Matrix IV, Inc. v. American Nat. Bank & Trust Co.
2011 U.S. App. LEXIS 15537
| 7th Cir. | 2011Background
- Matrix IV sued ANB and Gateway for RICO and common-law fraud stemming from Stylemaster/ Gateway dealings and an alleged prebankruptcy fraud scheme.
- Stylemaster pledged assets to ANB; Matrix claimed a first-priority lien on molds in Matrix’s possession.
- Bankruptcy: Stylemaster’s assets sold to JR Plastics; ANB received a secured lien assignment; Matrix challenged sale and lien priority.
- Bankruptcy court and on appeal rejected Matrix’s fraud theories; Matrix’s equitable-subordination defense was denied.
- During bankruptcy, Matrix later filed this RICO/fraud action; district court dismissed on res judicata/collateral estoppel grounds; Gateway’s Rule 11 sanctions motion denied; Matrix appeals.
- Court affirms on collateral estoppel grounds and denies sanctions, noting a split over claim preclusion in bankruptcy context.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether collateral estoppel bars Matrix’s claims | Matrix argues fraud issues weren't resolved on the merits | ANB/Gateway contend prior judgments preclude relitigation | Yes, collateral estoppel applies and bars relief |
| Whether res judicata would bar claims | Matrix asserts identity of claims broader than prebankruptcy rulings | Preexisting judgments preclude later claims | Collateral estoppel governs; careful note on Barnett/Stern conflict; res judicata not dispositive here |
| Whether Barnett/Stern resolve core/noncore distinction for preclusion | Barnett should preclude based on bankruptcy proceedings; Stern casts doubt | Distinction should determine preclusion scope | Court leaves broader Barnett/Stern conflict for future cases; collateral estoppel remains operative |
| Whether Rule 11 sanctions against Gateway were warranted | Sanctions unnecessary; claims not frivolous | Sanctions warranted due to preclusion arguments | Sanctions denied; no frivolous or harassing conduct established |
Key Cases Cited
- In re Met-L-Wood Corp., 861 F.2d 1012 (7th Cir. 1988) (bankruptcy-asset sale preclusion of later RICO suit; res judicata)
- Crop-Maker Soil Services v. Fairmount State Bank, 881 F.2d 436 (7th Cir. 1989) (fraud claim barred by bankruptcy judgments; Crop-Maker rule)
- Barnett v. Stern, 909 F.2d 973 (7th Cir. 1990) (core/noncore distinction for res judicata; later RICO may be noncore)
- Stern v. Marshall, 131 S. Ct. 2594 (2011) (Article III limits on bankruptcy court judgments; jurisdictional issues clarified)
- Adair v. Sherman, 230 F.3d 890 (7th Cir. 2000) (general rule: bankruptcy orders are res judicata in subsequent proceedings)