In Re IFC Credit Corp.
663 F.3d 315
| 7th Cir. | 2011Background
- IFC Credit Corporation filed a voluntary Chapter 7 bankruptcy on July 27, 2009, with the petition signed by its president, who was not a lawyer.
- Before filing, Northbrook Bank & Trust (creditor) sued IFC for fraud; after filing, the stays allowed Northbrook to refile as a claim in the bankruptcy.
- The trustee moved to rescind pre-petition payments to Northbrook as voidable preferences under 11 U.S.C. § 547(b).
- Northbrook challenged the petition’s validity on the ground that the original filing was a nullity because it was not signed by a lawyer.
- IFC later amended the petition the next day with a lawyer’s signature; the question was whether the lack of initial lawyer signature voided the case and whether amendments related back.
- The Seventh Circuit held that corporate lay representation is not a jurisdictional defect and that, under Bankruptcy Rule 1009(a), the petition could relate back to the original filing once counsel amended the petition.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is corporate pro se representation a jurisdictional defect? | Northbrook: lack of lawyer signature renders petition a nullity and voids jurisdiction. | IFC: the defect is not jurisdictional and may be cured; amendments allowed. | Not jurisdictional; the defect is not a subject-matter jurisdiction bar. |
| May a corporation cure a defective filing by amendment and relate back under bankruptcy rules? | Northbrook: amendment cannot cure a jurisdictional defect; case should be dismissed. | IFC: Rule 1009(a) allows amendment of voluntary petitions; relation back is appropriate to preserve the filing date. | Amendment related back to the date of the original filing; allows preservation of the petition. |
| Should dismissal for lack of representation have effectively ended the case? | Northbrook: dismissal would be appropriate if the defect were jurisdictional. | IFC: once counseled, the filing could proceed with relation back without prejudice. | No dismissal; relief granted through relation back and continued proceedings. |
Key Cases Cited
- Arbaugh v. Y & H Corp., 546 U.S. 500 (2006) (statutory limits on federal court jurisdiction are narrow; jurisdictional questions often about competence)
- Kontrick v. Ryan, 540 U.S. 443 (2004) (defects in jurisdiction treated cautiously; harmless violations may be ignored)
- United States v. Hagerman, 545 F.3d 579 (7th Cir. 2008) (corporate representation issues; pro se by corporations discouraged)
- Scandia Down Corp. v. Euroquilt, Inc., 772 F.2d 1423 (7th Cir. 1985) (nonlawyer representation; if objected, district court should prevent appearance, but sanctions depend on consequences)
- Applebaum v. Rush University Medical Center, 231 Ill.2d 429 (2008) (state-law nullity rule for corporate representation treated as discretionary rather than mandatory)
- Torrey v. Leesburg Regional Medical Center, 769 So.2d 1040 (Fla. 2000) (state courts diverge on nullity for corporate representation; some jettison the rule)
- Tri-No Enterprises, Inc. v. United States, 819 F.2d 154 (7th Cir. 1987) (harmless violations may be ignored)