Court Opinion

ID: 2963118
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:06:44.513461+00
Date Added: 2024-06-11T11:42:38.885195
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 94-1382        No. 94-1456               XEROX FINANCIAL SERVICES LIFE INSURANCE COMPANY, ET AL.,                                Plaintiffs, Appellees,                                          v.         HIGH PLAINS LIMITED PARTNERSHIP, ALLIED FIRST CLASS PARTNERS, INC.,               ALLIED PROGRAMS CORPORATION, M.S. STERMAN & ASSOCIATES,                        and THE MAYFLOWER GROUP, LTD., ET AL.,                                Defendants, Appellees.                                      __________                                 MARSHALL S. STERMAN,                                Defendant, Appellant.                                 ____________________                    APPEALS FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                       [Hon. Rya W. Zobel, U.S. District Judge]
                                           ___________________                                 ____________________                                        Before                                Torruella, Chief Judge,
                                           ___________                                Boudin, Circuit Judge,
                                        _____________                           and Barbadoro,* District Judge.
                                           ______________                                 ____________________            George W.  Mykulak with whom Louis  J. Scerra,  Richard M. Gilbert
            __________________           ________________   __________________        and Goldstein & Manello, P.C. were on briefs for appellant.
            _________________________            J.  Timothy Eaton  with  whom  Michael W.  Coffield,  Theodore  S.
            _________________              ____________________   ____________        Harman,  Coffield Ungaretti & Harris, John J. Curtin, Jr., Patricia J.
        ______   ___________________________  ___________________  ___________        Hill, Daniel  S. Savrin and  Bingham, Dana &  Gould were on  brief for
        ____  _________________      ______________________        plaintiffs.                                 ____________________                                   January 17, 1995                                 ____________________        ____________________        *Of the District of New Hampshire, sitting by designation.

                 BOUDIN,  Circuit Judge.  This appeal has its origin in a
                          _____________            settlement agreement that purported to resolve the claims and            counterclaims   of   approximately   a  dozen   corporations,            partnerships, and  other business  entities in at  least four            separate lawsuits.   The settlement  went awry; and  one side            sought  to enforce  consent  judgments filed  as part  of the            settlement.  The  subject of those  judgments sought to  undo            them  and now appeals from the district court's denial of his            efforts.                                   I.  THE HISTORY                 The  appellant Marshall  S. Sterman ("Sterman")  and his            now-  deceased partner  Lester  Grant owned  or controlled  a            number  of business  entities ("the  Sterman entities")  that            engaged in  real estate development  projects in a  number of            states in  the late 1980s and early  1990s.  To finance these            projects, the Sterman entities entered into transactions with            appellee Xerox Financial Services Life Insurance Company  and            appellee Van  Kampen  Merritt,  Inc.  and  related  companies            (collectively, "Xerox-VKM").  Xerox-VKM provided financing to            the Sterman  entities in  exchange for security  interests in            the  real estate  and  in bonds  related  to the  development            projects.                 The  Sterman entities allegedly  defaulted on certain of            their obligations relating to at least three projects,  and a            succession of  lawsuits began.   The  first suit was  brought                                         -2-
                                         -2-

