Mendez v. Perla Dental, et al

Filing 681

WRITTEN Opinion entered by the Honorable Joan H. Lefkow on 6/6/2012: Republic Bank's motion to set aside judgment [#667] is granted. The order of contempt and judgment entered against Republic Bank [#622] and this court's memorandum opin ion and order [#623] are vacated. The court adopts the report and recommendation of Magistrate Judge Maria Valdez [#571] and denies plaintiff's motion for contempt and judgment against Republic Bank [#497]. Reasons are stated in the statement section of this order.Mailed notice(mad, )

Order Form (01/2005)

United States District Court, Northern District of Illinois
Name of Assigned Judge
or Magistrate Judge

Joan H. Lefkow

CASE NUMBER

04 C 4159

CASE
TITLE

Sitting Judge if Other
than Assigned Judge

DATE

6/6/2012

Mendez vs. Perla Dental

DOCKET ENTRY TEXT

Republic Bank’s motion to set aside judgment [#667] is granted. The order of contempt and judgment
entered against Republic Bank [#622] and this court’s memorandum opinion and order [#623] are vacated.
The court adopts the report and recommendation of Magistrate Judge Maria Valdez [#571] and denies
plaintiff’s motion for contempt and judgment against Republic Bank [#497]. Reasons are stated in the
statement section of this order.

O[ For further details see text below.]

Docketing to mail notices.
*Copy to judge/magistrate judge.

