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
"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.
(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 ...