Opinion ID: 527542
Heading Depth: 3
Heading Rank: 2

Heading: Consensual Priority for the Tax Claims and Criminal Fines

Text: 90 Within the above framework, each defendant's consent and judgment are properly read in tandem, for each consent incorporated the pertinent judgment by reference and provided that the consent was incorporated into that judgment. None of these documents, however, referred to or incorporated the SEC side letters. As set forth below, we conclude that the district court properly found there was no consensual priority for the criminal fines or tax claims over other claims since (1) the consents and judgments did not provide for priority, (2) the side letters or oral exchanges could not be used to vary the terms of the judgments, and (3) even if the side letters were considered, they did not provide for priority. 91 The documents submitted to the court as the parts of the judgment to be entered, i.e., the consents and the proposed judgments, did not purport to establish any priorities. Paragraph 8 of each consent stated that the disgorged funds were to be available for the satisfaction of any and all claims against Levine and Wilkis, respectively. Neither document stated that any class of claim would be preferred over any other class. Nor did the documents state that the funds were to be disbursed ratably or in proportion to the size of the claims asserted. Rather, the consents stated simply that the assets were to be distributed in accordance with a plan proposed by the SEC and approved by the court. Thus, a straightforward reading of these documents leads to the conclusion that the Commission was accorded substantial discretion in fashioning plans for the payment of claims against Levine and Wilkis arising out of the purchase and sale of securities alleged in the respective complaints. 92 We reject the arguments of Levine and Wilkis that the criminal fines and tax claims should have been given priority on the theory that the SEC had orally promised such priority during negotiations and had written the side letters to memorialize this undertaking. Plainly the terms of the documents could not properly be varied by oral promises. Nor were the side letters admissible to provide the advocated variation since the consents and judgments neither incorporated the side letters by reference nor provided that those letters could be looked to for assistance in interpreting the terms of the consents, and since the terms of the consents and the judgments were not in any significant respect ambiguous. Thus, we conclude that, as a matter of contract law, extrinsic evidence was not admissible to vary their terms. 93 Even if the SEC side letters were admissible, however, they would not warrant the interpretation advocated by Levine and Wilkis, for their language simply did not purport to require the SEC to give priority to the tax claims and criminal fines. Each letter stated that the SEC interprets the phrase 'claims'  against that defendant  'arising out of the purchase and sale of securities ... as alleged in the COMPLAINT ...' to include  tax claims and fines, etc. (Emphasis added.) Nowhere in either letter is there any indication that inclu[sion] was intended to mean placement at the top of a prioritized list. 94 Finally, we are constrained to note that the consent judgment is a special variety of contract, since it is a judicial decree. Thus, it is backed by the court's power to enforce compliance with it by means not available for the enforcement of ordinary contracts, e.g., by the court's power to hold a breaching party in contempt. This factor prompts us to observe that, when the parties have presented documents to the court that purport to reflect the boundaries of their agreements, and the court has given its official approval to those terms, the parties are not entitled to vary those terms without court approval. The court is not required to enforce, as part of the consent judgment, terms that it has not approved. It is an entirely appropriate exercise of the court's discretion to reject later-asserted variations that apparently were agreed to earlier than or contemporaneously with the judgment and that are virtually contradicted by the documents actually presented to the court. In Wilkis's case, for example, the SEC side letter is dated June 29, 1986. The SEC's complaint, the consent, and proposed judgment were submitted to the court on July 1. Thus, had the parties wished to have the terms of that letter deemed part of the judgment entered by the court they could easily have so provided and submitted it to the court. Instead, the Wilkis Consent and proposed judgment were submitted to the court for signing and entry without disclosure that there were any oral promises or side agreements, and, instead, with the express representation that no promises ... except as provided herein (Wilkis Consent p 4, emphasis added) had been made to induce Wilkis's agreement. 95 For all of the above reasons, we conclude that the district court properly rejected the contentions of Levine and Wilkis that the SEC, by agreement, was required to give priority to the payment of tax claims or criminal fines.