Emerson Radio Corp v. Donald K. Stelling

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
__________
No. 01-3689
__________
EMERSON RADIO CORP; THOMAS HACKETT;
FIDENAS INTERNATIOL BANK; GEOFFREY P. JURICK;
WAYNE J. ARANHA
v.
DONALD K. STELLING; PETRA JACOBS STELLING;
ERIC F. GEBAIDE; FIDENAS INTERNATION LIMITED;
ELISION INTERNATIONAL INC.
BARCLAYS BANK PLC (Intervenor in D.C.)
Petra Jacobs Stelling,
Appellant
(Newark N.J. Civil No. 94-cv-03393)
WAYNE J. ARANHA, Official Liquidator of FIDENAS INVESTMENT LIMITED
v.
GEOFFREY P. JURICK; GSE MULTIMEDIA TECHNOLOGIES CORPORATION;
FIDENAS INTERNATIONAL LIMITED, L.L.C.; ELISION INTERNATIONAL INC.
(Newark N.J. Civil No. 96-cv-01695)
WAYNE J. ARANHA, Provisional Liquidator
v.
FIDENAS INVESTMENT LIMITED, Debtor in a foreign proceeding,
(Case No. 94-D 42677(BRL), USBC, S.D.N.Y.)
(Newark N.J. Civil No. 94-cv-04380)
THOMAS HACKETT, Official Liquidator;
FIDENAS INTERNATIONAL BANK LIMITED
v.
GEOFFREY P. JURICK; ERIC F. GEBAIDE; FIDENAS INTERNATIONAL
LIMITED;
WAYNE J. ARANHA, Official Liquidator of Fidenas International Bank Limited
BARCLAYS BANK PLC (Intervenor in D.C.)
(Newark N.J. Civil No. 95-cv-01179)
__________
No. 01-3818
__________

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EMERSON RADIO CORP; THOMAS HACKETT;
FIDENAS INTERNATIOL BANK; GEOFFREY P. JURICK;
WAYNE J. ARANHA
v.
DONALD K. STELLING; PETRA JACOBS STELLING;
ERIC F. GEBAIDE; FIDENAS INTERNATION LIMITED;
ELISION INTERNATIONAL INC.
BARCLAYS BANK PLC (Intervenor in D.C.)
Geoffrey P. Jurick,
Appellant
(Newark N.J. Civil No. 94-cv-03393)
WAYNE J. ARANHA, Official Liquidator of FIDENAS INVESTMENT LIMITED
v.
GEOFFREY P. JURICK; GSE MULTIMEDIA TECHNOLOGIES CORPORATION;
FIDENAS INTERNATIONAL LIMITED, L.L.C.; ELISION INTERNATIONAL INC.
(Newark N.J. Civil No. 96-cv-01695)
WAYNE J. ARANHA, Provisional Liquidator
v.
FIDENAS INVESTMENT LIMITED, Debtor in a foreign proceeding,
(Case No. 94-D 42677(BRL), USBC, S.D.N.Y.)
(Newark N.J. Civil No. 94-cv-04380)
THOMAS HACKETT, Official Liquidator;
FIDENAS INTERNATIONAL BANK LIMITED
v.
GEOFFREY P. JURICK; ERIC F. GEBAIDE; FIDENAS INTERNATIONAL
LIMITED;
WAYNE J. ARANHA, Official Liquidator of Fidenas International Bank Limited
BARCLAYS BANK PLC (Intervenor in D.C.)
(Newark N.J. Civil No. 95-cv-01179)
__________
No. 02-3570
__________
EMERSON RADIO CORP; THOMAS HACKETT;
FIDENAS INTERNATIOL BANK; GEOFFREY P. JURICK;
WAYNE J. ARANHA
v.
DONALD K. STELLING; PETRA JACOBS STELLING;
ERIC F. GEBAIDE; FIDENAS INTERNATION LIMITED;
ELISION INTERNATIONAL INC.

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BARCLAYS BANK PLC (Intervenor in D.C.)
