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1 John R. McDowall (WSBA # 25128) The Honorable Donald MacDonald IV

Jason M. Kettrick (WSBA #35459)
2 Carney Badley Spellman, P.S.
701 Fifth Avenue, Suite 3600
3 Seattle, WA 98104
Telephone: 206-622-8020
4 Attorneys for ADAK Seafood, LLC

6
UNITED STATES BANKRUPTCY COURT
DISTRICT OF ALASKA (ANCHORAGE)
7
In re:
8 NO. 09-00623-DMD
ADAK FISHERIES, LLC, an Alaska limited Chapter 11
9 liability company

10 Debtor.

11 ADAK SEAFOOD, LLC, a Delaware

limited liability company,
12 Adv. Proceeding No. __________________
Plaintiff,
13 vs.

14 ADAK FISHERIES, LLC, an Alaska limited

liability company,
15
Defendant.
16
ADAK SEAFOOD, LLC’S COMPLAINT FOR BREACH OF CONTRACT, SPECIFIC
17 PERFORMANCE, CONSTRUCTIVE TRUST, AND DECLARATORY RELIEF

18 COMES NOW Plaintiff, Adak Seafood, LLC, a Delaware limited liability company

19 (“Adak Seafood”), by and through its undersigned counsel, and hereby alleges and avers by

way of its Complaint against Defendant Adak Fisheries, LLC, (“Adak Fisheries”) as follows:
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ADAK SEAFOOD, LLC’S COMPLAINT FOR BREACH OF

CONTRACT, SPECIFIC PERFORMANCE, CONSTRUCTIVE
TRUST AND DECLARATORY RELIEF – 1

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1 I. JURISDICTION & VENUE

2 1. This adversary proceeding arises out of, and is related to that certain pending

3 Chapter 11 bankruptcy proceeding more commonly known, and identified, as In re ADAK

4 Fisheries, LLC, Case No.: 09-00623. As such, this Complaint is brought pursuant to Rule

5 7001.

2. This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1334(b)

6
and 2201, respectively. Further, this is a core proceeding pursuant to 28 U.S.C. §157(b)(A)
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and (N).
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3. Venue is proper in the District of Alaska pursuant to 28 U.S.C. § 1408.
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II. PARTIES
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4. Plaintiff Adak Seafood, LLC is a duly organized and existing Delaware
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limited liability company active and in good standing, which is registered to do business in
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Alaska. Adak Seafood, LLC operates a fish processing plant located at 100 Supply Road,
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Adak, Alaska 99456.
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5. Defendant Adak Fisheries, LLC (“Adak Fisheries”) is the Chapter 11 debtor-
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in-possession, and, upon information and belief, a duly organized and existing Alaska limited
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liability company, active and in good standing, formerly doing business at 100 Supply Road,
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Adak, Alaska, and 800 East Diamond Boulevard, Suite 3-400, Anchorage, Alaska.
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III. FACTS AND ALLEGATIONS
19
6. Adak Seafood realleges and incorporates the allegations set forth in
20 Paragraphs 1 through 5 above as if the same were set forth more fully herein.

ADAK SEAFOOD, LLC’S COMPLAINT FOR BREACH OF

CONTRACT, SPECIFIC PERFORMANCE, CONSTRUCTIVE
TRUST AND DECLARATORY RELIEF – 2

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1 7. On or about September 11, 2009, Debtor/Defendant Adak Fisheries

2 commenced the instant Chapter 11 proceeding by filing a Voluntary Petition in this Court.

