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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: PACIFIC ENERGY RESOURCES LTD., et al.

,’ Liquidating Debtors.
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Chapter 11 Case No. 09-10785 (KJC) (Jointly Administered)

PACIFIC ENERGY RESOURCES LTD., ) PACIFIC ENERGY ALASKA HOLDINGS, LLC,) PACIFIC ENERGY ALASKA OPERATING LLC,)
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Plaintiffs,
V.

)
)
)

Adv. No.

FOREST OIL CORPORATION, FOREST ALASKA HOLDING LLC, Defendants.

) )

COMPLAINT FOR AVOIDANCE AND RECOVERY OF FRAUDULENT TRANSFER, AND RECOVERY OF DAMAGES AND/OR RESCISSION FOR COMMON LAW FRAUD AND CALIFORNIA SECURITIES VIOLATIONS Pacific Energy Resources Ltd. ("PERL"), Pacific Energy Alaska Holdings, LLC ("PEAB"), and Pacific Energy Alaska Operating LLC ("PEAO" and together with PERL and PEAH, "Plaintiffs"), the above-captioned liquidating debtors, by and through their undersigned counsel, file this Complaint against Forest Oil Corporation and Forest Alaska Holding LLC (collectively "Forest" or "Defendants"), and in support hereof allege as follows:

The liquidating debtors in these cases, along with the last four digits of each of the debtors’ federal tax identification number, are: Pacific Energy Resources Ltd. (3442); Pacific Energy Alaska Holdings, LLC (tax I.D. # not available); and Pacific Energy Alaska Operating LLC (7021). The mailing address for the debtors is 111 W. Ocean Boulevard, Suite 1240, Long Beach, CA 90802.
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Preliminary Statement 1. This adversary proceeding seeks to avoid and recover for the benefit of

Plaintiffs’ creditors over $250,000,000 in value that Plaintiffs transferred to or for the benefit of Forest as part of Plaintiffs’ acquisition in August 2007 of various oil and gas interests and associated assets in or around Cook Inlet, Alaska (together, the "Alaska Assets"), including interests in Cook Inlet Pipe Line Company ("CTPL") 2. Plaintiffs paid approximately $453,850,000 for the Alaska Assets, far in

excess of what these assets were worth at the time, and Plaintiffs were rendered insolvent as a result. 3. Further, Plaintiffs were misled by Forest in entering into the sale

transaction by false statements of fact about the Alaska Assets, false assumptions imbedded in reserve reports and development plans based on misinformation from Forest, and inaccurate financial data prepared by Forest and supplied to Plaintiffs prior to their purchase of the Alaska Assets. 4. As a result of the foregoing misrepresentations and the resulting disastrous

investment made by Plaintiffs in the Alaska Assets, Plaintiffs incurred significant losses and were forced to file for bankruptcy within approximately eighteen months thereafter. During the bankruptcy proceedings, virtually the same Alaska Assets that Plaintiffs had purchased from Forest only two years earlier for $453,850,000 were either abandoned by Plaintiffs’ estates because they were of no value and unsaleable, or sold for a purchase price totaling approximately $2,250,000.

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The Parties 5. On March 9, 2009 (the "Petition Date"), Plaintiffs filed voluntary petitions

for relief in this Court under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). 6. Plaintiff PERL is a Delaware corporation with its principal place of

business at all times relevant herein located in Long Beach, California. 7. Plaintiff PEAO is a Delaware limited liability company with its principal

place of business at all times relevant herein located in Long Beach, California. 8. Plaintiff PEAH is a Delaware limited liability company with its principal

place of business at all times relevant herein located in Long Beach, California. 9. Upon information and belief, Forest Oil Corporation is a New York

corporation with its principal place of business at all times relevant herein located in Denver, Colorado. 10. Upon information and belief, Forest Alaska Holding LLC is a Delaware

limited liability company with its principal place of business at all times relevant herein located in Denver, Colorado. 11. Upon information and belief, Forest Alaska Holding LLC is and was at all

relevant times herein a wholly owned subsidiary of Forest Oil Corporation. 12. Upon information and belief, all of the acts and activities of Forest Alaska

Holding LLC as alleged herein were made, conducted, controlled and directed by Forest Oil Corporation, to and for the benefit of Forest Oil Corporation.