            against the Sterman entities by Xerox-VKM in Illinois federal            district court  on  February  27,  1992,  and  related  to  a            Pennsylvania   hotels  development   project.1     A   second            transaction involved  a hotel  in Colorado; a  Sterman entity            had agreed to repurchase bonds from Xerox-VKM and Sterman had            personally guaranteed  the obligation.   When  the repurchase            did not occur, Xerox-VKM filed two lawsuits.                 The first of those two lawsuits was  brought against the            Sterman  entities   in  the   same  Illinois  court   as  the            Pennsylvania hotels lawsuit  on March 13,  1992.2  The  other            concerned  Sterman's   own   guaranty  which   contained   an            arbitration  clause; Sterman  was domiciled  in Massachusetts            and, to  compel arbitration,  Xerox-VKM brought  suit against            him personally in the federal district court in Massachusetts            on May 4,  1992.3  In  this action Sterman failed  to respond            to the  complaint  and  the court  entered  a  default  order            against him.                 The three  suits just  described are the  centerpiece of            the  present litigation but are not an exhaustive list of the            disputes between the parties.   Xerox-VKM brought yet another                                
            ____________________                 1Van Kampen  Merritt, Inc. v. Pilgrim  Financial Servs.,
                  _________________________    __________________________            Inc., No. 92-C-1476 (N.D. Ill.).  
            ____                 2Xerox  Financial Servs.  Life  Ins.  Co.  v.  Mayflower
                  ________________________________________      _________            Group, Ltd., No. 92-C-1809 (N.D. Ill.).
            __________                 3Xerox Financial  Servs. Life  Ins. Co. v.  Sterman, No.
                  ______________________________________     _______            92-11029-Z (D. Mass.).                                         -3-
                                         -3-

            lawsuit against  the Sterman entities in  New Mexico relating            to a nursing home development  in that state.  In  several of            the lawsuits,  the Sterman entities filed  counterclaims.  In            addition,  several other transactions between the parties had            gone wrong and  were the subject of  litigation- and workout-            related discussions between the parties.                 Against  this  background,  in   May  1992  the  parties            negotiated  a  global  settlement  agreement to  resolve  all            pending  and a  host of  potential lawsuits.   The agreement,            signed on May  19, 1993, was  a lengthy document  stipulating            that it would be  governed by Illinois substantive law.   The            parties  agreed  to execute  mutual  releases.   The  Sterman            entities  agreed  to  transfer  their  interests  in  several            properties to Xerox-VKM; these  were apparently properties in            which  Xerox-VKM had  security interests  but for  which they            wanted clear title.   Sterman personally agreed to pay Xerox-            VKM $125,000 in 60 days--July 19, 1993--and to execute a note            for four more annual installments in the same amount.                 In  return,   Xerox-VKM  agreed  that,  in  addition  to            releasing the  Sterman entities from various  claims, Sterman            himself  could  within  60  days  repurchase  from  Xerox-VKM            certain  bonds  he had  originally  sold them  relating  to a            development  in Brush,  Colorado  ("the Brush  bonds").   The            bonds were priced at nearly $5 million but Sterman apparently            calculated that he could buy them at the stipulated price and                                         -4-
                                         -4-

            then resell  them for a  profit of more  than $450,000.   The            bond  repurchase  was proposed  by  Sterman  as  part of  the            settlement  but  the  terms  were  contained  in  a  separate            agreement.                 The settlement agreement contained a back-up enforcement            mechanism  that is the center of this appeal.  Sterman agreed            to  the entry of a consent judgment against him personally in            one  of  the Illinois  actions  (concerning  the Pennsylvania            hotels)  and  in  the  Massachusetts  action (concerning  the            Colorado hotel);  but the settlement  agreement provided that            Xerox-VKM  would  not  enforce  either judgment  so  long  as            Sterman complied  with his  obligations under the  settlement            agreement.  Motions for entry of the consent judgments  noted            this condition.                 Pursuant to the  settlement agreement, the parties  made            the property transfers from the Sterman entities to Xerox-VKM            on  May  19,  1993,  coincident  with  the   signing  of  the            agreement.   On  June 7,  1993, the consent  judgment against            Sterman  and in favor of Xerox-VKM was entered in the pending            Massachusetts case in  the amount of about $2.3  million; and            on June 9, 1993, a similar judgment was entered in the amount            of  about $3.5 million in  the original Illinois  action.  On                                         -5-
                                         -5-