3 8. On or about November 10, 2009, via Order of this Court (the “Sale Order,”

4 Docket No. 149), Plaintiff Adak Seafood purchased all of the assets of Debtor/Defendant

5 Adak Fisheries, including the fish processing plant now being operated by Plaintiff. The Sale

Order, a true and correct copy of which is attached hereto as Exhibit 1, contemplated
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execution of an Asset Purchase Agreement (“APA”), Lease Assignment, and other
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conveyance documents. The Sale Order also attached and specifically incorporated the
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subject APA, except as specifically modified in the Sale Order.
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9. On or about November 25, 2009, Adak Fisheries executed a formal Lease
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Assignment in favor of Adak Seafood pursuant to the Sale Order and the APA. Rather than
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execute the APA attached as Exhibit A to the Sale Order, however, on November 25, 2009,
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Adak Fisheries furnished Adak Seafood with a Bill of Sale. Adak Fisheries also executed a
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Manager’s Certificate as part of this conveyance.
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10. Adak Seafood informed Adak Fisheries on or about November 25, 2009 that it
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expected a signed APA, and delivered a signed APA to Adak Fisheries as part of the purchase
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of Debtor’s assets. The closing of the sale transaction was conditioned on the APA being
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signed by both parties. The Lease Assignment was delivered, and funds were wired by Adak
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Seafood on November 25, 2009 so that Adak Seafood could gain access to the fish processing
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plant and commence operations.
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ADAK SEAFOOD, LLC’S COMPLAINT FOR BREACH OF

CONTRACT, SPECIFIC PERFORMANCE, CONSTRUCTIVE
TRUST AND DECLARATORY RELIEF – 3

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1 11. Defendant Adak Fisheries and/or its principals initially promised to sign the

2 APA in conjunction with the other sale documents, but later refused to sign it. On multiple

3 occasions, Adak Fisheries subsequently promised to execute the APA, but it has never done

4 so. The Sale Order includes a provision at paragraph 19 requiring the parties to take all

5 necessary actions to effectuate the purposes of the sale and the APA. Adak Seafood has

pointed this out to Adak Fisheries on multiple occasions, but it still refuses to execute the
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APA.
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12. Adak Seafood wired funds to Adak Fisheries pursuant to the Sale Order and
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APA in specific reliance on Adak Fisheries’ commitment to pay specific debts, obligations
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and creditors spelled out in the APA, among other things. Adak Seafood also assumed $6.7
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million in bank debt in consideration for such commitments by Adak Fisheries.
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13. Representatives of Adak Fisheries made representations in the Manager’s
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Certificate that all assets had been conveyed to Adak Seafood pursuant to the Sale Order and
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the APA, when in fact, that was not the case. Adak Seafood relied specifically on these
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representations, among other things, in wiring funds to Adak Fisheries, as called for in the
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APA and the Sale Order.
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14. Upon information and belief, Defendant Adak Fisheries intends to not pay for
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certain obligations and creditors that it is required to pay in the Bankruptcy Estate with funds
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tendered by Adak Seafood pursuant to the Sale Order and the APA, including certain
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obligations to the Internal Revenue Service that are specifically enumerated in the APA.
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ADAK SEAFOOD, LLC’S COMPLAINT FOR BREACH OF

CONTRACT, SPECIFIC PERFORMANCE, CONSTRUCTIVE
TRUST AND DECLARATORY RELIEF – 4

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1 15. Upon information and belief, Defendant Adak Fisheries also intends to hold or

2 remit to third parties certain sums that are due to Plaintiff Adak Seafood pursuant to the Sale

3 Order and the APA because they were assets of Debtor that Adak Seafood purchased.

4 Specifically, Adak Fisheries seeks to disburse a portion of certain escrowed funds known as

5 the Seoil escrow to an unsecured creditor, and to hold a portion of such funds. These funds

rightfully belong to Adak Seafood as part of the asset sale, pursuant to the Sale Order and the
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APA.
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16. Defendant Adak Fisheries held, and continues to hold, certain funds in escrow
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for the benefit of Plaintiff Adak Seafood, including the Seoil escrow.
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17. Plaintiff Adak Seafood has, and continues to, suffer damage as a result of
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Defendant’s failure to comply with the Sale Order and the APA, its failure to execute the
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APA, and its failure/refusal to convey certain assets to plaintiff or pay certain obligations
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with funds remitted by plaintiff pursuant to the Sale Order and the APA.
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IV. COUNT I - BREACH OF CONTRACT
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18. Plaintiff Adak Seafood realleges and incorporates the allegations set forth in
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Paragraphs 1 through 17 above as if the same were set forth more fully herein.
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19. The above-described actions and omissions of Defendant constitute a breach
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of the Asset Purchase Agreement approved via this Court’s Sale Order. Included among
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these breaches are specific misrepresentations in the Manager’s Certificate executed by Adak
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Fisheries regarding assets that were conveyed to plaintiff pursuant to the Sale Order and the
20 APA.

