Nereida Mendez v. Republic Bank
725 F.3d 651
7th Cir.2013Background
- Mendez obtained a federal judgment against her former employers and served a citation to discover assets on Republic Bank to freeze multiple accounts she believed held debtor funds.
- Judge Der-Yeghiayan issued an October 15, 2010 order specifying certain accounts to remain frozen and stating that an emergency motion to quash was granted as to all other accounts not identified in the order.
- Republic Bank read the order to mean only the listed accounts should remain frozen and unfroze other accounts (including accounts of Dentists, P.C. and Dental Profile, Ltd.), from which the debtors later transferred substantial funds.
- Mendez moved to hold Republic Bank liable under Illinois law for releasing funds in violation of a citation restraining provision; a magistrate judge recommended in favor of Republic Bank, but District Judge Lefkow initially ruled for Mendez.
- After Republic Bank appealed, Judge Lefkow realized she had overlooked the magistrate judge’s report, invited a Rule 60(b) motion, granted relief, and then denied Mendez’s motion; the Seventh Circuit affirmed, holding the order’s plain text reasonably required unfreezing the non-listed accounts.
Issues
| Issue | Mendez's Argument | Republic Bank's Argument | Held |
|---|---|---|---|
| Whether district court properly used Rule 60(b) after an appeal was filed | Rule 60(b) cannot be used to correct errors that are correctable on appeal; no extraordinary circumstances justified relief | District court may use Rule 60(b) to correct its inadvertent error discovered shortly after appeal was filed; motion was timely | Affirmed. Relief appropriate under Rule 60(b)(1) for inadvertence; not an abuse of discretion given timing and circumstances |
| Whether district court deprived Mendez of de novo review of magistrate judge report | Vacating prior order after seeing the report meant the judge failed to perform de novo review | A district judge may independently review and be persuaded by a magistrate’s reasoning without improper deference | Affirmed. De novo review satisfied; being persuaded by the magistrate’s analysis does not violate §636(b)(1) |
| Whether Republic Bank violated Illinois citation restraining provision by releasing funds | Bank released debtor funds in violation of the citation and is liable under 735 Ill. Comp. Stat. 5/2-1402(f)(1) regardless of intent | The October 15 order reasonably required unfreezing the non-listed accounts; Bank followed the most reasonable reading and thus did not violate the citation | Affirmed. The plain text of the October 15 Order reasonably unfroze accounts not specifically listed, so Republic Bank did not violate the citation |
Key Cases Cited
- Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847 (U.S. 1988) (Rule 60(b)(6) relief limited to extraordinary circumstances)
- Buggs v. Elgin, Joliet & E. Ry. Co., 852 F.2d 318 (7th Cir. 1988) (district court may use Rule 60(b)(1) to correct its own error even if error could be appealed)
- Bank of Aspen v. Fox Cartage, Inc., 533 N.E.2d 1080 (Ill. 1989) (Illinois law allows entry of judgment against third-party who transfers funds in violation of citation; contempt requires willful contumacious conduct)
- United States v. Raddatz, 447 U.S. 667 (U.S. 1980) (district judges may rely on magistrate judges’ reports; de novo review permits being persuaded by magistrate reasoning)