Case 3:10-cv-00017-RRB Document 45 Filed 02/25/2010 Page 1 of 11

UNITED STATES DISTRICT COURT

DISTRICT OF ALASKA

ALEUT ENTERPRISE, LLC, )

)
Plaintiff, ) 3:10-cv-00017 JWS
)
vs. ) ORDER AND OPINION
)
ADAK SEAFOOD, LLC, ) [Re: Docket 1-5]
)
Defendant. )
)

I. MATTER PRESENTED
Plaintiff Aleut Enterprise, LLC (“Aleut”) asks the Court to issue a Writ of
Assistance allowing Aleut to take possession of certain real property located on Adak
Island, Alaska, pursuant to its Complaint for Forcible Entry and Detainer (“FED”) found
at docket 1-5. At docket 25, Aleut filed a memorandum in support of its request. At
docket 28, defendant Adak Seafood, LLC (“Adak Seafood”), which is currently in
possession of the property, opposed Aleut’s request. A hearing on the application for a
Writ of Assistance pursuant to Aleut’s FED complaint was held on February 22, 2010.
Before reaching the merits of Aleut’s FED action, the court notes that Aleut filed a
supplemental notice at docket 24 regarding this court’s subject matter jurisdiction over
this action. Aleut indicates that Kjetil Solberg, majority owner of Adak Seafood, “did not
affie as to his immigration status,” and contends that if Mr. Solberg has a “green card”
then he can be deemed a citizen of the state in which he is domiciled pursuant to
28 U.S.C. § 1332(a). Aleut does not cite any Ninth Circuit authority for the above
proposition. Moreover, based on the evidence, it appears that Mr. Solberg is domiciled
 Case 3:10-cv-00017-RRB Document 45 Filed 02/25/2010 Page 2 of 11

in Panama. Accordingly, the court’s order at docket 17, finding “complete” diversity and
denying Aleut’s motions to remand, stands.
II. BACKGROUND
This action concerns the possession of a fish processing plant located at 100
Supply Road, Adak, Alaska, and the buildings and property associated with the plant
(collectively “the Plant”). Aleut holds title to the Plant. In December 2005, Aleut and
Adak Fisheries, LLC (“AF”), an Alaska limited liability company, entered into a Lease
Agreement and Pollock Agreement, effective January 1, 2006. Under the Lease
Agreement (“the Lease”), Aleut agreed to lease the Plant to AF. and AF agreed to
operate the Plant “on a year round basis during all commercially reasonable times of the
year.” The Lease provides in pertinent part:
4. Term. The Initial Term of this Lease shall be for a period commencing not
later than January 1, 2006, (the “Commencement Date”) and ending on
December 31, 2009. AF shall have an option to extend the term of this Lease for
five (5) additional five (5) year terms (each, an “Extended Term”) upon giving
written notice to [Aleut] at least one hundred twenty (120) days before the
expiration of the Initial Term or any Extended Term.1
The Lease further provides that if AF files a petition in bankruptcy or insolvency in any
court it would constitute default and breach of the Lease, and Aleut would have the
option to
(I) Declare AF’s rights terminated and re-enter the Premises and
improvements, using such force as is necessary, and without further notice,
remove all persons deemed to have an immediate right to possession of the
Premises and improvements and AF shall peacefully surrender the same. No
judicial action shall be necessary to effect such termination.2
The Lease further states that “[a]ny modification or extension of this Lease must be
made in writing and executed by both parties hereto,” and that before commencing any
litigation involving the Lease “the parties shall attempt to resolve their differences
through mediation.”3

1
Doc. 23-2 at p. 2.
2
Doc. 23-2 at p. 10.
3
Id. at p. 13.

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In conjunction with the Lease, Aleut and AF entered into a Pollock Agreement
concerning the management of a Pollock allocation received by the Aleut Corporation.
The Pollock Agreement states in part,
1. Plan of Operation. By November 15, 2005, and by every October 1
thereafter, AF will present [Aleut] with a plan of operations for the forthcoming
Pollock season. In addition, by October 1, 2006, AF will present [Aleut] with a
five-year plan of operations for the forthcoming Pollock seasons, which plan will
be updated annually thereafter. These plans will contain a specification of the
number of pounds of Pollock that AF commits to process at the leased Premises
at Adak (the “Committed Amount”), the type of processing to be performed, the
anticipated daily throughput, the type and cost of equipment necessary to attain
that throughput, and the type and number of vessels required to supply the
plant.4
In February 2007, AF took out a loan from Independence Bank for $4.35 million
to make improvements at the Plant. On February 1, 2007, Aleut signed a Commitment
Letter concerning Independence Bank’s loan of $4.35 million to AF. The Commitment
Letter states in pertinent part,
[Aleut] acknowledges and agrees that it is the landlord or grantor of certain
Leases, Contracts, Agreements and/or Licenses to AF.... [Aleut] further agrees
that during the life of the Loan to AF, [Aleut] shall not, under any circumstances
or for any reason, terminate any Lease, Contract, Agreement or License with AF
prior to the expiration of the rent abatement period described below without the
express written consent of Lender.5

....

