JPMorgan Chase Bank, N.A. v. Asia Pulp & Paper Co.

In the

United States Court of Appeals

For the Seventh Circuit

Nos. 10-3413 & 12-2123

JPM ORGAN C HASE B ANK, N.A.,

successor in interest to

The First National Bank of Chicago,

Plaintiff-Appellee,

v.

A SIA P ULP & P APER C OMPANY, L TD.,

PT. INDAH K IAT P ULP & P APER T BK., and

PT. P ABRIK K ERTAS T JIWI K IMIA T BK.,

Defendants-Appellants.

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 02 C 6240—James F. Holderman, Chief Judge.

A RGUED N OVEMBER 1, 2011—D ECIDED F EBRUARY 21, 2013

Before B AUER, F LAUM, and SYKES, Circuit Judges.

S YKES, Circuit Judge. These consolidated appeals arise

out of a complicated financing arrangement put in place

to underwrite Beloit Corporation’s construction of two

massive paper-making machines for a consortium of

2 Nos. 10-3413 & 12-2123

paper manufacturers in Southeast Asia. Simplified, the

basic facts are these: In 1996 Beloit agreed to build two

high-speed paper-making machines for Indonesian

paper companies PT. Indah Kiat Pulp & Paper Tbk. (“Indah

Kiat”) and PT Pabrik Kertas Tjiwi Kimia Tbk. (“Tjiwi

Kimia”), subsidiaries of Asia Pulp & Paper Company,

Ltd. (“Asia Pulp”), which is based in Singapore. (For

simplicity, we refer to the companies collectively as

“Asia Pulp” unless the context requires otherwise.) To

finance construction, Indah Kiat and Tjiwi Kimia

executed credit agreements and promissory notes in

favor of Beloit reflecting a principal indebtedness

of approximately $38 million, later increased to $43.8

million. Asia Pulp guaranteed the notes, and Beloit as-

signed them to JPMorgan Chase Bank, N.A. (“JPMorgan”)

in exchange for construction financing equal to the princi-

pal amount.

The machines were delivered in 1998 but did not run

at the speeds specified in the contracts; there were other

problems as well. In 2000 the parties entered into a settle-

ment resolving all claims pertaining to the machines but

specifically preserving Asia Pulp’s obligations under

the notes. Asia Pulp defaulted, and JPMorgan sued for

nonpayment. Asia Pulp asserted multiple defenses and

a counterclaim invoking various contract and fraud

theories. In a series of decisions, the district court held

that Asia Pulp’s warranty-based claims were foreclosed

by the settlement and its remaining claims lacked

factual and legal support. The court entered judgment

for JPMorgan for more than $53 million. Asia Pulp

appealed, raising a host of arguments regarding the

Nos. 10-3413 & 12-2123 3

viability of its defenses and counterclaim and also chal-

lenging the court’s award of interest and attorney’s fees.

Matters became a bit more complicated after we heard

argument. After the appeal was filed, JPMorgan issued

citations to discover assets on which to execute its large

judgment. Asia Pulp moved to stay discovery based on

an Indonesian injunction in an unrelated case, raising an

interesting international conflict-of-law question. The

district court denied the motion and ordered Asia Pulp

to comply with the asset-discovery citations. Asia

Pulp appealed this order as well.

We affirm the judgment. The district court correctly

held that the settlement waived Asia Pulp’s implied-

warranty defenses and counterclaim. The fraud defense

is mostly barred as well; to the extent it is not, Asia

Pulp’s evidence is wholly insufficient to survive sum-

mary judgment. Asia Pulp’s remaining defenses—that

the notes lacked consideration; that the notes were

issued for a “special purpose” and were not intended to

be repaid; and that JPMorgan is not a holder in due

course—are all meritless. As to damages, the court prop-

erly awarded interest at the contractual default rate

and attorney’s fees as provided in the notes. Finally, we

lack jurisdiction over Asia Pulp’s appeal of the asset-

discovery order. Postjudgment orders for the discovery

of assets are nonappealable interlocutory orders, and

the collateral-order doctrine does not apply.

4 Nos. 10-3413 & 12-2123

I. Background

The following account is from the summary-judgment

record, which we construe in the light most favorable

to Asia Pulp. On July 10, 1996, Beloit Corporation entered

into two contracts with Asia Pulp to build two high-

speed paper-making machines for its Indonesian sub-

sidiaries, Indah Kiat and Tjiwi Kimia. These enormous

machines—known as the PPM3 and the MPM11—are

several stories high and about 200 meters long, roughly the

length of two football fields. On May 12, 1997, Indah Kiat

and Tjiwi Kimia assumed all of Asia Pulp’s rights and

obligations under the contracts. Specifically, Indah Kiat

purchased the PPM3 machine and Tjiwi Kimia pur-

chased the MPM11 machine.

To finance the construction of these huge machines,

Indah Kiat and Tjiwi Kimia executed credit agreements

and promissory notes in favor of Beloit in the original

principal amount of $21,809,962.00 (the Indah Kiat

note) and $16,213,352.95 (the Tjiwi Kimia note). Asia

Pulp issued unconditional guarantees ensuring repay-

ment of the notes. These transactions closed on April 25,

1998. That same day, Beloit entered into a Note Pur-

chase Agreement with First National Bank of Chicago,

JPMorgan’s predecessor in interest,1 assigning the

notes to the bank in exchange for a line of credit in the

amount of $38,023,314.95 to serve as partial construc-

tion financing for the PPM3 and MPM11 machines.

1

JPMorgan eventually assumed First Chicago’s interest in

the notes. We refer only to JPMorgan throughout.

