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ALASKA HOUSING FINANCE CORP. v. SALVUCCI12/19/1997
I. INTRODUCTION
This is an appeal by the Alaska Housing Finance Corporation (AHFC) from certain rulings of the superior court in favor of former AHFC employee Pat Salvucci. The superior court directed a verdict for Salvucci on his breach of contract claim, ruled that AHFC's termination of Salvucci gave rise to a claim under the Alaska Whistleblower Act,
and held that AHFC was not immune from punitive damages under the Act. The jury found AHFC in violation of the Whistleblower Act and awarded Salvucci compensatory and punitive damages. Salvucci also was granted prejudgment interest on lost past and future wages and benefits as well as on punitive damages. We remand the award of prejudgment interest on lost past and future wages and benefits, reverse the award of punitive damages, and affirm in all other respects.
II. FACTS AND PROCEEDINGS
In 1989 Salvucci was hired by AHFC as its Internal Auditor. At the time of his hire, Salvucci signed a letter stating that his "employment [at AHFC] is at all times subject to AHFC Personnel Rules and any future amendments to those rules." The Personnel Rules divided employees into two groups, the "Regular" and "Executive" Service. Personnel Rule, Section 2.01.0. While the former could be terminated only for cause and only following a disciplinary procedure, the latter could be terminated at will by the Executive Director. All Regular Service employees received contractual employment protection, set forth in Rules 4, 11 and 13; only Executive Service employees did not receive the protection afforded by these rules.
The Executive Service became a part of AHFC Personnel Rules in August 1989 when AHFC's Board of Directors adopted Personnel Rule 2, Section 2.03.03. One of the positions designated Executive Service by Section 2.03.03 was the Internal Auditor position. Regular Service was defined as "positions within the Corporation that are not in the executive service."
The AHFC's Audit Charter, authored by Salvucci and adopted in June 1990, defined the duties and role of the Internal Auditor. The Charter set forth the reporting procedure, specifically that the Internal Auditor reported administratively to the chief executive officer and functionally to the Audit Committee of the Board of Directors. Further, it mandated that the Internal Auditor's removal required the concurrence of the Audit Committee.
In 1992 AHFC Personnel Rule 2.03.03 was amended. The amended rule shortened the list of Executive Service positions and omitted the Internal Auditor position from the list of positions in the Executive Service. The definition of Regular Service was not changed.
In July 1993 Will Gay became AHFC's Executive Director. In November Gay placed Salvucci on administrative leave, subject to an approval vote by the Audit Committee. In December the Audit Committee concurred in Gay's decision and Salvucci's employment was terminated. Salvucci was not given any reason for his termination and was not afforded a prior disciplinary process, as required for the termination of Regular Service employees.
Salvucci filed a grievance, pursuant to Personnel Rule 13. AHFC refused to consider his grievance and also declined to consider
his appeal of the grievance refusal, both instances on the ground that the Personnel Rules were inapplicable to the position of Internal Auditor.
After the denial of his internal remedies, Salvucci filed a complaint in superior court alleging breach of contract, breach of the implied covenant of good faith and fair dealing, due process violations, and violation of the Whistleblower Act.
The superior court deni
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