1). the underlying   lawsuit   related to the 1989 Exxon Valdez oil spill.  (1d. at- 14).

7. Exxon now seeks declaratory    relief   or, in the alternative, reformation   of the Settlement Agreement.  (1d. at 4-5).
8. The issue     between    the    parties     IS    how    to   calculate prejudgment   interest.   The parties   dispute   whether,   under   the Settlement Agreement,    prejudgment    interest    would    be   compounded    regardless    of whether     state    law    or   federal    law    applied.    Inherent    to   the   parties’ disagreement   is whether state or federal law would apply.
9. Based on  the  Settlement   Agreement,   Judge   Holland   of the United   States   District  Court   for  the  District  of Alaska  entered  Judgment, with   CIP and  NME entitled  to  recover  prejudgment   interest   at  the  rate  of 10.5% compounded   annually.   (Exh. 2002).  Before Judge  Holland  entered Judgment   on  July    23,   2007,  Exxon  raised  the   issue  whether  the   interest should  be  compounded.  Exxon appealed the Judgment.
10. On April 16,  2007   the  Court of Appeals for  the  Ninth Circuit, in  a  related  case,  Sea   Hawk   Seafood’s   v.  Exxon, No.  05-35468 ruled that state   law would apply. (Exh. P1092).
11. On March  10,   2009    in   the   appeal  of  this   case   the   Ninth Circuit  ruled  that    Judge   Holland  improperly  failed  to   consider  extrinsic evidence  regarding  whether  the   parties  agreed  to  compound  interest.  The Ninth Circuit ruled   that    Judge   Holland did   not   abuse his   discretion in denying   leave to    supplement    the    answer   to    add    a   counterclaim   for reformation.  (Exh. P-11 00).
12. In the meantime, in August of 2007   Exxon filed this state lawsuit – 3AN-07-10901CI.
13. After the    remand   from  the    Ninth  Circuit,  Judge   Holland vacated  the  Judgment   in  the   Federal District  Court case   on  July    13,  2009. On September 10, 2009   Judge Holland issued a stay   until   the   state   court proceedings conclude.  (Exh.11 02).

