IN THE MATTER OF: STEVEN ROBERT LISSE, Debtor. APPEALS OF: WENDY ALISON NORA
Nos. 18-1866 & 18-1889
United States Court of Appeals For the Seventh Circuit
April 1, 2019
Before WOOD, Chief Judge, and BRENNAN and ST. EVE, Circuit Judges.
Appeals from the United States District Court for the Western District of Wisconsin. No. 16-cv-617-wmc — William M. Conley, Judge. ARGUED JANUARY 14, 2019 — DECIDED APRIL 1, 2019
I. Background
Proceedings in multiple venues are relevant to these appeals, including each level of the Wisconsin state court system, two Chapter 13 petitions in federal bankruptcy court, and two bankruptcy appeals in the district court. Because the procedural history is pertinent to resolving Nora‘s appeals, we detail it below.
A. Wisconsin Foreclosure Action
Steven and Sondra Lisse refinanced their home in 2006, taking out a new mortgage and signing a corresponding note. The Lisses fell behind on their payments, and an entity controlled by HSBC Bank USA, N.A. filed a foreclosure action in Dane County Circuit Court in 2010.1
Four years later, HSBC moved for summary judgment. In response, the Lisses asked the court for additional discovery that they hoped would demonstrate HSBC could not enforce
B. Chapter 13 Bankruptcy Petitions
Approximately six weeks after the Wisconsin Court of Appeals’ affirmance, Steven Lisse (by attorney Nora) filed a Chapter 13 bankruptcy petition in the Western District of Wisconsin. As a result, the Wisconsin Supreme Court extended the Lisses’ deadline to petition for review of the foreclosure judgment. Order, HSBC Bank USA v. Lisse, No. 2015AP273 (Wis. Apr. 7, 2016).2 The practical effect was to postpone HSBC‘s foreclosure on the Lisses’ home as long as bankruptcy proceedings remained pending in federal court.
Nora submitted a Chapter 13 plan for Steven Lisse that proposed the Lisses would make their monthly mortgage payments to Nora‘s trust account while the bankruptcy court conducted an adversary proceeding to identify the entity entitled to the money. HSBC objected, noting it already litigated its claim to judgment in the Wisconsin courts.
Five days after the bankruptcy court dismissed Steven Lisse‘s petition, Nora filed a separate Chapter 13 petition on behalf of his wife, Sondra Lisse. This again extended the Lisses’ deadline in the Wisconsin Supreme Court. Order, HSBC Bank USA v. Lisse, No. 2015AP273 (Wis. July 28, 2016). Nora‘s proposed Chapter 13 plan for Sondra Lisse was similar to the one the bankruptcy court had just rejected in Steven Lisse‘s case. HSBC moved to dismiss the petition for lack of good faith, arguing Nora filed it with the sole intent to delay the final disposition of the Wisconsin foreclosure action. HSBC also sought relief from the automatic stay.
Nora responded by moving for sanctions, claiming HSBC‘s Rooker-Feldman and preclusion arguments were frivolous and accusing HSBC‘s counsel of “completely desecrating the integrity of these proceedings.” Motion for
After these procedural rulings, Nora filed three appeals to the district court and moved to voluntarily dismiss Sondra Lisse‘s petition pending resolution of the appeals, which the district court granted. With both bankruptcy cases dismissed (although on appeal), the Lisses filed their petition for review with the Wisconsin Supreme Court — 13 months after the Wisconsin Court of Appeals affirmed the foreclosure judgment. Petition for Review, HSBC Bank USA v. Lisse, No. 2015AP273 (Wis. Mar. 23, 2017).
C. Bankruptcy Appeals to the District Court
Nora began Steven Lisse‘s bankruptcy appeal by filing a document accusing HSBC and its counsel (by name) of federal crimes, including bankruptcy fraud under
Following this initial burst of activity, Steven Lisse‘s appeal lay dormant for almost a year. Finally, on August 23,
Nora filed a motion to stay the appeal ten days later, citing the Americans with Disabilities Act of 1990,
The day after the district court stayed Steven Lisse‘s bankruptcy appeal, the Wisconsin Supreme Court denied the Lisses’ petition to review the foreclosure judgment. HSBC Bank USA v. Lisse, 904 N.W.2d 124 (Wis. Sept. 22, 2017) (unpublished table decision). As a result, in December 2017, HSBC began moving forward with a foreclosure sale in Dane County Circuit Court.