ADAK SEAFOOD, LLC’S COMPLAINT FOR BREACH OF

CONTRACT, SPECIFIC PERFORMANCE, CONSTRUCTIVE
TRUST AND DECLARATORY RELIEF – 5

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1 20. As a direct and proximate result of the Defendants’ wrongful and willful

2 breaches and misrepresentations, Plaintiff Adak Seafood has been, and continues to be

3 injured, harmed and/or damaged, in an amount to be proven at trial.

4 21. There exists no justifiable issue of either law or fact, and Defendant’s contract

5 breaches are wholly unjustified.

V. COUNT II – SPECIFIC PERFORMANCE

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22. Plaintiff Adak Seafood realleges and incorporates the allegations set forth in
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Paragraphs 1 through 21 above as if the same were set forth more fully herein.
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23. The APA is a legally valid, binding and enforceable contract, which was
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approved by this Court. At all times relevant hereto, Adak Seafood has performed pursuant
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to the terms of the APA and the Sale Order, and has also incurred certain expenditures,
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assumed certain debts, and remitted certain sums for the benefit of Debtor and the Estate, all
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in specific reliance on Defendant’s anticipated execution of the APA, Defendant’s multiple
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promises to execute the APA and Defendant’s other assurances and commitments.
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24. Plaintiff Adak Seafood is entitled to specific performance and execution of the
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APA by Defendant, and specific performance and compliance with the Sale Order.
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25. As a direct and proximate result of the Defendant’s wrongful and willful
17
breach of the APA, refusal to perform, and refusal to comply with the Sale Order, Plaintiff
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Adak Seafood has been, and continues to be injured, harmed and/or damaged, in an amount to
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be proven at trial.
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ADAK SEAFOOD, LLC’S COMPLAINT FOR BREACH OF

CONTRACT, SPECIFIC PERFORMANCE, CONSTRUCTIVE
TRUST AND DECLARATORY RELIEF – 6

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1 VI. COUNT III –BREACH OF IMPLIED COVENANT, DUTY

OF GOOD FAITH AND FAIR DEALING
2
26. Plaintiff Adak Seafood realleges and incorporates the allegations set forth in
3
Paragraphs 1 through 25 above as if the same were set forth more fully herein.
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27. Defendant owes a duty of good faith and fair dealing to Plaintiff Adak Seafood
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under the APA and Sale Order to preserve and/or protect the value of the Estate and all assets
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for Plaintiff’s benefit, to satisfy certain debts and obligations on behalf of Plaintiff and also
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the Estate, and to honor the terms of the APA and the Sale Order.
8 28. Defendant has breached this duty owed to Plaintiff Adak Seafood.
9 29. As a direct and proximate result of the Defendant’s actions and breach,

10 Plaintiff Adak Seafood has been, and continues to be injured, harmed and/or damaged, in an

11 amount to be proven at trial.

12 VII. COUNT IV – PROMISSORY ESTOPPEL

13 30. Plaintiff Adak Seafood realleges and incorporates the allegations set forth in

14 Paragraphs 1 through 29 above as if the same were set forth more fully herein.

15 31. Plaintiff remitted funds to Defendant with the specific understanding that

16 Defendant would pay certain debts pursuant to the Sale Order and the APA. Plaintiff would

17 not have done so unless Defendant had committed to paying creditors called for in the APA.

Rather, Plaintiff would have paid those creditors directly. Plaintiff has also refrained from
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taking specific legal action to date as a result of multiple promises by Defendant to execute
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the APA, which promises were never fulfilled.
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ADAK SEAFOOD, LLC’S COMPLAINT FOR BREACH OF

CONTRACT, SPECIFIC PERFORMANCE, CONSTRUCTIVE
TRUST AND DECLARATORY RELIEF – 7

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1 32. Plaintiff is entitled to specific performance of the APA and the Sale Order, and

2 damages in an amount to be proven at trial.