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Jurisdiction and Venue 13. The Court has jurisdiction over this adversary proceeding under the

Bankruptcy Code and pursuant to 28 U.S.C. § 157(a) and § 1334(a). 14. 15. Venue in this district is proper pursuant to 28 U.S.C. § 1409(a). This adversary proceeding is commenced pursuant to Rule 7001 of the

Federal Rules of Bankruptcy Procedure and is a core proceeding under 28 U.S.C. § 157(b), except as to the causes of action for fraud and deceit, negligent misrepresentation and securities law violations asserted herein against Forest under California law, which causes of actions are related to Plaintiffs’ chapter 11 cases. General Allegations 16. On May 24, 2007, PERL entered into a Membership Interest Purchase

Agreement (the "MIPA") and an Asset Sales Agreement (the "ASA") with Forest for the purpose of acquiring the Alaska Assets (the "Sale Transaction"). The MIPA and the ASA were each amended on July 31, 2007. 17. The aggregate purchase price for the Alaska Assets that Plaintiffs agreed

to pay to or for the benefit of Forest under the MIPA and ASA (the "Purchase Price") was approximately $453,850,000, consisting of $400,000,000 in cash, a subordinated note payable to Forest in the original principal amount of $29,250,000 (the "Forest Note"), and 10,000,000 shares of PERL’s common stock with a value at the closing date of the Sale Transaction of $24,600,000 (based on a closing price of $2.46 per share on the Toronto Stock Exchange on August 24, 2007, the closing date of the Sale Transaction).

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18.

The Sale Transaction was structured as PERL’ s acquisition of the

membership interests in Forest Alaska Operating LLC ("FAO"), the entity which held most of the Alaska Assets, including interests in CIPL, pursuant to the MIPA. PERL acquired FAO through a newly-created holding company called PEAH. PERL subsequently changed the name of FAO to PEAO. As part of the Sale Transaction, PERL also acquired certain other assets of Forest pursuant to the ASA. 19. The Sale Transaction was initially scheduled to close on June 30, 2007,

with the possibility of extension to July 31, 2007. 20. The extension option was exercised, but as of July 31, 2007, PERL’s

financing sources were not yet ready to close. 21. Forest permitted an additional extension to August 24, 2007, when the

Sale Transaction finally closed (the "Closing Date"), and Plaintiffs paid the Purchase Price to or for the benefit of Forest. 22. PERL funded the acquisition almost entirely through borrowed funds.

PEAO was the principal borrower, and PERL and PEAH guaranteed the debt. 23. As of the Closing Date, the Alaska Assets were worth at least

$250,000,000 less than the Purchase Price paid by Plaintiffs to or for the benefit of Forest. 24. As a result of Plaintiffs’ purchase of the Alaska Assets from Forest and the

debts that Plaintiffs were required to incur in order to consummate such purchase, Plaintiffs (a) were insolvent or became insolvent, (b) were engaged in business or a transaction, or were about to engage in business or a transaction, for which any property remaining with Plaintiffs was an unreasonably small capital, and/or (c) intended to incur, or believed that Plaintiffs would incur,
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debts that would be beyond Plaintiffs’ ability to pay as such debts matured. 25. Plaintiffs were misled by Forest in entering into the Sale Transaction.

Specifically, as part of its efforts to sell the Alaska Assets, and to induce Plaintiffs to purchase those assets, Forest supplied to Plaintiffs at their Long Beach, California offices in or about March 2007, a Forest Oil Corporation 2007 Alaska Divestiture Confidential Memorandum (the "Memo"), which contained materially false and misleading statements concerning the Alaska Assets. 26. The materially false and misleading statements contained in the Memo

included, but were not limited to, the following: (a) that the Alaska Assets had "Net Proved Reserves of 30.8 MJVIboe with a

PV-10% [present value of estimated future revenues from production reduced at an annual discount rate of 10%] of $628 MM"; (b) that the Alaska Assets had "PUID [proved undeveloped] reserves of 14.4

MIMboe with a PV-10% value of $283.7 MM"; (c) that "Chevron, [the operator of a significant portion of the Alaska Assets,]

is currently studying initiatives to reduce operating costs. These efforts should realize substantial savings and longer field lives, especially if Chevron can lower operating costs to similiar levels that Forest has achieved on Redoubt. The CIPL tariff was recently reduced to $2.25 per barrel in 2007 and is projected to be reduced below $2 per barrel in the next few years"; (d) that Chevron has proposed the following opportunities which include both

drilling and sidetracking projects: 26 Drilling Opportunities, 19 PUD, 7 Probable, 24 Hemlock/Tyonek, 1 Tyonek (G-Zone), and 1 Jurassic; and 6
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(e)

that the Memo provided historical operating costs that were distorted by

intentional overproduction of natural gas wells by Forest, which was not sustainable and resulted in damage to the gas reservoir, making future operating costs projected in the Memo unachievable. 27. (a) The true facts were: that the Net Proved Reserves were materially less than 30.8 MMboe with

a PV-10% of materially less than $628,000,000; (b) that the PUD reserves were materially less than 14.4 I\4IMboe with a PV-