With respect to Sondra Lisse‘s appeal, on December 5, 2017, the district court affirmed the bankruptcy court‘s rulings. Lisse v. Select Portfolio Serv., Inc., No. 17-cv-206-jdp, 2017 WL 6021316 (W.D. Wis. Dec. 5, 2017). It held that the preclusive effect of the Wisconsin foreclosure judgment defeated Nora‘s challenges to the note‘s authenticity and provided HSBC with standing to object to Sondra Lisse‘s proposed Chapter 13 plan. Id. at *7. Also, the district court concluded the “appeal, like the bankruptcy litigation, plainly lacks merit and was wastefully presented.” Id. at *8.5 Nora asked the district court to reconsider, but the district court declined. Lisse v. Select Portfolio Serv., Inc., No. 17-cv-206-jdp, 2018 WL 840157, at *3 (W.D. Wis. Feb. 12, 2018) (finding Nora‘s motion provided “no basis ... to reconsider its decision“). Sondra Lisse did not appeal the district court‘s rulings to this court.
After the stay expired in Steven Lisse‘s appeal — and on the eve of Nora‘s deadline to file an opening brief — the Lisses returned to Dane County Circuit Court to file a flurry of motions seeking to postpone the foreclosure sale.6 The day before
The following day, instead of filing an opening brief, Nora moved to voluntarily dismiss Steven Lisse‘s appeal — more than 16 months after she filed it.
D. Sanctions in the District Court
The district court dismissed Steven Lisse‘s appeal, but it did not stop there. Due to her “pattern of sharp practice,” the district court ordered Nora to show cause “why she should not be sanctioned for her frivolous, or at best vexatious, appeal.” Order, Lisse v. HSBC Bank USA, No. 3:16-cv-00617-wmc (W.D. Wis. Jan. 22, 2018), ECF No. 49. A week later, Nora asked the district court to vacate its show cause order, alleging that the order violated due process and that the district court had pre-judged the merits of imposing sanctions. The district court scheduled an evidentiary hearing before a three-
Nora, now represented by her own counsel, filed an answer seeking to “quash” the show cause order, alleging a lack of notice of the “charges” against her, objecting to Judge Conley‘s participation at the hearing, and challenging the constitutional authority of Chief Bankruptcy Judge Furay to participate. The district court provided Nora with a 13-page “supplemental notice” identifying the bases for the order to show cause. Nora‘s lawyer followed up with a “rejoinder,” objecting to the lack of separate “counts” and arguing the court could not conduct its own attorney discipline proceedings.
The district court held a 90-minute hearing on the show cause order and issued its opinion on March 20, 2018. It grouped Nora‘s misconduct into three categories: “(1) inappropriately pursuing relief in federal court; (2) dilatory litigation conduct, including numerous, last-minute requests for lengthy extensions; and (3) filing multiple cases or appeals then failing to consolidate or join them.” Opinion and Order at 8, Lisse v. HSBC Bank USA, No. 3:16-cv-00617-wmc (W.D. Wis. Mar. 20, 2018), ECF No. 88. The court decided, “Nora‘s advocacy has crossed the line of professional conduct too many times to be tolerated or ignored any longer.” Id. at 11. The district court fined Nora $2,500 and suspended her from appearing in new matters in the Western District for six
Meanwhile, HSBC had filed a motion for $3,675 in costs and attorneys’ fees under both
About a week later, the Wisconsin Supreme Court issued a decision in disciplinary proceedings against Nora — for conduct not connected with this litigation — revoking her law license for at least one year. In re Disciplinary Proceedings against Nora, 909 N.W.2d at 167. On April 13, 2018, pursuant to W.D. Wis. LR 83.5, the district court suspended Nora from practice in the Western District until her Wisconsin law license was restored.