III.     THE PREJUDGMENT   INTEREST DISPUTE

14. It is important to   understand    the   context of the   dispute leading up to the Settlement Agreement. In two similar cases, Judge Holland had    previously ruled   that    federal law   would govern the    calculation   of Prejudgment   interest under 28 U.S.C. § 1961. That   statute   sets   the T-Bill rate   as the   “default” rate,   although the   court has   the power to vary it in its discretion    under    extraordinary    circumstances.     The     statute    expressly provides that    interest   will be   “compounded annually.”   (Exh. P1000;  Exh. P1001).  Judge   Holland’s   rulings   in   the    previous   cases  had    found  no extraordinary   circumstances   and   applied  the   default  T-Bill rate,   or  4.11% compounded     annually     on     damages    accrued    m     1992,    and     3.54% compounded  annually  on  damages  accrued  in  1993. (Daum 66:16-19).
15. Exxon took the  position that   these prior rulings were correct, that   federal law  should  govern, that   the  T-Bill rate   should be used,  and  that the  rate   should  be  compounded  annually  as  provided by the  statute.  (Daum 43:16-44:10).
16. NME disagreed and  in  late  June    of 2006   filed  a motion in the District  Court,  seeking  to   establish   prejudgment   interest  under  Alaska’s state    prejudgment   interest   statute.   (Exh.  P1006;   see   a/so   Daum 45: 17- 46:24).
17. The Alaska statute in effect at the time of NME’s damages in 1992 and      1993      (A.S.   09.30.070(a),    since   amended)    provides   that prejudgment    interest    IS   10.5% simple   in    the    absence   of   a   contrary agreement.  (Id.)
18. in the motion, NME’s attorney Mr. Weidner argued that   since NME’s claims were based on Alaska state   law, Alaska state   law should also govern the   calculation   of prejudgment   interest.  Thus NME requested that the   court “apply the   state    statutory   prejudgment   interest rate   of 10.5%.” (Exh. P1006.0035).
19. in the alternative, Mr. Weidner argued  that,   assuming  Judge Holland continued  to  apply federal law,  the  court  should use the  prime rate or  “some other federal standard,  compounded  annually”  based on equitable principles.   (Id.)  Judge   Holland denied the  motion as   premature.   (Daum 46:25-47:11).
20. SETTLEMENT NEGOTIATIONS
21. On June 29,   2006   Mr.  Weidner wrote a letter to Mr.  Daum initiating serious discussions that led   to the   settlement.   (P100S; see  also Daum 42: 17-22).
22. Mr. Weidner was   the   primary negotiator on behalf of NME. Mr.  Daum was the primary negotiator on behalf of Exxon.
23. during negotiations, Mr. Weidner and   Mr.  Daum exchanged numerous  proposals.   There was   mention of both    simple and   compound interest,   and    there was    mention of both    state    and    federal prejudgment interest rates.
24. Needless to say,  the    parties   also    ran    various   scenarios regarding the prejudgment   interest rate.   Again, there  were computations  of simple interest  and   compound  interest,  as  well  as  computations  under  state law  and  various scenarios  under  federal law.
25. in early September of 2006   Mr.  Weidner called Mr.  Daum and    asked   if  Exxon  would  be   interested   in   a   settlement   modeled  on   a previous   settlement   between   Exxon  and    Sea   Hawk,  where  the   issue    of prejudgment  interest  would be  reserved  for  Judge  Holland to  decide, and  if necessary,  for the  Ninth Circuit Court of Appeals to  decide.
26. On September   11,   2006    Mr.   Weidner wrote to Mr.  Daum with   the  settlement   proposal  that   the  parties  settle the   principal  amount  of damages  and   allow Judge  Holland to  resolve the   issue   of “computation  and assessment   of prejudgment  interest”.  (Exh. P1030.0002).
27. after consultation with    Exxon,   Mr.   Daum   accepted   the: substance   of Mr.  Weidner’s letter and   agreed to leave the   determination of prejudgment interest to the District Court. (Daum 68: 16-69:2; 69:25-70:5).
28. in his testimony, Mr. Daum was   credible on  this   point, that it  was  his  belief that   Judge  Holland would rule   consistently  as  he  had   done previously,  and   apply federal law  in  a  compounded  interest  rate.   Mr.  Daum was   clear   in his position that   should state   law would apply, then   the   10.5% interest rate would be simple.