Petra Jacobs Stelling,
Appellant
(Newark N.J. Civil No. 94-cv-03393)
WAYNE J. ARANHA, Official Liquidator of FIDENAS INVESTMENT LIMITED
v.
GEOFFREY P. JURICK; GSE MULTIMEDIA TECHNOLOGIES CORPORATION;
FIDENAS INTERNATIONAL LIMITED, L.L.C.; ELISION INTERNATIONAL INC.
(Newark N.J. Civil No. 96-cv-01695)
WAYNE J. ARANHA, Provisional Liquidator
v.
FIDENAS INVESTMENT LIMITED, Debtor in a foreign proceeding,
(Case No. 94-D 42677(BRL), USBC, S.D.N.Y.)
(Newark N.J. Civil No. 94-cv-04380)
THOMAS HACKETT, Official Liquidator;
FIDENAS INTERNATIONAL BANK LIMITED
v.
GEOFFREY P. JURICK; ERIC F. GEBAIDE; FIDENAS INTERNATIONAL
LIMITED;
WAYNE J. ARANHA, Official Liquidator of Fidenas International Bank Limited
BARCLAYS BANK PLC (Intervenor in D.C.)
(Newark N.J. Civil No. 95-cv-01179)
__________
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
D.C. Civil No. 94-cv-3393
District Judge: The Honorable Nicholas H. Politan
__________
Argued July 24, 2002
__________
Before: SLOVITER, NYGAARD, and BARRY, Circuit Judges
(Opinion Filed: October 17, 2002)
____________
Frederick R. Kessler, Esquire (Argued)
Wollmuth, Maher & Deutsch
500 Fifth Avenue
New York, NY 10110
Attorney for Appellant/Cross Appellee

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Gerald Krovatin, Esquire (Argued)
Krovatin & Associates
744 Broad Street, Suite 1901
Newark, NJ 07102
Attorney for Appellee/Cross Appellant
____________
OPINION
____________
BARRY, Circuit Judge
We are called upon in what the District Court described as this "seemingly endless
litigation saga" to review the appeal of appellant Petra Jacobs Stelling and the cross-
appeal of Geoffrey P. Jurick from the District Court’s Letter Opinion and Order dated
August 29, 2001. Stated somewhat simply, Stelling appeals the entry of an order fixing
the amount to which she is entitled after the termination of an agreement entered into by
the parties. Jurick, in turn, cross-appeals the termination itself and the order fixing the
amount. For the reasons that follow, we will affirm in part and reverse in part. We have
jurisdiction under 28 U.S.C. 1292(b).
The parties are fully familiar with the long and arduous history of this case and we
see no need to reprise that history here, particularly given the fact that we are writing
only for the parties in this not precedential opinion. We, therefore, will recount only
those facts necessary to place into perspective the issues we are called upon to decide.
In 1994, Emerson Radio Corp. ("Emerson") emerged from bankruptcy pursuant to
a plan of reorganization. It then issued 30 million shares, and the creditors claimed
entitlement to some of them. Subsequent litigation between Stelling and other creditors,
on the one hand, and Emerson and its CEO Jurick, on the other, led to a 1996 Stipulation
of Settlement and Order (the "Agreement"). The parties stipulated in that Agreement
that Jurick and certain related parties were jointly and severally liable to Stelling for $21
million (the "Consent Judgment"), as well as to other creditors for other amounts.
29,152,542 shares of Emerson common stock were deposited with the District Court, a
portion of the proceeds from the sale of which were to satisfy the Consent Judgment.
Certain shares were deposited with the Court as "Pool A" shares to be marketed by an
Advisor with the proceeds of the sale to be distributed to Stelling and the other creditors.
To avoid default on an earlier Indenture to which Jurick was subject, a separate block of
shares, the "Pool B" shares, were also deposited with the Court but held in Jurick’s name
in order to retain his beneficial ownership of 25% of Emerson’s outstanding common
shares. The Pool A and Pool B shares secured the payment of the amount due the
creditors.
