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Google Inc. v. Central Mfg. Inc.

February 12, 2007


The opinion of the court was delivered by: Hon. Virginia M. Kendall

Hearing Date: February 20, 2007

Hearing Time: 9 a.m.


Plaintiff Google Inc. ("Google"), by its attorneys, and defendants Central Mfg. Inc. and Stealth Industries, by and through Richard M. Fogel, not individually but as Chapter 7 Trustee (the "Trustee") for the bankruptcy estate of Leo Stoller, respectfully request that the Court enter the Stipulated Permanent Injunction and Final Judgment (the "Injunction and Final Judgment") agreed to by the parties in complete and final resolution of this action and approved by the United States Bankruptcy Court for the Northern District of Illinois.

Background of Settlement

Defendants to this action are two corporate entities, Central Mfg. Inc. ("Central Mfg.") and Stealth Industries, Inc. ("Stealth"). (Central Mfg. and Stealth are, collectively, "Defendants"). Defendants' former principal, Leo Stoller ("Debtor"), filed Chapter 13 bankruptcy proceedings on December 20, 2005.*fn1 Subsequently, on August 31, 2006, the Bankruptcy Court converted Debtor's bankruptcy proceedings to ones under Chapter 7 for, among other reasons, Debtor's failure to maintain any books or records (including for the Defendants and other entities in which he claimed an interest) and his failures to disclose assets.*fn2

By Order dated October 5, 2006, the Bankruptcy Court duly authorized the Trustee to act on behalf of the Defendants.*fn3 Moreover, since the time of the Chapter 7 conversion, the Bankruptcy Court specifically has rejected, twice, Debtor's requests to represent Defendants in legal proceedings.*fn4

As set forth in its Complaint and discussed in Google's separate Memorandum in Support of the Joint Motion, this action stems from these corporate Defendants' pattern of fraudulent acts that targeted Google for extortion and, in the process, cost Google hundreds of thousands of dollars in damage -- damage that continues to this day. Google and the Trustee negotiated a Settlement Agreement that, if implemented as described below, resolves Google's claims against the Defendants (the "Settlement Agreement").*fn5 The Bankruptcy Court approved the parties' Settlement Agreement by Order dated December 5, 2006 (the "Settlement Order").*fn6

The Bankruptcy Court thus authorized the Trustee to enter into the Settlement Agreement, which includes the Injunction and Final Judgment, and found that the Settlement Agreement was in the best interests of the estate.*fn7 Moreover, in so ruling, the Bankruptcy Court also rejected Debtor's belated objections to the Settlement Agreement.*fn8

The Settlement Agreement is contingent upon, among other things, the discontinuance of various proceedings that Defendant Central Mfg. had brought against Google, including through entry of the Injunction and Final Judgment in this action.*fn9 If the Injunction and Final Judgment is entered so as to ensure a complete termination of the proceedings that Defendant Central Mfg. brought against Google and to ensure that Google is protected against further repetition of Defendants' misconduct, Google has agreed to release its monetary claims against the Defendants and the Debtor's bankruptcy estate.*fn10

Grounds For This Motion

"There is no question that fostering settlement is an important Article III function" of the federal courts. United States v. Glens Falls Newspapers, Inc., 160 F.3d 853, 856 (2d Cir. 1998). See also Uhl v. Thoroughbred Technology and Telecommunications, Inc., 309 F.3d 978, 986 (7th Cir. 2002) (applying principle that "[f]ederal courts favor settlement" to limit scope of review of class action settlements); Goodman v. Epstein, 582 F.2d 388, 403 (7th Cir. 1978) (settlement of claims "is recognized as essential to the continued functioning of our judicial system."); Clarion Corp. v. American Home Products Corp., 494 F.2d 860, 861 (7th Cir. 1974) ("Compromises of disputed claims are favored by the courts."); Porsche Cars North America, Inc. v. Manny's Porshop, Inc., 972 F. Supp. 1128, 1132 (N.D. Ill. 1997) ("there is a strong public policy in favor of voluntary settlements."); B.H. v. Ryder, 856 F.Supp. 1285, 1290 (N.D. Ill. 1994) ("There is a strong public policy in favor of settlements, and the efforts of judges to promote settlement are among the most important functions they perform."); United States v. Bliss, 133 F.R.D. 559, 567 (E.D. Mo. 1990) ("The courts have long recognized that public policy favors settlements as a cost-efficient and convenient means of resolving disputes and conserving judicial resources.").

This policy favoring settlement extends to the entry of consent decrees and injunctions in furtherance of the parties' voluntary agreements. As the Supreme Court has stated, District Courts may properly enter a consent decree where it (1) "spring[s] from and serve[s] to resolve a dispute within the courts' subject-matter jurisdiction"; (2) "come[s] within the general scope of the case made by the pleadings"; and (3) furthers the objectives upon which the complaint was based. Local No. 93, Int'l Ass'n of Firefighters v. Cleveland, 478 U.S. 501, 525-26, 106 S.Ct. 3063, 3077 (1986). "However, in addition to the law which forms the basis of the claim, the parties' consent animates the legal force of a consent decree. Therefore, a federal court is not necessarily barred from entering a consent decree merely because the decree provides broader relief than the court could have awarded after a trial." Id. As one Court of Appeals has stated, "the parties enjoy wide latitude in terms of what they may agree to by consent decree and have sanctioned by a court." Conservation Law Foundation of New England, Inc. v. Franklin, 989 F.2d 54, 59 (1st Cir. 1993); see also Bliss, 133 F.R.D. at 567 ("Unless a consent decree is unfair, inadequate, or unreasonable, it ought to be approved.").

Both the Trustee and Google respectfully submit that the Injunction and Final Judgment amply meets these standards. As noted, an essential condition for the effectiveness of the Settlement Agreement, including Google's releases of its monetary claims against Defendants, is entry of the Injunction and Final Judgment. Unless and until that condition is satisfied, Google's claims against these corporate Defendants will remain. If not resolved, and regardless of where they would have to be litigated, these claims will constitute a burden to the bankruptcy estate in the hands of the Trustee; will inevitably diminish the funds available to other creditors for disbursement by the Trustee; and will require the expenditure of scarce judicial resources, either in this Court, the Bankruptcy Court or both. These are, of course, among the reasons the Bankruptcy Court approved the Trustee's settlement with Google as being in the best interests of the estate. Entry of the Injunction and Final Judgment will result in a resolution, and complete release, of Google's monetary claims against Defendants in accordance with the Settlement Agreement's terms while also providing Google with the injunctive relief that it needs to bring a full resolution to the proceedings that Defendants brought against Google and to avoid further, protracted litigation that will burden Google and the judicial system. Thus, the Injunction and Final Judgment comes within the general scope of the case as reflected by the pleadings, and its entry would further the objectives upon which the complaint was based. Because the ...

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