10% of materially less than $283,700,000; (c) that Chevron was not studying initiatives that could lower operating costs

to levels even close to those achieved on Redoubt, and that the CIPL tariff was not projected to be reduced below $2 per barrel in the next few years; (d) that Chevron had not proposed undertaking the 26 Drilling Opportunities

identified, and that the equipment to execute such Drilling Opportunities was not even available; and (e) that Forest had intentionally operated the natural gas wells in a manner

designed to distort operating costs below sustainable levels, even though Forest knew doing so would damage the natural gas reservoir, raising future operating costs for Plaintiffs. 28. Additionally, in order to prevent Plaintiffs from discovering the true facts

concerning the Alaska Assets, Forest concealed the true facts by instructing Chevron not to communicate with Plaintiffs prior to the closing of the Sale Transaction, and instructed Plaintiffs that they were forebidden from communicating with Chevron prior to such closing. As a result, 7
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Plaintiffs were unable to discover the false and misleading statements, and the concealed facts, concerning the Alaska Assets. 29. After Plaintiffs assumed ownership of the Alaska Assets, Plaintiffs were

unable to achieve the operating results that Forest had forecasted, nor were they able to achieve the operating results that were to be expected from the Memo that Forest had delivered, nor were they able to achieve even the level of results that Forest claimed to have achieved historically from those assets. The greatest components of the discrepancy were lease operating expenses and forecasted production from operating the Alaska Assets. 30. After approximately eighteen months below anticipated operating results,

Plaintiffs were forced to file chapter 11 petitions in this Court on March 9, 2009, and subsequently commenced an effort to market and sell the Alaska Assets. 31. On June 19, 2009, given the uncertainty of the sale process and the

ongoing operational burdens associated with the Alaska Assets, Plaintiffs filed alternative motions to abandon the Alaska Assets (excluding interests in CIPL), which motions were subsequently granted by the Court by separate orders on September 2, 2009, and September 11, 2009. Later, Plaintiffs were successful in obtaining an order from the Court to vacate its abandonment order as to certain of the Alaska Assets, which Plaintiffs then were able to sell in late 2009 for approximately $2,250,000. The remaining Alaska Assets (later including Plaintiffs’ interests in C]IPL) were abandoned. 32. In sum, during the approximately two years following Plaintiffs’

acquisition of the Alaska Assets from Forest for approximately $453,850,000, Plaintiffs incurred substantial operating losses with respect to the Alaska Assets and ultimately realized a mere 8
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$2,250,000 in gross sale proceeds from the Alaska Assets (or less than 0.5% of the original purchase price). First Claim for Relief (For Avoidance of Constructive Fraudulent Transfer Against Forest) 11 U.S.C. § 548(a)(1)(B) 33. Plaintiffs repeat and reallege the allegations in the foregoing paragraphs of

this Complaint as though fully set forth herein. 34. The Purchase Price paid by Plaintiffs to or for the benefit of Forest as part

of the Sale Transaction (the "Transfer") was a transfer of an interest of Plaintiffs in property. 35. 36. The Transfer occurred on or within two years prior to the Petition Date. Plaintiffs received less than reasonably equivalent value and less than fair

value in exchange for the Transfer. Specifically, as of the Closing Date, the Alaska Assets were worth at least $250,000,000 less than the Purchase Price paid by Plaintiffs to or for the benefit of Forest. 37. Plaintiffs (a) became insolvent as a result of the Transfer or the obligations

incurred in order to fund the Transfer, (b) were engaged in business or a transaction, or were about to engage in business or a transaction, for which any property remaining with Plaintiffs was an unreasonably small capital, and/or (c) intended to incur, or believed that Plaintiffs would incur, debts that would be beyond Plaintiffs’ ability to pay as such debts matured. 38. Plaintiffs are entitled to an order and judgment under 11 U.S.C. §

548(a)(1)(B) that the Transfer is avoided.