29. Mr. Weidner’s testimony   does    not   contradict   Mr.   Daum’s recollection of events and   the discussion.  Mr.  Weidner’s position reflected in his   testimony  was   that   he   expected  Exxon  to  keep   its  word. At  best,   Mr. Weidner  suggested  that   there   was   an   implicit understanding   that   to  make NME whole, compound  interest  would be  required.
30. DRAFTING OF THE  LETTER AGREEMENT
31. In response  to  Mr.  Weidner’s September  11,  2006   letter, Mr. Daum  re-drafted   a   letter  agreement   (the   “Letter  Agreement”), which  Mr. Daum  explicitly  stated   was    “completely  consistent”   with    Mr.   Weidner’s letter.  (Exh. PI043.0003).  (See a/so Daum 70:25-71:5).
32. The relevant   provisions   of   the    Letter  Agreement  are    as follows:
33. Exxon agrees to  pay   CIP  …  $710,750.06   on account   of   damages   accrued   in    1992    and    NMI $1,797,859.50    on   account   of   damages  accrued  in 1992,  and    to   pay    CIP   $113,851.03    on   account   of damages  accrued  in  1993, and   NMI $1,928,696.65   on account   of  damages   accrued  in   1993,  together  with prejudgment,  interest   on   those  sums   as   provided  by law,  and  an  additional  sum  which CIP and   NM wish to allocate  to   attorneys’   fees.   The   parties   agree  that    if prejudgment  interest  is  payable  at  4.11 %  on  damages accrued in  1992, and   at  3.54% on  damages  accrued  in 1993, compounded  annually,  the  total   amount  payable by   Exxon  will   come  to   $8.5    million.  In   any   event, Exxon will  pay   that   sum   to  CIP  and   NMI on  or  before September 20,  2006.
34. Exxon contends   that     the    correct   rate    of prejudgment  interest  in  this   case  is 4.11 % on  damages accrued  in   1992   and   3.54%  on   damages  accrued  in 1993.  CIP   and    NMI contend   that     higher   rates   of prejudgment    interest   apply.   CIP,    NMI,  and    Exxon stipulate    that      the     issue    of    the     correct    rate     of prejudgment  interest  in  this   case   shall be  submitted  to the     Court    for    resolution    and     the     entry    of    an appropriate    judgment,    with     all    parties    preserving rights  of appeal  to  the   Ninth Circuit from any  adverse decision . (Exh. P1043.0004).
35. Both parties  signed  the   Letter Agreement  on  September  14, 2006. They intended  it to  “constitute  an  agreement”  to  settle the  case.   (Exh. P1043.0001).   This    agreement   to   settle   was    binding   between  NME and Exxon. (1d.; See  also  Daum 74: 14-25).
36. At the   time   the   parties  settled  the   case   by  way  of the   Letter Agreement,  Mr.  Weidner and   Mr.  Daum  had   never discussed  an  agreement to  pay  compound  interest  no  matter  what   law  applied.  (Daum 75: 18-22). At that   time, Mr.  Daum  had   not  represented  to  Mr.  Weidner that   Exxon would pay   compound  interest  in  all  circumstances   regardless  of the   rate   chosen. (Weidner Depo. 174:18-23).
37. After reviewing the written  exchange  of  offers and   counter- offers, the   Letter Agreement,  as  well  as  the  testimony  of Mr.  Daum and   Mr. Weidner, this   court  finds   there   is no  evidence that   the  parties  discussed  and reached  agreement  that   only  compound  interest  would  apply regardless  of whether  state   or federal law  controlled.
38. THE SETTLEMENT AGREEMENT
39. The Letter Agreement provided for  the  preparation  of a more formal Settlement  Agreement.  (Exh. P1043.0005).  The  Settlement Agreement was   intended   to   implement   the   provisions   of  the   Letter  Agreement  with additional  standard  language.
40.    Mr. Daum transmitted   a  draft   settlement  agreement  to  Mr. Weidner on  September  18,  2006.  (Daum 76: 11-23).
41. Attached as  Exhibit A to  the  draft   settlement  agreement was a  form   of  proposed  final  judgment   that   the   District  Court  might choose to use   in  effectuating  the   Settlement  Agreement.  Mr.  Daum  drafted  this   form and   included  it  for  the   District  Court’s  convenience. (Daum 82:9-22). It is from  the  Proposed Order that   the  genesis of this   dispute  arises.
42. The proposed  final  judgment  included  the  following:

WHEREAS, in Order No. _,   the  Court determined  that plaintiffs Polar Equipment,  Inc.,  d/b/a     Cook Inlet Processing, and  Nautilus Marine Enterprises,  Inc. (collectively, the   “Seafood Processors”) were   entitled  to recover  prejudgment   interest   from   defendants   Exxon Mobil Corporation  and   Exxon Shipping  Company (collectively, “Exxon”) on   1992   damages  at  the   rate   of %,   compounded   annually,   and    were     entitled   to recover prejudgment   interest  on  1993   damages  at  the rate      of    %,     compounded    annually,    and      also were/were     not     entitled    to    recovery   of    Rule     82 attorneys’  fees  on  additional  prejudgment  interest;

38. Mr. Daum  drafted  the  proposed  final  judgment  based on  his expectation    that     Judge    Holland   would   rule    that     federal   law   applied, consistent  with  his  two  previous  rulings.
39. Mr. Daum  did  not   intend  the   proposed  final  judgment  to  be an   independently   operative  provision.  (Daum  85:5-7).  Judge  Holland was not  required  to  use   the   exact form  of judgment  or  simply “fill in  the  blank.” The  agreement  would have   been   binding even  if Judge  Holland did  not  sign the  proposed judgment.   (Daum 82:9-22).
40. Mr. Weidner   made   revisions   to   Mr.   Daum’s   draft    of  the settlement   agreement  and   transmitted   them   to  his   clients  for  input,  along with   a copy  of the  Letter Agreement to  “insure the  documents  conform to the Settlement  agreed to  on  September  14,  2006.” (Exh. PlOSS.0001).
41. NME’s principal Mr.   Waterer  and    his   private  counsel  Mr. Weigelt provided  feedback  on  this   draft   of the   settlement   agreement.  (Exh. P1060;  Exh.   P1069).  After receiving their   input,  Mr.  Weidner sent   a  draft with   proposed  changes  back   to  Mr.  Daum.  (Exh. P1070).
42. Although the    parties   negotiated   some  unrelated   matters, they   did  not  make  any   changes  or  have   any  substantive   discussions  on  the prejudgment    interest   issue     and    the    first    recital   of   the    proposed   final judgment  remained  unchanged   in  the  final  version of the  agreement.  (Daum 88: 13-23).
43. The parties  and   their   representatives   signed the   Settlement Agreement on  September  29,  2006   and  October 2,  2006.  (Exh. P1076).
44. The Settlement   Agreement  contains   paragraph   3.1,   which reflects  the  parties’  agreement  that   resolution  of the  rate   of interest  payable would be  determined  by  the  District Court. Paragraph  3.1  contains language similar to  the  Letter Agreement:

Exxon contends   that   the   correct  rate   of pre-judgment interest  in  this   case   is 4.11 % compounded  annually  on damages   accrued   in    1992    and    3.S4%  compounded annually           on   damages   accrued  in   1993.  The   Seafood Processors          contend   that    higher  rates    of  prejudgment interest    apply.   Exxon   and    the    Seafood  Processors agree that   the  issue   of the  correct rate   of prejudgment interest  in  this   case   shall   be  submitted  to  the   District Court for    resolution    and    entry   of   an    appropriate judgment,   with   all  parties  preserving  rights  of  appeal to  the   Ninth Circuit from any   adverse  decision. When the    District  Court  has    rendered   its   decision  on   the correct    rate     of    pre-judgment    interest,    and     such decision  is   final  on   appeal,  Exxon  shall  pay   to   the Seafood  Processors  a  sum    equal  to  the   difference, if any,   between: (a) interest  on  $2,508,609.56  calculated at  the   pre-judgment  interest  rate   the   Court shall find correct  for  damages  accruing  in   1992 plus   interest  on $2,042,547.68   calculated  at  the   pre-judgment  interest rate   the   Court shall find  correct for  damages  accruing in   1993; and   (b) interest  on  $2,508,609.56   at  4.11 %, compounded  annually,  plus   interest  on  $2,042,547.68 at 3.54%, compounded  annually.  The  period for which interest  shall be  payable on  the   sum   of $2,508,609.56 shall   commence   on    July    1,    1992,   and     continue through   November  1,   2006,  or   the    date    the    Court enters  judgment,   whichever  is  earlier.  The   period  for which   interest    shall   be    payable   on    the     sum     of $2,042,547.68    shall commence  July     1,   1993,  and continue  through  November 1,  2006,  or  the   date   the Court enters judgment,  whichever is  earlier. (Exh. P1076.0006).