The Advisor, appointed by the Court, determined that for a number of reasons it
was unfeasible or even impossible to sell the shares on the market. In March 2000,
therefore, the District Court, acting pursuant to the Agreement, terminated it after finding
that there were no reasonable prospects for achieving its goals. The following May, the
Court released approximately 8 million shares to Stelling (her portion, as among the
creditors, of the Pool A shares), which she shortly thereafter sold to Emerson for $.50 per
share. In accordance with the language of the Agreement, which provided for entry or
release of the Consent Judgment upon termination of the Agreement by the Court,
Stelling then requested a restated judgment that reflected a credit for the sale to Emerson
(that is, reducing the amount of the Consent Judgment to take into account the money
received from the sale). Jurick did not accept the proposed restated judgment, and in late
2000, Stelling moved for the original Consent Judgment to be entered and released. The
District Court held hearings in June 2001 for the purpose of valuing both the Pool A and
Pool B shares to determine the amount by which the Consent Judgment should be
reduced or restated.

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In August 2001, the District Court determined the value of the shares, and thus the
credit to be applied and the ultimate amount due Stelling $9,717,020.12. As suggested
above, neither party was happy with the District Court’s ruling, and both appealed.
I.
It is appropriate to begin our discussion with that part of Jurick’s cross-appeal that
challenges the termination of the Agreement because only if termination was proper do
we reach the issues raised by what happened thereafter. Critical to this discussion, of
course, is the language of the termination provision of the Agreement. That provision,
11(b)(v), states:
(b) Termination Upon the Order of the Court. In the event . .
. (v) that there is no reasonable prospect that the goals contemplated by this
Stipulation and Order can be achieved, then any Creditor may apply to the
Court, on notice to all other Lead Parties, for an order from the Court
declaring that the Stipulation and Order is terminated. After a hearing, at
which any Lead Party may participate, the Court, in its discretion, based on
the totality of the circumstances, including, without limitation, evidence
with respect to the then-current Marketing Plan or other advice or opinions
of the Advisor and the value of the remaining Emerson Shares, if any, and
the available ways and means of realizing such value, shall determine
whether to order the termination of this Stipulation and Order on the
grounds that its goal and purposes are not reasonably likely to be realized.
A.77-78.
In November 1997, Stelling moved to terminate the Agreement because she had
not been paid "one cent." The District Court held hearings over six days in April and
July of 1998, taking extensive testimony about Emerson’s financial condition from the
Advisor and others. The Advisor testified that a sale of Emerson shares "for the amounts
mentioned and discussed or called for in the settlement agreement are highly unlikely."
A.653. He described the low stock price, the price dilution that had occurred through
1997 and which continued at that time, and Emerson’s failure to meet its (and his market
plan’s) projected performance. The District Court, when it subsequently ruled, credited
this testimony, and made explicit findings as to the impact of the large quantity of
outstanding shares on share value, the low trading price of the shares, the failed
negotiation for Emerson shares, and the failure of the Advisor’s marketing plan and other
avenues of "satisfying creditors’ claims." A.1532-35.
The Court also noted the failure of certain 1999 negotiations between Emerson
and Oaktree Capital Management, LLC, that would have significantly helped all parties’
financial positions. The Court found that this was important evidence that there was no
reasonable prospect that additional help could be found, and that Emerson’s financial
forecast was less than favorable. In an opinion dated March 3, 2000, the Court
terminated the Agreement.
Jurick argues in his cross-appeal that despite the poor prognosis for selling the
Emerson shares or increasing their value, the District Court’s termination of the
Agreement was premature because it did not consider the "turnaround" the company had
made and the profits it had recently shown. Such a turnaround may in fact have
generated profits, and there may have been long-term promise for Emerson. It is clear,
however, that the District Court had the opportunity to consider all of that information, in
the very, very detailed form not only of the financial statements of Emerson’s Annual
Reports for the years and quarters immediately preceding its opinion, but also for the
periods immediately preceding the hearing on whether to terminate the Agreement. The
District Court indicated that it found these Reports insufficiently persuasive as to
Emerson’s promise, especially given the Advisor’s observation that Emerson stock prices
had not responded even to the increased profits.
