Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-akb-3_07-ap-90007/USCOURTS-akb-3_07-ap-90007-0/pdf.json

Parties Involved:
Kenneth Battley
Plaintiff
Last Frontier Air Ventures, Inc.
Defendant

Document Text:

UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF ALASKA

In re: Case No. A06-00358-DMD

VALDEZ HELI-SKI GUIDES, LLC, 

Debtor. 

 

Chapter 7

KENNETH BATTLEY, TRUSTEE,

 Plaintiff, 

v.

LAST FRONTIER AIR VENTURES,

INC., 

Defendant.

Adversary No. A07-90007-DMD

MEMORANDUM DECISION

This is a contract dispute arising out of the defendant’s breach of a prepetition

settlement agreement with the debtor, Valdez Heli-Ski Guides, L.L.C. (“VHSG”). After

VHSG filed its chapter 7 petition in September, 2007, trustee Kenneth Battley initiated this

adversary proceeding to collect the settlement amount. Battley’s complaint alleges that this

court has jurisdiction and the defendant has admitted the jurisdictional allegations.

Jurisdiction arises under 28 U.S.C. § 157(c)(2) and the district court’s order of reference. I

find for the plaintiff.

VHSG was a company specializing in helicopter skiing near Valdez. Scott

Raynor was the owner of VHSG. Last Frontier Air Ventures, Ltd. (“Last Frontier”), is a

company that operates helicopters. It is based in Palmer. David King is the president of Last

Frontier. VHSG and Last Frontier entered into two written helicopter service agreements on

Filed On

10/22/07

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1

 Pl.’s Ex. 1.

2

 Pl.’s Ex. 2.

3

 Pl.’s Ex. 3.

4

 Pl.’s Ex. 4.

2

January 4, 2005.1

 Pursuant to the agreements Last Frontier was to provide helicopters for use

with VHSG’s guided ski operations in Valdez. The agreements provided for payment of

$1,500.00 per hour for the use of each helicopter. One helicopter was to be provided from

February 22, 2005, through May 8, 2005. A second helicopter was to be provided from

March 13, 2005, to May 1, 2005. In accordance with the agreements, VHSG paid Last

Frontier a $60,000.00 deposit on February 8, 2005.2

 On February 24, 2005, the parties

entered into an oral agreement for Last Frontier to furnish a third helicopter. VHSG made

an additional $35,000.00 deposit for the third helicopter.3

Last Fronter did not perform in accordance with the agreements. Its first

helicopter was to be in Valdez on February 22, 2005. The helicopter did not arrive until nine

days later, on March 3, 2005. Last Frontier’s second helicopter was also late. Even after it

arrived, Last Frontier failed to provide a pilot. Shortly after Last Frontier’s second helicopter

arrived, the first helicopter suffered mechanical damage and became inoperable. Because

VHSG didn’t have use of the helicopters as needed for its business, it was forced to cancel

clients and refund substantial deposits. Having incurred significant damages in lost profits

from ski operations, VHSG terminated the helicopter agreements it had entered with Last

Frontier on March 15, 2005.4

 VHSG hired another helicopter company for the balance of the

2005 ski season. VHSG was forced to spend $47,720.00 more for these helicopter services

than it would have paid under its agreements with Last Frontier.

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5

 Pl.’s Ex. 5.

6 Id.

7

 Pl.’s Ex. 6.

8

 Pl.’s Ex. 7.

3

Raynor attempted to recover VHSG’s damages from Last Frontier. After

negotiating for some time, he reached an agreement with David King, president of Last

Frontier. The agreement was memorialized in a letter signed February 9, 2006, by Raynor

and February 10, 2006, by King.5

 Pursuant to the agreement, Last Frontier was to pay VHSG

$20,000.00 immediately and $20,000.00 on March 20, 2006. The agreement provided that

payment was “in resolution of any and all claims either party may have arising out of or in

any way relating to the Helicopter Services Agreement entered by Last Frontier Air Ventures

and Valdez Heli-Ski Guides.”6

 The agreement also contained a mutual release.

Last Frontier did not make the first payment of $20,000.00. On March 14,

2006, VHSG’s attorney sent a demand letter to King threatening legal action to collect

$195,000.00 in damages if Last Frontier didn’t fund the settlement.7

 King responded with

a letter rejecting the settlement and threatening to deposit a $30,000.00 retainer with his

attorney to fight VHSG’s claim.8

VHSG filed for chapter 7 relief on September 5, 2006. Kenneth Battley is the

duly appointed Chapter 7 trustee for the debtor. Battley initiated this adversary proceeding

on February 20, 2007, to recover the settlement amount from Last Frontier. Last Frontier

filed an answer in this proceeding which denies the $40,000.00 settlement agreement was

reached, but admits no portion of that debt has been paid. A trial of this matter was

scheduled for October 18, 2007. Last Frontier’s counsel appeared, but King did not attend

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9 K & K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702, 714 (Alaska 2003), citing Nat’l Bank of

Alaska v. Warfle, 835 P.2d 1167, 1170 (Alaska 1992).

10 Pride v. Harris, 882 P.2d 381, 384 (Alaska 1994).

11 RESTATEMENT (SECOND) OF CONTRACTS § 281(2) (1981).

12 11 U.S.C. § 541(a)(1).

