In Re: Kafantaris v. Signore

Filing 21

MEMORANDUM Opinion and Order, Signed by the Honorable Harry D. Leinenweber on 9/5/2012.(ea, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

IN RE: KAFANTARIS v. SIGNORE
-----------------------------JULIA MANNIX, Attorney for
Plaintiff,

Case No. 12 C 2299
Appeal from
Bankruptcy Court
Case No. 09 B 13534
Adversary No. 09 A 667
Hon. Harry D. Leinenweber

Appellant.

MEMORANDUM OPINION AND ORDER
Before the Court is Appellant Julia Mannix’s appeal of the
Bankruptcy Court’s entry of sanctions against her under Rule 9011.
Because the Court agrees that the Bankruptcy Court was without
subject matter jurisdiction when it entered the sanctions, the
Order of Sanctions is vacated.
I.

BACKGROUND

Julia Mannix (“Mannix”) was the attorney for Plaintiff, James
Kafantaris (“Kafantaris” or “Plaintiff”).

Mannix filed a lawsuit

in Cook County Chancery Court (07 CH 38002) on behalf of Plaintiff
on December 21, 2007. The suit accused Plaintiff’s sister, Kanella
Signore (“Signore” or “Defendant”) of essentially taking advantage
of their invalid mother, Jean Kafantaris (“Jean”), to drain her
accounts – accounts that were held in joint tenancy with Plaintiff.
On April 16, 2009, Signore and her husband (collectively, the
“Defendants”) filed for protection under Chapter 7 of Title 11 of
the United States Bankruptcy Code.

On August 3, 2009, Attorney

Mannix filed an Adversary Complaint in the bankruptcy action that
was largely factually identical to the Cook County action.
Signore’s attorney served Mannix with a letter pursuant to
Federal Rule of Bankruptcy Procedure 9011 and demanded Mannix
withdraw the suit or face sanctions.

Mannix did not and on

October 18, 2009, Bankruptcy Judge Jacqueline P. Cox denied a
Motion to Dismiss as well as the Motion for Sanctions.
On September 15, 2010, Signore moved for sanctions under
Federal Rule of Civil Procedure 16(f) and scheduled a hearing for
September 22, 2010.

That motion dealt entirely with alleged

failures by Mannix to meet deadlines, return phone calls, appear at
scheduled

court

dates

and

procedural requirements.
sought

dismissal

of

the

comply

with

other

discovery

and

The motion did not invoke Rule 9011 and
adversary

complaint

and

“reasonable

attorney fees and costs incurred in defending the case.”

See

Def.’s Mot. for Sanctions, ECF No. 1-1, PageIDs 54-58.
On September 17, 2010, Judge Cox granted a Motion for Summary
Judgment and a docket entry indicates the adversary case was closed
on September 21, 2010.

On September 22, 2010, Judge Cox continued

the hearing on the Rule 16(f) sanctions to October 27, 2010.
Plaintiff filed a timely notice of appeal on October 1, 2010.

On

October 12, 2010, Plaintiff filed its response to the Motion for
Sanctions.

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On October 22, 2010, Defendants filed their reply in support
of their motion for sanctions.

The reply is somewhat broader than

the original motion, and bolstered the arguments for Rule 16(b)
sanctions by also alleging the action itself was meritless. Still,
the reply did not seek Rule 9011 sanctions.

(Nor could it, as

Rule 9011 motions “shall be made separately from other motions.”
FED. R. BANKR. P. 9011(c)(1)(A).).
On November 5, 2010, the Bankruptcy Court entered an order
reopening the case, stating that it had been closed “due to
clerical error” and reopening it pursuant to Rule 60(a).
appeal was docketed in this Court on November 12, 2010.

The

On May 5,

2011, this Court entered its judgment affirming Judge Cox’s grant
of summary judgment.

The hearing on the motion for sanctions was

continued several times until September 8, 2011, when it was
finally argued.
At that hearing, Defendants’ attorney stated “all we’re really
seeking is for reimbursement of expenses and for reimbursement of
those fees associated with what has been outlined to be constant
delay throughout this litigation.”

Tr. of Proceedings of Sept. 8,

2011, 3, ECF No. 5-1, PageID 321.

Defendants asked for $5,254.22

to

cover

$2,614.22

in

costs

associated with Mannix’s delays.

and

$2,640

in

attorneys’

fees

Id.

But when Mannix denied she should pay anything, and that
Defendants should have filed for sanctions under Rule 26 and 37,

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Defendants’ attorney again bolstered his motion with reference to
the early Rule 9011 attempt and the alleged meritlessness of the
case.

Id. at 7-8, ECF No. 5-1, Page ID 325-326.

After much back

and forth about whether the case ever had any merit, Mannix tried
to refocus on the Rule 16 motion at hand.
MANNIX:

Your Honor, with all due respect, we’re
going, I think, afar from the motion.

THE COURT:

But the issue is whether or not the time
and money spent by the defendants was
justified. Whether they should have had
to do this, or whether the plaintiff
acted
without
cause,
without
even
probable cause.

