In the Matter of: Mary Anne ZURN, Debtor-Appellant. Aldo E. Botti, et al., Creditors--Appellees.
No. 01-2930
United States Court of Appeals, Seventh Circuit
Argued Feb. 11, 2002. Decided May 15, 2002.
290 F.3d 861
Stephen R. Swofford (argued), Hinshaw & Culbertson, Chicago, IL, For Appellees.
Susan Getzendanner (argued), Skadden, Arps, Slate, Meagher & Flom, Chicago, IL, for Debtor-Appellant.
Before EASTERBROOK, RIPPLE, and DIANE P. WOOD, Circuit Judges.
EASTERBROOK, Circuit Judge.
“Only a belief that bankruptcy is forever could produce a case such as this.” That sentiment, which opens the opinion in Pettibone Corp. v. Easley, 935 F.2d 120, 121 (7th Cir. 1991), is equally applicable to this long-running dispute.
Aldo Botti and his former client, Mary Anne Zurn, have spent the last decade debating the quality of legal work Botti provided to Zurn during divorce litigation, and torts that Zurn believes Botti to have committed during the course of his representation. Zurn‘s suit in Illinois was met by a request for sanctions; Botti also argued in a countersuit that Zurn still owed money for legal fees. When the dust settled in the state‘s trial court, Botti emerged with a judgment of about $180,000. To avoid paying, Zurn filed a federal bankruptcy proceeding. It soon became clear that the bankruptcy court would not allow Zurn to retain the stakes without accruing interest during an appeal in state court, nor would the bankruptcy court take over the appellate function and decide the matter itself. After the bankruptcy court formally decided to abstain from any role in the ongoing state litigation, Zurn filed a plan promising full payment to all creditors, including Botti. She paid the sums he claimed as a creditor, her plan was approved, and the federal proceedings were dismissed in April 1996.
Meanwhile the litigation continued in Illinois. In March 1998 the state‘s appellate court reversed the judgments to the extent that they had required Zurn to pay Botti. With respect to Zurn‘s claims against Botti, the appellate court decided three in Botti‘s favor but held that Zurn‘s claim for battery had been dismissed improperly. At this point Botti should have returned the money Zurn had paid to satisfy the judgments. Buzz Barton & Associates, Inc. v. Giannone, 108 Ill. 2d 373, 381-82, 91 Ill. Dec. 636, 483 N.E.2d 1271, 1275 (1985). See also Richardson v. Penfold, 900 F.2d 116, 118 (7th Cir. 1990); Palmer v. Chicago, 806 F.2d 1316, 1319 (7th Cir. 1986). Yet he did not do so, though it is hard to see how he could be entitled to keep the money after the reversal. The appellate decision left each side with unresolved legal claims against the other, but neither took timely steps to resume the litigation in the trial court. Illinois requires a litigant that wants to continue the proceedings after an appeal to act within a reasonable period after the appellate mandate (which issued in November 1998). See
For her part, Zurn allowed 13 months to pass and then moved to reopen, not the state litigation, but the bankruptcy proceeding. She asked the bankruptcy judge to order Botti to return the money that had been paid under the plan. A few weeks later (in January 2000) she tried to reinstate the litigation in the state‘s trial court. Both the bankruptcy judge and the state judge said no. The state judge concluded that Zurn‘s request was untimely, and after initially granting some of the relief Zurn had requested the bankruptcy judge changed his mind. The details of events in the bankruptcy court do not matter. Ultimately, Bankruptcy Judge Wedoff concluded that Zurn had not supplied adequate cause to reopen the proceedings under
Zurn did not appeal within the state system, but she did ask a district judge to review the bankruptcy judge‘s decision.
The district court characterized its decision as one affirming the bankruptcy judge‘s decision to abstain rather than interfere with state litigation. If that is the right understanding, then
Neither of the district judge‘s substantive reasons is correct. The Rooker-Feldman doctrine instantiates the principle that only the Supreme Court of the United States may modify a judgment entered by a state court in civil litigation. Zurn did not ask the federal court to review or alter the state courts’ decisions; she argued, instead, that the appellate decision has a particular legal consequence (that Botti must make restitution). That may be right or wrong, but deciding whether it is right does not transgress Rooker-Feldman. Federal law does not undercut efforts to enforce state judgments. Nor was it right to say that Zurn‘s delay in attempting to reinstate her suit obliterated her opportunity to obtain restitution. Illinois entertains independent actions for restitution, when a judgment that has been satisfied later is reversed. See Liberty Mutual Insurance Co. v. Zambole, 141 Ill. App. 3d 803, 96 Ill. Dec. 318, 491 N.E.2d 132 (1986). Whether such an independent suit would be appropriate in light of other circumstances that are not in the record (such as whether Zurn has made a timely demand of Botti for restitution) is something on which we offer no comment.
