J.P. Stadtmueller, U.S. District Judge.
David Novoselsky ("Novoselsky"), a resident of Pleasant Prairie, Wisconsin, filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Wisconsin. Before the Court is an appeal by Tiberiu Klein ("Klein"), who is proceeding pro se as a creditor of Novoselsky's bankruptcy estate. Klein appeals from an order of Bankruptcy Judge G. Michael Halfenger excusing a violation of the automatic stay pursuant to 11 U.S.C. § 362. Although the facts of the case are difficult to parse, the legal issues before the Court are simple. On this record, the Court must dismiss the appeal for want of jurisdiction.
The history of this case extends from long before the filing of these bankruptcy proceedings. The web of litigation that precedes the task before the Court is complicated but is largely irrelevant to the disposition of the instant appeal. The Court will briefly summarize the history between these parties and then turn to the facts giving rise to Klein's appeal.
Claudia Zvunca was killed in 2002 when she was struck by a Greyhound bus. Zvunca ex rel. Klein v. Greyhound Lines, Inc., 530 Fed.Appx. 672, 672 (10th Cir. 2013). Her eight-year-old daughter, Cristina, witnessed her death. Id. Klein, a resident of Illinois, was married to Claudia at the time of her death, but he is neither Cristina's biological nor adoptive father. Id.
An onslaught of litigation, and litigation on that litigation, followed Claudia's death. The Appellate Court of Illinois summarized this legal morass, stating that "from the tragic, but relatively straightforward, facts regarding Claudia Zvunca's death, arose at least 13 lawsuits in various state
For purposes of this appeal, the Court need only describe two of the several actions brought relating to Claudia Zvunca's death and her estate's representation in prior wrongful-death proceedings. In 2007, Cristina and her mother's estate brought a wrongful death action in the Circuit Court of Cook County, Illinois against several defendants, including Greyhound Lines, Inc. ("Greyhound") and Motor Coach Industries, Inc. ("Motor Coach"). (Docket #12-1 at 75-76); (Docket #12 at 6). In April 2014, Cristina and her mother's estate brought a similar action in the same court. (Docket #12-1 at 75-76). In the 2014 complaint she included Greyhound, Motor Coach, and various attorneys and representatives involved in prior actions, including Novoselsky. Id. Appellees represent that the 2014 action was filed as a "protective measure," while admitting that this action was "duplicative" of the 2007 case "and completely unnecessary to the recovery on behalf of the estate." (Docket #12 at 6).
On July 18, 2014, Novoselsky filed a Chapter 11 bankruptcy petition in this District. (Docket #12-1 at 76). Klein joined the bankruptcy as a creditor, filing a proof of claim for $6,000,000 for alleged legal malpractice. (14-29136, Docket #38).
A year and a half later, on January 15, 2016, Cristina filed a motion with the bankruptcy court seeking relief from the
The bankruptcy court held two hearings on the motion. The first occurred on February 10, 2016, and the second was held one month later. Id. at 108-15. In the interim between the two hearings, Cristina, apparently under the impression that the Court was sure to rule in her favor, requested in Cook County that the 2014 action be taken off the bankruptcy stay calendar and then dismissed the entire 2014 action, including Novoselsky, with prejudice. (Docket #12 at 7). Cristina's counsel informed the bankruptcy court of the dismissal at the March 10, 2016 continued hearing. Id.
Klein had appeared at both hearings and argued against granting relief from the stay. Id. At the March 10, 2016 session, Klein asserted that taking the 2014 action off the bankruptcy stay calendar was a violation of the stay. Id. After hearing the parties' arguments — which are not available to this Court because the hearing was audio-recorded and never transcribed — the bankruptcy court found that "the state court proceeding that resulted in an order dismissing the debtor was a continuation of a judicial proceeding against the debtor" and was "thus a technical violation" of the automatic stay. (Docket #12-1 at 112-14).
Nevertheless, the bankruptcy court concluded that there was cause to grant relief from the stay and annul the stay retroactively so as to sanction the dismissal. Id. According to Appellees, Cristina apprised the bankruptcy court that the 2014 action had "no value" because the same wrongful death claims were nearly trial-ready in the 2007 case. (Docket #12 at 8). Cristina further asserted that having both cases pending at the same time could create thorny procedural problems. Id. Appellees state that the trustee of the bankruptcy estate agreed with them. Id. at 8-9. The bankruptcy court concluded, therefore, that "there [was] good reason for the Estate of Claudia Zvunca to have wanted to dismiss the [2014 Cook County] case," since "that case stood in the way of the litigation of the Estate's 2007 state court case based on the Illinois pending case rule." (Docket #12-1 at 113.) Further, "absent Novoselsky's bankruptcy, the estate would have simply dismissed the action, but the automatic stay was thought to have prevented that course." Id. Moreover, "[a]lthough certain creditors contended that the Illinois court's dismissal might eliminate valuable claims that are property of the estate," the bankruptcy court found that "none of those arguments was convincing."