MANNIX:

But, Your Honor, that’s not a Rule 16
motion. [The] rule 16 motion deals with
[the] pretrial order.
This is going
beyond that.

Id. at

16,

Defendants’
Rule 9011?”

ECF

No.

attorney

5-1,
if

PageID
he

had

334.

Judge Cox

“pursue[d]

Id. at 18, ECF No. 5-1, 336.

then

asked

sanctions

under

Defendants’ attorney did

not contend that his motion was for Rule 9011 sanctions, but noted
that he had filed such a motion early on in the case and it was
denied.

However, he added “But the court has the inherent powers

under Chambers v. Nasco to enter sanctions sua sponte for abuse of
judicial process, regardless of Rule 16.”

Id.

When Mannix protested that she was being asked to defend a
motion that was not even before the Court, and requested an
opportunity

to

respond

to

what

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was

essentially

a

different

argument, the Judge replied “I agree there’s a difference between
not doing discovery and then filing a spurious lawsuit.”

Id. at

19, ECF No. 5-1, PageID 337.
A few moments later, Judge Cox asked Defendants’ attorney
point-blank:
Rule 9011?”

“[Do] you want to amend your motion to proceed under
Id. at 21, ECF No. 5-1, PageID.

Defendants’ attorney

replied, “I hadn’t thought about that, Your Honor.

No, I don’t.

I want to stand on the motion as it currently stands.”
22, ECF No. 5-1, PageIDs 339-340.

Id. at 21-

With that, the Court recessed,

returning after a recess to deny the motion without prejudice
because “I just have some trouble with ruling on the basis of
Rules 16 and 37.”

Id. at 22, ECF No. 5-1, PageID 340.

Two weeks later, on September 22, 2011, Defendants’ attorney
apparently changed his mind and filed a motion for sanctions under
Rule 9011. Mannix missed the response deadline of October 28, 2011
and the hearing on November 15, 2011.

On November 28, 2011, she

filed for leave to file a response, which Judge Cox granted.

No

request for another hearing date was made and no hearing was held.
On December 9, 2011, Judge Cox granted the motion for Rule 9011
sanctions, awarding Defendants the entirety of their costs and
attorney’s fees, $44,951.72.
II.

This timely appeal followed.
LEGAL STANDARD

The District Court reviews the Bankruptcy Court’s imposition
of Rule 9011 sanctions for an abuse of discretion.
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Levit v. Savard

(In re Savard), No. 02-9142, 2003 U.S. Dist. LEXIS 12118, at *5
(N.D. Ill. July 25, 2003).
III.
A.
One

of

the

jurisdiction.

grounds

ANALYSIS

Jurisdiction
upon

which

Mannix

appeals

involves

She argues that because the Motion for Rule 9011

Sanctions was filed on September 22, 2011, four months after
judgment was entered on October 1, 2010, the bankruptcy judge had
no jurisdiction to entertain or grant the motion for sanctions.
They note this Court simply affirmed summary judgment without ever
remanding the case to the Bankruptcy Court.
Defendants protest Mannix did not identify in her Rule 8006
statement the jurisdictional issue as one to be addressed on
appeal, and it is therefore waived.

But Mannix is correct that

subject

matter

matter

jurisdiction

is

“a

than

can

never

be

forfeited or waived.” Union Pacific R.R. Co. v. Bhd. of Locomotive
Eng’rs & Trainmen Gen. Comm. of Adjustment, C. Region, 130 S.Ct.
584, 596 (2009).

“Indeed, it is the duty of this court to satisfy

itself not only of its own jurisdiction, but also that of the lower
courts in a cause under review.”

Weaver v. Hollywood Casino-

Aurora, Inc., 255 F.3d 379, 381 (7th Cir. 2001).
“It is a fundamental tenet of federal civil procedure that –
subject to certain defined exceptions – the filing of a notice of
appeal from the final judgment of a trial court divests the trial
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court of jurisdiction and confers jurisdiction upon the appellate
court.”

In re Transtexas Gas Corp. v. TransTexas Gas, 303 F.3d

571, 578-579 (5th Cir. 2002) (citing Griggs v. Provident Consumer
Co., 459 U.S. 56, 58 (1982).
to bankruptcy cases.”

“This rule applies with equal force

Transtexas, 303 F.3d at 578-579 (citing In

re Statistical Tabulating Corp, Inc., 60 F.3d 1286, 1289 (7th Cir.
1995)).
“There are, however, various exceptions to the jurisdictional
rule that jurisdiction is vested with the court of appeals upon the
proper filing of a notice of appeal.

For example, jurisdiction

continues

jurisdiction

in

the

[trial

court]

if

is

reserved

expressly by statute, or if the court expressly reserves or retains
such jurisdiction, or while the court is entertaining motions
collateral to the judgment or motions which would aid in resolution
of the appeal.

However, these exceptions only apply to those

motions filed with the [trial] court while the appeal on the merits
is pending.”