Nos. 10-3413 & 12-2123 5

On September 24, 1998, the parties increased the princi-

pal amount on the Indah Kiat and Tjiwi Kimia notes to

$26,701,678.00 and $17,123,488.95, respectively. Indah Kiat

and Tjiwi Kimia issued amended promissory notes to

Beloit reflecting the increased indebtedness, and Asia

Pulp again unconditionally guaranteed payment. On

September 30, 1998, Beloit and JPMorgan amended

their Note Purchase Agreement to cover the amended

notes, and JPMorgan increased Beloit’s line of credit

to $43,825,167.00.

The terms of the credit agreements and notes required

Indah Kiat and Tjiwi Kimia to make principal and interest

payments to JPMorgan in eight installments, the first

due on September 30, 1998. The remaining payments

were to be made semiannually until the notes were paid

in full. Indah Kiat and Tjiwi Kimia made their scheduled

payments beginning in September 1998 and continuing

through October 2000.

When the machines came online in 1998, however,

Asia Pulp employees identified several defects in their

operation. The main performance problem was insuf-

ficient speed. Asia Pulp catalogues other design and

mechanical defects in its brief, but the details are not

important to this appeal. 2 It is enough to note that the

2

In brief, the claimed defects were these: (1) inability to reach

the operational speed specified in the contracts; (2) incorrect

design and mechanical function in the wire section resulting

in low-quality paper; (3) incorrect mechanical function in the

(continued...)

6 Nos. 10-3413 & 12-2123

parties resolved all disputes regarding the defects by a

“Deed of Settlement” dated October 3, 2000. This agree-

ment expressly settled and released all claims relating to

the “Disputed Contracts”—that is, the contracts for

the construction, sale, and purchase of the PPM3 and

MPM11 machines. More specifically, the settlement

released Beloit, its successors, and related companies,

from “all claims . . . known or unknown . . . in connection

with or in any way pertaining to” the construction, instal-

lation, or operation of the PPM3 and MPM11 machines.

Importantly, however, the Deed of Settlement expressly

preserved the obligation of Indah Kiat, Tjiwi Kimia, and

Asia Pulp to pay on the notes. On this point, the agree-

ment stated as follows:

The APP Parties [Asia Pulp, Indah Kiat, and Tjiwi

Kimia] are not released from their obligations to pay

or repay any promissory notes issued to [Beloit Corpo-

ration] or other financing or other loans relating to

the PPM3 and MPM11 Contracts . . . . In addition,

the Beloit Entities’ rights with respect to such promis-

sory notes, financings and loans are not [a]ffected

by this Deed.

Despite this explicit reservation of rights and obligations

under the notes, Asia Pulp and its subsidiaries made

2

(...continued)

press section resulting in shutdowns and increased operational

expenses; (4) a flaw in the drying section making it difficult

to operate and limiting its speed; and (5) flaws in the sizer,

calendar, and reel sections resulting in increased operational

expenses.

Nos. 10-3413 & 12-2123 7

no further payment. Early in 2001 Asia Pulp issued

a “standstill” letter to all its creditors—including

JPMorgan—announcing a freeze of interest and principal

payments on all Asia Pulp debt, including the debt of

its subsidiaries Indah Kiat and Tjiwi Kimia. The

standstill letter had nothing to do with the PPM3 and

MPM11 machines; rather, the stated reason for the debt-

payment freeze was Asia Pulp’s corporate restructuring.

In September 2001 JPMorgan sent Asia Pulp a notice

of default. The bank had not been paid since

October 2000, and missing a principal or interest

payment automatically caused the notes to mature,

making all unpaid principal and accrued interest due

immediately. In addition, the notes and credit agree-

ments allowed for recovery of default interest and “fees

and disbursements of counsel.” Payment was not forth-

coming, so JPMorgan initiated this suit against Asia

Pulp, Indah Kiat, and Tjiwi Kimia to collect money due

on the notes.

A. The Litigation

The defendants vigorously contested JPMorgan’s suit,

asserting multiple affirmative defenses to liability and a

counterclaim premised on various contract and fraud

theories. Specifically, they alleged that: (1) Beloit breached

several implied warranties;3 (2) Beloit misrepresented its

3

The first, second, and fourth affirmative defenses alleged

breach of the implied warranty of merchantability, breach of

(continued...)

8 Nos. 10-3413 & 12-2123

design and construction expertise and fraudulently

represented that the notes were only a temporary

construction-financing measure; 4 (3) the notes were

issued as “special purpose” financing only and lacked

consideration;5 and (4) JPMorgan was not a holder in

due course.6 JPMorgan moved for summary judgment.

In three separate orders, the district court, Judge James F.

Holderman, granted summary judgment in favor of

JPMorgan and against the three defendants.

First, on October 14, 2009, the court granted summary

judgment in favor of JPMorgan and against Indah Kiat

and Tjiwi Kimia, rejecting their various defenses to

liability on the notes. The court held that the implied-

warranty defenses were barred by the Deed of Settle-

ment and the remaining defenses were factually and

legally deficient. On April 21, 2010, the court granted

summary judgment in favor of JPMorgan and against

Asia Pulp, rejecting the same affirmative defenses as

3

(...continued)

the implied warranty of fitness, and breach of an implied

warranty entitling Indah Kiat and Tjiwi Kimia to con-

sequential damages. The counterclaim was also based on

an alleged breach of implied warranty.

4

The fraud allegations are contained in Asia Pulp’s third

affirmative defense.

5

These allegations are contained in Asia Pulp’s fifth and

sixth affirmative defenses.

6

This claim is contained in Asia Pulp’s seventh affirmative

defense.

