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Charles W. Coe, Law Offices of Charles W. Coe, Anchorage, for Appellant. John Clough III, Clough & Associates, P.C., Auke Bay, for Appellee Exxon Mobil Corporation.
Douglas J. Serdahely and Barat M. LaPorte, Patton Boggs LLP, Anchorage, for Appellee Exxon Shipping Company.
Carla J. Christofferson and Dawn Sestito, O'Melveny & Myers LLP, Los Angeles, California, for Appellees.
Before: FABE, Chief Justice, CARPENETI and STOWERS, Justices.
In September 2006 Exxon Mobil Corporation and Exxon Shipping Company (collectively " Exxon" ) entered into a Settlement Agreement with two seafood processors, Nautilus Marine Enterprises (Nautilus) and Cook Inlet Processing (Cook Inlet). The agreement contained the following language: " Exxon and the Seafood Processors agree that the issue of the correct rate of prejudgment interest in this case shall be submitted to the [United States] District Court for resolution and entry of an appropriate judgment...." It also noted that the " Final Judgment shall be in the same form as Exhibit A to this Settlement Agreement."
The parties disputed whether the Settlement Agreement required interest to be compounded annually, or whether the federal District Court was free to award simple or compound interest at its discretion.
Exxon filed an action in the Alaska Superior Court seeking a declaratory judgment construing the Settlement Agreement. The
superior court found that the parties did not intend that prejudgment interest had to be compounded annually, but rather that they intended to reserve this issue for the District Court to decide. Because the superior court's interpretation of the Settlement Agreement was not clearly erroneous, we affirm.
II. FACTS AND PROCEEDINGS
A. Facts And Proceedings Concerning The Settlement Agreement
The September 2006 Settlement Agreement was intended to resolve a lawsuit by Nautilus and Cook Inlet against Exxon in the United States District Court for the District of Alaska. The underlying lawsuit related to the 1989 Exxon Valdez oil spill. An important issue in dispute between the parties was how to calculate prejudgment interest that would be payable on damages that Nautilus and Cook Inlet suffered as a result of the spill. In two similar cases, the District Court had previously ruled that federal law would govern the calculation of prejudgment interest under 28 U.S.C. § 1961. That statute sets the Treasury bill rate (" T-bill rate" ) as the default rate for prejudgment interest, although the court has the power to vary the rate if the equities of a particular case demand it. The statute expressly provides that interest shall be " compounded annually." 
In June 2006 Nautilus and Cook Inlet filed a motion in the District Court prepared by their attorney, Phillip Paul Weidner, arguing that the Alaska state prejudgment interest rate of 10.5% should apply to their case, rather than the federal T-bill rate that the District Court had applied in the previous cases. The Alaska prejudgment interest statute in effect at the time of Nautilus's and Cook Inlet's damages in 1992 and 1993 provided that prejudgment interest was 10.5% per annum unless otherwise provided for in a contract or agreement.  Decisions applying former AS 09.30.070(a) had held that in the absence of an agreement to the contrary, the method of computing interest under the statute was " simple interest."  The motion argued that Alaska's prejudgment interest statute should apply because Nautilus's and Cook Inlet's underlying claims were based on state law. In the alternative, the motion argued that the District Court should apply a federal rate " compounded annually."
Meanwhile, Weidner initiated settlement negotiations with John Daum, negotiator and outside counsel for Exxon. In a letter to Daum in July 2006, Weidner discussed the applicable prejudgment interest rate, noting that it would be necessary to conduct " an analysis of whether the treasury T-bill rate will be used and compounded, whether the Alaska 10.5% simple rate will be used, or whether the federal lending rate will be used and compounded." Weidner also provided Daum a list of interest calculations he had formulated using compound interest when applying federal rates and simple interest when applying the Alaska rate of 10.5%.
In a September 2006 letter, Weidner proposed to Daum that the parties settle the principal amount of damages and allow District Court Judge Russel Holland to resolve the issue of the " computation and assessment of prejudgment interest," subject to appeal to the United States Court of Appeals for the Ninth Circuit. Daum responded by drafting a Letter Agreement that was intended to set forth the basic terms of the settlement consistent with the substance of Weidner's letter. The Letter Agreement stated that Exxon would pay prejudgment interest " as provided by law" and explained that " Exxon contends that the correct rate of pre-judgment interest in this case is 4.11% on damages accrued in 1992 and 3.54% on damages accrued in 1993," consistent with the Treasury bill rates for those years, while Cook Inlet and Nautilus contend that " higher rates of pre-judgment interest apply." The Letter Agreement provided that the
District Court would determine the " correct rate of prejudgment interest," and that both parties preserved their rights to appeal to the Ninth Circuit. Finally, the Letter Agreement provided that the parties would execute a formal settlement agreement to implement the provisions of the Letter Agreement. On September 14, 2006, Weidner countersigned the Letter Agreement, indicating that " a settlement on this basis is agreeable to [his] clients." In testimony, Daum and Weidner agreed that at the time they signed the Letter Agreement, Daum had made no " specific representation" that Exxon would pay compound interest in all circumstances.
From the signing of the Letter Agreement on September 14 until September 18, 2006, when Daum transmitted a first draft of the Settlement Agreement to Weidner, the parties did not have any substantive discussions. After minor modifications to Daum's initial Settlement Agreement draft, the parties executed the final Settlement Agreement.
Closely following the wording of the Letter Agreement, the language of the Settlement Agreement regarding prejudgment interest read as follows:
Exxon contends that the correct rate of pre-judgment interest in this case is 4.11% compounded annually on damages accrued in 1992 and 3.54% 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.
Paragraph 3.5 of the Settlement Agreement provided for the " entry in the Action of a Final Judgment," which " 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 ...