Bank of America, N.A., et al v. Pethinaidu Veluchamy

Filing

Filed opinion of the court by Judge Kanne. AFFIRMED. Richard A. Posner, Circuit Judge; Michael S. Kanne, Circuit Judge and John Daniel Tinder, Circuit Judge. [6316012] [11-1704, 11-1705]--[Edited 06/17/2011 by AM to reflect that the opinion issued in both appeals]

Case: 11-1704

Document: 53

Filed: 06/16/2011

Pages: 9

In the

United States Court of Appeals
For the Seventh Circuit
Nos. 11-1704 & 11-1705
B ANK OF A MERICA, N.A.,
Plaintiff-Appellee,
v.
P ETHINAIDU V ELUCHAMY and
P ARAMESWARI V ELUCHAMY,
Defendants-Appellants.
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
Nos. 09-cv-05108 & 09-cv-05109—Milton I. Shadur, Judge.

A RGUED M AY 2, 2011—D ECIDED M AY 4, 2011 1
P UBLISHED JUNE 16, 2011

Before P OSNER, K ANNE, and T INDER, Circuit Judges.
K ANNE, Circuit Judge. This case presents the question
of whether a district court has the power to temporarily
seize the passports of judgment-debtors who are
subject to a production of assets order. We conclude
that the district court has that authority, and therefore

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With notation that an opinion would follow.

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affirm the portion of the order seizing the Veluchamys’
passports.
In June 2009, Pethinaidu and Parameswari Veluchamy
defaulted on debts owed to Bank of America to the tune
of thirty-nine million dollars. Bank of America sued the
Veluchamys for breach of contract in district court, and
the district court ultimately entered a judgment in favor
of Bank of America in December 2010. Post-judgment
proceedings began in earnest, with Bank of America
working to locate assets owned by the Veluchamys
that could be applied to satisfy the multi-million dollar
judgment against them.
During the post-judgment proceedings, the district
court entered a number of citations requiring the
Veluchamys to turn over financial records and respond
to questions regarding their assets. The Veluchamys’
response rate was rather sluggish. From January to
March 2010, the Veluchamys refused to provide any
information regarding their assets, instead making a
blanket assertion that the Fifth Amendment privilege
against self-incrimination applied to all testimony they
might provide. They did this despite the fact that
such a broad, undifferentiated assertion is insufficient
in a post-judgment proceeding; instead, the privilege
must be asserted in a far more specific fashion. See, e.g.,
United States v. Hatchett, 862 F.2d 1249, 1251 (6th Cir.
1988); Capitol Prods. Corp. v. Hernon, 457 F.2d 541, 542-43
(8th Cir. 1972). The district court ultimately rejected
the Veluchamys’ Fifth Amendment claim in early
March 2011, instructing them to comply with the citations forthwith.

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Bank of America did not sit idly by during the
Veluchamys’ silence. The Bank received some responses
to the district court’s citations from third-party financial institutions. Through these responses, Bank of America learned that the Veluchamys had transferred significant sums of money (about twenty million dollars)
out of their bank accounts in the United States and into
their bank account in India after they defaulted on their
loans in June 2009. The Veluchamys also diluted or transferred their ownership interests in their non-movable
assets located in the United States during the same
period. Thanks to the Veluchamys’ efforts, there are
now sparse funds remaining within the United States
(and the district court’s jurisdiction) to satisfy the judgments against them.
Based on these discoveries—along with the Veluchamys’
hesitance to respond to the district court’s citations—Bank
of America moved for an emergency order compelling
the Veluchamys to produce the funds that they transferred to India and deposit them with the district court.
They also requested that the Veluchamys turn over
their passports until the funds were transferred, for
fear that the Veluchamys would flee when ordered to
deposit the cash with the court. Over the course of one
day, the district court reviewed the evidence regarding
these transfers put forth by Bank of America and addressed the Veluchamys’ objections. The district court
then ordered the Veluchamys to repatriate the funds or
disclose the reasons precluding them from doing so.
The district court also found that—in the interim—

