Court rules against dissident Huna shareholders

Original suit claimed voting irregularities were an attempt to prevent directors' recall

Posted: Tuesday, January 25, 2005

Dissident Huna Totem shareholders are not entitled to financial damages from the corporation for alleged recall election irregularities by corporation directors six years ago, the Alaska Supreme Court has ruled.

Petersburg attorney Fred Triem argued before justices in March that directors "placed their hands over the ballot box" to keep from being recalled in 1999. But in a decision issued last week, Chief Justice Alexander Bryner wrote that the high court found Juneau Superior Court Judge Patricia Collins correctly denied a claim for damages in January 2003.

Huna Totem's directors and its chief operating officer acted in good faith by relying on experts for actions that plaintiffs characterized as "flagrant misconduct," Bryner wrote.

"While we regret having to settle our differences in a court of law, the Supreme Court's decision confirms the board of directors' commitment to its shareholders and confirms our certainty that the corporation did not act in an illegal manner," Huna Totem CEO Robert Wysocki said Monday.

The suit, seeking compensatory and punitive damages, was filed by Gregory O. Brown and Karl H. Greenewald Jr. It named directors Albert Dick, Bertha M. Franulovich, Sam M. Hanlon Jr., Ernest W. Hillman Jr., Ernest Jack, William O. "Ozzie" Sheakley and Peter D. Hocson.

The dispute goes back to a disagreement over a land deal directors voted on in 1997. The corporation is invested in tourism operations, commercial real estate, banking and managed investments.

Greenewald was then a director. The controversy led to an effort to recall directors through proxy vote at the corporation's 1999 annual meeting. Directors voted at the 2004 annual meeting to no longer pursue the land deal in favor of other investments, Wysocki said, pointing to recent tourism successes.

Arguing to overturn Collins' finding that errors in the election were inadvertent, Triem noted that proxy forms did not provide a box where shareholders could vote in favor of the recall.

Attorney Barbara Nault, representing the defendants, pointed out that many shareholders, nonetheless, voted to recall the directors.

Brown and Greenewald could not be reached for comment Monday.

While hearing oral arguments last March in Juneau, Bryner said that finding someone's voting rights had been violated would automatically lead to a finding that they were harmed. In the ruling, he wrote for the court that the plaintiffs had failed to show they were entitled to damages.

"Here the court carefully considered all relevant evidence concerning the inadvertent nature of the proxy violations at issue and the defendants' good-faith reliance on competent expert advice," Bryner wrote. "The court likewise considered the absence of any evidence of actual economic harm."

Wysocki said Huna Totem leaders are happy to have successfully concluded the matter. "What this means for us - the corporation and the 1,200 shareholders we represent - is that we can put the issue behind us and focus our time and resources on growing the corporation."

He added that during the past several years the corporation has prevailed in simultaneous legal actions filed by dissident shareholders against the corporation and the Shareholders' Settlement Trust.

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