[Aleut] hereby makes a voluntary relinquishment of known rights and

acknowledges and agrees that the rental payments as provided in Exhibit D to
that certain Lease Agreement by and between [Aleut] and AF are the only
monies it is entitled to and agrees that it shall not take any actions, including the
commencement of a lawsuit to recover said monies or in any way interfere with
or hinder operations of AF during the life of the Loan.6

....

4
Doc. 23-3 at p. 10.
5
Doc. 23-5 at p. 16.
6
Id. at p. 17.

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This letter shall constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and representations, both oral and in writing, with
respect to such subject matter. The terms and conditions of this letter shall
survive the closing.7

The Commitment Letter further provides that no obligations under the loan shall be
dischargeable in bankruptcy.
On February 5, 2007, Aleut signed a “Lessor’s Agreement to Abate and Consent
to Assignment of Adak Seafood Plant Lease and Related Rights for Security Purposes”
(“Consent to Assignment”), under which Aleut consented to AF’s granting to
Independence Bank a lien on AF’s interest in the Lease, the Pollock Agreement, and
other collateral to secure the above-referenced loan.8 In the Consent to Assignment,
Aleut agreed “neither the Pollock Agreement nor the Lease shall be assigned, amended
or modified in any way or extended, terminated or surrendered without Lender’s prior
written consent which Lender, in its sole and absolute discretion, may withhold.”9 The
Consent to Assignment expressly provides that “[i]f there is a conflict between the
Lease or the Pollock Agreement and this Consent and the Security Instruments, this
Consent and the Security Instruments shall govern.”10 The maturity date for the
Consent to Assignment for purposes of AS 34.20.150 is February 3, 2016.11
Between February 2007 and February 2009, AF took out several other loans
from Independence Bank, each of which was purportedly secured by a similar
Commitment Letter and Consent to Assignment from Aleut. The loans, totaling over

7
Doc. 23-6 at p. 1.
8
Doc. 23-7 at p. 1.
9
Id. at p. 3.
10
Id. at p. 3.
11
Id. at p. 4.

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$12,000,000, were used in large part for improvements to the Plant, including
construction of the pollock processing portion of the Plant.12
In 2008 and 2009, AF’s operations were not profitable. On September 11, 2009,
AF filed for Chapter 11 relief.13 On November 12, 2009, the bankruptcy court entered a
stipulated order authorizing AF’s application to sell the Plant free and clear of liens to
Adak Seafood.14 “The sale price was $485,000.00, plus Adak Seafood’s assumption of
the entire obligation owed to Independence Bank.”15 At the time, AF owed
Independence Bank approximately $6,773,000 on outstanding loan obligations.16 Adak
Seafood also agreed to pay Aleut $250,000 for property damage and the minimum
annual rent due for the 2009 calendar year, and to escrow $150,000 for six months of
the minimum annual rent under the lease for the 2010 calendar year. The sale order
specified that the foregoing payments did not amount to a waiver of any claim, right, or
position by Aleut with respect to the Lease.17 Pursuant to the sale order, AF transferred
its interest in the Lease to Adak Seafood subject to the claims and causes of action
asserted in the bankruptcy proceeding. The transfer was not an assumption and
assignment of the Lease under 11 U.S.C. § 365.18
On December 30, 2009, Aleut gave Adak Seafood a notice to quit the Plant
premises not later than December 31, 2009. The notice stated in pertinent part, “You
claim a right to be in possession under a lease agreement (“Lease”) executed between

12
Doc. 30 at p. 2.
13
Doc. 26-2 at p. 2.
14
Id. at p. 6.
15
Id. at pp. 6-7.
16
Doc. 31 at p. 3.
17
Doc. 26-2 at pp. 7-8.
18
Id. at p. 7.