STATEMENT
Statement
The facts are set out in the report and recommendation and will not be repeated here. In short, on
October 15, 2010 Judge Samuel Der-Yeghiayan (to whom this case was then assigned) entered an order
[#316] (“the Order”) granting certain intervenors’ motion to lift a prohibition against the transfer of certain
property of the defendant judgment debtors. Republic Bank, relying on the Order, transferred funds contrary
to the directive of a citation to discover assets. Plaintiff, Nereida Mendez, moved for a finding of contempt
and entry of judgment against Republic Bank. On October 18, 2011, Magistrate Judge Valdez issued a report
and recommendation [#571] recommending that this court deny plaintiff’s motion.1 Overlooking Judge
Valdez’s report and recommendation and the objections to it, this court on March 7, 2012, issued an opinion
and order [#623] granting Mendez’s motion as an initial matter and entering judgment against Republic Bank
for the unpaid portion of the judgment [#622]. Republic Bank now moves under Federal Rule of Civil
Procedure Rule 60(b) to set aside the judgment.
Rule 60(b) permits the court, “[o]n motion and just terms,” to relieve a party from a final judgment
for a variety of enumerated reasons and “any other reason that justifies relief.” Fed. R. Civ. P. 60(b)(6); see
Klapprott v. United States, 335 U.S. 601, 614–15, 69 S. Ct. 384, 93 L. Ed. 266 (1949) (“the language of the
‘other reason’ clause . . . vests power in courts adequate to enable them to vacate judgments whenever such
action is appropriate to accomplish justice”); Margoles v. Johns, 798 F.2d 1069, 1073 (7th Cir. 1986) (“relief
under 60(b)(6) is warranted only upon a showing of extraordinary circumstances that create a substantial
danger that the underlying judgment was unjust”). The decision whether to grant or deny a motion to set
aside judgment is committed to the sound discretion of the trial court and will be reversed only if “no
reasonable person could agree with the district court.” Reinsurance Co. of Am., Inc. v. Administratia
Asigurarilor de Stat, 902 F.2d 1275, 1277 (7th Cir. 1990) (citation and internal quotation omitted). This
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STATEMENT
court is persuaded that this is an unusual circumstance justifying relief. First, this court failed to follow Rule
72(b) in ruling on the motion, and having reviewed the magistrate judge’s report and recommendation the
court is persuaded that the magistrate judge’s recommendation is correct. As such, justice is served by
granting the motion to vacate the judgment.
Under Federal Rule of Civil Procedure 72(b), the district court reviews a magistrate judge’s report
and recommendation to which objections have been timely filed under a de novo standard and “may accept,
reject, or modify the recommended decision; receive further evidence; or recommit the matter to the
magistrate judge with instructions.” Fed. R. Civ. P. 72(b)(3); 28 U.S.C. § 636(b)(1).2 “If no objection or
only partial objection is made, the district court reviews those unobjected portions [of the magistrate judge’s
report and recommendation] for clear error.” Johnson v. Zema Sys. Corp., 170 F.3d 734, 739 (7th Cir. 1999)
(citations omitted). Mendez has timely filed objections and review of the disputed portion of Judge Valdez’s
report is therefore de novo.3
Mendez’s objections, and the difference between this court’s original opinion and that of Judge
Valdez, stem from the interpretation of the Order. Judge Valdez held that the “plain language” and the “most
reasonable interpretation” of the Order was that it unfroze the Dental Profile/Dental Profile, Ltd. and
Dentists, P.C. accounts at Republic Bank and that Republic Bank was justified in relying on the Order as
written. [#571 at 8–9.] Judge Valdez also concluded that because the intervenors’ motion requested “other
relief as the Court deems just and equitable,” the Order was not confined to the relief specifically requested
by the intervenors in their motion. [Id. at 8.]4
This court, in reaching the contrary conclusion, considered the text of the Order, the intervenors’
motion, the hearing transcript for the motion, and the court’s and parties’ subsequent statements and actions.
[See Opinion #623 at 12–14.] This court noted that the Order was entered in response to a motion to quash
supplementary proceedings and for injunctive relief filed by certain intervenors that did not include a request
for relief that defendants’ Republic Bank accounts be unfrozen.5 The Order explicitly referenced the
intervenors’ motion in its holding. This led this court to conclude that defendants’ accounts at Republic
Bank were not at issue in the motion or the Order, and this court held Republic Bank responsible for failing
to examine the order in light of the underlying motion or to seek clarification from the court.
As explained in West Bend Mutual Insurance Co. v. Belmont State Corp., No. 09 C 354, 2010 WL
5419061, at *13 (N.D. Ill. Dec. 23, 2010), which, as here, dealt with claimed wrongful transfer of a debtor’s
assets subject to a citation to discover assets,
A court’s civil contempt power rests in its inherent limited authority to enforce compliance with
court orders and ensure judicial proceedings are conducted in an orderly manner. To be held in
civil contempt, the district court must be able to point to a decree from the court which sets forth
in specific detail an unequivocal command which the party or witness in contempt violated. . . .
To prevail on a request for a contempt finding, the moving party must establish by clear and
convincing evidence that: (1) a court order sets forth an unambiguous command; (2) the alleged
contemnor violated that command; (3) the violation was significant, meaning the alleged
contemnor did not substantially comply with the order; and (4) the alleged contemnor failed to
make a reasonable and diligent effort to comply. Furthermore, [the movant] must show that [the
contemnor’s] actions were contumacious.
Id. (citations, internal quotation and insertion indicators omitted); see also Ferrell v. Pierce, 785 F.2d 1372,
1378 (7th Cir. 1986) (“In order to hold a party in contempt, the court must be able to point to a decree from
the court which sets forth in specific detail an unequivocal command which the party in contempt violated.”
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STATEMENT
(citation, internal quotation and insertion indicators omitted)).6
In its response to Mendez’s objections, Republic Bank argued that the Order was unambiguous on its
face and required Republic Bank to unfreeze defendants’ accounts. Republic Bank indicated that it read the
Order to mean that “the only accounts to remain frozen pursuant to the citation issued by Plaintiff Nereida
Mendez against Defendants Dentists, P.C.; Perla Dental, and Dental Profile/Dental Profile, Ltd[.] are [certain
intervenor accounts, and] . . . [the] [e]mergency motion to quash citations as to all other accounts at . . .
Republic Bank of Chicago . . . is granted.” [See #316 (emphasis added).] Moreover, Republic Bank stated
that it was not required to look beyond the plain text of the Order and thus was not obligated to consider the
intervenors’ underlying motion, despite the court’s explicit reference thereto.
Having considered Judge Valdez’s report and recommendation and the parties’ subsequent filings,
this court concludes that Judge Valdez reached the correct result. The Order, at best, was ambiguous.
Indeed, this court could not make sense of it without resort to the intervenors’ motion, the hearing transcript,
and the court’s and parties’ subsequent statements. Facially, the Order quashed the citation “as to all other
accounts . . . at Republic Bank that [were] not identified above [within the order].” [#316.] Although Judge
Der-Yeghiayan likely intended to quash “all other accounts” addressed in the motion before him, that
directive was not articulated in the Order. Republic Bank was not a party to the intervenors’ motion, did not
attend the motion hearing, and did not file an appearance in this case until after the Order was entered. [See
#507.] Republic Bank’s reading was reasonable.
Because the Order cannot be said to have set forth an unambiguous command, the first element of
proof of contempt is not met. Moreover, there is no evidence of “contumacious” conduct. W. Bend Mut. Ins.
Co., 2010 WL 5419061, at *13. Unlike a competing or colluding creditor, Republic Bank had no apparent
stake in the disposition of the funds in the accounts that would suggest that it acted in knowing disobedience
of the court’s order. Under these circumstances, this court concludes that any ambiguity in the order should
be resolved in favor of Republic Bank and that a finding of contempt of court is unwarranted.
It is regrettable that an order from the court could be the cause of such confusion among both the
citation respondent and plaintiff. Litigants look to the court to provide clear guidance, particularly when they
face harsh penalties for non-compliance, and the court fell short of its obligation in this instance. It is even
more regrettable that plaintiff has been denied satisfaction of her judgment as a result. Nonetheless, the order
of judgment and contempt entered against Republic Bank by this court [#622] must be vacated because it was
wrongly decided.