Nos. 10-3413 & 12-2123 9

well as the counterclaim. In this order the court also

determined damages (including contractual interest),

but reserved consideration of attorney’s fees. On Septem-

ber 13, 2010, the district court modified the damages

award and added attorney’s fees as provided in the

notes. This order entered final judgment for JPMorgan

as follows:

(1) judgment against Indah Kiat in the amount of

$31,904,510.92 (principal and interest on the Indah

Kiat note) plus $251,820.63 in attorney’s fees and

costs, for a total of $32,156,331.55;

(2) judgment against Tjiwi Kimia in the amount of

$21,088,185.59 (principal and interest on the Tjiwi

Kimia note) plus $251,820.63 in attorney’s fees and

costs, for a total of $21,340,006.22; and

(3) judgment against Asia Pulp for the combined

total of $53,496,337.77.

(Forgive the exquisite detail; in light of the issues raised

on appeal, we cannot omit it.) Asia Pulp filed a timely

notice of appeal designating all three merits orders

(dated October 14, 2009; April 21, 2010; and September 13,

2010). This is Appeal No. 10-3413.

B. Postjudgment Collection Proceedings

Having won a very large judgment, JPMorgan sought

to protect its enforcement options while the appeal

was pending. On October 19, 2010, JPMorgan issued

citations to discover assets on which to execute its judg-

10 Nos. 10-3413 & 12-2123

ment. Asia Pulp moved to stay enforcement of the cita-

tions, claiming that a “Provisional Injunction” issued by

an Indonesian court in 2008 in an unrelated case pro-

hibited it from complying with postjudgment collection

proceedings. Judge Holderman referred the motion to

Magistrate Judge Geraldine Soat Brown, and on Novem-

ber 16, 2011, she rejected Asia Pulp’s argument and

ordered it to comply with the asset-discovery cita-

tions. Asia Pulp moved for reconsideration, but

Judge Brown denied the motion. Asia Pulp then filed

objections with the district court pursuant to Rule 72(a)

of the Federal Rules of Civil Procedure. On January 10,

2012, Judge Holderman set a briefing schedule.

Eight days later, however, Asia Pulp filed a notice of

appeal purporting to appeal Magistrate Judge Brown’s

ruling. This appeal was docketed as Appeal No. 12-1136.

We questioned appellate jurisdiction and issued a juris-

dictional order. In the meantime Judge Holderman

entered an order overruling Asia Pulp’s objections, con-

firming the soundness of Magistrate Judge Brown’s

conclusions, and ordering Asia Pulp to comply with the

asset-discovery citations. 7 The court held that Asia Pulp

7

Although the “filing of a timely notice of appeal confers

jurisdiction over the matter on the court of appeals and divests

the district court of its control,” Henry v. Farmer City State

Bank, 808 F.2d 1228, 1240 (7th Cir. 1986), that “rule does not

operate . . . where there is a purported appeal from a non-

appealable order,” United States v. Bastanipour, 697 F.2d 170, 173

(7th Cir. 1982). Magistrate Judge Brown’s ruling was a

(continued...)

Nos. 10-3413 & 12-2123 11

had not established that it would be subject to sanc-

tions under the Indonesian injunction if forced to

comply with the asset-discovery citations. The court

also held that principles of international comity fa-

vored enforcement of the citations. After unsuccessfully

moving for reconsideration, Asia Pulp filed a notice of

appeal from the district court’s postjudgment orders.

This is Appeal No. 12-2123.

Because the magistrate judge’s ruling was not a final,

appealable order, we dismissed Appeal No. 12-1136

for lack of appellate jurisdiction. We consolidated the

remaining appeals and ordered the parties to specif-

ically address the question of appellate jurisdiction in

Appeal No. 12-2123, Asia Pulp’s appeal from Judge

Holderman’s order denying the motion to stay and com-

pelling compliance with the asset-discovery citations.

The consolidated appeals are now ready for decision.

II. Discussion

The case is before the court following the grant of

summary judgment in favor of JPMorgan, so our review

is de novo. Righi v. SMC Corp., 632 F.3d 404, 408 (7th Cir.

2011). The district court held that Asia Pulp is liable on

the notes and that its counterclaim and affirmative de-

7

(...continued)

nonappealable order, so the district court’s jurisdiction over

the supplementary proceedings was intact notwithstanding

Asia Pulp’s attempted appeal from her order.

12 Nos. 10-3413 & 12-2123

fenses were either barred by the Deed of Settlement or

lacked factual and legal support. The court entered judg-

ment for the unpaid principal amount, plus interest at

the contractual default rate and attorney’s fees as pro-

vided in the credit agreements and notes.

On appeal Asia Pulp presses its counterclaim and

affirmative defenses, and also challenges the award of

interest at the contractual default rate and attorney’s

fees. The basic facts are uncontroverted; the appeal turns

on legal conclusions regarding the contract defenses

and counterclaim, and whether Asia Pulp’s fraud

evidence is sufficient to get to a jury. In reviewing the

district court’s grant of summary judgment, we draw all

reasonable inferences in favor of the nonmoving party,

here Asia Pulp. Id. Summary judgment is appropriate if

there are no material factual disputes for trial and

JPMorgan is entitled to judgment as a matter of law.

Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing FED.

R. C IV. P. 56(c)). To establish a material factual dispute,

Asia Pulp must present evidence that would permit a

reasonable jury to return a verdict in its favor. See

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Before turning to the merits, however, we must clear

some procedural underbrush.

A. The Scope of the Appeal

As a threshold matter, JPMorgan argues that certain

language in the first notice of appeal limits our jurisdic-

tion to the claims involving Indah Kiat only. Rule 3(c)(1)(B)

of the Federal Rules of Appellate Procedure requires

Nos. 10-3413 & 12-2123 13

that a notice of appeal “designate the judgment, order,

or part thereof being appealed.” Although the require-

ments of Rule 3 are “jurisdictional in nature, and their

satisfaction is a prerequisite to appellate review,” we

generally construe the notice requirements liberally.

Smith v. Barry, 502 U.S. 244, 248 (1992) (citing Torres

v. Oakland Scavenger Co., 487 U.S. 312, 316-17 (1988)).