On April 5, 2016, Klein appealed the bankruptcy court's order. (Docket #1). On June 20, 2016, the trustee abandoned certain of Novoselsky's contingent claims, including the potential claim for attorney's fees that Klein believed Novoselsky could have asserted against Cristina and her mother's estate. (Docket #12-1 at 117-19). Appellees assert that Klein has been trying to purchase this and other of Novoselsky's legal claims for a nominal amount. Id.
On April 20, 2016, Klein filed with the bankruptcy court a motion to reconsider its order granting relief from the automatic stay. Id. at 121. The bankruptcy court denied the motion on July 6, 2016, noting that Klein had identified no basis for setting aside the prior order. Id. at 122. The court observed that Klein's arguments were similar to those presented regarding the original order and that repetition of the argument was not a proper basis for reconsideration. Id.
When adjudicating bankruptcy appeals, district courts normally apply a dual standard of review: the bankruptcy court's findings of fact are reviewed for clear error, while its conclusions of law are reviewed de novo. Stamat v. Neary, 635 F.3d 974, 979 (7th Cir. 2011); Fed. R. Bankr. P. 8013. However, a decision to annul the automatic stay pursuant to 11 U.S.C. § 362(d) "is committed to the discretion of the bankruptcy court and, therefore, we review the court's decision for an abuse of discretion." In re C & S Grain Co., Inc., 47 F.3d 233, 238 (7th Cir. 1995) (citing In re Boomgarden, 780 F.2d 657, 660 (7th Cir. 1985)); Matter of Williams, 144 F.3d 544, 546 (7th Cir. 1998).
Klein's appeal suffers from numerous infirmities. One of them is jurisdictional and, as a result, the Court lacks the power to reach the merits of the appeal. For the sake of a complete record, however, the Court will also briefly address Klein's unavailing challenge to the substance of the bankruptcy court's order.
Appellees do not challenge the Court's jurisdiction under 28 U.S.C. § 158, which provides the district court with jurisdiction over appeals from "final judgments, orders, and decrees" of the bankruptcy court. 28 U.S.C. § 158(a). As the Seventh Circuit has recently observed, "[f]inality in a bankruptcy appeal is considerably more flexible than in an ordinary civil appeal taken under 28 U.S.C. § 1291 and, in the bankruptcy context, does not require the termination of the entire bankruptcy proceeding." Schaumburg Bank & Trust Co., N.A. v. Alsterda, 815 F.3d 306, 312 (7th Cir. 2016). Thus, bankruptcy court
Here, the alleged violation of the stay — the removal of the Cook County action from the bankruptcy stay calendar as a precursor to dismissal — is complete. Any dispute over whether that violation should have been forgiven was fully and finally resolved by the bankruptcy court's order. Id.; see also In re Rodriguez Camacho, 361 B.R. 294, 299 (1st Cir. BAP 2007) ("An order granting relief from stay is a final order."); Germeraad v. Powers, 826 F.3d 962, 965 (7th Cir. 2016) (an order is final where it "brought to an end a single `proceeding' that exists within the larger bankruptcy case"). Accordingly, the bankruptcy court order under review here is final and appealable under Section 158(a).
Although the Court is statutorily authorized to entertain Klein's appeal, the Constitution will not permit it. Article III of the Constitution limits the jurisdiction of federal courts to resolution of actual cases and controversies. Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 471, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982). The party invoking federal jurisdiction — here, Klein — must establish that he brings a cognizable controversy before this Court. In re GT Automation Grp., Inc., 828 F.3d 602, 605 (7th Cir. 2016). To do so, Klein must demonstrate that he suffered an "injury in fact" which is "fairly traceable" to the challenged action and which would "likely" be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-62, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).
Not only must he suffer an injury, the injury complained of must usually persist throughout the life of the litigation. As the Supreme Court has explained:
Genesis Healthcare Corp. v. Symczyk, ___ U.S. ___, 133 S.Ct. 1523, 1528, 185 L.Ed.2d 636 (2013). Mootness, put simply, is this: although a party may come to federal court with a redressable injury, if that injury is remedied, or if the power to redress it evaporates, the court loses the power to hear the case. Fink v. Cont'l Foundry & Mach. Co., 240 F.2d 369, 374 (7th Cir. 1956); Mills v. Green, 159 U.S. 651, 653, 16 S.Ct. 132, 40 L.Ed. 293 (1895) (a case is no longer "live" when it is impossible for the court to provide "any effectual relief"). These principles apply to appeals as well. Dorel Juvenile Grp., Inc. v. DiMartinis, 495 F.3d 500, 503 (7th Cir. 2007).
Klein's appeal is moot because the Court can no longer fashion meaningful relief. Based on his motion practice in the bankruptcy court below and the appellate brief he submitted to this Court, it appears that Klein wants Novoselsky as the debtor to be able to maintain two different types of
Klein's complaints about both claims are moot, for slightly different reasons. First, his dispute regarding the contribution claims are moot because the 2014 action was dismissed with prejudice. Without a lawsuit against them, Novoselsky, Greyhound, Motor Coach, and the other defendants in the 2014 case have no liability to share.