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Second Claim for Relief (For Avoidance of Constructive Fraudulent Transfer Against Forest) 11 U.S.C. § 544, California Civil Code §§ 3439.04(a)(2) and 3439.05 39. Plaintiffs repeat and reallege the allegations in the foregoing paragraphs of

this Complaint as though fully set forth herein. 40. The Transfer made by Plaintiffs was fraudulent as to a creditor whose

claim arose before or after the Transfer was made and who would have the right to avoid the Transfer under California law. 41. Plaintiffs (a) were insolvent, or became insolvent as a result of the

Transfer or the obligations incurred in order to fund the Transfer, (b) were engaged in or were about to engage in a business or a transaction for which Plaintiffs’ remaining assets were unreasonably small in relation to the business or transaction, and/or (c) intended to incur, or believed or reasonably should have believed that Plaintiffs would incur, debts beyond their ability to pay as such debts became due. 42. Transfer. 43. Plaintiffs are entitled to an order and judgment under 11 U.S.C. § 544 and Plaintiffs did not receive reasonably equivalent value in exchange for the

California Civil Code §§ 3439.04(a)(2) and 3439.05 that the Transfer is avoided.

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Third Claim for Relief (For Recovery of Property Against Forest) 11 U.S.C. § 550 44. Plaintiffs repeat and reallege the allegations in the foregoing paragraphs of

this Complaint as though fully set forth herein. 45. As alleged above, Plaintiffs are entitled to avoid the Transfer under 11

U.S.C. §§ 548(a)(1)(B) and 544, and California Civil Code §§ 3439.04(a)(2) and 3439.05. 46. Because Defendants were the initial transferees of the Transfer, Plaintiffs

are entitled under 11 U.S .C. § 550 to recover the difference between the amount of the Transfer and the value of the Alaska Assets as of the Closing Date in an amount to be determined at trial, but which Plaintiffs believe to be in an amount in excess of $250,000,000. Fourth Claim for Relief (For Fraud and Deceit Against Forest) California Civil Code § 1710 47. Plaintiffs repeat and reallege the allegations in the foregoing paragraphs of

this Complaint as though fully set forth herein. 48. The acts, conduct and statements of Forest alleged herein constitute fraud

and deceit against Plaintiffs by concealment, nondisclosure, and/or misrepresentation of material facts. 49. Forest intentionally misrepresented, concealed and/or intentionally failed

to disclose material facts in connection with its solicitation of Plaintiffs to purchase the Alaska Assets and Plaintiffs’ entry into the MJIPA and the ASA. 11
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50.

As alleged herein, Plaintiffs were misled by Forest in entering into the

Sale Transaction by false statements of fact about the Alaska Assets, false assumptions imbedded in reserve reports and development plans based on misinformation from Forest, and inaccurate financial data prepared by Forest and supplied to Plaintiffs prior to their purchase of the Alaska Assets. 51. When Forest made these misrepresentations, concealed this information,

and failed to disclose material information as set forth herein, Forest knew its statements to be false and misleading or it acted in reckless disregard of the statements’ truth or falsity, and made the representations and/or concealed information or omitted to disclose information with the intent to defraud and deceive Plaintiffs and with the intent to induce Plaintiffs to enter into the agreements to purchase the Alaska Assets and take the other actions herein alleged. 52. Forest made the foregoing misrepresentations, concealed this information,

and failed to disclose material information as set forth herein with the specific intention of misleading Plaintiffs in connection with Plaintiffs’ purchase of the Alaska Assets, and entry into the Sale Transaction, the MIPA and the ASA by which Plaintiffs purchased the Alaska Assets. 53. Plaintiffs reasonably and justifiably relied on the false statements and the

nonexistence of the concealed information to their detriment in agreeing to purchase the Alaska Assets and proceeding with the purchase thereof and were unaware of the true facts. 54. Had Plaintiffs been aware of the falsity of the representations, and aware

of the material facts intentionally concealed from them and not disclosed by Forest, Plaintiffs would not have entered into the Sale Transaction, the MIPA and the ASA, and would not have purchased the Alaska Assets on the terms that they did. 12
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55.

As a direct and proximate cause of the foregoing acts and omissions of

Forest, Plaintiffs have suffered damages in an amount to be determined at trial, but which Plaintiffs believe to be in excess of $250,000,000. 56. Plaintiffs are informed and believe, and based thereon allege, that Forest’s

conduct as herein alleged was done by, with the authorization of, and/or ratification by, officers, directors or managing agents of Forest with a conscious disregard of the rights of Plaintiffs and with the intent to injure Plaintiffs so as to constitute oppression, fraud or malice, entitling Plaintiffs to recover punitive damages in an amount sufficient to punish and deter Forest. Fifth Claim for Relief (For Negligent Misrepresentation Against Forest) California Civil Code § 1710 57. Plaintiffs repeat and reallege the allegations in the foregoing paragraphs of

this Complaint as though fully set forth herein. 58. The foregoing false statements by Forest constitute negligent

misrepresentations of material facts by Forest. At the time Forest made the material misrepresentations to Plaintiffs, Forest had no reasonable ground for believing that such misrepresentations were true, and that Forest failed to undertake a proper and reasonable investigation to determine the truth of such representations. 59. Forest made the foregoing false statements with the intent to induce