Asia Pulp’s first notice of appeal designates three

orders as the subject of the appeal:

(1) [the] October 14, 2009 Order granting JP Morgan’s

motion for summary judgment against defendants

[Indah Kiat] and [Tjiwi Kimia]; (2) [the] April 21, 2010

Order granting JP Morgan’s motion for summary

judgment against defendant [Asia Pulp]; and (3) [the]

September 13, 2010 Order[] amending the April 21,

2010 judgment and awarding damages in the total

amount of $32,156,331.55.

Note the language of subpart (3) of the notice, which

identifies the September 13, 2010 order but goes on

to specifically mention the award of damages in the

amount of $32,156,331.55, which corresponds to the

award against Indah Kiat only. As we have earlier ex-

plained, the September 13, 2010 order modified the dam-

ages determination contained in the court’s April 21

order, awarded attorney’s fees, and entered final judg-

ment as follows: judgment against Indah Kiat in

the total amount of $32,156,331.55; judgment against

Tjiwi Kimia in the total amount of $21,340,006.22; and

judgment against Asia Pulp for the combined total

of $53,496,337.77.

14 Nos. 10-3413 & 12-2123

JPMorgan argues that by specifying the amount of

damages awarded against Indah Kiat only, the notice

of appeal limits our review to that part of the judgment.

We disagree. The notice designates all three orders by

which the district court addressed the merits of the case

and reached final judgment, culminating in the court’s

order on September 13, 2010, which encompassed the

judgment against all three defendants. Read as a whole,

we think the notice “sufficiently demonstrate[s] [the]

intention to appeal all orders previously issued by the

district court.” Badger Pharmacal, Inc. v. Colgate-Palmolive

Co., 1 F.3d 621, 626 (7th Cir. 1993). The requirements of

Rule 3 are satisfied when the matters appealed can be

readily inferred from the text of the notice and the

appellee has not been misled. See Ortiz v. John O. Butler

Co., 94 F.3d 1121, 1125 (7th Cir. 1996); see also United

States v. Michelle’s Lounge, 39 F.3d 684, 691-92 (7th Cir.

1994) (notice of appeal identifying orders “otherwise

denying any adversary hearing” satisfies Rule 3 even

though it does not more specifically identify the order

appealed from).

Considered in context, the specific mention of only a

subset of the total damages—the amount awarded against

Indah Kiat—is best explained as a clerical error, not an

attempt to limit the scope of the appeal. The notice

listed all three orders that together comprise the district

court’s disposition of JPMorgan’s claims against the

three defendants in toto. Asia Pulp’s opening brief, which

addresses the liability of all three defendants, confirms

that no limitation was intended, and JPMorgan does not

claim to have been misled. Accordingly, all three or-

Nos. 10-3413 & 12-2123 15

ders—including the September 13, 2010 order in its

entirety—are properly before the court.

B. Summary Judgment

Asia Pulp’s counterclaim and three affirmative

defenses are premised on breach-of-warranty theories

relating to the PPM3 and MPM11 contracts. The district

court held that these claims are barred by the Deed of

Settlement. A fourth affirmative defense alleges that

Beloit made certain material misrepresentations to

induce Indah Kiat and Tjiwi Kimia to enter into the

credit agreements and issue the notes. The district

court held that the fraudulent inducement defense

is not barred by the Deed of Settlement but lacks

factual support on the merits. The court also rejected

Asia Pulp’s remaining contract defenses and entered

judgment for the balance due on the notes, plus con-

tractual interest and attorney’s fees. Asia Pulp challenges

every one of these rulings.

1. The Deed of Settlement

The Deed of Settlement comprehensively releases

Beloit, its successors, and related companies from all

claims arising from or relating to the “Disputed Con-

tracts”—that is, the contracts for the construction, sale,

and installation of the PPM3 and MPM11 machines.

Importantly, however, the Deed of Settlement specifically

preserves the obligation of Asia Pulp and its subsidiaries

to pay on the notes. As Beloit’s assignee and successor

16 Nos. 10-3413 & 12-2123

on the notes, JPMorgan may assert Beloit’s rights under

the notes and the Deed of Settlement. See Plumb v. Fluid

Pump Serv., Inc., 124 F.3d 849, 864 (7th Cir. 1997)

(“[E]lementary contract law provides that upon valid

and unqualified assignment the assignee stands in the

shoes of the assignor and assumes the same rights, title

and interest possessed by the assignor.” (citation omitted)).

Clause 10 of the Deed of Settlement contains the provi-

sions relevant here. First, Clause 10(A) contains Beloit’s

release of rights:

Each of the Beloit Entities and Harnischfeger

hereby releases the [Asia Pulp] Parties . . . from all

claims and waives all rights against them, whether

such claims or rights are known or unknown, accrued

or to accrue, in connection with or in any way per-

taining to the Disputed Contracts, except as set forth

in Clause 10(C).

Clause 10(B) contains Asia Pulp’s release of rights:

Each of the [Asia Pulp] Parties hereby releases the

Beloit Entities and Harnischfeger . . . from all claims

and waives all rights against them, whether such

claims or rights are known or unknown, accrued or

to accrue, in connection with or in any way per-

taining to the Disputed Contracts. [Asia Pulp] agrees

to indemnify the Beloit Entities and Harnischfeger

against any claims arising out of and in connection

with the Disputed Contracts by the [Asia Pulp] Parties.

Finally, Clause 10(C) unequivocally states that the settle-

ment does not affect Beloit’s right to enforce the notes

Nos. 10-3413 & 12-2123 17

and does not release the obligation of Asia Pulp and its

subsidiaries to pay on the notes:

The [Asia Pulp] Parties are not released from their

obligations to pay or repay any promissory notes

issued to [Beloit Corporation] or other financing or

other loans relating to the PPM3 and MPM11

Contracts . . . . In addition, the Beloit Entities’ rights

with respect to such promissory notes, financings

and loans are not [a]ffected by this Deed.