4

the trial. Battley’s counsel introduced exhibits and provided testimony from Raynor in

support of the claim. This matter was then submitted to the court.

Analysis 

VHSG and Last Frontier reached an accord on February 9, 2006, when the

agreement to pay $40,000.00 in settlement of all disputes was reached. “An accord is a

contract between a creditor and debtor for a settlement of the creditor’s claim by some

performance other than that which is due.”9

 “Consideration for an accord exists where

parties settle a good faith dispute.”10 If there is a breach of an accord, the injured party may

enforce either the original contract or the duty imposed by the accord.11 

Last Frontier became a creditor of VHSG when it breached its contracts to

provide helicopters to VHSG during the 2005 Valdez ski season. VHSG suffered substantial

losses as a consequence of the breach. VHSG agreed to accept $40,000.00 from Last

Frontier in lieu of the greater damages it could seek under the helicopter agreements. The

parties settled a good faith dispute. When Last Frontier breached the accord, VHSG had the

ability to sue on the original contracts or enforce the accord.

After VHSG filed chapter 7, its claim against Last Frontier became an asset of

the bankruptcy estate.12 Battley, as chapter 7 trustee, acquired standing to pursue the claim

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13 11 U.S.C. § 704(a)(1).

14 Otto v. Niles (In re Niles), 106 F.3d 1456, 1463 (9th Cir. 1997) (if debt arises under state law, an

award of prejudgment interest is governed by state law); Ford v. Baroff (In re Baroff), 105 F.3d 439, 441 (9th

Cir. 1997) (state law governs contract claims, and prevailing party is entitled to recover attorney’s fees if state

law provides for such an award).

15 Tookalook Sales and Serv. v. McGahan, 846 P.2d 127, 129 (Alaska 1993), citing State v. Phillips,

470 P.2d 266, 274 (Alaska 1970).

16 Diaz v. Silver Bay Logging, Inc., 55 P.3d 732, 737 (Alaska 2002).

17 AS 09.30.070(b).

5

on behalf of the estate.13 In the exercise of his business judgment for administering this

estate, Battley has chosen to enforce the accord rather than seek to recover a potentially much

larger claim for damages on the original helicopter agreements. Battley is entitled to

damages for Last Frontier’s breach of the accord, in the sum of $40,000.00.

This claim is governed by state law. Battley is entitled to recover interest and

attorney’s fees if permitted under state law.14 In Alaska, all damages “should carry interest

from the time the cause of action accrues, unless for some reason peculiar to an individual

case such an award of interest would do an injustice.”15 Further, Alaska Civil Rule 82

provides for an award of attorney’s fees to a prevailing party. There are some exceptions

to Rule 82, but breach of contract claims are within its scope.16 State law permits Battley,

as the prevailing party, to recover prejudgment interest as well as attorney’s fees.

Prejudgment interest accrues from the earlier of the day process is served on

the defendant or the day the defendant receives written notification that an injury occurred

and that a claim may be brought against it.17 In this case, Last Frontier received VHSG’s

attorney’s demand letter on March 14, 2006. Prejudgment interest on the $40,000.00

settlement will be calculated from the date of the demand letter. Further, as none of the

helicopter agreements or the accord subsequently entered provided for a contractual rate of

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18 AS 09.30.070(a).

19 Ak. R. Civ. P. 82(b)(4).

6

interest, both pre- and post-judgment interest will be calculated at the rate provided by

Alaska statute for the year judgment is entered.18 The applicable statutory rate for 2007 is

9.25%. Last Frontier’s first payment of $20,000.00 was outstanding at the time VHSG’s

demand letter was served. Prejudgment interest at the rate of 9.25% accrues on that amount

for six days, from the date of the demand, March 14, 2006, through March 20, 2006, when

the second payment was due per the accord. Prejudgment interest for this six day period is

$30.41. Prejudgment interest accrues on the full $40,000.00 from March 20, 2006, through

the date of this memorandum, October 22, 2007. That sum is $5,889.58. Total prejudgment

interest through October 22, 2007, is $5,919.99. Prejudgment interest will continue to accrue

at the rate of $10.14 per diem through the date judgment is entered in this proceeding.

Alaska Civil Rule 82(b)(1) contains a schedule for calculating an attorney fee

award on a money judgment. However, in this case I feel it is more appropriate to award

Battley his reasonable, actual attorney’s fees under Civil Rule 82(b)(4). The (b)(1) schedule

would provide for a fee award of more than $8,000.00 on a simple contract case. Under

subsection (b)(4), a plaintiff recovering a default judgment may be awarded fees using either

the schedule provided in (b)(1) or its “reasonable actual fees which were necessarily

incurred, whichever is less.”19 Here, the defendant failed to appear for trial and the matter

became, essentially, a default prove up. Battley will therefore be awarded his reasonable,

actual attorney’s fees in this matter. His counsel will be given 10 days to file an itemization

of fees incurred in this case. The court will review the fees and thereafter enter a final

judgment.

An appropriate order will be entered.

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DATED: October 22, 2007.

BY THE COURT

/s/ Donald MacDonald IV 

DONALD MacDONALD IV

United States Bankruptcy Judge

Serve: E. LeRoy, Esq. 

C. Johansen, Esq. 

P. Gingras, Adversary Case Manager 

10/22/07

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