Thomas HOLSTEIN, Plaintiff-Appellant, v. Kevin BRILL, Defendant-Appellee.
No. 92-1670
United States Court of Appeals, Seventh Circuit
Decided Feb. 18, 1993.
Rehearing and Rehearing En Banc Denied March 16, 1993.
987 F.2d 1268
Argued Jan. 6, 1993.
I concur in this case, but I write separately because my analysis of the issue in regard to the motion for acquittal differs from that of the majority.
The majority has accurately set forth what the indictment did and did not charge in this case, and what the evidence did and did not demonstrate. It is undisputed that the defendant was an officer of his corporation, Woods and Water. It is undisputed that the law applicable to this defendant‘s employment status is Georgia law, and that under Georgia law an officer of a corporation is an employee of that corporation. Accordingly, it seems to me that because this defendant was an employee of the corporation, he was not, as a matter of law, self-employed. Thus his statement that he was not self-employed was not, as a matter of law, false, and therefore he was entitled to a judgment of acquittal unless the evidence permitted a finding that the corporate veil could be pierced. Here, as the majority opinion makes clear, the government simply did not present any evidence that the defendant had done any of the things with regard to the corporation which would permit such a finding. Because the actual falsity of the statement is an element of the offense, a failure of proof on that issue is fatal to a conviction. Therefore, since the evidence presented did not warrant an instruction to the jury on piercing the corporate veil, even if the instruction which the district court gave the jury had been adequate to explain what the jury must consider in determining whether to disregard the existence of the corporation, the district court erred in sending this matter to the jury at all.
It is clear that this defendant intended to make and indeed, did make a false statement to the government. However, he was not indicted for the false statement which he actually made, but for the statement which could only have been false if the government adequately established the identity between the defendant and his corporation. This the government did not do.
Thomas O. Holstein (argued), Chicago, IL, for plaintiff-appellant.
David A. Mucklow (argued), Norman B. Newman, Much, Shelist, Freed, Denenberg, Ament & Eiger, Chicago, IL, for defendant-appellee.
Before EASTERBROOK and RIPPLE, Circuit Judges, and MILLER, District Judge.*
EASTERBROOK, Circuit Judge.
Two bankruptcy lawyers have landed in bankruptcy themselves, owing each other money. Thomas Holstein owes Kevin Brill more than $11,000 as wages for services performed while Brill was his employee; Brill owes Holstein more than $7,000 in fees for cases referred after the employment ended.
Come 1990 Brill, who had not been paid, asked Bankruptcy Judge Katz, to whom the case had been reassigned, to convert the reorganization to a Chapter 7 liquidation. Holstein opposed this, observing that he had paid more than $340,000 to his creditors and was about to begin paying the lowest-priority debts. After Holstein demanded that Brill fork over the more than $7,000 to which he was clinging, Brill replied on September 4, 1990, by increasing his own claim. Unpaid wages actually exceed $28,000, according to Brill‘s revised calculation. Judge Katz declined to convert the case to Chapter 7, refused to give Holstein any additional time to pay, ordered Brill to turn the $7,000 over to the estate, granted Brill‘s request to increase his claim to $28,000, and rejected Holstein‘s request to offset his accounts with Brill. 1991 WL 236871, 1991 Bankr. LEXIS 1606. The district court affirmed. 1992 WL 55488, 1992 U.S. Dist. LEXIS 2506. Bank-
Setoff is not available. Holstein owes Brill money for wages preceding August 30, 1984; Brill owes Holstein money for legal work done after Brill was in practice on his own. These are not “mutual” (that is, contemporaneous) debts and accordingly may not be canceled in bankruptcy. Boston & Maine Corp. v. Chicago Pacific Corp., 785 F.2d 562 (7th Cir. 1986); cf. In re Iowa R.R., 840 F.2d 535, 543-44 (7th Cir. 1988). Holstein must pay Brill in full under his Chapter 11 plan, and Brill must pay Holstein in full under both Judge Katz‘s turnover order and Judge Wedoff‘s order. As both apparently have the means to do so, it all comes to the same thing as setoff, provided these lawyers live up to their obligations.
Increasing Brill‘s claim 4 years after the confirmation of Holstein‘s plan, and 5 1/2 years after the bar date in the Chapter 11 case, is another matter entirely. Because the plan of reorganization does not specify the sum Holstein must pay Brill, an increase would not “modify” the plan in a way that
Leave to amend should be freely granted early in a case, Foman v. Davis, 371 U.S. 178, 83 S. Ct. 227, 9 L. Ed. 2d 222 (1962), but passing milestones in the litigation make amendment less appropriate. One milestone of particular significance in bankruptcy is the bar date. By then creditors must submit their proofs of claim. Once the claims are in, the parties may concentrate on determining their validity and providing for payment. How they will proceed depends on who claims how much. Some enlargement later by amendment may be appropriate, and the debtor may himself submit claims within a limited period after the bar date. See
Confirmation of the plan of reorganization is a second milestone, equivalent to final judgment in ordinary civil litigation. Kham & Nate‘s Shoes No. 2 v. First Bank of Whiting, 908 F.2d 1351, 1354 (7th Cir. 1990). Once that milestone has been reached, further changes should be allowed only for compelling reasons. In re Chappell, 984 F.2d 775, 782 (7th Cir. 1993). Cf.