E. Appeals in this Court
Nora now appeals the district court‘s decisions in her individual capacity.8 Her opening brief was due on July 30,
Nora also repeatedly filed documents styled as “Requests for Judicial Notice,” asking this court to take judicial notice of various documents filed in other cases (affidavits, deposition transcripts, court orders). After two orders denying Nora‘s requests, on Nora‘s third attempt Judge Easterbrook (as motions judge) published an opinion explaining why the requests were procedurally improper. In re Appeals of Nora, 905 F.3d 495, 497 (7th Cir. 2018) (“The right place to propose judicial notice, once a case is in a court of appeals, is in a brief. ... There‘s no need to engage in motions practice, require the attention of additional appellate judges, and defer briefing.“).
When HSBC submitted its response, Nora moved to strike portions of its brief and supplemental appendix. Nora argued HSBC‘s citation of documents from the Wisconsin foreclosure action and Sondra Lisse‘s bankruptcy case — some of which
After the completion of merits briefing, HSBC moved for damages and costs under
II. Discussion
Nora appeals two separate rulings by the district court, although her briefs meld them together. First, Nora challenges the district court‘s March 22, 2018 sanctions order holding her and Steven Lisse jointly and severally liable to HSBC for $1,837.50 under
A. March 22, 2018 Sanctions Order
A district court may “award just damages and single or double costs” if it determines a bankruptcy appeal is frivolous.
Likewise, a court may hold an attorney personally liable for “excess costs, expenses, and attorneys’ fees reasonably incurred because of” her unreasonable and vexatious litigation conduct.
Under both
1. Sanctions were appropriate under FED. R. BANKR. P. 8020(a) because the bankruptcy appeal was frivolous.
The bankruptcy court found Nora filed Steven Lisse‘s Chapter 13 bankruptcy petition for the improper purpose of thwarting the Lisses’ creditors, rather than paying them. That conclusion was not clearly erroneous. In re Wiese, 552 F.3d 584, 588 (7th Cir. 2009) (a bankruptcy court abuses its discretion when its decision is premised on an incorrect legal principle or a clearly erroneous factual finding).
Unlike a Chapter 7 petition, which focuses on liquidating the debtor‘s assets to satisfy his creditors, Chapter 13 allows a debtor to voluntarily propose a plan to reorganize his debts for repayment out of his future income. RICHARD I. AARON, BANKRUPTCY LAW FUNDAMENTALS 777 (2013 ed.) (“The central thesis of Chapter 13 is that an individual debtor can dedicate future income to pay accumulated debts.“); see also 8 COLLIER ON BANKRUPTCY § 1300.02 (Richard Levin & Henry Sommer eds., 16th ed. 2018). The focus on repayment is highlighted by the requirement that the debtor begin making payments to the trustee within 30 days after proposing a Chapter 13 plan, even before the plan is confirmed.
A bankruptcy court may dismiss a Chapter 13 petition for cause if it finds the petition was filed in bad faith.
Using a Chapter 13 petition to stave off an impending home foreclosure sale is not necessarily improper. Although Chapter 13 generally prohibits a plan from modifying mortgage lenders’ underlying rights,
But this is not what Nora proposed for the Lisses. As the bankruptcy court recognized, the object of Nora‘s plan was
In the district court, Nora never presented any argument about why the bankruptcy court‘s good-faith determination was clearly erroneous. Indeed, Nora never even filed a brief on the merits of the appeal, despite the fact it was pending in the district court for 16 months. Cf. Klein v. O‘Brien, 884 F.3d 754, 757 (7th Cir. 2018) (“[A]n appellate brief that does not even try to engage the reasons the appellant lost has no prospect of success.“).
