one three one nine five nine universal one three one nine five nine one three one nine six zero zero universal settlements international versus national why article incorporated at all national was my voice this core previously affirmed the district court's finding that my client's appellants did not have a likelihood of success on the merits of the same issues under very different standard than summary judgment standard and the context of the record with a court order and we have the transcript in the record the confidentiality term was talked about at length in the transcript and in the transcript it was agreed that u s side that was also  didn't that refer to the five million dollar judgment were the parties in the magistrate talking about confidentiality as to the five million dollar amount and not as to other aspects of the settlement or that there's a direct reading of the evidence on that issue standard and it said the terms of the agreement should be homes for confidence subject to disclosure to the canadian court and the monitor like a trustee so right there there's a conflict in the evidence on that issue the scope of the that's that's another conflict in that in the evidence is the report relied on my client statement ok they're not put on a website i don't care that there is some consent to do what was done here in terms of putting on the home page of a website there's a conflict in evidence on that my client testified by affidavit that i was referring to a limited access web site we've just been talking in the pages around that comment we're talking about pacer what would appear on pacer i'm familiar with how this works to limit access websites i knew we couldn't keep it up absolutely secret but that's what we agreed to use good faith efforts to keep it as secret as possible and get the canadian court to do the same and if this record self acknowledged the precise contours of the company confidentiality provision were not spelled out the apple is point to the bennett declaration which was the declaration of their canadian council as to what he did in terms of submitting the canadian court and that and so that the canadian court and instructed him over a telephone to have this on the website if interested and if they are what's undisputed evidence we when interesting way that declaration self creates a an issue of fact because of what it doesn't say it doesn't say and we asked the judge who can we not put it on the website could we send emails to court a person could we could be there something else other than putting it on the world wide web that we could have done so the declaration self is evidence that did not use good faith efforts to get the canadian court to protect confidential confidentiality as much as possible these are these are issues that the jury should have decided the treat the settlement agreement as if it were a contract yes or are we apply normal contract principle to decide whether there is any  breach of the contract by either both for construction of the contract and to breach the interesting thing here is it's an oral settlement that's put on a transcript but the transcript isn't a written contract per se it's evidence of the oral settlement bit the same rules against contract instruction apply and whether the settlement was breached you apply normal contract principles now this court also ruled ok what even if you decided as a matter of law or not i don't believe so your honor it can be decide as a matter of law but the test is the test is did it frustrate the essential purpose of the contract  that there was a failure of consideration and the conflicting other why would why would there be any argument here that that was that major breach that you should be able to avoid paying the one million dollars to the others oh the evidence supporting that was my client's declaration that this was essential confidentiality was essential the mediator who is also the matter court judge also said that she had called the confidentiality was very important to mr ga the jury could have found from that evidence that paying one million dollars on an alleged fifty million dollars claim one fifteenth of the what they were suing for was for the purpose of getting a confidential settlement he's been sued for fraud and stealing for three years and wanted to put that behind them and have a hav confidential settlement whereas if you say reason why no rules of evidence settlement talks are not admissible because people assume that if you're going to pay money you're guilty so the jury could have found that the primary consideration for my client was a confidentiality and not having to go to a jury trial and that kind of feeds over into the the next issue which is if the court does affirm this court a examining whether this is a penalty first that issues timely the two thousand and eleven judgment that was not appealed at the end of the first case with a settlement he says in the event of a default  injunction or get the ten day notice to pay the whole million dollars within ten days and so happily body motion to enter a judgment for five million dollars the district court said they still did a policy analysis they said well this this higher amount is a reasonable estimate of damages and in that case it was had to do with and so it was also different procedurally that xerox case because the consent judgments were enter for the higher amounts and there was forbearance it wasn't a if you default you get hit with extra money it was the million dollar judgments were filed they were entered and then there was a fall and it is stopped for bearing and then the penalty argument came up as a procedural that's also different on the seventh circuit in two opinions checkers and behind not having penalties and contracts that we don't want to coerce performance efficient you know should allow fish in breach and the the damage from not paying or not paying on time  already had summary judgment for an amount of money that was the penalty amount if you will and so will allow that because it's reasonable it's a fixed amount in this case it's not a contract case we have a multi count complaint alleging all kinds of torts and fraud and trouble damages counterclaims heavily contested i please cite to the denial of our motion for summary judgment in that case as as evidence that it damages and in our case well it could just avoid been zero as five million or fifteen million and the parties agreed to replace that uncertainty in the cost of trial with this settlement contract my contract is governed by contract