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the Veluchamys were flight risks, and it ordered them
to relinquish their passports until they complied
with the production order.
The Veluchamys appeal the portion of the district
court’s order temporarily seizing their passports. We
begin where we must—with our jurisdiction to hear
their appeal. The post-judgment proceedings continue
below, so we would normally lack the power to hear
the appeal for want of a final judgment resolving the
parties’ claims. 28 U.S.C. § 1291; Johnson v. Jones, 515
U.S. 304, 309 (1995). Immediate appeal is permitted,
however, for orders that are collateral to the merits of
the proceeding. Cohen v. Beneficial Indus. Loan Corp., 337
U.S. 541, 546 (1949). An order is collateral when it “conclusively determines a disputed question that is
separate from the merits of the case and is effectively
unreviewable on an appeal from the final judgment.”
Jones v. Clark, 630 F.3d 677, 679 (7th Cir. 2011).
Both parties contend that the district court’s seizure
order is a collateral order, and we agree. First, the
seizure portion of the order is indeed conclusive. Even
though the order was designed to be temporary, its
termination depends upon various conditions being
satisfied; it thus answers the question of seizure for an
indefinite period of time. Second, the order directly
addresses an issue that is separate from the merits of
the post-judgment proceeding: whether the Veluchamys
retain their passports is sufficiently distinct from
what funds must be applied to the judgment and where
those funds are located (the subjects of a post-

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judgment proceeding). Finally, because the Veluchamys’
passports will have been returned by the time the proceedings end, the order will be unreviewable at a later
time. Satisfied that the order is collateral, we may
proceed to the merits of the appeal.
On the merits, the Veluchamys focus their argument
on whether the district court had the power to seize
their passports. They contend that a judgment-debtor’s
passport can be seized only upon a finding of contempt,
and only then if the record establishes a demonstrated
history of flight on the part of the judgment debtor. For
its part, Bank of America asserts that the district court
has the power to temporarily seize the passport of a
judgment debtor in limited circumstances, even without
a finding of contempt.
The powers available to a district court in a post-judgment proceeding are dictated by state law—here, the
law of Illinois. See Fed. R. Civ. P. 69; Star Ins. Co. v. Risk
Mktg. Grp. Inc., 561 F.3d 656, 661 (7th Cir. 2009). Illinois
law, in turn, provides the court with a variety of tools
that can be used to satisfy a judgment. For example, the
court may issue citations ordering parties and nonparties to turn over information, it may order parties and
non-parties to transfer funds to satisfy a judgment, and—
as is germane here—it may summarily compel a party
or non-party to produce funds within their control.
See 735 ILCS 5/2-1402(a)-(c). These powers are to be
broadly construed, providing the district court with the
authority to enter a wide variety of orders to ensure that
usable assets are located, seized, and—where appro-

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priate—applied to the judgment. See Dexia Credit Local
v. Rogan, 629 F.3d 612, 624 (7th Cir. 2010); Soc’y of Lloyd’s
v. Estate of McMurray, 274 F.3d 1133, 1135-36 (7th Cir.
2001); City of Chicago v. Air Auto Leasing Co., 697 N.E.2d
788, 791 (Ill. App. Ct. 1998).
In light of this broad construction, we think the power
to order a party to produce funds includes the power to
exercise some minimal control over the party subject
to that order—but only when doing so is necessary to
protect the court’s ability to enforce the underlying
order and prevent the loss of assets. Cf. Herbstein v.
Bruetman, 241 F.3d 586, 588-89 (7th Cir. 2001) (contempt
power includes the power to seize a party’s passport);
SEC v. Lauer, 52 F.3d 667, 671 (7th Cir. 1995) (injunction
power reaches orders “essential to prevent the dissipation of assets”). Whether such controls are necessary will
depend upon the circumstances of the case, but it will
be a rare case where any extraordinary steps are needed.
In the lion’s share of cases, the debtor will not have
moved assets to a locale beyond the court’s jurisdiction,
and thus the court’s other powers—especially its power
to order the holding financial institution itself to freeze
the assets—will be enough to safeguard the court’s
ability to enforce a production order. But in the outlier
case where the court can seize the funds at issue only
through a particular party, the district court’s ability to
enforce a production order is threatened if the party
subject to the order demonstrates a risk of flight. In that
limited circumstance, a concomitant order exercising
some minimal control (in the form of a passport seizure)
is permissible.