Somewhat relatedly, the Advisor testified that an alternative means of increasing
Emerson’s profitability, i.e. changing management, would require "long-term"
evaluation; that is, whether a management change might help the company would take
some time to determine. Also looking far into the future, one of Emerson’s directors
testified that in three to five years, Emerson would turn around to the point that both the
share prices and the overall sale value of the company would rise. The District Court

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concluded, however, that giving the additional time required to hopefully achieve
financial stability and/or profitability would frustrate the purposes of the Agreement.
In terminating the Agreement, and terminating it when it did, the District Court
did not abuse the discretion that the parties expressly gave it. Jurick’s argument to the
contrary fails.
II.
What should have happened following termination is the focus of the parties’
attention on Stelling’s appeal. Again, we must initially turn to the Agreement, which, we
find, clearly and explicitly provides the answer. If the District Court terminated the
Agreement, as it did here, the Agreement provides, at 11(c), that, within five business
days,
. . . the parties shall take the following actions and request
that the Court (or its designee) dispose of the documents deposited with it
in the following manner:
(i) . . . the Creditors shall consult with Jurick with respect
to the amount of the Consent Judgments to be entered . . . , after giving
appropriate credit to the Jurick group for any payments previously made
pursuant to paragraph 1 hereof. . . . Following a determination by the
Creditors, which determination shall be made in their sole discretion, of the
appropriate reduced amount of the Consent Judgments . . ., the Creditors
shall request that, within ten (10) Business Days, Jurick cause each
judgment debtor to deliver to them executed Consent Judgments, in form
acceptable to counsel for the Creditors, in the reduced amounts
(collectively, the "Restated Consent Judgments"). If the Restated Consent
Judgments are delivered, the Creditors will then request, on notice to each
of the other Lead parties, that the Court enter the Restated Consent
Judgments. Upon the entry by the Court of the Restated Consent
Judgments, the original Consent Judgments shall returned to the judgment
debtors. If all of the Restated Consent Judgments are not delivered or any
proposed judgment debtor seeks to be heard in any respect concerning the
amount or form of any Restated Consent Judgment, then the Court will
enter the original Consent Judgments (in the amount of . . . $49.5 million
against Jurick and each other judgment debtor). Following the entry of the
original Consent Judgments or the Restated Consent Judgments, the
Creditors may take any action permitted by law to execute upon their
Consent Judgments to collect the unpaid balance. . . .
A.78-80.
After the March 2000 termination of the Agreement, Stelling proposed a restated
consent judgment to Jurick. Jurick did not accept the restated judgment, and Stelling
submitted a proposed order to the District Court restating the original Consent Judgment
and releasing and entering it. The Court heard argument on the issue of entry of the
judgment, but did not resolve the issue. Instead, hearings were held to value the shares.
hearings which led to the August 29, 2001 order from which these appeals were taken.
Stelling argues that the Court should not have held these hearings, but, rather, and
without more, should have entered the original Consent Judgment given her compliance
with the procedure outlined in 11(c) and Jurick’s opposition to the restated judgment
and consequent refusal to deliver it.
Settlement agreements are often treated as contracts, and basic contract principles
apply. In re: Cendant Corp. Prides Litig., 233 F.3d 188, 193 (3d Cir. 2000); see also
Coltec Industries, Inc. v. Hobgood, 280 F.3d at 262, 269 (3d Cir. 2002). There is little
question that, given that fact, a court should endeavor to stay within the "four corners" of
the agreement and abide by the plain meaning of what the parties have agreed to. New
York State Elec. & Gas Corp. v. Federal Energy Reg. Comm’n, 875 F.2d 43, 45 (3d Cir.
1989) (stating that "contract principles are generally applicable to the construction of
settlement agreements and that it would be error . . . to depart from the plain meaning of
a settlement agreement in establishing the parties’ obligations"). It is a given that the
language of an agreement should not be tortured to create an ambiguity where none
exists. It is also a given, of course, that the parties’ intent is important.

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Paragraph 11(c) clearly and unambiguously provides that, within five business
days of the termination, the creditors shall consult with Jurick as to the amount of the
consent judgments to be entered after giving appropriate credit to the Jurick group for
any payments previously made by Jurick or his group. If there is no agreement as to the
reduced amount, which amount is in the sole discretion of the creditors to determine, the
Court will enter the original consent judgments $21,000,000 as to Stelling and the
creditors may execute upon them to collect the unpaid balance.