45. The Settlement  Agreement also  contains  paragraphs  3.5  and 3.5.1-3.5.4,   which set  forth the   final judgment’s  agreed-upon  and   required terms.  This section provides that   NME agrees to entry of final judgment and:

This Final  Judgment   shall  be   in   the   same  form  as Exhibit  A· to   this    Settlement   Agreement,  and    shall include the  following provisions:

3.5.1 A dismissal with prejudice  of all  Claims of the  Seafood Processors;

3.5.2 A  full   and   final  release  and   discharge  of Exxon   from   all    Claims   by    each   of   the     Seafood Processors ;

3.5.3   An    order   forever   barring    the     parties identified    in      paragraph      3.5.2     from    asserting, instituting,   maintaining,  prosecuting  or  enforcing any Claim against  Exxon  ;

3.5.4     A   reservation    of   jurisdiction    over    the Claims  of  the    Seafood  Processors   against   Exxon  to enforce   this     Settlement t   Agreement   and     the    Final Judgment. (Exh. PI076.0008-0009).

46. Paragraph 3.5  makes  clear that    per   the   parties’  agreement, the    Final  Judgment    entered   by   Judge   Holland  had    to   contain   certain specific  provisions.  There  is   nothing   in   Paragraph   3.5   that    provides  for compound  interest  regardless  of  whether  state    or  federal law  applied. The parties  did  not  agree that   Exxon would pay  compound  prejudgment  interest regardless  of whether  state   or federal law  was  found to  govern. (Daum 48:4-8;   Weidner  Depo.   157:8-12).  There  is   also    nothing   in   the    discussions between the  parties,  the  Letter Agreement, or the  Settlement Agreement that the  parties  would disregard Alaska State law’s application of simple interest.

VII.         NME’S INTERNAL COMMUNICATION SETTLEMENT AGREEMENT RELATING TO THE

47. NME’s conduct   does    not    support   its    contention   that    it believed that   the  proposed final  judgment  constituted  a promise by Exxon to pay  compound  interest  regardless  of the  rate  chosen.
48. NME’s and Mr.  Weidner’s  internal   communications   during the  negotiation  period confirmed their   own  understanding   that   prejudgment interest  would be  compounded  if federal law  applied and   simple if state   law applied.   (Trial  Testimony   of   M.   Thomas   Waterer   (“Waterer”) 281: 120- 304:  16).    Between   July      11    and     September    25,    2006     these   internal communications   referenced  simple interest  numerous   times and   never once calculated  the   10.5% Alaska rate   as  compounded.  (Waterer 324:1-325:3).
49. On July    11,  2006,  Siao  Ling  Kok,  an  outside  accountant  for NME,  sent    a   document   to   Mr.   Waterer   in   care    of   Mr.   Weidner.  This document   contained  three    pages  entitled  “Analysis of  Accrued  Interest  on Damages  for  NME,” one   page   of  which  calculated   damages  based  on  the “Alaska  Statutory   Rate   of   10.5%  –  Simple  Interest,”   while  the   other  two pages  calculated  damages  based  on  compounded  “Federal  Lending Rates.” (Exh. P1009.0007-0009).
50. On July    13,   2006    Ms.   Kok   sent   to   Mr.   Weidner  damages calculations   entitled   “Exxon  Offer of  Settlement   Analysis”  in   which  she calculated   the    Alaska   10.5%  interest   rate    using   simple  interest.   (Exh. P1010.0002).
51. On July     14,   2006    Ms.   Kok   transmitted    to   Mr.   Weidner calculations  of interest  multipliers  and  rates   of interest  using various federal rates     compounded   annually   and    the   Alaska   10.5%  interest   rate    using simple interest.  (Exh. P1014.0005,  0012).
52. On August 29,  2006   Mr.  Waterer sent   a letter to  Mr. Weidner and   Mr.  Mike Shupe,  President  of CIP,  copying Mr.  Ed  Weigelt, then   advisor and   current  counsel  to  NME. Attached  to  Mr.  Waterer’s  letter  were   several charts,    including    updated     “Interest    Multiplier[]”  charts,    which   were calculated  using  simple interest  when  applying the  Alaska statutory  rate   of 10.5%. (Exh. P1022.0002,  0004).
53. On September 9,  2006   Mr.  Waterer  sent   a  letter  to  Messrs. Weidner,  Shupe,   and    Weigelt with    further   calculations   of  Exxon’s  offer applying  interest   multipliers  which  used    simple  interest   to   calculate  the Alaska  statutory   rate    and    compound   interest   when  calculating   various federal rates.  (Exh. P1027).
54. On September 11,   2006    Mr.   Waterer  sent    another  letter clarifying  his   prior  analysis  and   included  a  copy of  the   updated  interest multiplier  table calculating  the  Alaska statutory  rate   as   10.5% simple. (Exh. P1033).
55. On September  25,  2006, after  he  saw  the  proposed judgment III the    draft   settlement   agreement,   Mr.   Waterer  continued   to   direct  his accountant   to  perform calculations  of NME’s potential recovery using simple interest  under  Alaska state   law  and   compound  interest  under  federal law. (Exh. P1065). (See a/so Waterer 308:9-2).
56. In all   the   documents   except  one,   in   each    instance  where NME used    the   Alaska  statutory  rate,    simple interest  was   used.  NME used compound  interest  when  the   federal  rate   was   used.  Many different federal rates  were used,  some higher and   some lower than   10.5%.
57. The one   exception  is   that    at   his   deposition,   Mr.   Waterer produced   a  telephone  log  book   from  2006    that    he   claimed  to  have  only found recently.    (Waterer   325:12-15).    The    notes   purported    to    reflect conversations   between   Mr.    Weidner   and     Mr.    Waterer   supporting   the existence  of  an   agreement  by  Exxon to  pay   compound  interest  regardless. (Exh. P1003).
58. This court   finds   Mr.   Waterer’s   credibility  to   be   severely compromised  and   his   testimony  not   believable. This   court’s  impression  of Mr.  Waterer’s  testimony  is  that   he  was  very  careful in  answering  questions, approaching  perjury but  never committing it.
59. Mr. Waterer  admitted   at   trial   that    as   many  as   six  entries were altered  after  the  fact,   some as  recently as  last  winter.  (Waterer 328: 12- 329:9). Mr.  Waterer also  admitted  that   it was  possible that   all  the  additions were  related  to  compound  interest   and   that    the   additions  were  made  to assist  NME’s litigation position in  this   case.  (Id.)  Yet Mr.  Waterer steadfastly maintained  that   he  did  not  know when he  made those alterations.
60. If there had   been any  discussions  regarding an  agreement to pay  compound  interest,  Mr.  Waterer’s  notes would have reflected them. Mr. Waterer’s   alteration   of   his    notes   to   add    six   references   to   interest   or compound  interest  confirms  that    there  was   no  such    purported  agreement documented  in  the  unaltered  notes.
61. Mr. Waterer intentionally  removed from his  second notebook one  or  more pages with  entries  dated  September  26  and   possibly September
62. (Trial Testimony of  Erich  Speckin  461 :9-471 :3).  During  this   time, Mr. Waterer   and  Mr.  Weidner   were  reviewing the  draft  Settlement   Agreement. (Exh. PI069; Exh. PI070).
63. Mr. Waterer’s     intentional      destruction      of    pages    from September    26   and/or    27,  2006   creates   the  inference   that   Mr.  Waterer removed  pages containing   information   harmful   to NME’s legal position.