Our interpretation of the Deed of Settlement is gov-

erned by principles of contract law—here, the contract

law of Illinois. Capocy v. Kirtadze, 183 F.3d 629, 632 (7th

Cir. 1999). The scope and effect of the release depend on

the intent of the parties, but we “determine this intent

‘from the language used and the circumstances of the

transaction.’ ” Id. (quoting Carlile v. Snap-On Tools, 648

N.E.2d 317, 321 (Ill. App. Ct. 1995)). Absent ambiguity,

the question presented is one of law. Id. (citing Gavery

v. McMahon & Illiott, 670 N.E.2d 822, 824 (Ill. App. Ct.

1996)). There is no ambiguity here.

Clause 10(C) expressly excludes the promissory notes

from the release, so the obligation to pay survives the

settlement and JPMorgan retains the right to enforce that

obligation. In contrast, in Clause 10(B) Asia Pulp and its

subsidiaries release all claims and waive all rights

against Beloit and its successors without qualification.

The release language is comprehensive, encompassing

“all claims . . . known or unknown . . . in connection with

or in any way pertaining to the Disputed Contracts.” (Em-

phases added.) This language covers the implied-

18 Nos. 10-3413 & 12-2123

warranty defenses and counterclaim asserted here.

These claims are based on design and construction defects

well known to the parties on October 3, 2000, when the

Deed of Settlement was executed. Indeed, the whole

point of the settlement was to resolve all claims per-

taining to the myriad performance problems of the PPM3

and MPM11 machines.

According to the uncontroverted evidence (much of it

from Asia Pulp’s own employees), the machines had

serious problems immediately following their installa-

tion in 1998—two years before the parties signed the

Deed of Settlement. In 1997 Tjiwi Kimia hired away

Beloit’s project manager Robert Prutzman, whose job

was to oversee the installation and operation of the ma-

chines. In a sworn declaration, Prutzman stated that he

was never able to get the PPM3 and MPM11 to work at

their target speeds. Also in the record is a sworn declara-

tion from Aarno Tuomenoja, who was apparently an

engineer or supervisor in charge of technology at Asia

Pulp during the relevant time period. He recounted

that after the machines were received, “field level em-

ployees . . . reported that the machines would not run

at the speeds required in the contract.” He itemized

other defects as well. As such, Asia Pulp was well aware

of possible warranty claims long before October 2000

when the Deed of Settlement was signed. The implied-

warranty affirmative defenses and counterclaim are

plainly barred by the terms of the settlement.

The same is true of the fraudulent-inducement defense,

at least to the extent that this defense is premised on

Nos. 10-3413 & 12-2123 19

alleged misrepresentations about the PPM3 and MPM11

machines. Asia Pulp complains of two distinct misrepre-

sentations. First, it contends that Beloit falsely rep-

resented that it had the experience and skill necessary

to design and build the PPM3 and MPM11 to the

desired specifications. Second, it claims that Beloit

falsely represented that the promissory notes would be

temporary or “interim” financing only, inducing Asia

Pulp and its subsidiaries to believe that the notes

would not have to be repaid.

The first of these misrepresentations relates directly

to the performance problems of the PPM3 and MPM11

machines. As factual support for this claim, Asia Pulp

relies primarily on Prutzman’s declaration that Beloit

had never designed or manufactured machines to the

specifications and quality required by the PPM3 and

MPM11 contracts. But Prutzman began working for

Tjiwi Kimia in 1997, so Asia Pulp was aware of Beloit’s

alleged misrepresentation on this score three years before

the Deed of Settlement was executed. To the extent

that the fraud defense is based on misrepresentations

about Beloit’s design and construction experience, it

falls squarely within the release in the Deed of Settle-

ment and is therefore barred.

The misrepresentation about the nature of the credit

transaction is another matter, however. This aspect of

the fraudulent-inducement defense does not pertain to

the “Disputed Contracts” per se; it pertains to the associ-

ated construction financing. We do not need to decide

whether the release language in the Deed of Settlement

20 Nos. 10-3413 & 12-2123

is broad enough to bar this part of the claim; we agree

with the district court that it fails on the merits. To

survive summary judgment, Asia Pulp needed clear

and convincing evidence on the following elements:

(1) Beloit made a false statement of material fact;

(2) knowing it was false or in reckless disregard of its

truth or falsity; (3) with intent to induce Indah Kiat and

Tjiwi Kimia to enter into the credit agreement and issue

the notes, and to induce Asia Pulp to guarantee repay-

ment; (4) Indah Kiat, Tjiwi Kimia, and Asia Pulp reason-

ably believed the false statement to be true and acted

in justifiable reliance on it; and (5) damages as a result

of their reliance on the misrepresentation. See Kapelanski

v. Johnson, 390 F.3d 525, 530-31 (7th Cir. 2004) (applying

Illinois law); LaScola v. U.S. Sprint Commc’ns, 946 F.2d

559, 569 (7th Cir. 1991) (applying the clear-and-convincing

evidentiary standard in affirming a summary judgment

dismissing a fraud claim). Asia Pulp’s evidence falls

far short on several elements of the claim; there are

legal barriers as well.

To repeat, Asia Pulp asserts that Beloit falsely repre-

sented that the notes were temporary or “interim” financ-

ing and that it would secure permanent financing else-

where, and that this representation led Asia Pulp and

its subsidiaries to believe that they would not have to

repay the notes. There are several problems with this

claim. First, it is a claim of promissory fraud; that is, Asia

Pulp contends that Beloit made a promise—that it would

secure permanent financing elsewhere—with no present

intention of fulfilling it. But Illinois does not recognize

a cause of action for promissory fraud. Indep. Trust Corp. v.