Plaintiffs to purchase the Alaska Assets in reliance thereon. 60. Plaintiffs were unaware of the true facts and Plaintiffs reasonably and

justifiably relied on the false statements in agreeing to purchase the Alaska Assets and 13
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proceeding with the purchase thereof to Plaintiffs’ detriment. 61. As a direct and proximate cause of the foregoing acts and omissions of

Forest, Plaintiffs have suffered damages in an amount to be determined at trial, but which Plaintiffs believe to be in excess of $250,000,000. Sixth Claim for Relief (For California Securities Law Violations Against Forest) California Corporations Code §§ 25401 and 25504 62. Plaintiffs repeat and reallege the allegations in the foregoing paragraphs of

this Complaint as though fully set forth herein. 63. Forest, by making the materially false and misleading representations to

Plaintiffs within the State of California, and by concealing material information that was necessary to make the statements made to Plaintiffs not misleading under the circumstances under which the statements were made, as alleged herein in connection with Forest’s offer to sell the membership interests in FAO, and by entering into the MIPA which constituted a sale of securities to Plaintiffs within the State of California, Forest has violated California Corporations Code §§ 25401 and 25504. 64. As a direct and proximate result of the foregoing, and pursuant to

California Corporations Code § 25501, Plaintiffs have suffered damages in an amount to be determined at trial, but which Plaintiffs believe to be in excess of $250,000,000. 65. As a result of the acts alleged herein, Plaintiffs purchase of the

membership interests in FAO, should be rescinded, and by the filing of this action, Plaintiffs hereby tender those membership interests to Forest in exchange for the return of the 14
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consideration paid to Forest under the MIPA, and interest thereon pursuant to California Corporations Code § 25501. Objection to Claims of Forest 66. Plaintiffs repeat and reallege the allegations in the foregoing paragraphs of

this Complaint as though fully set forth herein. 67. Any claims asserted against Plaintiffs by Forest should be disallowed in

their entirety, pursuant to 11 U.S.C. § 502(d), until such time that any and all amounts owed by Forest to Plaintiffs on account of the allegations in this Complaint are paid in full. 68. Further, Forest’s claims against Plaintiffs on account of the Forest Note

should be disallowed as such claims should be subordinated to the claims of other creditors of Plaintiffs pursuant to the terms of the Forest Note and applicable law. WHEREFORE, Plaintiffs pray for judgment against Defendants as follows: 1. To avoid the Transfer as a fraudulent transfer under 11 U.S.C. §

548(a)(1)(B) and 544, and California Civil Code §§ 3439.04(a)(2) and 3439.05; 2. To recover under 11 U.S.0 §§ 550 the difference between the amount of

the Transfer and the value of the Alaska Assets as of the Closing Date in an amount to be determined at trial, but which Plaintiffs believe to be in excess of $250,000,000; 3. For rescission of the M1PA, and return of all consideration provided to

Forest thereunder plus interest thereon pursuant to California Corporations Code § 25501, or in the alternative, damages according to proof 4. To recover actual damages in an amount to be determined at the time of

trial, but believed to be in excess of $250,000,000; 15
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5. 6. 7. Transfer; 8.

To recover punitive damages pursuant to California Civil Code § 3294; To disallow any claims asserted by Forest against Plaintiffs; For interest at the maximum legal rate from the date of the foregoing

For costs of suit incurred herein, including without limitation, attorneys’

fees, to the extent permitted by law; and 9. For such other and further relief as the Court may deem just and proper. PACHUILSKJ STANG ZIEHL & JONES LLP

Dated: March 7, 2011

Ira pjKharasch (CA Bar No. 109084) Jars B. O’Neill (DE Bar No. 4042) Maxim B. Litvak (CA Bar No. 215852) 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705 Telephone: 302/652-4100 Facsimile: 310/652-4400 Email: ikharasch@pszjlaw.com m1itvakpszj1aw.com joneill@pszjlaw.com -and-

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RUTAN & TUCKER LLP Steven J. Goon (CA Bar No. 171993) Gregg A. Amber (CA Bar No. 102055) 611 Anton Boulevard, 14th1 Floor Irvine, CA 92626 Telephone: 714/641-5100 Facsimile: 714/546-9035 Email: sgoonrutan.com gamber@rutan.com Counsel for Plaintiffs

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