What explains Brill‘s delay? A high hurdle for a litigant does not imply searching appellate review. Still, we must ensure that the bankruptcy and district judges applied the right standard. Neither judge, however, identified any appropriate reason for Brill‘s six-year delay in making a claim for $28,000. Brill‘s brief in this court is equally silent. He does not contend, for example, that essential documents became available only recently, or that Holstein hindered his efforts to compute unpaid wages accurately. His latest claim invokes an oral contract; he does not rely on documents. Brill received notice of the proceedings and of the two bar dates (one in Chapter 13 and another in Chapter 11). He made a claim for a little more than $11,000 without suggesting that the computation was tentative. Brill did not object to the disclosure statement or the plan of reorganization; he did not ask for discovery so that he could compute the back pay obligation using Holstein‘s records. There is nothing but the equivalent of: “Whoops, my mistake.” Perhaps there is more: Brill asserts that after Holstein renewed his claim to the $7,000 and demanded an accounting, he was “forced to reanalyze the situation.” In other words, he retaliated for Holstein‘s demand by increasing his own demands. A litigant‘s inattention, laziness, error, or desire to lash back at an adversary is not good cause by any standard. Danielson, 981 F.2d at 298; United States v. Dumont, 936 F.2d 292, 295 (7th Cir. 1991); Redfield v. Continental Casualty Co., 818 F.2d 596, 602 (7th Cir. 1987). Having kept his silence while the trustee was toting up Holstein‘s obligations, Brill cannot surface 5 1/2 years later with a demand almost three times the original amount.
We asked the parties whether any other court ever had allowed a claim to be increased, for any reason, after confirmation of a plan of reorganization. Neither side could find such a decision under the 1978 Code, or for that matter under the 1898 Act during its final 50 years. Our search was equally fruitless. Without excluding the possibility of a post-confirmation amendment of a claim for cogent reason, we conclude that a creditor‘s inattention to the case or careless error in calculation does not suffice. As Brill has not provided any other explanation for the delay, a remand is unnecessary.
The judgment is affirmed to the extent it precludes a setoff of the debts and reversed to the extent it directs Holstein to pay Brill more than $11,318.
RIPPLE, Circuit Judge, dissenting.
I agree with the majority that there are limits on the authority of a bankruptcy court to allow an amendment under
However, it is still important to remember that the matter of amendment is committed to the sound discretion of the bankruptcy judge. In the Matter of Stavriotis, 977 F.2d 1202, 1204 (7th Cir. 1992). The bankruptcy court, especially in a Chapter 11 proceeding, is engaged in the delicate, complex, and sophisticated task of attempting to breathe life back into the bankrupt entity. The bankruptcy court is therefore in a unique position to appreciate the motivations of the creditors and the impact on the bankrupt estate from an amendment.
This is one of many cases to arrive in this court recently where a matter controlled by the abuse of discretion standard comes to us either unexplained or vaguely explained. This lack of explanation may be due in large measure to the pressures on courts of first instance, including bankruptcy courts, to deal with a great number of cases. However, this failure to communicate adequately with reviewing courts does provide, understandably, a significant unease on the part of appellate courts. It also provides a temptation for appellate courts to micromanage bankruptcy matters.
While prolonging bankruptcy proceedings is indeed regrettable, I believe the appropriate course in a case such as this is to remand the case to the bankruptcy court in order to allow that court to provide us with a more elaborate explanation of its reasons for permitting the amendment. The bankruptcy court did note that Mr. Brill was unable to compute the full amount of his claim when he filed the original proof of claim but left us in the dark as to when such information did become reasonably available to Mr. Brill. The bankruptcy court is also in a far superior position than we to determine the impact of such an amendment on the debtor and on any other remaining creditors.
I believe that remanding this case to the bankruptcy court is far more appropriate than engaging in factual assumptions at the appellate level. The majority concludes that Mr. Brill should have known the total of his legal fees long in advance of his amended filing. The majority also attributes to Mr. Brill a retaliatory motive for filing the amended proof of claim. This sort of fact-finding ought to be done on remand in the bankruptcy court rather than here.
Because I believe the bankruptcy court should have an opportunity to set forth in greater detail the basis of its decision to permit an amendment of Mr. Brill‘s proof of claim, I would remand this matter to the bankruptcy court for a more detailed elaboration.
FRANK H. EASTERBROOK
UNITED STATES CIRCUIT JUDGE