Nora now resurrects the argument that HSBC‘s note is a forgery, so the appeal to the district court was not frivolous. This only confirms the bankruptcy court‘s conclusion that Nora intended to use the proceedings to thwart HSBC, rather than to cure the Lisses’ mortgage defaults or otherwise satisfy HSBC‘s claim. Many court decisions have previously informed Nora that, under the Rooker-Feldman doctrine, federal courts are bound by state-court resolutions of debtors’
Throughout the federal proceedings, Nora has repeatedly attacked HSBC‘s “standing” to oppose Steven Lisse‘s Chapter 13 plan on the theory that HSBC‘s note is a forgery. She similarly contends the district court lacked jurisdiction to sanction her due to this alleged Article III defect. Nora is wrong on both counts. The Wisconsin foreclosure judgment established HSBC as the Lisses’ judgment creditor. It is the foreclosure judgment, not the note, that gives HSBC standing at this point to object to Steven Lisse‘s Chapter 13 plan.
Nora manages to flag one potentially legitimate basis to challenge the bankruptcy court‘s decision: that the court decided sua sponte to not only deny confirmation but to dismiss the petition without leave to amend the plan. Compare In re Terry, 630 F.2d 634, 636 n.5 (8th Cir. 1980) (“As we read § 1307, a court cannot order dismissal or conversion on its own motion.“), with In re Hammers, 988 F.2d 32, 34-35 (5th Cir. 1993) (holding sua sponte dismissal appropriate under
Nora‘s attempt to relitigate HSBC‘s foreclosure judgment in bankruptcy court was frivolous. Nora‘s repeated fraud accusations do not change the calculus. Mains v. CitiBank, 852 F.3d 669, 676 (7th Cir. 2017) (holding Rooker-Feldman prohibits federal courts from reviewing whether a lender procured a state-court foreclosure judgment through fraud). If Nora believed she possessed new evidence of fraud, Wisconsin‘s state courts were the appropriate venue to raise such arguments.
28 U.S.C. § 1927 .
Courts may also impose sanctions against a lawyer who “multiplies the proceedings in any case unreasonably and vexatiously.”
Nora‘s stall tactics are blatant when one looks back at how this litigation unfolded. Although Nora denies intentionally delaying proceedings, the record before us belies her position. Nora herself openly acknowledged the purpose of Steven Lisse‘s bankruptcy petition was to extend the deadline to petition the Wisconsin Supreme Court. And, as Nora now boasts in her brief, her strategy worked:
The March 22, 2018 Order [by the district court] concludes that attorneys’ fees should be awarded based on “dilatory conduct” whereby the Lisses have maintained possession of their home for six (6) years. Actually, the Lisses have remained in possession of their home for over eight (8) years since the fraudulent foreclosure began and they are still in possession of their home, contrary to Judge Peterson‘s conclusion
that the foreclosure of the Lisses’ home is “inevitable.”
Appellant‘s Response to Motion for Sanctions at 16-17, ECF No. 24.
Using the automatic stay in
The conclusion of intentional delay is supported, not only by the obvious motive, but also by the lack of any substantive merit to the Chapter 13 proceedings. As discussed above, the plan Nora filed on behalf of Steven Lisse (and then again for Sondra Lisse) improperly attempted to use an adversarial proceeding to relitigate the merits of a foreclosure judgment HSBC had already obtained in Wisconsin state court (with HSBC receiving no payments in the interim). Any reasonably careful attorney — let alone an attorney with Nora‘s familiarity with bankruptcy court — would have known that this type of conduct would not be tolerated. Bell, 908 F.3d at 1082; cf. Carr v. Tillery, 591 F.3d 909, 920 (7th Cir. 2010) (“Although the suit is not frivolous, or at least not utterly so, it is so lacking in merit ... that its pursuit by the plaintiff indicates a motive to harass.“).
Nora then compounded the delays caused by these meritless bankruptcy petitions by filing numerous, last-minute motions for lengthy stays or deadline extensions. For example, in
B. Nora‘s Suspension from Law Practice
In addition to awarding HSBC damages and costs against both Nora and Steven Lisse as a monetary sanction, two district court orders imposed professional discipline on Nora. First, on March 20, 2018, the district court fined Nora $2,500 and suspended her right to practice in the Western District for six months, although it stayed the penalties until Nora committed another violation.