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[Aleut] and [AF]. [Aleut], however, has never consented to any assignment of lease
rights to Adak Seafood, LLC. Further, the lease expires by its terms on 12/31/2009.”19
On January 22, 2010, Aleut filed a complaint against Adak Seafood for forcible
entry and detainer in the Superior Court for the State of Alaska, Third Judicial District at
Anchorage. Thereafter, Adak Seafoods timely removed the action to federal court on
the basis of diversity of citizenship pursuant to 28 U.S.C. § 1332(a)(1). On January 22,
2010, Adak Seafoods also filed a complaint against Aleut for breach of contract, specific
performance, unjust enrichment, and declaratory relief. That action, 3:10-cv-0010 RRB,
is currently before Chief Judge Ralph Beistline. On February 12, 2010, Adak Seafoods
filed an answer to Aleut’s complaint setting forth numerous affirmative defenses and
alleging counterclaims for breach of contract, specific performance, unjust enrichment,
and breach of the duty of good faith and fair dealing.
III. DISCUSSION
This is a civil action pursuant to AS 09.45.070, which provides “[w]hen a forcible
entry is made upon a premises, or when an entry is made in a peaceable manner and
the possession is held by force, the person entitled to the premises may maintain an
action to recover the possession.” Under AS 09.45.070, “[w]hen a tenant occupies a
property after the termination of [a] lease, in defiance of a notice to quit, the landlord
may institute an FED action to regain possession.”20 “This action is summary in nature,
and traditionally the court will recognize almost no affirmative defense or counterclaim.
The sole issue to address is that of possession.”21
FED hearings exist to protect a landlord’s right to possession and to
prevent the use of self-help. They are designed to be uniquely expedited
processes that ensure a fair hearing on the issue of possession. But they often
lack many of the procedural aspects, such as the right to a jury, discovery,

19
Doc. 10-2.
20
Vinson v. Hamilton, 854 P.2d 733, 735 (Alaska 1993).
21
Id. (internal citation omitted).

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preparation time, and procedural continuances, that are needed for a “full and
fair” trial on issues other than possession.22
“One of the justifications for FED actions is the lack of equity held by the tenant-in-
possession.”23 Although an FED action may result in equitable relief, “FED actions are
unsuited for resolution of more complex inquiries, such as when equitable ownership
interests are at stake.”24
Aleut argues that it should be granted a Writ of Assistance to obtain possession
of the Plant because the Lease acquired by Adak Seafoods in the bankruptcy
proceeding expired by its own terms on December 31, 2009, and that no section of the
Consent to Assignment or Commitment Letter altered the length of the initial term of the
Lease. Aleut further argues that AF made a “business decision” not to timely exercise
the Lease’s renewal option, and that Adak Seafoods knew that the Lease had not been
timely renewed when it acquired an interest in the Lease through the bankruptcy
proceeding.
Adak Seafoods opposes the request for a Writ of Assistance on the grounds that
Adak Seafoods has a binding lease with Aleut that has not terminated, and that Aleut
expressly waived any right to terminate the Lease in the Consent to Assignment and
Commitment Letter executed in 2007. Adak Seafoods’ position is that the Commitment
Letter and Consent to Assignment executed by Aleut and AF superseded the terms of
the Lease. In support of its position, Adak Seafoods cites the declaration of Kjetil
Solberg, current Plant and Operations Manager for Adak Seafood and former CEO of
AF. In his declaration, Mr. Solberg states that the intent of the Lease Assignment and
Commitment Letter were “to waive any termination or surrender rights or arguments
regarding the Lease, or requirements to renew the Lease, and to subordinate the Aleut's
interest to the Bank, while the Bank’s loan remained in place.”25 Given the self-serving,

22
Chilton-Wren v. Olds, 1 P.3d 693, 698 (Alaska 2000).
23
Kopanuk v. AVCP Regional Housing Authority, 902 P.2d 813, 817 (Alaska 1995).
24
Id. at 816 n.1.
25
Doc. 30 at p. 3.

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conclusory nature of the affidavit, Solberg’s statements are likely entitled to minimal
weight.26
Adak Seafoods also cites the declaration of Robert Catanzaro, Sr., CEO of
Independence Bank, which sets out the various loans Independence Bank made to AF
totaling over $12,000,000 and describes the security agreements entered into by AF,
Aleut, and Independence Bank for the loans. In his declaration, Mr. Catanzaro avers
that the “Lease was a necessary, and contemplated, part of the Collateral with regard to
the loans,” and that the Commitment Letter securing the loan “was the result of arduous
and extensive discussions and negotiations” by Independence Bank, AF, and Aleut.27
Mr. Catanzaro further states that the intent and purpose of the section entitled “Waiver
of Rights” in the Commitment Letter was “to ensure the validity and effect of the Aleut
Lease during the terms of the IB loans or so long as the subject IB loans remained
‘open’ and unpaid in full.”28 Mr. Catanzaro also states that a provision entitled “Entire
Agreement” was an express recognition by Aleut “that the terms and conditions of the
Commitment Letter ‘overrode’ and/or superseded any of the terms and conditions of the
Aleut Lease, and had the ‘net effect’ of [Aleut] waiving any requirement in the Aleut
Lease that AF exercise an option to extend the Initial Term of the subject lease so long
as the [International Bank] loans remain ‘open’ and unpaid in full.”29
Aleut argues, on the other hand, that the following language in the Consent to
Assignment precludes any assertion that the Commitment Letter or Consent to
Assignment altered AF’s duty to exercise its renewal right:
1. Landlord hereby consents to Borrower’s granting to lender a lien on
Borrower’s interest in the Lease of the Property, the Pollock Agreement and the
other Collateral by executing the Security Instruments in favor of Lender. The
assignment of the Lease and the Pollock Agreement under the Security
Instruments constitutes an assignment for security purposes. Notwithstanding