            July 15, 1993, Xerox-VKM  registered the Illinois judgment in            Massachusetts.  28 U.S.C.   1963.4                 All that remained was for  Sterman to purchase the Brush            bonds by the  July 19 closing  date and to make  the $125,000            payment  on that  date, leaving  Xerox-VKM with  the note  to            cover four more installments.  Sterman was unable to purchase            the bonds  or  pay the  first  installment on  July  19.   It            appears that he had more  difficulty arranging in advance  to            resell the bonds than he had expected and that he had planned            to  use the  profits on the  resale of  the bonds  to pay the            first installment.  Xerox-VKM refused Sterman's request for a            delay  of  two months  and began  steps  to collect  on their            judgments in Massachusetts.                 Although  Sterman  resided  in  Beverly,  Massachusetts,            apparently there was  a scarcity  of assets held  in his  own            name.   Xerox-VKM  thus initiated  so-called  attachments  on            trustee process directed at a number of business interests in            Massachusetts.   This  procedure is used  under Massachusetts            state court rules primarily to attach  interests in the hands            of a  third party that are  owed to or indirectly  owned by a            judgment debtor;  and the procedure is  available to judgment            creditors in Massachusetts federal courts.  See Fed. R.  Civ.
                                                        ___            P. 64; Mass. R. Civ. P. 4.2.                                
            ____________________                 4Van Kampen  Merritt, Inc. v.  Sterman, No.  93-MC-10542
                  _________________________     _______            (D. Mass.).                                         -6-
                                         -6-

                 Xerox-VKM filed motions  to initiate the attachments  in            both  the Massachusetts  dockets: the  original Massachusetts            consent  judgment  and  the  new docket  that  reflected  the            registration of  the Illinois consent judgment.   Judge Zobel            presided over both cases and eventually consolidated them, so            we  discuss the  proceedings without  differentiating between            the  two  dockets.   The  original  motion  to  initiate  the            attachments  ex  parte  was  filed on  August  12,  1993, and
                         _________            allowed almost immediately.                   On October 20, 1993, Sterman filed a motion captioned as            one  "to dissolve  trustee  process and  for other  equitable            relief."   In  substance,  Sterman claimed  that  he had  not            breached the  settlement agreement, and that even  if he had,            the fault  lay with Xerox-VKM.   Alternatively, he  said that            Xerox-VKM  had  to  give him  credit  for  the  value of  the            properties  transferred on May 19,  1993, and that  it was an            impermissible  penalty for  Xerox-VKM  to collect  almost  $6            million in  judgments for Sterman's failure to pay a $125,000            debt.  After  briefing and argument,  Judge Zobel denied  the            motion.  Sterman did not seek to appeal.                 Proceedings  continued  to  implement  the  attachments,            including  discovery directed against the putative "trustees"            who Xerox-VKM thought owed money to Sterman or held interests            owned by him.  Then on  February 1, 1994, Sterman filed a new            motion captioned as  one "to modify  judgment amounts or  for                                         -7-
                                         -7-

            entry of satisfaction of  judgment or for accounting  and for            stay."    This motion  repeated  in  detail  the penalty  and            credit-for-previously-transferred-property claims made in the            November  motion; in a footnote the new motion also sought to            incorporate the  old one  by reference.   After  briefing and            argument, Judge Zobel denied the motion on February 25, 1994.                 In a memorandum and order Judge Zobel  said that Sterman            had breached  the settlement agreement by failing to make the            promised  $125,000  payment   and  Xerox-VKM  was   therefore            entitled  to enforce  the  judgments.   Further, Judge  Zobel            concluded  that  Sterman "has  used  a  variety of  means  to            obstruct collection of this debt"; and for this reason  Judge            Zobel  granted Xerox-VKM's  recently filed  "emergency motion            for  further injunctive relief" under Fed.  R. Civ. P. 65(b).            The  order enjoined Sterman, and  others under his control or            in concert  with him, from concealing  or otherwise disposing            of any interest held by or due to Sterman.                 Sterman filed a  timely notice  of appeal  from the  new            order,  entered February 25, 1994, and it is that appeal that            is now before  us.   Judge Zobel's order  also provided  that            discovery should  be completed by the  end of May 1994  and a            further conference was scheduled for June 1994.  However, the            briefs  are silent  as  to what  developments,  if any,  have                                         -8-
                                         -8-