terms contract and construction and in any other universe of four men dollars penalty for not paying one million dollars to be struck down there's no reason to have an exception here because it was so much of a loss or a lawsuit suggest to the court that almost nothing that you heard this afternoon is an accurate reflection of what is in the record i think that we should we should probably start with just looking into we are we were on october the twenty sixth of two thousand and ten when we sat down for a settlement conference it was the second settlement conference we'd had in the case the reason we were having our second son one conference was because the opposing party the parties particularly mr n v i and the i mr torture had taken the position that the real parties in interest in this controversy were the shareholders and creditors of us i in the canadian equivalent of a chapter eleven the c c w case so they said they didn't come to the first settlement conference they need to be here right there you have a recognition of the importance that the real party in interest here an important party an interest who needs to be consulted  is the canadian bankruptcy court while formal approval isn't necessary there needs to be something that happens there we were facing we were two weeks from trial we had a very very strong case i mean if you read that denial of the motion for summary judgment the evidence was overwhelming that this had been an out and out theft of five million dollars likely to be troubled plus exemplary damages why did we sell well this is why we settled they came to us and said look you may have a strong case but we don't have any money and frankly you know we're going to we're not going to try this case or we're going to try it in georgia because we'll be record so some of some of it is in the record in the structure that's that results from that is evidence of what exactly was concerning but we don't even need to talk about specifically whether that's the case here because this is a common situation and frankly if you accept their construction of this penalty provision you know we're going to settle a case like that because what do you have to do to suddenly case like that you have to if you're going to settle that case and you're going to be what you're going to be in line with other creditors the last thing you're going to do the last thing we would have done is reduce a fifteen million dollar claim to a one million dollar claim and then get in line with everybody else to get a portion of our one million dollars it would be it would destroy the opportunity to settle the kinds the very kinds of cases that you really want to settle one where i know when i'm a mediator and i hear that that's an issue and collection is an issue i jump or my ears perk up i go right in there and say ok well how do we going to do this and that's why we did what we did  relevant here it is somewhat relevant here is that there is some schizophrenia in their position about what the rules are with respect to this penalty thing they slant they claim sometimes that it's a federal rule and they claim sometimes that it's that it's a state rule although they argue that it's a federal but then they cite only cases that apply state law in diversity cases and in frankly the only real case that up that purported to apply federal law  to this circumstance was the xerox case that they talked about and that case came out in our favor in that case that the court said if for purposes of analyzing a penalty you don't do what obligated to contractually agreed to one million dollars and you're paying five they said no no that that's myopic something that may be the rule when you're talking about a general contract but we're not talking about a general contractor we're of a lawsuit and that introduces a whole different set of considerations trial costs probably in mr graham's case having to come from georgia and having to try cases in grand rapids in january brad wasn't very attractive to but likelihood of success vagaries of a jury trial it introduces a whole different idea and what the what that court said was you're using the wrong benchmark when you're comparing the equivalent of the one to the five here what you got to look at is compare the one or the five to the fifteen because that's what you're settling that's that's that's the deal you were just you were creating what's called an accord and you are willing to recognize this and says that when you when you are using the benchmark for did deciding whether this is a reasonable settlement or whether this is a penalty you look you compare what is your you're entitled to in the event of the default first is what you might have recovered in the lawsuit that's a great comparison and what they did in that case was they said you know this is not a penalty but what happened in that case was the interest of a judgment before six million dollars or more for failure to pay a one hundred twenty five thousand dollars settlement fees feet because they said the comparison isn't between the one twenty five and the and the six million it's between the six million in the claims in the case the seventh circuit is pretty much come out the same way although they did they applied federal law you had mr mr graham misstated the scavenger case the the scavenger case first you had the checkers case and that's a case where the court split two to walk two judges said we look at this as a question of state law we think that illinois would would apply the type of analysis that stay argue the dissents and all that's crazy i can't believe illinois would do that they would they would in determining whether whether there's a penalty involved here they would look at comparing the claim in the underlying lawsuit versus what is being paid in the event of the fault and they would come out a different way then you had the scavenger case and the scavenger case came out the other way it came out again purporting to apply illinois law the way the xerox case did that said your benchmark it's got to be the underlying claim it's not to compare what you pay under under two different  and so and that's what we had here what we had here and it is quite clear from the transcript in this case that there was to be a judgment immediately entered for five million dollars that was non  negotiable for obvious reasons on our side we were going to get in line in this threaten bankruptcy with a one million dollars client we were going to get in line at best with a five million dollars claim is five million dollars a reasonable