cc: Mag. J. Valdez

1

Mendez argues that Judge Valdez was without authority to issue a report and recommendation on the
matter because there was not a referral order in place for Mendez’s motion for contempt and judgment.
On March 30, 2011, however, Judge Der-Yeghiayan entered an order recommending that all postjudgment proceedings be referred to the magistrate judge pursuant to 28 U.S.C. § 636(b)(3). [See #368.]
The Executive Committee Order referred the matter on the same day. [See #376.] Because the motion for
contempt and for judgment arose from post-judgment proceedings, the magistrate judge properly
considered it.
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2

See also Michelson v. Schor, No. 93 C 5124, 1996 WL 667803, at *2 (N.D. Ill. Nov. 15, 1996) (“The
provisions of subsection (b)(1) generally have been held to apply to the remaining subsections of (b),
which would include (b)(3) . . . [and] Federal Rule of Civil Procedure 72 . . . applies to matters referred
under the catch-all provision § 636(b)(3)[.]”).

3

Mendez argues that because this court decided her motion for contempt and judgment as an initial
matter, without considering Judge Valdez’s report and recommendation, this court’s decision was the
equivalent of de novo review and should stand. This court, however, understands Rule 72(b) and §
636(b)(1) to require the district court to actually review a magistrate judge’s report and recommendation,
as well as the parties’ objections and responses, before issuing a ruling. See, e.g., Lorillad Tobacco Co. v.
Montrose Wholesale Candies & Sundries, Inc., No. 03–cv–5311, 03–cv–4844, 2011 WL 65963, at *4
(N.D. Ill. Jan. 10, 2011) (“Where a party files and serves ‘specific written’ objections to the magistrate’s
findings, the district court must conduct de novo review of any part of the magistrate’s findings to which
there are proper objections.” (quoting 28 U.S.C. § 636(b)(1), Fed. R. Civ. P. 72(b)(2))); H.R. Rep. No.
1609, 94th Cong., 2nd Sess. (1976) (“The district court, on application, shall listen to the tape recording
of the evidence and proceedings before the magistrate and consider the magistrate’s proposed findings of
fact and conclusions of law. The court shall make a de novo determination of the facts and the legal
conclusions to be drawn therefrom.” (emphasis added)). Because no such review occurred here, this court
believes that relief under Rule 60(b)(6) is warranted.
4

Judge Valdez also questioned the admissibility of the exhibit offered by Mendez to establish the amount
of money transferred out of defendants’ Republic Bank accounts between October 12, 2010 and February
28, 2011. [See #571 at 11; #497 Ex. 2.] Mendez has since authenticated the exhibit, see #587 at 11 & Ex.
3, and Republic Bank has not objected to its admissibility under Federal Rule of Evidence 1006.
5

See also R&R #474 at 6–7 (stating that Ariel Weissberg, attorney for the intervenors, “never requested
the release of any of the judgment debtor’s accounts at the October 15, 2010 hearing . . . [and]
Weissberg’s motion was specifically aimed to quash non-judgment debtors”)
6

Republic Bank argues that court orders issued pursuant to a citation to discover assets are considered
injunctions and as such they must comply with the Illinois Injunction Act and Federal Rule of Civil
Procedure 65. The Illinois Supreme Court has held otherwise, however. See Bank of Aspen v. Fox
Cartage, Inc., 533 N.E.2d 1080, 1083, 126 Ill. 2d 307, 127 Ill. Dec. 952 (1989) (“[W]e conclude that the
restraining provision of section 2-1402 does not constitute an injunction. The statute simply informs the
citee of the penalties which may occur if it transfers or disposes of property belonging to the judgment
debtor.”).

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