ANCHORAGE, Alaska (Legal Newsline) - An Alaska man who was elected to the board of a tribal corporation was properly barred from taking his seat because he refused to sign a confidentiality agreement, the Alaska Supreme Court ruled, rejecting as unripe for adjudication his argument the clause was overbroad and prevented him from disclosing wrongdoing.
Lucas Borer served on the board of the Eyak Corporation, a state-recognized village corporation, from 1985 to 1989 but was defeated in several elections between 2012 and 2018. In 2019 he received enough votes to take a seat on the board but objected to the corporation’s bylaws. Concerned that voters would be disenfranchised if their candidate was denied a seat on the board, the corporation agreed to amend the bylaws to address Borer’s complaints.
The corporation gave Borer a deadline of July 11, 2019, to sign the revised agreement but he never responded so Eyak placed a substitute on the board. Borer sued, but a trial court granted Eyak summary judgment plus 20% of its attorney fees, or $17,780.
The Alaska Supreme Court, in an April 1 decision, upheld the dismissal.
On appeal, Borer argued that the bylaws were illegal and thus unenforceable. He also said he couldn’t sign the confidentiality agreement because it didn’t allow reporting of illegal activity. The Supreme Court said that clause was eliminated in the 2019 revision at his insistence, and the new version is the one he was required to sign.
The high court also dismissed Borer’s arguments based on governance rules that had not yet been applied, saying they weren’t ripe for adjudication. It cited similar decisions, including one dismissing a lawsuit challenging the constitutionality of a marijuana statute that hadn’t been enforced.
Focusing on the confidentiality clause, the court noted that as a private corporation, board members have a duty under Alaska law to disclose “all germane or material information” to shareholders.” We presume Eyak’s board is aware of this general fiduciary duty and that the confidentiality agreement will be construed and applied in light of this duty,” the court said.
The court dismissed comparison to another decision where a confidentiality agreement was struck down as overbroad, saying in that case a shareholder was seeking specific information as opposed to Borer’s general concern about keeping information secret. Eyak’s confidentiality clause could legitimately cover materials protected by the attorney-client privilege, for example.
Borer also challenged a clause allowing directors to be sanctioned by the loss of travel expenses or access to confidential documents. The court said denial of travel expenses wouldn’t be a hardship if the director could attend meetings via telephone and it couldn’t address the question of document access without a specific example.
Finally, the court rejected Borer’s challenge to the award of legal fees, which he said should be struck down because he didn’t stand to gain anything personally if he won. “This is incorrect,” the court said, since he would have gained a seat on the board along with compensation as a director without having to comply with the bylaws.
“There is no doubt that Borer will suffer some hardship if we decline to adjudicate his claims: he will lose his legal claim to a directorship on Eyak’s board and the incumbent rights and duties that he would gain as a director,” the court concluded. “Yet it is worth noting that Borer has contributed to this hardship himself by rejecting the agreements out of hand without waiting to see whether they would actually place him in a position of being unable to fulfill his fiduciary duties.”