Ten days later, however, the Wisconsin Supreme Court suspended Nora‘s law license for one year. In re Disciplinary Proceedings against Nora, 909 N.W.2d at 167-68. As a result, on April 13, 2018, the district court issued another order suspending Nora‘s right to practice based on W.D. Wis. LR 83.5(E). That local rule automatically imposes reciprocal discipline when another jurisdiction does so, although it permits the attorney to apply “for modification or vacation of the [district court‘s] discipline.”
Although Nora appeals the district court‘s April 13, 2018 disciplinary order separately from its March 22, 2018 order awarding HSBC its damages and costs under
District courts are permitted to rely on state-court disciplinary proceedings to suspend attorneys practicing before them. Selling v. Radford, 243 U.S. 46, 51 (1917). And this case shows why a local rule making reciprocal discipline automatic (while also providing a process for attorneys to challenge that federal discipline) makes sense. Such rules align the procedure with the relevant legal presumptions. Separate federal hearings are not required. In re Palmisano, 70 F.3d 483, 486 (7th Cir. 1995). Federal courts give “great weight” to state-court disciplinary findings. In re Jafree, 759 F.2d 604, 608 (7th Cir. 1985). The attorney bears the burden to identify either a due process violation, insufficient fact findings, or “some other grave reason” why the state-court‘s ruling is not entitled to the federal court‘s respect. Selling, 243 U.S. at 51. Placing the onus on the attorney to raise such issues in a motion to modify or vacate discipline minimizes the amount of resources diverted to (essentially) collateral attacks on state-court proceedings. See In re Wick, 628 F.3d 379, 381 (7th Cir. 2010).15
Again, Nora used tag-team Chapter 13 bankruptcy filings by a husband and wife — each lacking a good faith basis — to postpone the orderly resolution of state-court proceedings. Nora‘s behavior in this litigation unfortunately is not an aberration for her. See, e.g., PNC Bank v. Spencer, 763 F.3d 650, 654-55 (7th Cir. 2014) (“In sum, this appeal is frivolous, and we are troubled by Nora‘s conduct in this litigation. ... [W]e suspect that the removal was part of a strategy designed to gum up the progress of the case.“); Spencer v. Federal Home Loan Mortg. Corp., No. 15-cv-332-wmc, 2015 WL 4509159, at *1 (W.D. Wis. July 24, 2015) (stating that Nora‘s appeals appeared “motivated by the goal to further delay a warranted state court foreclosure.“). Courts have sanctioned Nora for this conduct before, but apparently she has not received the message that it will not be tolerated.
Not only are Nora‘s litigation tactics inappropriate, her treatment of opposing counsel and judicial officers is censurable. In the district court, Nora accused HSBC‘s counsel (by name) of committing “uncontroverted fraud on the Court,” as well as multiple federal crimes, by presenting HSBC‘s claim. She repeats similar attacks in these appeals. See, e.g., Appellants Br. at 47. This behavior is, again, not new for Nora. PNC Bank, 763 F.3d at 655 (“Nora has accused the state court judge and court reporter of fraudulently manipulating transcripts, the district court judge of pursuing ‘a campaign of libel against her,’ and opposing counsel of engaging in ‘actionable civil fraud and racketeering that may constitute state and federal criminal misconduct.‘“); Nora v. Furay, No. 14-cv-527-jdp, 2014 WL 4209608, at *2 (W.D. Wis. Aug. 25, 2014) (“Nora contends that Judge Furay ‘acted in reckless haste to place false findings on the public record in order to support the falsely made allegations against her former client ... to make false findings of fact concerning matters which had never been adjudicated, and to damage Nora‘s character and reputation.‘“); In re Rinaldi, No. 11-35689-svk, 2017 WL 104749, at *1 (E.D. Wis. Jan. 10, 2017) (“The conversion of the case to Chapter 13 clearly changed the context of HSBC‘s entitlement to relief from stay, but Attorney Nora ignored the conversion and accused HSBC‘s attorneys of fraud on the Court.“).
Flippant, unfounded accusations of misconduct and fraud by opposing counsel and court officials demean the profession and impair the orderly operation of the judicial system. In re Palmisano, 70 F.3d at 487. They also violate the ethical standards for lawyers practicing in this circuit. See 7TH CIR. STANDARDS FOR PROF. CONDUCT, Lawyer‘s Duties to Other Counsel at ¶4 (“We will not, absent good cause, attribute bad motives or improper conduct to other counsel or bring the profession into disrepute by unfounded accusations of impropriety.“). Such behavior warrants punishment.