resolution of this claim yes and mr graham was asked a question about contracts and he answered quickly in terms of some of these confidentiality issues yes contract issues apply here but for purpose of the analysis of the penalty issue the alleged penalty issue that's not the case we are a requirement that some notice have to be given the other side have the opportunity to pay that one million before the five million they went before on the confidentiality term when they went before a magistrate judge carmody who would who had been involved in addressing the entire settlement agreement there were two motions they only talk about their own motion but the code nt mr cho well represented by the insurance company filed a motion for sanctions against u s side for doing what it did to at the direction of the canadian bankruptcy court it's not the name  and the judge decided that motion best rate judge decided that motion i guess that she she who had been involved in the details of negotiations said they didn't do anything wrong here us i did exactly what they had to do and what they said they would do it what mr bennett thought he would do and thought he could do but didn't know he could do in canada they then went down to once mr graham saw the handwriting on the wall he was going to lose his motion to amend his complaint to assert such months until we could get the case back up here and back before the court here which when it found out what had happened said this is this is just not what i ordered but what you have so what we have here we're not dealing for purposes of set aside the confidentiality issue for me for purposes of the of the the thirteen fifty nine issue we're dealing with a consent judgment there was an agreement to the entry of a consent judgment that judgment the essence of what they challenging here was issue entered back in two thousand and eleven they didn't appeal and never filed a motion for reconsideration and it makes crystal clear that there is a judgment in place and if only in the event of default that the judge the judgment will be immediately in her judgment will be for this judgment is five million dollars you can start collecting on five million dollars now we went through the additional step of getting a clean five million dollars judgment but there's no dispute that there was a default there's no dispute that the notice was given the notice was given sixteen months after we could have given it because they had that because we had the t r o hanging over our heads improperly obtained through agreed to do was to engage in good faith negotiations to draft a written terms of a confidentiality agreement that would accommodate the recognized need to go to the to the c c double a court to get what whatever you want to call it blessing approval they make a big deal about saying formal approval wasn't required but that was made clear by mr bennett on the record at the summit conference he said i don't think that's formal approval it's not entirely clear what i got to do but i got to give notice and an opportunity for that for the creditors to object and that was recognized throughout that transcript the essence of your opponent's argument as i understand it in the one nine hundred sixty case is that confidentiality was a critical term of the contract and that there's a fact question as to whether the actions of your side breached the confidentiality requirements so i don't think we've got that topic if you want to address the happy to address that first of all the existence of a crack question isn't enough to defeat summary j what you have to have is a genuine issue of material fact raised by competent evidence here i don't think you need to go much farther than what this court has already done in its prior appeal because well technically you're right mr graham is correct that the the standards are a little bit different on a preliminary injunction the steppingstones that the court decided apparently this court decided in breaching that hard are dispositive there mostly matters are largely dispositive in matters of  for example interpreting the country the contract doesn't support your position and things like that and and not much frankly of any relevance has happened since then nothing material has changed since that the first opinion we have the court was presented below with the affidavit declaration of mister mr bennett who was the canadian lawyer in the c c w proceeding who appeared at the settlement conference and said what he hoped in thought he could do and in fact exactly that's exactly what he did he went to the to the court in canada and said this is what i need to do he was able to do it in the off the record chambers conversation because that's what they wanted he then asked what do i do in the corps directed him to do the following which included putting the notice on the website the website was known to be a very important part of the canadian bankruptcy proceeding because you had thousands of investors involved all over the world notice that's put on the website is the one million dollar judgment the notice that's put on the website it contains the information that mr bennett said he would put in which in which he said among other things there's a total of one point two million dollars didn't say who was paying what because that included a two hundred forty two thousand dollar one point two but no indication of which defendant was paying what which is exactly what mr bennett said he hoped he could do and i think i don't think i have to put the five million dollars on the record if i can tell them that where we're getting at least one point two four two million and they prove that the fact that there's actually five million for sure they would approve that so that we didn't put in the information that mr torrens said he was concerned about mr graham has has frankly misstated to you today what do you and obviously the affidavit of the declaration of mr torture cannot be squared with the record you said the statement that they're going to put on a website was made in the context of the discussion about what would be entered on the record in grand rapids when this settlement went forward that's not the case it was made in specific reaction to a statement by mr kilo's lawyer that why don't we just exempt out whatever needs to be done in the canadian court mr sullivan mr skills lawyer page fourteen of the transcript why don't we just exempt from confident the confidentiality except to the extent necessary for reporting to the canadian court and to our taxing authorities