Bachner Company, Inc. v. Alaska Department of AdministrationAnnotate this Case
The Bachner Company leased office space to the State of Alaska. The lease stipulated that the State would occupy 15,730 square feet of space but would not have to pay rent on 1,400 square feet of that space during the lease’s initial ten-year term. The lease further specified that if it was extended beyond the initial term the parties would negotiate a rate for the free space and the State would pay for it. Toward the end of the initial term the State exercised its first renewal option and opened negotiations with the company over the free space’s value. The parties retained an expert to value the space, but the State questioned his methods and conclusions. The State also resisted the company’s claim that the State should begin paying rent for additional space, not identified in the lease, that the company contended the State had been occupying. The parties failed to reach agreement, and the State did not pay rent for any of the extra square footage. Eventually the State executed a unilateral amendment to the lease based on the expert’s valuation and, ten months after the end of the lease’s initial term, paid all past-due rent for the formerly free space identified in the lease. The company filed a claim with the Department of Administration, contending that the State had materially breached the lease, the lease was terminated, and the State owed additional rent. A contracting officer rejected the claim, and on appeal an administrative law judge found there was no material breach, the lease had been properly extended, and the company had waived any claim regarding space not identified in the lease. The Commissioner of the Department of Administration adopted the administrative law judge’s findings and conclusions. The superior court affirmed the Commissioner’s decision except with regard to the space not identified in the lease; it directed the company to pursue any such claim in a separate action. Both parties appealed to the Alaska Supreme Court. After review, the Supreme Court concluded the administrative law judge's findings were supported by substantial evidence, and because the lease did not terminate under the Supreme Court's interpretation of it, the Court affirmed the Commissioner's decision except with regard to the company's claim to rent for space not identified in the lease. The Court concluded that, to the extent it sought rent after the end of the initial term, it was not waived by the document on which the administrative law judge relied to find waiver. Only that issue was remanded to the Commissioner for further consideration.