Nos. 10-3413 & 12-2123 21

Fid. Nat’l Title Ins. Co. of N.Y., 577 F. Supp. 2d 1023, 1038-

39 (N.D. Ill. 2008); see also BPI Energy Holdings, Inc. v. IEC

(Montgomery), LLC, 664 F.3d 131, 136 (7th Cir. 2011).

Although an exception exists for certain fraudulent

schemes, it only applies if the misrepresentation is embed-

ded in a larger pattern of deception or the deceit is par-

ticularly egregious. See Desnick v. Am. Broad. Cos., 44 F.3d

1345, 1354 (7th Cir. 1995). There is no evidence of that

here. Asia Pulp alleges a garden-variety promissory fraud.

Second, the evidence does not begin to show, let alone

clearly and convincingly, that Beloit actually made the

alleged false representation knowing it to be false. To

the extent that the representation about permanent fi-

nancing was actually made (the evidence of this is

skeletal and lacking in specifics), there is no evidence

that it was false when made or that Beloit knew it

was false. Tuomenoja merely asserts that Beloit “had

no intention of acting on its representation.” Asia Pulp

has no evidence to back up this assertion.

Proof of justifiable reliance is also lacking. Asia Pulp

claims that it reasonably believed, based on Beloit’s

misrepresentation about permanent financing, that it

would not have to repay the notes. No record evidence

supports this contention. To the contrary, Indah Kiat

and Tjiwi Kimia paid on the notes for two years before

defaulting. Asia Pulp has not explained why these pay-

ments were made if indeed it believed it did not have

to repay the notes. Moreover, Asia Pulp and its subsidiar-

ies expressly acknowledged their continued liability on

the notes in the Deed of Settlement, which specifically

22 Nos. 10-3413 & 12-2123

preserved their obligation to pay. In short, whether or

not it was barred by the Deed of Settlement, Asia Pulp’s

fraudulent-inducement defense is legally and factually

unsupported.

2. Remaining Affirmative Defenses

In another twist on the same theme, Asia Pulp insists

that the notes are unenforceable because they were

issued for a “special purpose”—that is, as temporary or

“interim” financing—and were never intended to be

repaid. 8 As Judge Holderman aptly put it, this argu-

ment “defies common sense.” Asia Pulp has not ex-

plained how this putative “special purpose” extinguishes

its obligation to repay the notes. The terms of the credit

agreements and notes plainly specify a repayment

schedule and bind Indah Kiat and Tjiwi Kimia to pay

the notes in full. Asia Pulp unconditionally guaranteed

repayment. No bank would extend $40 million in credit

8

The only factual support for this so-called “special purpose”

defense is a statement in the Tuomenoja declaration that “th[e]

promissory note was meant to be a temporary measure.” The

district court excluded this statement under the parol-evidence

rule. This evidentiary ruling was sound. Main Bank of Chi.

v. Baker, 427 N.E.2d 94, 100 (Ill. 1981) (“[A]lthough article 3 of

the [Uniform Commercial] Code allows an instrument

to be modified by a separate writing executed contemporane-

ously, . . . it otherwise follows the parol evidence rule that

prior or collateral oral agreements are inadmissible to contra-

dict the express terms of a written instrument.”).

Nos. 10-3413 & 12-2123 23

in exchange for illusory promissory notes. And as we

have noted, Indah Kiat and Tjiwi Kimia made payments

on the notes from September 1998 to October 2000, and

the Deed of Settlement, signed on October 3, 2000, specifi-

cally preserved their obligation to pay. Nothing further

need be said on this point.

Asia Pulp also argues that the notes lacked considera-

tion. Consideration is “a bargained-for exchange,

whereby the promisor . . . receives some benefit, or the

promisee . . . suffers detriment.” Vassilkovska v. Woodfield

Nissan, Inc., 830 N.E.2d 619, 624 (Ill. App. Ct. 2005). Under

the relevant section of Illinois’s version of Article 3 of

the Uniform Commercial Code, “any consideration suffi-

cient to support a simple contract” satisfies the consider-

ation requirement. 810 ILL. C OMP. S TAT. 5/3-303(b). A

validly executed negotiable instrument is presumed to

be supported by consideration. Pedott v. Dorman, 548

N.E.2d 541, 546 (Ill. App. Ct. 1989). A clause stating that

an instrument was given “for value received” ordinarily

is sufficient evidence of consideration. Id.

The notes state that they were issued “for value re-

ceived,” and Asia Pulp does not dispute that they were

validly executed. Consideration is therefore presumed,

and although the presumption may be rebutted, “the

evidence offered in rebuttal must be of a very clear and

cogent nature.” Id. Asia Pulp offers no evidence in

rebuttal, much less “clear and cogent” evidence. Instead,

it advances an argument from the existence of the under-

lying construction contracts; that is, Asia Pulp argues

that its promise to repay the notes brought no new rights

24 Nos. 10-3413 & 12-2123

in return beyond those already contained in the PPM3

and MPM11 contracts. We fail to see—and Asia Pulp

does not explain—how this operates to defeat the pre-

sumption of consideration. The notes served as partial

construction financing, necessary for the completion

and delivery of machines, and were thus an integral part

of the larger transaction. The lack-of-consideration

defense is meritless.

Finally, Asia Pulp argues that JPMorgan is not a holder

in due course of the notes. But this issue comes into

play only if Asia Pulp has an affirmative defense that

survives summary judgment. See Bank of N.C., N. A. v.

Rock Island Bank, 630 F.2d 1243, 1246 (7th Cir. 1980). In

other words, assuming it has the status of a holder in

due course, JPMorgan would have a trump card to play

against an otherwise valid defense to liability on the

notes. See id. Because Asia Pulp has no valid affirmative

defense, the question is irrelevant.

