In Re Valdez Fisheries Development Association, Inc., Debtor. Sea Hawk Seafoods, Inc. v. State of Alaska

We must decide whether a bankruptcy court, which had approved a settlement agreement, had jurisdiction to interpret that agreement in an adversary proceeding between two creditors brought after the closing and dismissal of the underlying bankruptcy case. We conclude that, in the circumstances of this case, the bankruptcy court lacked jurisdiction and we therefore reverse the district court’s order.

FACTS

Appellant Sea Hawk Seafoods, Inc., (“Sea Hawk”) owns a seafood processing plant in Valdez, Alaska. In April 1995, Sea Hawk brought suit in the Alaska Superior Court against Valdez Fisheries Development Association (‘VFDA”) for breach of contract arising out of a failed agreement to sell its processing plant. In August 1997, the Superior Court entered judgment for Sea Hawk against VFDA for over $2 million. Alaska’s Division of Investments then called VFDA’s loans aggregating in excess of $7 million. In response, VFDA delivered to the State approximately $1.65 million in cash and over $400,000 in accounts receivable.

Sea Hawk then filed a petition in the Superior Court naming the State of Alaska as a party and challenging the transactions between VFDA and the State as void under…