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April 8, 1991


The opinion of the court was delivered by: Lechner, District Judge.


Currently before the court are the objections of the plaintiffs (the "Plaintiffs"), excluding Michael Malone and Thomas Malone (the "Malones"), to a Report and Recommendation (the "Report and Recommendation") of United States Magistrate Judge Ronald J. Hedges, filed 1 February 1991. Plaintiffs ask that the court reject the Report and Recommendation and retain jurisdiction of a dispute over the enforcement of a settlement agreement. Plaintiffs also move to vacate the restraints prohibiting them from distributing certain funds held in escrow pursuant to that settlement agreement. The Malones, in contrast, seek adoption of the Report and Recommendation and oppose the removal of the restraints with respect to the funds held in escrow.*fn1 For the reasons set forth below, the Report and Recommendation is adopted in part and rejected in part. In addition, Plaintiffs' motion to vacate the restraints is granted.


The current dispute arises out a suit brought by Plaintiffs in a complaint filed on 19 April 1988 (the "Complaint"). Plaintiffs brought suit against defendants for securities fraud, violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO") and various state law claims. Plaintiffs alleged defendants engaged in a fraudulent scheme to promote limited partnership interests in a corporation engaged in the purchase and leaseback of computer equipment. In a Letter-Opinion and Order, filed 10 May 1989, Plaintiffs' securities law claims and state law claims were dismissed pursuant to Fed.R.Civ.P. 12(b)(6). Plaintiffs' RICO claims, however, were not dismissed and they were given leave to amend the Complaint to replead certain allegations. The amended complaint was filed on 5 May 1989 (the "Amended Complaint").

Subsequently, the parties entered into a proposed "Order Stipulating Dismissal and Embodying Terms of Settlement" (the "Proposed Settlement Order"). The parties agreed to dismissal of this case upon the payment by defendants of certain sums of money (the "Settlement Proceeds"). The Proposed Settlement Order provides:

"This matter having been opened to the Court upon Stipulation of the parties to the above captioned civil action by Nagel & Rice, Esqs., appearing for plaintiffs; Gutkin, Miller, Shapiro & Selesner, Esqs., appearing for defendants Leasing Consultants Inc., Richard Wellbrock, William McKenna and Joseph Mailly; Tompkins, McGuire & Wachenfeld, Esq., appearing for defendants Lampf, Lipkind, Prupis & Petigrow; Steven Vasak, Esq., appearing for Richard Heitmeyer, and Litwin & Holsinger, Esqs., appearing for defendants Arthur Esch and Edward Lange and the parties to this action having agreed to settle and dismiss said civil action as herein stipulated subject to the performance of the within terms and conditions and to provide for the enforcement thereof as a Judgment of this Court and for good cause shown, the Court hereby approves the following settlement terms:"

"(1) The parties to this Stipulation, each without admitting the validity or veracity of the contentions of the other parties to this Stipulation, in order to avoid the difficulty and expense and possible detriment to the parties of an on-going protracted litigation, have agreed to compromise the above enumerated dispute and including any matters which may or might have arisen therein, on the terms and conditions set forth herein."

"(2) Defendant Lampf, Lipkind, Prupis & Petigrow ("Lampf Lipkind") shall pay plaintiffs the sum of $160,000 within 30 days of receipt of the release herein and executed stipulations of dismissal of this action and the companion action filed in state court captioned Sherman et al. v. Wellbrock, et al., Docket No. 044309 (Law Div. 1988). Attached hereto is a copy of the executed stipulation dismissing the state court action. Should any defendant other than Lampf Lipkind default under the terms of this agreement thereby providing plaintiff with the right to reinstate this action as to that defendant, that reinstatement shall not include Lampf Lipkind so long as Lampf Lipkind shall have performed according to these provisions."

"(3) The defendants Richard Heitmeyer, William McKenna and Richard Wellbrock shall pay the sum of $35,000 each ($105,000 total) payable to K-T Associates, c/o Nagel & Rice, 301 S. Livingston Avenue, Livingston, New Jersey. The payments shall be delivered and received by December 31, 1990."

  (a) If Heitmeyer, McKenna or Wellbrock or any of them
  fail to deliver his $35,000 payment by December 31,
  1990, plaintiffs shall have the right to proceed ex
  parte to enforce the terms hereof by obtaining a
  personal judgment from this Court against the
  particular defaulting defendant for the amount of
  their individual obligation. Thus, by way of example,
  if Wellbrock and McKenna delivered their payment by
  December 31, 1990, but Heitmeyer fails to do so, then
  plaintiff may make ex parte application before this
  Court based upon attorney certification, for judgment
  in the amount of $35,000 against Heitmeyer
  individually. The failure of either Heitmeyer,
  McKenna or Wellbrock to pay, shall not impose any
  liability upon any defendant who has rendered their
  payment in a timely fashion.
  (b) The obligation to pay $35,000 by each of
  Heitmeyer, McKenna or Wellbrock shall not bear
  interest from the date hereof until December 31,
  1990. If however, the obligation is defaulted by
  either of these defendants, any judgment entered by
  the Court shall bear interest at the legal rate
  imposed by law and any judgment shall include costs
  of collection including reasonable attorneys' fees.
  (c) The defendants Heitmeyer, Wellbrock and McKenna
  waive presentment and notice of any default upon
  their obligation to each pay $35,000.
  (d) In the alternative, if either Heitmeyer,
  Wellbrock and McKenna default, plaintiffs shall have
  the option to reinstate this action or the companion
  action to be dismissed in the New Jersey Superior
  Court against the defaulting defendant in federal and
  state court and proceed to trial as though this
  stipulation had not been entered.

"(4) Defendants Esch and Lange shall cause their company, Computer Match Inc. to execute a promissory note in plaintiffs' favor upon the following terms and conditions:"

  (i) Computer Match shall pay to the plaintiffs the
  principal amount of $55,000 as follows: $10,000
  immediately upon the execution of the Computer Match
  Note to the plaintiffs; $45,000 over three years with
  annual interest at 6% (six percent) interest on the
  unpaid balance from February 1, 1991 until paid. The
  said principal and interest shall be payable to K-T
  Associates, c/o Nagel & Rice, 301 S. Livingston
  Avenue, Livingston, New Jersey in equal monthly
  amortized installments of One thousand, three hundred
  and eighty-eight dollars and 99/100 cents commencing
  on the first day of February, 1991 and continuing on
  the first day of each month thereafter until the Note
  is fully paid; except that if not paid sooner, the
  entire indebtedness shall be due and payable on the
  first day of January, 1994.
  (ii) If, on the sixth day of the month, payment is
  not received, written notice of default shall be
  provided and the obligor shall be provided a fifteen
  day opportunity to cure. If the default is uncured,
  the plaintiffs may accelerate any remaining
  indebtedness and add to the principal, as a penalty,
  an amount equal to 25% of the then-outstanding
  balance as additional principal. In addition, in
  event of default, the Note shall provide for payment
  to plaintiffs of collection costs and expenses
  including reasonable attorneys' fees.
  (iii) John Holsinger, Esq., shall be designated agent
  for service of process in connection with ...

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