C. Damages

Asia Pulp challenges the damages award on two

grounds: (1) the district court should not have calculated

interest using the increased default rate specified in the

notes; and (2) the court should not have awarded attor-

ney’s fees.9 We find no error on either point.

9

Asia Pulp also claims that the damages award should have

been “mitigated” based on Beloit’s fraud. This argument has

no factual or legal support.

Nos. 10-3413 & 12-2123 25

Under the terms of the credit agreements and notes, a

slightly higher interest rate applies in the case of a de-

fault. For the Indah Kiat note, the rate increases from

2.17% to 3.125%. For the Tjiwi Kimia note, the rate in-

creases from 2.29% to 3.125%. Asia Pulp claims that

these provisions are unenforceable penalty clauses. The

district court rejected this argument and calculated

interest on the principal balance due on the notes using

the 3.125% rate. Whether the rate increase is an unen-

forceable penalty clause is a question of law, so our

review is de novo. Checkers Eight Ltd. P’ship v. Hawkins,

241 F.3d 558, 562 (7th Cir. 2001).

A contractual provision is an unenforceable penalty

clause when its sole purpose “is to secure performance

of the contract.” Id. Although doubtful cases are

resolved “in favor of classification as a penalty,” Lake River

Corp. v. Carborundum Co., 769 F.2d 1284, 1290 (7th Cir.

1985), Illinois courts routinely uphold reasonable

postdefault increases in interest rates as valid liquidated-

damages provisions, see, e.g., Baker v. Loves Park Sav. & Loan

Ass’n, 333 N.E.2d 1, 5-6 (Ill. 1975) (upholding a clause

providing for a 1% increase in interest rate upon de-

fault). Unlike fixed fees for a breach of contract bearing

no relationship to actual damages, here the small

postdefault rate increase—less than 1%—was entirely

reasonable in light of anticipated losses associated with

default, especially because actual damages from a breach

would have been difficult to measure at the time of con-

tract formation. See Checkers Eight, 241 F.3d at 562.

We agree with the district court that the post-

default interest-rate increase is a valid and enforceable

liquidated-damages clause.

26 Nos. 10-3413 & 12-2123

Asia Pulp’s challenge to the award of attorney’s fees

fares no better. Illinois requires that contractual fee-

shifting provisions be clear and specific. See, e.g., Estate of

Downs v. Webster, 716 N.E.2d 1256, 1260 (Ill. App. Ct. 1999)

(“When the language does not specifically state that

‘attorney fees’ are recoverable, courts will not give the

language an expanded meaning.”); Qazi v. Ismail, 364

N.E.2d 595, 596-97 (Ill. App. Ct. 1977) (stating that “specific

language” is required for an enforceable fee-shifting

provision). Here, the credit agreements specify that “[t]he

Borrower agrees to pay and save the Lender harmless

against liability for the payment of . . . the fees and disburse-

ments of counsel to the Lender.” (Emphasis added.) Asia

Pulp insists that the phrase “fees and disbursements of

counsel to the Lender” is not specific enough. We fail to

see the ambiguity. The cases do not require that a contrac-

tual fee-shifting provision must use the magic words

“attorney’s fees” to be enforceable. “Fees and disburse-

ments of counsel” is synonymous with “attorney’s fees”

and is oft-used boilerplate for contract provisions

allowing recovery of attorney’s fees and costs. See, e.g.,

Fallon Elec. Co., Inc. v. Cincinnati Ins. Co., 121 F.3d 125, 126,

129 (3d Cir. 1997); Day v. Gen. Elec. Credit Corp., 546 A.2d

315, 320-21 (Conn. App. Ct. 1988); Fry v. Toth, 166 N.W.2d

235, 237, 239 (Wis. 1969). The district court properly

awarded JPMorgan’s attorney’s fees and costs.

D. Postjudgment Asset-Discovery Order

As we have explained, the parties have done battle in

extensive supplementary proceedings while this appeal

Nos. 10-3413 & 12-2123 27

has been pending. Presently before the court is Asia Pulp’s

appeal from the district court’s order declining to stay

enforcement of JPMorgan’s asset-discovery citations. As

to that order, we now conclude that we lack appellate

jurisdiction. Judge Holderman’s order denying a stay

and compelling compliance with the asset-discovery

citations is not a final, appealable order under 28 U.S.C.

§ 1291.

We “treat [a] postjudgment proceeding like a freestand-

ing lawsuit and look for the final decision in that pro-

ceeding to determine the scope of” appellate review.

Solis v. Current Dev. Corp., 557 F.3d 772, 775 (7th Cir.

2009). Thus, “an order that addresses all the issues

raised in the motion that sparked the postjudgment

proceedings is treated as final for purposes of section

1291.” Id. at 776. In other words, the question is whether

the district court’s order completely disposes of the

postjudgment proceedings, not a single issue within those

proceedings. A contrary approach would permit piece-

meal appeals of interlocutory orders in ongoing

postjudgment proceedings. Id. at 775-76.

We have previously held that orders granting

postjudgment discovery are not final, appealable orders.

See Cent. States, Se. & Sw. Areas Pension Fund v. Express

Freight Lines, Inc., 971 F.2d 5, 6 (7th Cir. 1992); In re Joint E.

& S. Dists. Asbestos Litig., 22 F.3d 755, 760 (7th Cir. 1994). In

Asbestos Litigation we held that “[t]he denial of a motion

to quash the citation proceeding simply lets the pro-

28 Nos. 10-3413 & 12-2123

ceeding continue and therefore is not final or appealable.” 1 0

22 F.3d at 760. The district court’s denial of Asia Pulp’s

motion to stay is no different than the denial of the

motion to quash in Asbestos Litigation. It is not the end of

the postjudgment proceedings—to the contrary, the

denial of a stay simply lets those proceedings continue.