Prior to the March 3, 2000 termination, there were no payments which had been
"previously made" to Stelling and, thus, no reduced amount much less any agreement on
a reduced amount. The District Court, then, under the plain language of the Agreement
should have entered the original Consent Judgment. Indeed, in its March 3rd opinion,
that is precisely what the Court said it was going to do:
[T]he standards for termination have been met and the Stipulation is
declared terminated. The Consent Judgments executed as part of the
Stipulation of Settlement will be released upon appropriate applications.
The issue which remains to be decided is the appropriate distribution of the
shares of stock previously deposited with the Court.
A.1535.
That should have been, but was not, the end of it. Although counsel agreed that,
under the Agreement, upon termination the Consent Judgment would be entered, they
also agreed with the District Court that the Pool A shares sold by Stelling to Emerson
albeit after termination should act as a credit against that Judgment. A.7. Jurick
argued that the Pool B shares should also act as a credit, and the District Court agreed,
believing that "to permit Mrs. Stelling to obtain a judgment without regard to the value
of the retained [Pool B] shares would increase the agreed amount of liability by the value
of the shares, a result not contemplated by nor agreed to in the Stipulation." Id. And so
commenced valuation hearings as to both the Pool A and Pool B shares, although the
Agreement itself provided for no such thing.
III.
We will not attempt to put the cow back in the barn as to the Pool A shares.
Those shares have been sold and the parties agreed that there should be a credit against
the original Consent Judgment with the only dispute being how much. Stelling
essentially argues that because she sold her Pool A shares to Emerson for $0.50, the
District Court’s finding, which Jurick accepts, that the fair market value was closer to
$0.8675 was erroneous. The value assigned to those shares by the District Court is a
factual determination we review for clear error. Matter of Bankers Trust Co., 658 F.2d
103, 108 (3d Cir. 1981)(in assessing the worth of a destroyed ship, clearly erroneous
standard applies to determination of fair market value).
Ordinarily, in assessing the value of shares of stock, "the average exchange price
quoted on the valuation date furnishes the most accurate, as well as the most readily
ascertainable, measure of fair market value." Amerada Hess Corp. v. Commissioner of
Internal Revenue, 517 F.2d 75, 83 (3d Cir. 1975) (citing United States v. Cartwright, 411
U.S. 546, 551 (1973)). This typical measure, however, is subject to exceptions for
instance, when the trading date reflects an atypically high or low value; when shares have
some other restrictions on them; or when, as here, a "blockage discount" might apply
because the sale in question involved an "exceptionally large block" of shares. Amerada
Hess, 517 F.2d at 83-84 & n.33; see also Seas Shipping Co. v. Commissioner, 371 F.2d
528 (2d Cir. 1967). We noted in Amerada Hess, however, that even under such
"exceptional" cases, the observed market value might be a more appropriate benchmark,
in part because the vagaries of the market to which investors subject themselves include
such factors. Id. at 84; cf. id. at 92 (Hunter, J., concurring in part and dissenting in part
Stelling argues that, under that reasoning and barring other evidence, the $0.50
price at which she sold the Pool A shares to Emerson is a better benchmark of value and
the Consent Judgment should be reduced by applying that price, rather than $0.8675. We
disagree.
First, the District Court explained why it found the $0.50 value unfair and why it
found that the amount of credit to be deducted from the proposed judgment should be
$0.8675 per share:

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This is the exact amount that was paid for the shares beneficially owned by
[the other creditors] shortly before the sale by Mrs. Stelling of her shares
for $0.50. This is also the amount that was offered to Mrs. Stelling for her
Pool A shares . . . [Her] sale was not triggered by an offer made by
Emerson. Rather, it was Mrs. Stelling who offered the shares to Emerson
for $0.50 per share. Why that offer was made for $0.50 per share and not
$0.8675 per share is a total mystery to this Court.