            occurred  in the district court since the order now sought to            be appealed.                                   II.  THE ISSUES                 1.  The first question concerns our jurisdiction, and  a            related claim  of waiver raised  by Xerox-VKM.   The district            court's order was in part an explicit preliminary injunction;            such  injunctions can  be appealed  immediately, 28  U.S.C.              1292(a)(1),  and  Sterman's  appeal  was   filed  within  the            requisite  period.   But, argues  Xerox-VKM, this  should not            give Sterman a right  to relitigate issues on appeal  that he            raised by motion in October 1993, lost in the district court,            and  chose  then not  to  appeal.   According  to  Xerox-VKM,            Sterman has  "waived" his  right  to review  of the  district            court's rejection of his attacks on the judgments.  These, of            course, are the only issues that Sterman wants to litigate on            this appeal.                 We  regard both  of  Sterman's motions  in the  district            court as in substance motions under Fed. R. Civ. P. 60(b)  to            set aside final  judgments.   In form  the consent  judgments            were  both final  judgments; the  principal relief  sought in            Sterman's  two  motions  was  effectively to  set  aside  the            judgments; and  the arguments  made in the  motions concerned            the validity and enforceability  of the judgments rather than            the technicalities of trustee process.  Apparently both sides            share this view.                                         -9-
                                         -9-

                 Ordinarily  the  denial  of   a  Rule  60(b)  motion  is            immediately appealable since  there is nothing left to  do in            the district court.   See, e.g., FDIC v. Ramirez  Rivera, 869
                                  ___  ____  ____    _______________            F.2d 624,  626 (1st Cir. 1989).   Here neither denial of Rule            60(b) relief ended the proceedings;  they were ongoing at the            time of both  orders and so  far as  we know continue  today.            This raises interesting questions  about the appealability of            a Rule 60(b)  denial in  the context of  an ongoing  district            court proceeding.   See 15B  C. Wright &  A. Miller,  Federal
                                ___                               _______            Practice  and  Procedure     3916,  at   363  (2d  ed.  1992)
            ________________________            ("[Appeal]  may be denied if  the motion seems  bound up with            other proceedings that remain to be concluded.").                 In  our  view  it is  sufficient  that  as  part of  its            February  order  the  district court  entered  a  preliminary            injunction  in aid  of  enforcement of  the  judgments.   The            preliminary  injunction  is  immediately  appealable  and  is            itself colorably dependent on the denial of motions to vacate            the  judgments. "Our jurisdiction embraces a consideration of            such  questions  as  are  basic  to and  underlie  the  order            supporting the  appeal."     Alloyd  Gen. Corp.  v.  Building
                                         __________________      ________            Leasing  Corp., 361 F.2d 359, 363 (1st Cir. 1966).  Certainly
            ______________            the district  court would not have  continued the enforcement            proceedings if it  had agreed that the  judgments deserved to            be set aside.                                         -10-
                                         -10-

                 This  brings us  to  Xerox-VKM's waiver  argument.   The            analogy it offers is  to one who, having suffered  an adverse            judgment, seeks to set it aside under Rule 60(b); fails; does            not appeal; and then, when the time for appealing has passed,            renews the very  same arguments  in a new  motion under  Rule            60(b) and then seeks  to appeal the new denial.   In Burnside
                                                                 ________            v.  Eastern Airlines, 519 F.2d 1127 (5th Cir. 1975), cited to
                ________________            us by Xerox-VKM, the  court held that the moving  party could            not effectively pursue an out of time appeal by the expedient            of renewing the same motion later on.                 The  difficulty with  the analogy  is  that even  if the            October and February motions are  treated as raising the same            arguments,  although with  different  emphases, it  is by  no            means clear  that Sterman could  have appealed the  denial of            the October  motion.  At that  time, there was no  grant of a            preliminary  injunction  as  the  vehicle  for  an  immediate            appeal.   Xerox-VKM gives us  no reason or  precedent to show            that  such an  appeal was  possible.   If  an appeal  was not            possible, the waiver argument is pretty lame.                 In these  somewhat unusual circumstances, we  think that            the proper course  is to  reject the waiver  argument and  to            treat Sterman's claims as sufficiently related to the clearly            appealable injunction to justify our consideration of them on            the  merits.   Since we  think that  the  claims fail  on the            merits, it is enough  to assume arguendo that the  waiver and
                                            ________                                         -11-
                                         -11-

