detail, Davis noted that, when negotiating his retainer with the attorneys in the present case, he told the group that because all of them were my friends I would not require that more [than one day's fees] be deposited. Davis addressed the issue whether he was biased toward Bankston because of his work in Veco as follows: Although not solicited by you, it is clear to me that you or your client are concerned that I might have loyalties to Mr. Bankston arising out of the Agrium [6] case. I want to make it perfectly clear that Agrium was not referred to me by Mr. Bankston or anyone in his office. Agrium was referred to me by Rick Baldwin. . . . Just prior to the referral to me, Mr. Baldwin's firm found themselves in a conflict because they represented both AEG & T and Agrium which, as I outlined above, had conflicting interests. Because of the conflict situation his firm was in, it was decided that the AEG & T client would be referred to Mr. Bankston's office, and the Agrium client would be referred to my office. I owe nothing to Mr. Bankston for that referral[;] he, along with myself, were the beneficiaries of Mr. Baldwin's judgment. If you have any questions in this regard, please call Rick Baldwin . . . and I am sure he will confirm what happened. Finally, in support of her argument that Davis was not impartial, counsel for Kinn and Singletary points to an advertisement for a continuing legal education program held in September 2003, which was coordinated by Bankston. The program featured Davis as one of two Anchorage attorneys on the plaintiff's team in a mock trial.