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The district court found that this was the rare case
where such an order was justified, and we agree. The
bases for findings of necessity and flight risk were clear
and largely uncontested. The district court was faced
with debtors who had previously transferred abroad all
of the funds now subject to the order and were simultaneously hesitant to disclose information that would
have revealed those transfers. The district court found
that the extra-territorial location of the funds threatened
its ability to enforce the production order; in other
words, it found that the only way it could access the
funds at issue was through the Veluchamys. The court
also found that the Veluchamys had minimal assets
in the United States, what appeared to be significant
assets abroad, and a reluctance to disclose those facts, all
of which established some flight risk. We see no clear
error with those findings, and believe they are adequate
to support the minimal seizure imposed. Cf. United
States v. Shaheen, 445 F.2d 6, 11-12 (7th Cir. 1971) (suggesting that a district court’s seizure of a party’s passport is permissible when a judgment has been entered,
when there have been significant transfers abroad, and
when domestic funds would be inadequate to satisfy
the judgment). Nor do we see any fatal flaw in the
form those findings took; while a district court should
enter findings to support an injunction, a lack of
findings does not necessitate remand where—as here—
there is “a sufficient record from which we can render
a decision.” Dexia Credit Local v. Rogan, 602 F.3d 879,
885 (7th Cir. 2010).

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The Veluchamys finally claim that, even if the district
court had the power to seize their passports, the court
did not exercise that power in a manner comporting
with due process. They suggest—in a cursory manner—that due process and the rules of procedure for an
injunction likely go hand in hand for the seizure here.
While we are inclined to agree, the Veluchamys’ argument on this point is perfunctory and incomplete. The
vast majority of their brief focuses on the question of
whether the district court had the power to seize their
passports, not on what process was due if that power
existed. The Veluchamys do not mention due process
in their statement of issues, and their argument section
contains only a blanket assertion that there was a violation of due process. Conspicuously absent from their
argument is a thorough discussion of what process
would be appropriate and why. As one circuit eloquently
put it, “[i]t is not enough merely to mention a possible
argument in the most skeletal way, leaving the court to
do counsel’s work, create the ossature for the argument,
and put flesh on its bones.” United States v. Zannino, 895
F.2d 1, 17 (1st Cir. 1990). The Veluchamys have done
just that, and their argument is therefore waived. See,
e.g., United States v. Courtright, 632 F.3d 363, 370 (7th Cir.
2011) (“[W]e are not in the business of formulating arguments for the parties.”); Mahaffey v. Ramos, 588 F.3d 1142,
1146 (7th Cir. 2009); White Eagle Coop. Ass’n v. Conner,
553 F.3d 467, 476 n.6 (7th Cir. 2009) (“[I]t is not the province of the courts to complete litigants’ thoughts for
them . . . .”).

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Document: 53

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In the end, we answer the only question properly presented. The district court had the power to impose a
minimal seizure on the Veluchamys until they abided
by the asset production order or explained to the
district court why they could not. The Veluchamys complain that all of this effort is for naught because
“[t]here is just very little money available to satisfy
[Bank of America’s] judgment.” The district court has
responded with an order designed to make them prove
it, and until they show that the money is unavailable
(or until they transfer the funds subject to the order back
to the United States), their passports will remain in the
district court’s care. The district court’s order is
A FFIRMED.

6-16-11