            relatedness  points are  resolved in  Sterman's favor.   See,
                                                                     ___            e.g.,  Rhode   Island  Hosp.  Trust  Nat'l   Bank  v.  Howard
            ____   __________________________________________      ______            Communications  Corp.,  980 F.2d  823,  829  (1st Cir.  1992)
            _____________________            (avoiding difficult jurisdictional issue to resolve merits of            interlocutory appeal).                 2.   We  turn  now  to  the  main  arguments  raised  in            Sterman's  February motion  under  Rule 60(b).   The  consent            judgments  are  on  their  face unqualified  final  judgments            against Sterman, totally almost $6 million.  Still, under the            settlement agreement  the enforcement of  the final judgments            was  made contingent  on Sterman's  breach of  the agreement.            Had  Sterman complied  with the  agreement, Sterman  would be            entitled to some form of protection--we need not decide  what            kind.  But despite Sterman's original claim to have complied,            it is undisputed that he did not pay the $125,000 promised by            July 19 as provided in the written agreement.                 Sterman  might still  obtain  relief by  an  affirmative            showing of grounds sufficient to persuade a district court to            exercise  its  authority under  Rule 60(b)  to set  aside the            judgments.5    Rule 60(b)  needs  to  be emphasized  because,            while Rule 60(b) relief is not wholly a matter of discretion,                                
            ____________________                 5How  far the Massachusetts district court had authority            to  set aside the Illinois judgment is a debatable point, see
                                                                      ___            Carteret Sav. &  Loan Ass'n v. Jackson, 812 F.2d  36, 39 (1st
            ___________________________    _______            Cir. 1987); Indian Head Nat'l Bank v. Brunelle, 689 F.2d 245,
                        ______________________    ________            249-51 (1st Cir. 1982); see also 11 Wright & Miller, supra,  
                                    ________                     _____            2865, at  224  (1st  ed. 1973),  but  one that  need  not  be            resolved in view of our disposition of the merits.                                         -12-
                                         -12-

            relief from a  final judgment is "extraordinary";  discretion            plays  a role; and neither the grounds nor the procedures are            as rigidly prescribed as those  that would attend an ordinary            lawsuit seeking a judgment in the first instance.   Vasapolli
                                                                _________            v. Rostoff, 39 F.3d 27, 37 n.8 (1st Cir. 1994).
               _______                 Against  this background,  we  consider first  Sterman's            argument that  the judgments  represent a  contract "penalty"            forbidden  by   Illinois  law,   in  view  of   the  supposed            disproportion  between the $125,000  immediately owed and the            almost $6 million sought to be collected under the judgments.            The  parties appear to  treat Illinois law  as controlling on            this  point  because of  the  stipulation  in the  settlement            agreement.  They are arguably mistaken (for reasons explained            below)  but state law is pertinent by analogy and Illinois is            a perfectly good example.                 Illinois does refuse to enforce penalties  in contracts,            see, e.g.,  Lake  River Corp.  v. Carborundum  Co., 769  F.2d
            ___  ____   _________________     ________________            1284, 1288-91  (7th Cir. 1985);  Bauer v. Sawyer,  134 N.E.2d
                                             _____    ______            329,  333-34 (Ill. 1956), but the rule  may have little to do            with  final judgments.   Indeed, even a  contract agreeing to            settle a pending or  threatened suit--technically, a contract            of  "accord"  --may be  enforceable  despite  claims that  it            constitutes  a  penalty.   Williston  says  that the  penalty            defense is not available  in such cases; and the  sparse case            law is divided, weighted slightly in favor of Williston.  See
                                                                      ___                                         -13-
                                         -13-