Although neither of the district judge‘s reasons is convincing, its judgment nonetheless is correct, for the reason given by the bankruptcy judge. Zurn‘s bankruptcy ended in 1996. The plan of reorganization has been fully implemented; there is nothing to “enforce” and no reason to reopen and alter the plan. Zurn‘s belief that anyone who has been a debtor in bankruptcy has eternal access to federal court for all disputes related in some way to the debts handled in the bankruptcy proceeding is incompatible not only with Pettibone but with many other cases, none of which Zurn discusses. E.g., Maytag Corp. v. Navistar International Transportation Corp., 219 F.3d 587, 590 (7th Cir. 2000); In re Xonics, Inc., 813 F.2d 127, 130-32 (7th Cir. 1987); In re Chicago, Rock Island & Pacific R.R., 794 F.2d 1182, 1186-87 (7th Cir. 1986). Suppose that a Chapter 13 plan called for a debtor to pay in full for a car, and thus retain title, and that after the confirmation of the plan a warranty dispute occurred. Would the bankruptcy judge be called on to determine whether the car‘s transmission had been repaired to the debtor‘s satisfaction? Certainly not; the federal role ended with the decision that the car would be paid for and retained rather than abandoned. Other disputes concerning the car belong to state tribunals. So too with leaseholds, we held in Chicago, Rock Island & Pacific. Zurn conceded at oral argument that disputes of this kind could not be brought back to federal court but argues that her dispute differs because state litigation was ongoing at the time of the federal bankruptcy. But that was equally true in Pettibone, where the bankruptcy court abstained and left resolution of the parties’ dispute to state tribunals. After the bankruptcy ended, the parties could not agree on the effect in the state cases of the automatic stay in bankruptcy; even though this dispute (unlike the Zurn-Botti imbroglio) was related to federal law, we held in Pettibone that jurisdiction once relinquished stays relinquished. When a bankruptcy court abstains and permits state courts to handle pending litigation, the parties must thereafter look to the state courts to handle their complete dispute and may not drag selected issues back to the bankruptcy forum years later.
It is unfortunate that Botti‘s obduracy has prolonged this dispute. Lawyers should comply with their legal duties—including the duty to make restitution identified in Buzz Barton & Associates—rather than compel former clients to resort to still more litigation to vindicate their rights. Behavior such as Botti‘s brings the legal profession into disrepute. See also Dale M. v. Board of Education, 282 F.3d 984 (7th Cir. 2002). If litigation must continue, however, the right forum is state
AFFIRMED.
RIPPLE, Circuit Judge, dissenting.
The majority rests its decision on a ground that never was raised by the parties in this court or in the earlier stages of the litigation. Indeed, Mr. Botti conceded in his brief to this court that the bankruptcy court had the authority to reopen this case and properly had done so. Moreover, the majority‘s characterization of the bankruptcy court proceedings cannot be supported by the record. In my view, the appropriate course is to take the bankruptcy court at its word; it said that it was abstaining from exercising jurisdiction over the state cases just as it had done in 1996, leaving Ms. Zurn and Mr. Botti free to pursue their state remedies. Thus, the bankruptcy court abstained under
1.
The majority writes that “[t]he details of events in the bankruptcy court do not matter.” Maj. Op. at 862. I respectfully disagree. Indeed, careful attention to the course of those proceedings reveals that the majority‘s characterization of them cannot be supported by the record.