Following Nora‘s repeated abuse of the judicial process through frivolous filings and dilatory tactics, her unprofessional conduct toward opposing counsel, and the suspension of her Wisconsin law license, “the district court certainly was
C. Further Appellate Sanctions
We must also resolve HSBC‘s appellate motion for additional sanctions. This court may “award just damages and single or double costs to the appellee” when it deems an appeal frivolous.
Nora‘s arguments almost entirely regurgitate points she pressed before the bankruptcy court, which the district court concluded were frivolous. As we have explained to Nora previously, “Sanctions are warranted under Rule 38 when a litigant or attorney presents appellate arguments with no reasonable expectation of success for the purposes of delay, harassment, or sheer obstinacy.” In re Nora, 778 F.3d at 665. That aptly describes Nora‘s present appeals.
Not only were Nora‘s arguments on the merits frivolous, she also engaged in meritless and dilatory motion practice before this court. She moved to stay these appeals pending our ruling on a frivolous motion to strike that she filed. When we denied that motion, Nora immediately filed an equally frivolous motion to reconsider. Similarly, Nora submitted four separate “Requests for Judicial Notice,” needlessly clogging this court‘s motion docket. She continued to lodge these requests, even after this court issued an opinion detailing why
We find Nora‘s appeals to have been frivolous and grant HSBC‘s motion for attorneys’ fees and costs. HSBC requested $2,150.00 for attorneys’ fees and $446.00 for costs in its motion. Although such figures appear reasonable, HSBC has not submitted an affidavit or other evidentiary record to support them. See Arnold, 853 F.3d at 389 (directing moving party to “submit an affidavit and supporting papers specifying the damages” incurred); Flip Side Prod., Inc. v. Jam Prod., Ltd., 843 F.2d 1024, 1037 (7th Cir. 1988) (requiring party seeking sanctions to submit a “verified, itemized statement” of its damages and costs). So, we direct HSBC to provide an accounting of their costs and attorneys’ fees within 15 days.
For numerous reasons, including her failure to present “a separately filed motion” in compliance with
Finally, we must revisit our previous sanctions against Nora. Due to “frivolous and needlessly antagonistic filings” by Nora in an appeal back in 2015, we fined her $2,500 but suspended the sanction “until the time, if ever, that Nora submits further inappropriate filings.” In re Nora, 778 F.3d at 667. Given Nora‘s frivolous filings in these appeals, we lift the suspension of our previous monetary sanction.
III. Conclusion
Lawyers must represent their clients’ interests responsibly, not only zealously. Kapco Mfg. Co. v. C&O Enter., Inc., 886 F.2d 1485, 1497 (7th Cir. 1989). Part of being a responsible counselor to one‘s client is recognizing when the legal battle is lost and advising the client how to best handle that
For these reasons, we order as follows:
- On appeal number 18-1866, the district court‘s March 22, 2018 order holding Steven Lisse and Wendy Alison Nora jointly and severally liable for $1,837.50 is AFFIRMED;
- On appeal number 18-1889, the district court‘s March 20, 2018 and April 13, 2018 orders suspending Wendy Alison Nora‘s ability to practice in the Bankruptcy and District Courts for the Western District of Wisconsin (and staying an additional $2,500 fine) are AFFIRMED;
- HSBC‘s motion for damages and costs under
FED. R. APP. P. 38 is GRANTED, and HSBC is directed to provide an accounting of its costs and attorneys’ fees incurred in these appeals within 15 days; - Nora‘s “Request for Appellant‘s Attorneys Fees and Costs of Defending against the Motion for Sanctions” is DENIED; and
- We lift the suspension of the monetary sanction imposed in appeal number 13-2676 and order Nora to tender a check payable to the clerk of this court for $2,500 within 60 days of the date of this opinion.
The district court‘s decisions are AFFIRMED WITH SANCTIONS.