A.7-8. Moreover, as Stelling’s own expert testified on cross-examination, a price of 50,
60, 70, or 87 cents for these shares would have been "fair." A.1786.
[T]he clearly erroneous standard of review does not permit an appellate
court to substitute its findings for those of the trial court. It allows only an
assessment of whether there is enough evidence on the record to support
those findings. That a different set of inferences could be drawn from the
record is not determinative. It is sufficient that the District Court findings
of fact could be reasonably inferred from the entire trial record.
Scully v. US WATS, Inc., 238 F.3d 497, 506 (3d Cir. 2001) (citations and internal
quotation marks omitted). There was no clear error in determining that $0.8675 was a
better estimate of the Pool A shares’ value than was $0.50, and we will affirm the District
Court’s Order of August 29, 2001 insofar as it valued the Pool A shares.
IV.
We will not enter into the fray with reference to the valuation of the minority,
unregistered Pool B shares held in Jurick’s name and wonder why the District Court felt
it necessary to do so. Again, there was no provision in the Agreement even suggesting
that at termination, where no "payment" had been made, these shares or any others
should be valued and, thus, unlike the District Court, we are not "satisfied that the intent
of the Agreement requires a credit for the Pool B shares." A.7. Moreover, Stelling
argued, and continues to argue, that any valuation of Pool B shares was premature and
should be addressed when she seeks to execute on the Consent Judgment for only then
can an accurate valuation be performed. The District Court did not discuss this
argument, and effectively treated the Pool B shares as if they were already in Stelling’s
hands as "payment" towards that Judgment. This was error.
No "payment" has been made by Jurick to Stelling vis-a-vis the Pool B shares and,
indeed, may never be, unlike the Pool A shares where "payment" was made, albeit
belatedly, and the original Consent Judgment credited. Any payment now to be made by
Jurick to Stelling, whether that payment be made by virtue of Jurick’s sale of the Pool B
shares or other sources of funds he may have at his disposal, will also be valued and
deemed credited as of the time of payment. And if the Pool B shares or a portion thereof
were to be released to Stelling rather than sold by Jurick, those shares should be valued
as of the time of release, for that would be the time of payment. Even counsel for Jurick
conceded that "until there is some value realized for the shares, your Honor can’t fix the
appropriate amount." A.1823. It is, in our view, the amount of monies or shares paid to
Stelling if and when they are paid that should be credited against the Consent
Judgment, not some value predicated on largely hypothetical facts and assumptions.
Parenthetically, at oral argument before us, we suggested the possibility of
crediting the value of the Pool A shares to the original Consent Judgment ($21,000,000
with a credit of $7,094,009.88) and releasing all or part of the Pool B shares to Jurick
who could then sell those shares, pay the proceeds to Stelling, and receive a credit for
that amount. This, indeed, was suggested by the District Court at one point and, while
both counsel were receptive, one or both clients apparently were not. (A.1690-91, 1702,
1713, 1817).
We recognize, of course, that the retained Pool B shares are meant to serve as
collateral for the Judgment. It is at least conceivable that that collateral could be
dissipated if turned over to Jurick. We note, however, that the Agreement contemplated
the appointment of a Settlement Agent authorized, subject to certain provisions which we
need not describe, to sell Emerson shares and distribute the proceeds to the creditors and
to Jurick. A.51-52. While the sales were to be made under a marketing plan that, as far
as the record reflects, did not come to fruition, the concept of a disinterested third party

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being authorized to sell the Pool B shares, with the proceeds sufficient to satisfy the
Judgment thereafter paid to Stelling, seems to make sense. We leave that to the District
Court to consider on remand if it becomes necessary for the Court to reach the issue of
the disposition of the Pool B shares.
In summary, then, we will affirm in part and reverse in part the District Court’s
order of August 29, 2001 and remand for the District Court to enter judgment in favor of
Stelling and against the Jurick parties for the sum of $21,000,000 less $7,094,009.88 for
a net sum of $13,905.990.12.
TO THE CLERK OF THE COURT:
Kindly file the foregoing Opinion.
/s/ Maryanne Trump Barry
Circuit Judge

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