VIII.   POST-SETTLEMENT    BRIEFING

63.      Following execution of the  Settlement   Agreement   in  2006, Exxon paid  to  ClP  and  NME the  full  amount   required   by  the  Agreement, equal  to  $8.5   million,  representing   the  amount   of  I992 and  I993  losses, with  prejudgment interest   thereon  calculated   according  to the methodology of Order  No. 369,  and  an  additional   sum  which   ClP and  NME allocated  to attorneys’   fees.  (Complaint 34).
64. The settlement   proceeds  were  distributed,   $5 million  to NME and  $3.5 million  to CIP. (Exh. PI076; See a/so Waterer  568:  2I-2I).
65. On February     20,    2007    ClP    and    NME  filed   motions, consistent   with   the  parties’   settlement,   seeking  to have  the  District  Court award   a  higher   amount   of  prejudgment    interest   than   what   Exxon had previously  paid.  (Exh. PI088; Exh. PI089).
66. ClP and NME argued  that Alaska state law should  govern the interest     payable     on    their    claims,     not    federal    maritime    law.    (Exh. PI088.0005;  Exh. PI089.0003).
67. In the   alternative,  CIP  and   NME argued  that   if 28  U.S.C. §1961   applied,  the   District  Court  should  use   a  rate   higher  than   the   default rate.    CIP’s  motion,   signed  by   Mr.   Weidner,  stated   expressly  that    if  the Alaska  state    rate    was   used    to   calculate   interest,   the   interest   would  be simple   and     not     compound,    consistent    with    A.S.    09.30.070(a).    (Exh. P1089.0004).
68. In CIP’s reply brief, filed  April 13,  2007, Mr. Weidner accused Exxon  of  distorting   CIP’s  position   by   suggesting   that    CIP   was    seeking compound    interest    under    A.S.    09.30.070(a).    (Exh.1091.0004).   Mr. Weidner  was   emphatic   that   to  the   extent  the   Alaska  interest  rate   statute governed,  CIP  was   seeking only  simple interest  and   that   “the   Court should rule      that      the      interest     rates      (other     than     Alaska     statutory)     are compounded.”  (id.  Emphasis  in  Original).
69. Notably, NME did   not   argue  in  its   briefing  that   the   10.5% Alaska  statutory   rate   should  be  compounded  on  the   basis   that   the  parties had   agreed to  do  so in  the  Settlement  Agreement. (Exh. P1088).
70. In an   April  20,    2007    declaration,   Mr.   Waterer  proposed several    alternatives     that      he     believed    would    be     fair     “under    the circumstances.”    The   alternatives   sought   by  Mr.   Waterer  included  having Judge  Holland  award  simple  interest,   interest   compounded  monthly,  and others  which would not  have  been   possible without  modification of the  form of   the    proposed   judgment.    (Exh.  Pll13.16).     These   proposals   are    all inconsistent   with   NME’s current   position  that    there  was   an   agreement  to compound  interest  regardless,  and   NME’s position  that   the   form judgment constitutes  the  agreement.
71. The first  written document  suggesting that   the  parties agreed interest  would  be  compounded  if  Alaska  law   applies  is  a  June     12,  2007 letter  from Mr.  Weidner  to  Mr.  Weigelt. In  that    letter,  Mr.  Weidner states “after I conducted  a review of the  applicable settlement  documents  executed by  Exxon on  the   one   hand,  and   Nautilus  and   Cook Inlet   on  the   other,  it became  apparent   that    the   settlement   agreement,  page  8,  paragraph   3.5, provides  for  the   entry  of  a judgment   in  the   same  form as  Exhibit A to  the settlement   agreement.   Exhibit  A   calls    for   the    imposition   of   compound interest,  leaving only  the  rate   blank.” (Exh. P1093.0001).
72. Wayne Hawn,   an    associate   at    Mr.   Weidner’s   firm    who participated   in  drafting  settlement   letters,  the   Settlement  Agreement, and post-settlement   briefs, first  learned  in  June    2007   that   Mr.  Weidner claimed that    the   Settlement  Agreement  contained  an   agreement  to  pay   compound interest.  Mr.  Hawn was   surprised  by  Mr.  Weidner’s new   argument  because it  was   a  departure   from the   argument   for  simple interest  CIP  made in  its prior briefing. (Deposition of Wayne Hawn, September  30,  2010,  100:4-12). Mr.   Hawn  never  heard   the    term    “fill  in   the    blanks”   during   settlement negotiations.  (Id.  at  96:6-11).
73. On June   15,  2007  ClP  and   NME filed supplemental  briefs that    for   the   first    time  argued  that    the    proposed  final judgment   to   the Settlement  Agreement contained  a  promise  that    Exxon would pay   interest compounded  annually  under  state law.  (Exh. P1095; Exh. P1096).
74. ClP and   NME’s supplemental  briefs were filed after the  Ninth Circuit  held    on   April  16,   2007  in   the    Sea   Hawk   appeal  that    state  law governs the  issue of prejudgment  interest.  (Exh. P1092).

CONCLUSIONS OF LAW

75. Exxon requests   relief  on   two    alternative   grounds.   First, Exxon seeks a  declaratory judgment  that   the   Settlement  Agreement did  not contain  any   agreement  that    Exxon would pay   compound  interest,  did  not contain   any    agreement   to   pay   compound   interest   except  to   the   extent applicable  law  required  it,  and   did  not   contain  any   agreement  that   Exxon would pay  compound interest  if state law  controlled prejudgment  interest.
76. Alternatively, Exxon seeks reformation  of  the   first   recital in the   proposed  final judgment  to  delete the   phrase  “compounded  annually.” Such reformation would conform the  language  of the  Settlement Agreement to  reflect the  parties’  true   intent at  the  time of contracting.
77.    Because this court grants  declaratory  relief in  Exxon’s favor, there is no  need for this   court to reach the  reformation issue.
78. DECLARATORY RELIEF
79. The burden  of proof for  Exxon’s claim for  declaratory relief is a  preponderance   of  the   evidence. Kreider  v. C.I.R., 762   F.2d  580,   588   (7th Cir.   1985) (stating that,   regarding  an  ambiguous  contract,  “the  parties bear the     burden    of    proving   their    respective    interpretations     by    a    mere preponderance   of  the   evidence”); Yzaguirre   v. Barnhart,   58  Fed.   App. 460,

462   (10th  Cir.   2003)  (“The circuits  that    have  considered  this   issue  have concluded that   the  preponderance  of the  evidence is the  proper standard,  as it  is  the  default  standard  in  civil and   administrative  proceedings.”) (internal quotation  marks  omitted) (citing cases from the  4th,   7th,   and   11th   Circuits).