are two hundred cetera or torture blurts out then they're going to put it on a website write my statement i don't know mr torture i mean i don't care it doesn't matter clear he recognizes how does he know that it needs to put i would be put on a website he knows that because he's been a participant in that proceeding as a creditor they made a claim in that case on the basis of this sham a agreement to to manage policies where supposedly us i agreed to pay them five million dollars the defendants that their belief was that the notice would be posted on something like pacer as opposed to any website that's it they didn't object apparently at the conference but there was this what's going to happen in grand rapids in the in the district court what's going to be entered on the record is that five million dollars judgment going to be on the record no he's the argument is that he thought that's what we were talking about there's no pacer in that there was never an issue with respect to that he says what i was thinking about when i said it's going to be on the website is what's going to happen with the five million dollars judgment in this case is it going to be on pacer and that's what i'm concerned about because i don't want my creditors to think i've got a five million dollars judgment out there when even though there is a judgment for five million dollars i might not ultimately have to pay it if i can satisfy that judgment with a one million dollar payment within a year i guess at the end of the day there are so many on the record off the record things that appeared to be going on in this case what was really your best argument that us did not breach the confidentiality agreement if you had to just let it out for sure the there are a couple of the first is what we're just being there what they didn't they've they did exactly what they said they would do and what everybody recognized they had to do they went to the canadian court they said what we have to do to get your blessing everybody understood that we needed the blessing they even asked they insisted as part of the agreement on the record you will agree to recommend this to the bankruptcy court and so it's clear they did exactly what they said they would do and they did no more and there's no contrary evidence no mr bennett after this case was here in the court found that  the opinion that this doesn't this doesn't this your contract terms don't support your argument nothing else happened they took no discovery they could develop no competent evidence they didn't go to ernst and young and say you know and get a declaration from them they didn't even to this day this information still uncertain young's website to this day what does that tell you about materiality and that's really the best argument i mean there is really dispositive arguments as a matter of law on this number one that to excuse performance of account directors got to be a material breach and the standard is it is a standard of law which the court of indicated they'll never meet in this case and that is that it renders the no breaching parties performance impossible or are are fruitless and number two that this that these these arguments about material breach is based in the concept of rescission of the contract if my clients were ok with this going on any web site accessible the public why would we have spent any time talking about confidentiality at all that's the most public advertisement you could possibly do a settlement if that's what was intended as mr friendly or just argued there would been any need to even discuss confidentiality the in terms of what they agreed to in the transcript your clients articulate any specific websites or other types of sites that this could go on but my client's declaration followed matter he said that we were just talking about pacer we're talking about things going you know to find the core that's what i meant by website and it's not just his subjective intent you can look at the pages surrounding that comma and there's talk about pacer talk about limited access websites which he acknowledged you might have to do but this affidavit obviously after the settlement conference was not raised at all during the settlement conference or contemporaneously with what was going on in terms of notice that we post that your honor in fact the during the settlement conference that's on the chambers motion like you're doing something under seal in his view the consent judgment is simply a default mechanism that supports a penalty argument so it can be reported as being settled for total settlement at this point one point two four two million but he's saying i'm going to tell the court that he's not saying i'm going to put it on the worldwide web or even that we have to tell creditors mr abusive because we're being approached committee said i agree on behalf of the creditors there  was we were not aware of any requirement to notify creditors it's not in the transcript it's not it's also not in the draft settlement agreement that wasn't consummated the on the penalty issue in the in the settlement transcript judgment there is a question about the notice an opportunity cure this was a one year payment plan for a million dollars and i had a ten day notice an opportunity your i had the first payment in my old account this was in the record  before we found out about the website and we had the benefit of an injunction that started off as an export to injunction but it wasn't challenge for sixteen months and it continued in effect and they could move to dissolve when we got the notice it was you have ten days to pay the whole one year payments of a million bucks granted that you had passed but it had been stated by this injunction so the inherent unfairness the public policy behind not penalize in breach of contract in enforcing a one you know ten days or come up with a million bucks or even if you count the fourteen days the the court gave before the  injunction one year of payments a whole million dollars and it will form a dollar penalty on that ten day notice that's against public policy that's to coerce performance and we should have had the benefit of it even though the injunction was only question for this court is really whether there's an exception to this public policy about not having penalties and contracts to court performance because the settlement of a lawsuit and there are know there is an exception for settlements and there's other courts that say no we look at it like contracts we look at like contra supply contract law and if we're not going to