            generally 5 Williston,  Contracts    780, at  700-01 (3d  ed.
            _________               _________            1961).6                 The rationale  for the rule  against enforcing penalties            in  contract cases is not crystal clear.   But it is not hard            to imagine why a court might  be loath to enforce a  contract            provision  specifying  a disproportionately  large sum--which            courts  call  a penalty--for  breach  of the  contract.   The            parties  may make  such an  agreement far  in advance  of the            dispute  and may  not  appreciate  the  full  impact  if  the            unlikely  breach  does  occur.    Contract  damages,  broadly            speaking, aim  at compensation, not at  punishment.  Finally,            courts  do not  like results  that appear  unjust.   See Lake
                                                                 ___ ____            River, 769 F.2d at 1288-91.
            _____                 The  force of  such concerns  is lessened  where one  is            dealing  with a contract of accord that is entered into after
                                                                    _____            the  dispute  has arisen.   At  this  point, the  parties are            focusing  on the strength  of the claims,  the likely damages            and  the costs of litigating.  If the defendant, or potential            defendant, now consents to judgment in  a specific amount, it                                
            ____________________                 6Compare  Resolution Trust Corp.  v. Avon Ctr. Holdings,
                  _______  ______________________     ___________________            Inc., 832 P.2d 1073, 1075 (Colo. Ct. App. 1992) (holding that
            ____            the  penalty  analysis  is  inappropriate);  (Crosby  Forrest
                                                          _______________            Products, Inc. v. Byers,  623 So.2d 565, 568 (Fla.  Dist. Ct.
            ______________    _____            App. 1993)  (same); Security Pacific Nat'l  Bank v. Roulette,
                                ____________________________    ________            492  N.E.2d 438, 441 (Ohio 1986) (same), with Sybron Corp. v.
                                                     ____ ____________            Clark Hosp. Supply Corp.,  143 Cal. Rptr. 306, 310  (Cal. Ct.
            ________________________            App. 1978)  (finding  an unenforceable  penalty);  Aubrey  v.
                                                               ______            Angel  Enters., Inc., 717 P.2d 313, 315 (Wash. Ct. App. 1986)
            ____________________            (same).   See generally 5 Williston, Contracts   780, at 700-
                      _____________              _________            01 (3d ed. 1961).                                         -14-
                                         -14-

            is  ordinarily done with eyes wide open, and in large matters            usually  with legal advice.  These attitudes seem to underlie            the Williston  view that the defendant  should be constrained            in attacking his own settlement.                   Courts  that share  this  view may  also  feel that  the            plaintiff,  who  in settlement  often  accepts  less than  is            claimed,  ought not then be forced to litigate anew about the            propriety  of   the  discounted  amount.     After  all,  the            settlement  may be  attractive just  because it  assures that            litigation about liability and amounts is over.  If this view            is taken of  a contract in accord, one would  expect the same            considerations to  apply several times over  to insulate from            penalty defenses  a court-entered consent judgment,  which is            one step further down the line (and a very important step).                 The present case is  somewhat different from an ordinary            consent  judgment since Sterman's consent judgments, although            final in form, were contingent as to enforcement on a default            by  Sterman.   In that  sense  the analogy  to a  contract in            accord may  be a good one.   We have found  no Illinois state            decisions on whether the penalty defense applies to contracts            of accord.7   To the extent  we were forced to  guess at what                                
            ____________________                 7Two  federal  decisions  cited  to  us  assume  without            discussion that Illinois would  apply its penalty analysis to            a settlement agreement.  Justine  Realty Co. v. American Nat.
                                     ___________________    _____________            Can  Co., 976 F.2d  385 (8th Cir. 1992),  Yockey v. Horn, 880
            ________                                  ______    ____            F.2d 945 (7th Cir. 1989).  But neither decision considers the            possible distinction between ordinary contracts and contracts            of accord.                                         -15-
                                         -15-