79. Under Alaska law, the   court’s  “primary goal” in  interpreting the   Settlement  Agreement and   proposed  judgment  is  to  “give effect to  the parties’  reasonable   expectations.”  Brotherton v.  Warner,  2010 WL 3928791,*3 (Alaska 2010).
80. When there is a written  contract  setting out  the  terms of an agreement between the  parties,  the  parol evidence rule, a rule  of substantive law,  generally precludes  the  parties  from using evidence of prior agreements (also known as  extrinsic evidence) to  contradict  the  written terms. Froines  v. Valdez   Fisheries   Dev.  Assn,  75  P.3d  83,  86  (Alaska 2003).
81. In Alaska,   the    parol   evidence  rule    is   derived  from  as 45.02.202  and   Restatement  (Second) of Contracts  § 210,   et seq.  The  Alaska Supreme  Court  has   interpreted   the   rule   in  the   form of  a  three-part  test.’ Froines,  75  P.3d   at   87;   Still   v.  Cunningham,   94   P.3d    1104,  1109   (Alaska 2004).  Under the   three-part   test,   the   trial   court  must  consider  (1) whether the   contract  is  integrated,  (2) what the   contract  means,  and   (3) whether the prior  agreement   conflicts  with   the   integrated   agreement.   Still,   94  P.3d   at 1109.  In   determining   the    first    two   prongs  of  this    test,    the   court  may consider  the  extrinsic  evidence itself. Id.
82. In this    case,   there   is   no    question   that     the    Settlement Agreement is  an  integrated  agreement;  it  is  “a writing constituting  the  final expression   of   one    or   more  terms   of   an    agreement.”   See   Restatement (Second) of Contracts  § 209   (1981). Thus  the   analysis  moves to  the  second prong of the  three-part  test,   determining  what the  contract  means.
83. Once the meaning  is  determined,  the  analysis would move to the   third  prong,  whether  the   extrinsic  evidence or  prior agreement conflicts with   the   written  agreement.  If there  is  a  conflict, then   the   prior agreement cannot  be  enforced.  Still,   94  P.3d   at   1109. However, part   of the  analysis of the  test’s  second prong is  a  determination  of whether  the  extrinsic evidence conflicts  with    the   written   agreement.   Thus,  determination   of  the   second prong necessarily  overlaps with  determination  of the   third prong.
84. According to   Froines  and    Still,   determination   of  “what the contract  means”  (the  second prong) is  generally a  question  for  the  court, as the  words of an  integrated  agreement  remain the  most important  evidence of intention.   Id.  However, the   meaning  of  the   contract  may   be  a  question  for the   fact  finder when the  interpretation   of the  written  document  depends  on the   resolution  of conflicting extrinsic evidence. It is  a  preliminary  question for  the   court  to  determine  the  meaning  of the   agreement  and  whether  there is  conflicting evidence. Id.  If so,  then   the  court as  fact  finder may  decide the meaning  of  the   contract  as  it  depends  on  the   resolution  of  the   conflicting evidence,  as   long   as   the   language   of  the   contract   is   susceptible  to  two asserted  meanings.  Froines, 75  P.3d   at  87;  Still, 94  P.3d   at  1109-10. Again, the     extrinsic    evidence   itself   may    be    used      to    make    all    of    these determinatioris.
85. Under the   first   step   in  the   process,  the   settlement  entered into    by  the   parties   on   September  29,   2006    is   an   integrated  contract.  It contains  all  the  terms of the  agreement  between the  parties.
86. The second   step    would  be   to   determine,   looking  at   the contract,   what   IS    provided  for    the    prejudgment    interest   rate.     Before proceeding  with   the   analysis,  there  is  a  question  of  what  constitutes  the Settlement   Agreement  and    whether   it   includes   Exhibit  A,  the   Proposed Judgment.   This  court  concludes  that    it  does not.   Exhibit A is  a  separate document  titled (Proposed) Final Judgment.   Section 3.5  provides that   “Final Judgment    shall  be   in   the    same  form   as   Exhibit  A  to   this    Settlement Agreement and   shall include the  following provisions”. It then   goes on  to list the   provisions  that   are  to  be  included  in  the   Final Judgment.  The  proposed Judgment    was   just     that,     a   proposal   for   Judge   Holland  to   use    at   his discretion.
87. Looking at the   integrated  Settlement  Agreement, the  parties agreed  that    “that  the   issue   of  the    correct  interest   rate    of  prejudgment interest  in  this   case   shall be  submitted  to  the   District Court for  resolution and   entry  of  an   appropriate  judgment  with  all  parties  preserving rights  of appeal to  the  Ninth Circuit from any  adverse decision.”
88. Section 3   is   titled   Settlement   of   Claims.  The    operative language   of  paragraph   3.1   is   that    the    parties   dispute   the    appropriate prejudgment   interest  rate.    It states that    Exxon contends  that    the   correct rate   of prejudgment  interest  in  the  case   is  4.11 % compounded  annually  on damages  accrued  in   1992 and   3.54%  compounded  annually  on   damages accrued   in    1993.  The   Seafood  Processors   contend  that    higher  rates  of interest  apply.