3 VIII. COUNT IV – CONSTRUCTIVE TRUST

4 33. Plaintiff Adak Seafood realleges and incorporates the allegations set forth in

5 Paragraphs 1 through 32 above as if the same were set forth more fully herein.

34. Defendant Adak Fisheries, through escrow agents, is holding certain escrow
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funds that properly belong to Plaintiff Adak Seafood, including the Seoil escrow. These
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moneys are being held in trust by Defendant, and Plaintiff is entitled to a constructive trust
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regarding these funds.
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IX. COUNT V - DECLARATORY JUDGMENT AND INJUNCTIVE RELIEF
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35. Plaintiff Adak Seafood realleges and incorporates the allegations set forth in
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Paragraphs 1 through 34 above as if the same were set forth more fully herein.
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36. The rights, status, and legal standing of the parties are governed by their
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conduct, the APA, this Court’s Sale Order and applicable law.
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37. A dispute has arisen in connection therewith, and Plaintiff Adak Seafood is
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without an adequate remedy at law. Absent injunctive or declaratory relief, Plaintiff Adak
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Seafood will be irreparably harmed.
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38. A balancing of equities weighs in favor of the requested injunctive and
18
declaratory relief.
19
39. Plaintiff Adak Seafood has reasonably relied upon the parties’ contracts, as
20 well as their course of conduct and dealing, respectively, to its detriment. Adak Seafood is

ADAK SEAFOOD, LLC’S COMPLAINT FOR BREACH OF

CONTRACT, SPECIFIC PERFORMANCE, CONSTRUCTIVE
TRUST AND DECLARATORY RELIEF – 8

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1 entitled to injunctive relief and declaratory relief enforcing the APA, and compelling

2 Defendant Adak Fisheries to perform in accordance with both the APA and the Sale Order.

3 X. PRAYER FOR RELIEF

4 WHEREFORE, Plaintiff Adak Seafood, LLC respectfully prays that this Court enter

5 an order having the effect of a final judgment that provides as follows:

a. Judgment against Defendant on all of its claims.

6
b. An award of damages against Defendant in an amount to be proven at trial,
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with interest.
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c. A declaration and decree of specific performance that the APA is a legally
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valid, binding and enforceable agreement, and shall be executed and performed in full by
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Defendant.
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d. An Order compelling Defendant to comply with the Sale Order and the APA
12
and to convey all assets purchased by Plaintiff.
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e. Imposition of a constructive trust regarding certain escrow funds being held by
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Defendant, for the benefit of plaintiff Adak Seafood.
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f. A temporary, preliminary and permanent injunction restraining and enjoining
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Defendant from disbursing further funds until the APA is executed and honored, and
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Defendant fully complies with the Sale Order.
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g. An award of any and all costs and expenses incurred by Adak Seafood,
19
including without limitation any and all attorneys’ fees, expenses and costs, pursuant to
20 contract, statute or equity.

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CONTRACT, SPECIFIC PERFORMANCE, CONSTRUCTIVE
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1 h. Such other or further relief as this Court may deem fair, just and reasonable

2 under the attendant facts and circumstances.

3 DATED this 8th day of February, 2010.

4 Respectfully submitted,

5 ADAK Seafood, LLC,

By Its Attorneys,
6
CARNEY BADLEY SPELLMAN, P.S.
7
By /s/John R. McDowall
8 John R. McDowall, WSBA No. 25128
Jason M. Kettrick, WSBA No. 35459
9
701 Fifth Avenue, Suite 3600
10 Seattle, WA 98104
Phone: 206-622-8020
11 Email: mcdowall@carneylaw.com
kettrick@carneylaw.com
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ADAK SEAFOOD, LLC’S COMPLAINT FOR BREACH OF

CONTRACT, SPECIFIC PERFORMANCE, CONSTRUCTIVE
TRUST AND DECLARATORY RELIEF – 10

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