Second, Klein's dispute regarding the attorney's fee counterclaim is moot because the trustee abandoned that claim in July 2016.
Moreover, while it appears that Klein asked the bankruptcy court to sanction Appellees for the stay violation, see (Docket #5 at 8), he did not seek damages for any direct injury he suffered as a result of the violation, see 11 U.S.C. § 362(k); In re Clemmer, 178 B.R. 160, 165 (Bankr. E.D. Tenn. 1995). His decision not to request damages, in addition to the Court's inability to provide any other viable remedy, means that Klein's appeal no longer presents a live controversy. Accordingly, the appeal is moot and must be dismissed. Fink, 240 F.2d at 374.
Although the Court has determined that the Klein's appeal is moot, the history of this litigation suggests that Klein will take this appeal further. As a result, the Court finds it prudent to explain why the appeal fails on its merits, assuming there was jurisdiction to hear it in the first instance.
The bankruptcy court found, and Appellees do not dispute, that the act of
Klein's attacks on the bankruptcy court's order do not suggest that the court below abused its discretion. First, Klein argues that the bankruptcy court cannot grant retroactive relief from the stay violation. (Docket #5 at 5-6). Yet, as evidenced by the use of the word "annulment" in the statute, bankruptcy courts are indeed authorized to grant retroactive relief from a purported violation of the automatic stay. Ruby Tuesday, Inc. v. Thomas, 37 Fed. Appx. 821, 824 (7th Cir. 2002) (citing Eastern Refractories Co. Inc. v. Forty Eight Insulations Inc., 157 F.3d 169, 172 (2d Cir. 1998)); In re Brittwood Creek, 450 B.R. 769, 776 (N.D. Ill. 2011). Klein insists that the bankruptcy court entered an impermissible nunc pro tunc order, but his citations and argument reveal that Klein simply misapprehends what the bankruptcy court did here. There is no question that the bankruptcy court had the authority to annul the stay.
Second, Klein contends that he was deprived of procedural due process when Appellees dismissed the 2014 Cook County action before the bankruptcy court gave them leave to do so. (Docket #5 at 6-7). Although the Court is not inclined to entertain Klein's passing reference to constitutional deprivations raised for the first time on appeal, the claim is otherwise wholly without merit. Initially, Klein does not cite precedent indicating that he has a constitutionally protected property interest at stake here. Black Earth Meat Market, LLC v. Village of Black Earth, 834 F.3d 841, 848 (7th Cir. 2016). Even if he did, however, he was afforded an opportunity to be heard on the matter at the March 10, 2016 hearing. It so happened that the bankruptcy court disagreed with Klein's position, but procedural due process only guarantees the right to be heard, not success. Id. at 850 ("Procedural due process generally requires only `notice and an opportunity to be heard.'") (quoting Dusenbery v. United States, 534 U.S. 161, 167, 122 S.Ct. 694, 151 L.Ed.2d 597 (2002)). Additionally, Klein is mistaken that the March 10, 2016 hearing was "in vain" because the stay violation had already occurred. The action taken in violation of the stay was void until the bankruptcy court granted relief from the stay. Eastern Refractories Co., 157 F.3d at 172 ("[A]n order `annulling' a stay does have retroactive effect, and thereby reaches back in time to validate proceedings or actions that would otherwise be deemed void ab initio."); see also Matthews v. Rosene, 739 F.2d 249, 251 (7th Cir. 1984). Thus, the March 10, 2016 hearing was a meaningful opportunity for Klein to contest Appellees' request for relief from the stay.
Third, Klein asserts that the bankruptcy court abused its discretion in
Klein requests sanctions against the attorney representing Cristina and her mother's estate for violating the automatic stay. See (Docket #5 at 9). Appellees, in turn, request sanctions against Klein for filing a frivolous appeal. (Docket #12 at 21-22). The Court will not impose sanctions on any party. Klein will receive none because his appeal is without merit. Appellees' request for sanctions will be denied because although Klein has been a serial litigant in matters relating to his late wife, he remains a pro se litigant. Vukadinovich v. McCarthy, 901 F.2d 1439, 1445 (7th Cir. 1990) (a court may take into account a party's pro se status in analyzing allegedly frivolous filings). His arguments, while ultimately meritless, do not appear to have been presented for an improper purpose, and the Court will in this instance exercise its discretion not to award sanctions. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990); Independent Lift Truck Builders Union v. NACCO Materials Handling Grp., Inc., 202 F.3d 965, 969 (7th Cir. 2000). Klein is warned, however, that the strictures of Rule 9011 of the Federal Rules of Bankruptcy Procedure apply to him just as they do to all litigants in the bankruptcy court. In re Meltzer, 534 B.R. 757, 762-63 (N.D. Ill. 2015). Frivolous appeals will not be excused simply because Klein is proceeding pro se.
This Court lacks jurisdiction to hear Klein's appeal because his dispute has been mooted by subsequent events. Additionally, even if the Court had jurisdiction here, Klein has identified no colorable basis for reversing the bankruptcy court's challenged order.
Accordingly,