89. The agreement   does  not    address   the   issue   of  simple  or compound  interest,  and  whether  simple interest  shall only be  applied to  the state  interest  rate   and   whether  compound  interest  shall only be  applied to the   federal interest  rate.   The  agreement  is  also   silent and   does  not  say  that only  compound  interest  would be  applied.
90. Reading the settlement’s  literal language,  it contains  nothing that    limits  Judge   Holland’s  discretion   to   decide  not   only   the   numerical percentage   but    also   whether  it  would  be   simple  or   compound  interest. Indeed, this   court need not  go further  than   the  four  corners of the  document to  resolve the  issue between the  parties.
91. The extrinsic evidence shows that   the  parties  never agreed to compound  interest.
92. As discussed     previously,    extrinsic    evidence    may     be considered   to  discern  the   meaning  of  the   contract  and   also   whether  the prior agreement  conflicts with  the  integrated  agreement.  “Under Alaska law, ‘lilt  is  not  necessary  to  find  that   an  agreement  is  ambiguous  before looking to   extrinsic  evidence  as   an   aid’   to   determine  its   meaning.”  In  re  Exxon Valdez,  2009   WL 605900,  * 1 (9th  Cir.  2009) (quoting Estate  of Polushkin  v. Maw, 170  P.3d   162,   167  (Alaska 2007)).
93. At best, if this   court were to consider Exhibit A as  part   of the integrated   agreement,   there  may   be   an   “ambiguity” regarding  the   use   of compound  interest  only, and  Judge  Holland was  merely assigned  the  task   of “filling in  a number.”  If the  proposed judgment  is ambiguous,  then   the  court should  “resolve[] that   ambiguity by  determining  the  reasonable  expectations of  the   contracting   parties”  in  light   of  the   “extrinsic  evidence regarding  the parties’  intent  at  the   time   the  contract was   made.”  Weiner  v. Burr, Pease  & Kurtz,  P.c., 221  P.3d   1,9   (Alaska 2009) (internal quotation  marks  omitted); Brotherton,   2010   WL  3928791  at  *3.  See  also  Wenzell  v. Ingrim,  228   P.3d 103,    107   (Alaska  2010);  Hartley   u.  Hartley,   205   P.3d    342,    347   (Alaska 2009).  Considering  extrinsic   evidence  does    not    change   the   conclusions reached  by the  court.
94. All of  the   extrinsic  evidence  demonstrates   that    the   parties never agreed that   interest  would be  compounded.
95. The extrinsic  evidence also   demonstrates   that   the   proposed judgment  (including the  first  recital and  words “compounded  annually”) was intended  to  provide  a  form of judgment   that    Judge  Holland  could use   to implement  the  parties’  agreement.  The  proposed judgment   was  not  intended to include or be  an  agreement  to  pay  compound  interest.
96. The expectation    of    the     parties    was     to     reserve   the prejudgment  issue for Judge  Holland to  decide.
97. Accordingly, Declaratory Judgment  is  GRANTED in Exxon’s favor. ORDER  RE: SPOLIATION
98. Shortly before trial, Exxon filed  a motion regarding spoliation of  evidence, claiming that   NME and   Tom Waterer had   altered  or  destroyed evidence.  The   court  deferred  ruling  on   that    motion,  suggesting  that    the parties   argue  it  at   trial    and   reserving  ruling  until    after   trial.    Exxon hasrenewed the  motion, and  it is ripe  for  review.
99. Spoliation is  the   destruction   or  alteration  of evidence or  the intentional  concealment  of evidence until   it  is  destroyed.  State  v. Carpenter, 171  P.3d   41,   64  (Alaska 2007)  (quoting Hibbits  v. Sides,  34  P.3d   327,   330 (Alaska 200  1)).
100. To establish   spoliation,  a  party  must    provide  evidence that the   other  party  altered  or  destroyed   evidence.  Doubleday v.  State,  Comm. Fisheries   Entry  Comm’n,  238   P.3d   100,   106  (Alaska 2010). The  party must also   show  that    the   altered/ destroyed   evidence would  have   been   relevant. Apone  v. Fred Meyer, Inc., 226  P.3d   1021,1030   n.29   (Alaska 2010). Finally, the    party   must     show   that     absence    of   the    evidence   prejudiced   their preparation   for  the   case.   Sweet   v. Sisters   of Providence in Wash.,  895  P.2d 484,491   (Alaska 1995).
101. Here, the evidence in  question,  Mr.  Waterer’s  notebooks, was not   relevant  to  the   court’s  decisions.  Mr.  Weidner and   Mr.  Daum were  the primary  negotiators  of  the   Settlement   Agreement,  and   their   testimony  was the  only  evidence the  court needed  to  consider. Therefore, spoliation has  not occurred.  Exxon’s motion is DENIED.
102. Nonetheless, as   discussed   earlier,  the   court  finds   that   Mr. Waterer  intentionally  altered  his   notebooks  to  support  NME’s position. The court   also   finds    that    Mr.   Waterer   intentionally   removed  pages  from   his notebook  that   undermined  NME’s case.
103. Under Alaska Rule of Civil Procedure  37,  the  court has  broad discretion  in  assessing   discovery sanctions.   Allstate    Ins.   Co.  v. Dooley,   243 P.3d   197,200   (Alaska 2010). Even without  finding spoliation,  the  court can sanction  Mr.  Waterer and   NME.
104. The court   first    finds     that     the    pages   missing  from    Mr. Waterer’s  notebook would have  undermined   NME’s position.  Doubleday, 238

P.3d   at  106.  Also, the  court will  consider  this   violation in  assessing  attorney fees   and    costs,   potentially  forcing  NME to   bear    an   additional  portion  of Exxon’s attorney  fees  and  costs. ARCP 37(b)(2).

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