On December 16, 1999, Ms. Zurn filed a motion to reopen her bankruptcy case under
The parties then turned their attention to the merits of Ms. Zurn‘s request that the bankruptcy court order Mr. Botti to reimburse Ms. Zurn the funds she had paid earlier in compliance with her bankruptcy plan. Ms. Zurn characterized her motion for repayment as a motion to enforce the original Chapter 11 bankruptcy plan confirmed in 1996. Under Ms. Zurn‘s reading of the plan, the bankruptcy court had the authority to order Mr. Botti to repay Ms. Zurn because the plan had contemplated continued state proceedings subsequent to the plan‘s confirmation. In reply, Mr. Botti filed a motion for abstention and remand. He urged the bankruptcy court to deny Ms. Zurn‘s motion for enforcement of the plan.
After the parties submitted further briefing on the merits, the bankruptcy court ordered Mr. Botti to repay Ms. Zurn
By contrast, the bankruptcy court denied Ms. Zurn‘s motion for reimbursement with respect to the so-called “Botti” case. In this action, Mr. Botti and his law firm, as plaintiffs, had sought fees for representing Ms. Zurn in the divorce action. A default judgment had been entered in favor of Mr. Botti, awarding him the requested attorneys’ fees. However, this judgment had been reversed on appeal.
The bankruptcy court had reached different results in the two requests for reimbursement because it determined the state appellate decision to be final in the Zurn case but non-final in the Botti case. As to the Zurn case, the bankruptcy court explained that the Illinois Appellate Court had determined that Ms. Zurn had stated a cause of action; therefore Botti‘s claim for sanctions could not stand. Because the Chapter 11 payment was only provisional as to this claim, reasoned the bankruptcy court, Ms. Zurn was entitled to a return of the amount that she had paid to Botti on this claim. Contrary to this characterization, in the Botti case, Mr. Botti‘s claim for attorneys’ fees was still alive, and he ultimately might prevail and be entitled to the funds Ms. Zurn had paid through the Chapter 11 plan. In sum, the bankruptcy court granted in part and denied in part Ms. Zurn‘s motion to enforce the plan and to order repayment of those funds. After the bankruptcy court‘s oral ruling on March 16 and while that court was considering whether and at what rate to impose interest on the funds at issue, the DuPage County Court denied Ms. Zurn‘s motion to reinstate the Zurn case in that court. Mr. Botti brought a motion to amend the earlier order in light of this new development and what he submitted were manifest errors of law in the bankruptcy court‘s characterization of the Illinois Appellate Court‘s decision reversing the Zurn case. Ms. Zurn also brought a motion to reconsider with respect to the Botti case. As the bankruptcy court characterized the situation, “the legal issues raised by both parties are essentially of the same nature[;] that the court has misperceived the law that‘s applicable here and that to reconsider the order that‘s previously been entered.” June 8, 2000 Bankr. Tr. at 2. Specifically, Mr. Botti maintained that the bankruptcy court‘s order incorrectly perceived the nature of Illinois Supreme Court Rule 137, which is analogous to
Upon reconsideration, the bankruptcy court agreed with Mr. Botti that its earlier ruling was incorrect. “I have reviewed again the plan of reorganization of this case.... It does not say that there is any right to a refund in the event of a discharged judgment. It simply leaves the debtor in the position of pursuing her rights in state court.” June 8, 2000 Bankr. Tr. at 4. The court continued: “I made a decision to abstain, and that determination is reflected in the plan of reorganization that was actually confirmed.” Id. at 6.
2.
Mr. Botti also expressly waived any objection to the bankruptcy court‘s decision to reopen this case. In his brief to this court, Mr. Botti acknowledged that the bankruptcy court had “accepted jurisdiction by reopening the bankruptcy as it clearly had the authority to do under
3.
The majority states that “because the court had not been asked to interfere with or take over a pending suit, it also could not ‘abstain.’ ” Maj. Op. at 863. Under the permissive abstention rule of
The bankruptcy court‘s decision was a decision to abstain from exercising jurisdiction over the Zurn and Botti cases. The bankruptcy court had abstained in 1995 because, inter alia, the two cases were dominated by uncertain questions of state law. It abstained this time because the original plan did not permit Ms. Zurn to return to bankruptcy court to vindicate only a portion of her state law rights; to enforce the plan was to persist in abstaining.3
4.
The bankruptcy court‘s record cannot be read so as to conclude that the bankruptcy court‘s decision on June 8, 2000, reversed its original decision to reopen the case. The parties litigated the reopening issue and then proceeded to the merits. We are asked to review the bankruptcy court‘s decision on the merits. That decision was to abstain from exercising jurisdiction over