26
Nehad v. Mukasey, 535 F.3d 962, 968 (9th Cir. 2008).
27
Doc. 31 at p. 4.
28
Id.
29
Doc. 31 at pp. 5-6.

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anything to the contrary contained in any Security Instrument, Borrower shall at

all times remain liable under the Lease and the Pollock Agreement to perform all
of its duties and obligations thereunder to the same extent as if there had been
no assignment contained in the Security Instruments. . . .30
In interpreting the provisions of a contract, it is the court’s duty “to ascertain and
give effect to the intentions of the parties.”31 To determine the parties’ intentions, the
court looks “not only to the written contract, but also to extrinsic evidence regarding the
parties’ intent at the time the contract was made.”32 One of the key questions in this
case then is what meaning AF, Aleut, and Independence Bank attached to the terms of
the Commitment Letter and Consent to Assignment at the time these agreements were
made. Because complex factual disputes exist as to the parties’ intent, a summary FED
proceeding as to possession is inappropriate here.33
In addition, this action is unsuited for resolution in a FED proceeding because
potential equitable interests are at stake.34 Adak Seafoods contends that its
predecessor, AF, borrowed and invested millions of dollars improving the Plant based
on Aleut’s written promise that the Lease would not terminate during the life of the loans
used to improve the Plant, which in Adak Seafoods’ view “prevents any purported
termination or surrender of the Lease, both contractually and under the equitable theory
of specific performance.”35 Adak Seafoods further argues that in purchasing AF’s
interests in the Plant and assuming AF’s $6,773,000 in outstanding loan obligations,
Adak Seafoods relied on Aleut’s representations in the Commitment Letter and Consent
to Assignment that the Lease would not expire until the loans were paid in full. Adak
Seafoods’ arguments are persuasive for it is far more plausible that Adak Seafoods

30
Doc. 30-3 at p. 1.
31
Sprucewood Investment Corp. v. Alaska Housing Finance Corp., 33 P.3d 1156, 1162
(Alaska 2001) (internal quotation and citation omitted).
32
Id.
33
Id. at 1161; Kopanuk, 902 P.2d at 816 n.1.
34
Kopanuk, 902 P.2d at 816 n.1.
35
Doc. 28 at p. 2.

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agreed to assume AF’s debt based on the proposition that the Lease would remain in
effect until the loans were paid in full, rather than on the proposition that the Lease
would expire one month after it assumed AF’s loan obligations.
In its answer, Adak Seafoods raises counterclaims for specific performance and
unjust enrichment. Both claims allege that AF incurred debt to make significant
improvements to the Plant as required by the Lease; AF incurred the debt and Adak
Seafoods assumed that debt in reliance on Aleut’s representations in the Commitment
Letter and Consent to Assignment; Aleut benefitted from the improvements to the Plant;
and as a result, Adak Seafoods has an equitable interest in maintaining possession of
the Plant and exercising its rights under the Pollock Agreement.
As the Supreme Court recognized in Kopanuck, “FED actions are unsuited for
resolution of more complex inquiries, such as when equitable ownership interests are at
stake.”36 Here, because the affirmative defenses and counterclaims raised by Adak
Seafoods are complex and go to the heart of the question of possession and because
equitable interests in the property are at stake, this lawsuit is unsuitable for a summary
FED disposition.37
In its opposition to the FED action, Adak Seafoods indicates that it has posted
adequate security for a continuance of a FED action under AS 9.45.120. At oral
argument, Aleut indicated that adequate security might still be an issue. Given that the
court has concluded that the claims asserted herein are unsuitable for a FED action, it is
unclear whether security remains an issue. In any event, the parties are free to bring
motions regarding the necessity for or adequacy of security.
V. CONCLUSION
For the reasons set out above, plaintiff’s motion for Writ of Assistance pursuant
to the FED complaint at docket 1-5 is DENIED. By agreement of the judges, this case
is transferred to Hon. Ralph R. Beistline for all further proceedings. Counsel should

36
Kopanuk, 902 P.2d at 816 n.1.
37
Vinson, 854 P.2d at 736.

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confer and consider whether to seek consolidation of this action with Case No. 3:10-cv-
00010 RRB.
DATED at Anchorage, Alaska, this 25th day of February 2010.

/s/ JOHN W. SEDWICK

UNITED STATES DISTRICT JUDGE

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