The district court’s order compelling compliance with

the asset-discovery citations was not a final, appealable

order.

In the alternative, Asia Pulp argues that the district

court’s order qualifies for immediate review under the

collateral-order doctrine, which confers finality on an

otherwise interlocutory order if the order conclusively

resolves an important question completely separate from

the merits of the action and the question is effectively

unreviewable on appeal from a final judgment. Mohawk

Indus., Inc. v. Carpenter, 130 S. Ct. 599, 605 (2009); Cohen v.

Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949).

10

We have speculated that there may be room for exceptions to

the rule that orders granting postjudgment discovery are

nonfinal. In re Joint E. & S. Dists. Asbestos Litig., 22 F.3d 755, 760

(7th Cir. 1994) (citing Resolution Trust Corp. v. Ruggiero, 994

F.2d 1221, 1224 (7th Cir. 1993)). As in Asbestos Litigation, how-

ever, this case gives us no reason to explore this possibility. The

“circumstances surrounding the ruling of the district court

[made] it clear that the court did not regard its ruling as a

final disposition of the matter before it.” Id. at 761. The same

is true here. The district court explained that the denial of

the motion to stay the citation proceeding “likely will not

be this court’s last order in the postjudgment proceeding.”

Nos. 10-3413 & 12-2123 29

“Collateral-order review is based on a practical construc-

tion of 28 U.S.C. § 1291; it is not an exception to the final-

judgment rule.” Ott v. City of Milwaukee, 682 F.3d 552, 554

(7th Cir. 2012) (internal quotation marks omitted). In

making the collateral-order determination, we “do not

engage in an ‘individualized jurisdictional inquiry.’ ”

Mohawk Indus., 130 S. Ct. at 605 (quoting Coopers &

Lybrand v. Livesay, 437 U.S. 463, 473 (1978)). “Rather, our

focus is on ‘the entire category to which a claim be-

longs,’” id. (quoting Digital Equip. Corp. v. Desktop Direct,

Inc., 511 U.S. 863, 868 (1992)), and whether “the class of

claims, taken as a whole, can be adequately vindicated

by other means,” id.

Asia Pulp’s motion to stay enforcement of the asset-

discovery citations conclusively resolved an important

question—whether Asia Pulp is entitled to rely on the

Indonesian injunction to resist discovery of its assets—

but this question is coextensive with, not distinct from,

the merits of the postjudgment proceedings. The pur-

pose of the postjudgment proceedings is to discover

assets that might be available to satisfy the judgment,

and, following discovery, to execute on those assets.

Bank of Am., N.A. v. Veluchamy, 643 F.3d 185, 188 (7th

Cir. 2011). Asia Pulp claims that the terms of the Indone-

sian injunction prevent it from complying with the asset-

discovery citations. This claim goes to the heart of the

supplementary proceedings.

Moreover, under Mohawk Industries, Asia Pulp cannot

establish that the issue is effectively unreviewable if a

collateral review is not allowed. In Mohawk Industries the

30 Nos. 10-3413 & 12-2123

Supreme Court concluded that collateral-order appeals

were not permitted from pretrial discovery orders

adverse to the attorney-client privilege. 130 S. Ct. at 606.

The Court held that postjudgment appeal was sufficient

to protect the interests secured by the privilege. Id. The

Court emphasized that piecemeal appeals “undermine[]

efficient judicial administration and encroach[] upon

the prerogatives of district court judges.” Id. at 605 (inter-

nal quotation marks omitted). The Court thus refused

to expand the scope of collateral-order review to include

claims of privilege, noting that several options exist for

cases raising particularly acute concerns: interlocutory

appeal by certification under § 1292(b), mandamus, and

appeal from a contempt citation. Id. at 607-08. We have

recently observed that the “overriding lesson from

Mohawk Industries is that the class of collaterally ap-

pealable orders must remain narrow and selective in its

membership.” Ott, 682 F.3d at 555 (declining to extend

collateral-order review to the denial of a motion to

quash a nonparty subpoena for pretrial discovery).

If the privilege claim in Mohawk Industries failed to

satisfy the requirements of the collateral-order doctrine,

it’s hard to see how the present claim could qualify. Asia

Pulp insists that without collateral review, it may be

subject to monetary sanctions for violating the Indonesian

injunction if forced to comply with asset discovery here.

We note for starters that the district court found that

Asia Pulp failed to establish this as a matter of fact; on

the record before the court, the status and effect of the

injunction was unclear. Even assuming the possibility of

sanctions, Asia Pulp has not demonstrated that the

Nos. 10-3413 & 12-2123 31

conflict-of-law question is effectively unreviewable if

appeal is postponed until supplementary proceedings

have concluded. “That a ruling ‘may burden litigants in

ways that are only imperfectly reparable by appellate

reversal of a final district court judgment . . . has never

sufficed.’ ” Mohawk Indus., 130 S. Ct. at 605 (quoting Digital

Equip. Corp., 511 U.S. at 872). We note as well that the

procedural options that the Supreme Court found to be

adequate alternatives for review of the privilege claim in

Mohawk Industries—interlocutory appeal by certification

under § 1292, mandamus, and appeal from a contempt

citation—are also available here. Accordingly, we hold

that the collateral-order doctrine does not extend to the

district court’s order denying Asia Pulp’s motion to

stay enforcement of the asset-discovery citations.

For all the foregoing reasons, we A FFIRM the district

court’s order entering summary judgment in favor of

JPMorgan in its entirety. The appeal from the order

denying Asia Pulp’s motion to stay enforcement of

JPMorgan’s asset-discovery citations is D ISMISSED for

lack of jurisdiction.

2-21-13