535 B.R. 803
Bankr. N.D. Ill.2015Background
- Leventhal, Kubiak, and Pegasus filed an involuntary Chapter 7 petition against landlord Michael Meltzer to stall and harass him in an ongoing state-court eviction; the petition was dismissed as filed in bad faith.
- Evidence showed Pegasus was a sham corporation formed two weeks earlier, two petitioners had no valid claims, one claim (Kubiak’s FHA suit) was in bona fide dispute, and some filings contained forged signatures.
- The bankruptcy court found the petition part of a broader campaign of litigation abuse (FHA suit, lis pendens, removals, repeated filings) and determined Meltzer was entitled to fees, costs, punitive damages under 11 U.S.C. § 303(i), and other sanctions.
- The court held an evidentiary hearing; Leventhal largely invoked the Fifth Amendment and did not produce witnesses; Kubiak largely did not participate.
- The court awarded Meltzer $60,788.86 in attorney’s fees and $105.17 in costs (jointly and severally against the three petitioners), punitive damages of $120,000 (Leventhal), $40,000 (Kubiak), and $20,000 (Pegasus), and entered a narrowly tailored filing restriction in the bankruptcy court requiring leave to file.
Issues
| Issue | Plaintiff's Argument (Meltzer) | Defendant's Argument (Leventhal/Kubiak) | Held |
|---|---|---|---|
| Reasonableness of attorney fees under §303(i)(1) | Fees are reasonable; invoices and proof of payment submitted; lodestar supported | Fees invoices are fabricated; time sheets not produced; some work unnecessary | Awarded $60,788.86; rates and hours found reasonable; invoices authenticated by affidavit; voluntary reductions noted |
| Recoverable costs under §303(i)(1) | Seeks litigation costs including Westlaw charges and filing/third-party fees | No dispute on most costs; questions invoice numbering; Westlaw charges challenged | Awarded $105.17; Westlaw research disallowed as overhead |
| Punitive damages under §303(i)(2)(B) — amount and constitutionality | Requests punitive damages to punish and deter serial abuse | Argues state-court compensatory award sufficient; Eighth Amendment challenge | Awarded $120,000 (Leventhal), $40,000 (Kubiak), $20,000 (Pegasus); amounts reasonable and constitutional under Due Process (ratios within single-digit range) |
| Pre-filing injunction / filing restrictions | Requests broad injunction (including filings in other courts and against those who "encountered" petitioners) | Kubiak argues lack of evidence and right of access violated | Narrowly tailored injunction granted for bankruptcy court only: no filings without leave (except notice of appeal); broader nationwide/statewide bars denied |
Key Cases Cited
- Perdue v. Kenny A., 559 U.S. 542 (U.S. 2010) (lodestar adjustments and rare enhancement rule)
- Hensley v. Eckerhart, 461 U.S. 424 (U.S. 1983) (hours reasonably expended requirement for fee awards)
- Johnson v. GDF, Inc., 668 F.3d 927 (7th Cir. 2012) (lodestar method described for fee calculations)
- Pickett v. Sheridan Health Care Ctr., 664 F.3d 632 (7th Cir. 2011) (lodestar as touchstone for fee awards)
- Gastineau v. Wright, 592 F.3d 747 (7th Cir. 2010) (lodestar method characterization)
- BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (U.S. 1996) (due-process guideposts for punitive damages)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (U.S. 2003) (reprehensibility and ratio guideposts for punitive damages)
- Kapelanski v. Johnson, 390 F.3d 525 (7th Cir. 2004) (discussion of permissible punitive-to-compensatory ratios)