            Illinois law might be, we would  incline toward following the            Williston  view that  something far  more  than a  showing of            "penalty" is needed to defeat an obligation expressly assumed            to settle a pending or threatened law suit.                 What  is more, we are not concerned here directly with a            contract suit governed by  Illinois law but with a  motion to            reopen  a federal judgment under Rule 60(b).  While state law            on  contracts  is  very  instructive--that  is  why  we  have            discussed  it--"[t]he grounds and  the procedure  for setting            aside a federal  judgment are  entirely a  matter of  federal            law, on  which state law  may be  disregarded."  11  Wright &            Miller, supra,    2353, at 147-48; see  also Johnson Chemical
                    _____                      _________ ________________            Co.  v. Condado Center, Inc.,  453 F.2d 1044,  1046 (1st Cir.
            ___     ____________________            1972).  Even  if Illinois did regard a contract  in accord as            subject to  a penalty defense,  it is  debatable whether  the            district  court  would have  been  forced  to  use  the  same            standard in deciding whether to reopen.                 In all events, there  is no showing that enforcement  of            the judgments involves a penalty.  This case does not involve            in  isolation the collection of $6 million for failure to pay            a  $125,000 debt.    Any judgment  about disproportion  would            depend  on  the reasonable  magnitude  of all  of  the claims            settled  by the  May 19  settlement and  all of  the benefits                                
            ____________________                                                     -16-
                                         -16-

            received by Xerox-VKM.  The settlement covered four lawsuits,            three  projects,  and  a  substantial number  of  claims  and            counterclaims.  Xerox-VKM  may well receive less  than it was            originally  entitled to even if it collects the $6 million in            judgments and keeps  or collects everything else  that it was
                      ___            given or promised under the settlement.                 Even  if  the penalty  defense  were  available, it  was            Sterman's  burden  to make  a  colorable  showing of  overall            disproportion  through affidavits  before the  district court            needed even consider taking the claim  seriously.  His jumble            of assertions  and conclusions  does not even  begin to  make            such  a  showing.   Xerox-VKM  appears  to assert  that  even            collection  of the full judgment will not make them whole but            this is  beside the point.   What  they bargained for  in the            settlement included the right not to have to prove the actual
                                          ___            amount of  their  claims.   Instead,  Sterman  now  has  them            arguing about the matter.                 This discussion also disposes of Sterman's related claim            that he ought to  receive "credit" against the  judgments for            the value of assets transferred on May 19.   At first glance,            this might seem  to be a straightforward  suggestion that the            defendant suffered a  judgment, paid part  of it, and  should            naturally  be held to owe only  the unpaid balance.  When one            understands  what Sterman  is actually  saying, his  claim is                                         -17-
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            seen to  depend on the  same kind of false  comparison as his            penalty argument.                 Nothing in  the settlement agreement  suggests that  the            amounts specified in the consent judgments are to be  reduced            by  the assets transferred on  the same day  as the agreement            was  signed and well before the  judgments were even entered.            So  far as  we  know, the  transfers  may themselves  may  be            nothing  more than the  clearing of  title to  assets already            held  by Xerox-VKM as security.   And while  such security if            realized  would probably  reduce  liability, Sterman  has (as            noted) provided us with nothing to suggest that Xerox-VKM has            or ever will  collect as much as they might  have done if the            Sterman entities had compliedwith their original commitments.                 3.   This disposes of  the arguments made  by Sterman in            his February motion, but he also seeks to brief in this court            additional    arguments   made   in   his   October   motion.            Pertinently, he claims that parol agreements, both before and            after  the May  19 agreement,  made Sterman's payment  of the            $125,000 contingent on his ability to  resell the Brush bonds            and  provided that the July 19 closing date would be extended            upon Sterman's  request.  For  reasons already set  forth, we            think that these claims have arguably been preserved.                 At the oral argument on  the October motion, Judge Zobel            brushed aside the Sterman's claim that Xerox-VKM had from the            outset orally agreed to such a  linkage or a right of Sterman                                         -18-
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            to  extend at will.  Her  ruling was understandable:  the May            19 agreement was a complex, lawyer-crafted,  written document            and it made  no mention of any such linkage  or right; on the            contrary, it said that  time was of the essence,  adding only            that the parties could agree to extend the closing date.  
                                   _____                 Under  parol evidence  rules,  followed  in Illinois  as            elsewhere, evidence  of an alleged "prior  or contemporaneous            agreement[]" is  inadmissible if  "it would have  been normal            for  the parties  to incorporate  [such an agreement]  in the            written  instrument   . . .  ."   Roth v.  Meeker, 389 N.E.2d
                                              ____     ______            1248, 1256  (Ill. App. Ct.. 1979).   In this case,  the parol            evidence rule applies with  full force.  Once again,  it does            not matter  whether Illinois  law governs the  decision under            Rule  60(b) whether  to reopen  the judgments,  for it  is at            least instructive by analogy.                 But the parol evidence rule generally governs only prior            or contemporaneous agreements.  Thus:                 [I]t   does   not   bar  evidence   of   subsequent                 negotiations to show modification of  the contract.                 Even   a   completely   integrated  agreement   can                 therefore be modified or rescinded orally, subject,                 of course, to the doctrine of consideration and the                 statute of  frauds.   In a few  states, legislation                 requires   a  writing   for  the   modification  or                 rescission of a written instrument.            A.  Farnsworth, Contracts     7.6, at  492 (1990)  (footnotes            omitted);  accord  A.W. Wendell  &  Sons, Inc.  v.  Oazi, 626
                       ______  ___________________________      ____            N.E.2d  280, 287 (Ill. 1994) ("Under Illinois law, parties to                                         -19-
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            a  written  contract  may alter  or  modify  its  terms by  a            subsequent oral agreement . . . .").                 Xerox-VKM   has  not   troubled  to   address  Sterman's            modification claim  (except by  asserting that the  claim has            been waived).  Still, "[t]he court need not hold a hearing on            a  motion for relief from  judgment if the  motion is clearly            without  substance .  . . ."   11  Wright &  Miller, supra,  
                                                                 _____            2865, at 227.  We think that there is more than enough in the            record to  make clear that  Sterman's claim is  without merit            and that no evidentiary hearing was  needed to establish this            point (it was the subject of oral argument).                   A close  reading of  Sterman's affidavits--one from  him            and another  from his broker--show that  neither provides any            basis for  believing that  the parties reached  an agreement,            after the original May 19 document was signed,  purporting to
            _____            extend the  closing  date  or to  condition  the  closing  on            Sterman's resale of the Brush bonds.  Further, between May 19            and  the scheduled  closing  date, Xerox-VKM  twice wrote  to            Sterman  to  reconfirm  his  remaining  obligations;  neither            letter  evidenced  any  flexibility   on  the  date  and  one            explicitly reminded Sterman that he would be in default if he            failed to fulfill his obligations by July 19.                 Finally,  on July 19 Sterman himself faxed a letter to a            Xerox-VKM  representative  requesting  an  extension  of  the            closing date.  He made no  claim that Xerox-VKM had agreed to                                         -20-
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            extend the closing date  or that he had any  unilateral right            to an extension.   Far from granting an  extension, Xerox-VKM            wrote  to  Sterman the  next day  informing  him that  he had            defaulted on  his  payment  obligation,  that  the  judgments            against him could  now be executed, and  that his opportunity            to  purchase the  Brush bonds  had now  expired.   Three days            later  Sterman  again  sought  an  extension,  and  Xerox-VKM            immediately refused.                 In sum,  despite references in  his brief to  a supposed            post-May 19  modification in the  settlement agreement, there            is  no  substantial  basis  for  such  a  claim,  and  it  is            contradicted by  Sterman's own  correspondence.  Under  these            circumstances, we think that  there is no reason to  take the            claim seriously.                 Xerox-VKM's motion to supplement the record by inclusion            of  a  previously omitted  exhibit  page  is  granted.    The
                                                          _______            judgment is affirmed.
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