Overnite Transp. Co. v. Chicago Indus. Tire Co., 697

F.2d 789, 792 (7th Cir. 1983) (vacating district court award of
sanctions under 28 U.S.C. § 1927 where the motion for sanctions was
filed two months after the appellate court affirmed dismissal of
the case) (internal citations omitted).
Mannix argues that, under Overnite, the Court must vacate the
sanctions here, since the motion for sanctions under Rule 9011 was

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not filed until four months after this Court affirmed the grant
summary judgment.
But Appellees argue that because the motion for Rule 16(f)
sanctions was filed before the Bankruptcy Court entered summary
judgment,

this

case

is

different

from

Overnite.

“When

the

Bankruptcy Court denied the Rule 16 motion without prejudice, it
clearly contemplated that it would entertain a Rule 9011 motion,”
argue appellees.

Defendants’ Resp. 14.

The Court notes that the Seventh Circuit has instructed trial
courts that the preferred method for dealing with post-judgment and
collateral motions is to rule on them as quickly possible after
judgment.

That way, if parties wish to appeal the post-judgment

ruling, they may do so and the appeal will be combined with the
merits appeal rather than be ruled on piecemeal. See Overnite, 697
F.2d at 793 (“In an effort to avoid delay and wasted effort, the
Terket court adopted a general rule that ‘district courts in this
circuit should proceed with attorneys’ fees motions, even after an
appeal

is

filed,

as

expeditiously

as

possible.

Any

party

dissatisfied with the court’s ruling may then file an appeal and
apply to this court for consolidation with the pending appeal of
the merits.”) (citing, generally, Terket v. Lund, 623 F.2d 29 (7th
Cir. 1980).
The record is not clear on why both the hearing and judgment
on the Rule 16 motion were delayed until after the entry of this
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Court’s appeal ruling. This Court assumes the bankruptcy judge had
good reason to do so.

Overnite does not mean that mere delay of a

collateral decision over which the bankruptcy court properly had
jurisdiction robs that court of jurisdiction. See Cooter & Gell v.
Hartmarx

Corp.,

496

U.S.

384,

389,

394-399

(1990)

(finding

voluntary dismissal did not divest District Court of the collateral
issue of Rule 11 sanctions, even though sanctions were imposed
3 1/2 years after a hearing on the sanction and dismissal of the
complaint) (superseded on other grounds by Rule amendments as
recognized in De La Fuente v. DCI Telecomms., Inc., 259 F.Supp.2d
250, 258 n.4 (S.D.N.Y. 2003).
However,

the

Seventh

Circuit

has

oft

found

where

jurisdictional matters or explicit Federal Rules of Civil Procedure
are at issue, a trial court possesses no power to extend deadlines
– even where the parties have relied upon a judge’s assurance that
a case was dismissed without prejudice or an appeal deadline was
extended.
For example, in Blue v. IBEW Local Union 159, the Seventh
Circuit, apparently sua sponte, refused to review the merits of an
appeal where the district court judge had improperly extended the
28-day period to file Rule 50 and 59 motions (said motions being
ones that extend the 30-day period in which to file an appeal).
Blue v. IBEW Local Union 159, 676 F.3d 579, 582-583 (7th Cir.
2012).
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In the bankruptcy context, Judge John H. Squires dismissed as
untimely a complaint after it was refiled one day after being
dismissed without prejudice as a sanction for missing a pre-trial
order filing deadline.
(Bankr.

N.D.

Ill.

Baermann v. Ryan, 408 B.R. 143, 158-161

2009).

The

complaint

was

untimely

under

Rule 4007(c), which requires adversary bankruptcy complaints to be
filed within 60 days of the first meeting of creditors.

Although

the dismissal had been without prejudice, and the Seventh Circuit
had ruled Rule 4007(c) was not a jurisdictional rule, Judge Squires
felt that “[b]ankruptcy courts lack authority to alter rules of
state law, or depart from those in the Code, to implement their own
views of wise policy.”

Id. (citing In re A.G. Fin. Serv. Ctr.,

Inc., 395 F.3d 410, 413-414 (7th Cir. 2005)).

As Judge Squires

noted, “without prejudice” does not mean “without consequence.”
Id. at 160 (quoting Powell v. Starwalt, 866 F.2d 964, 966 (7th Cir.
1989)).

“If the case is dismissed and filed anew, the fresh suit

must satisfy the statute of limitations.”
Although

Squires

was

discussing

a

believes the same logic applies to motions.

Id.
dismissal,

the

Court

If a motion is denied

without prejudice, a newly filed motion must not be barred by any
jurisdictional limitations.

The Court believes – but need not

decide – that the dismissal without prejudice, coming after final
summary judgment and appellate review, disposed of the collateral
Rule

16(f)

sanctions

issue

being
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reviewed

and

divested

the

bankruptcy

court

of

the

power

to

entertain

even

a

renewed

Rule 16(f) motion.
The Court need not reach this question, however, to address
Defendants’ arguments.

They argue implicitly that the pendency of

the Rule 16(f) motion at the time the first appeal was decided
invested jurisdiction in the Bankruptcy Court to (1) take up,
again, the 16(f) motion after dismissing it without prejudice and
(2) to convert the Rule 16(f) motion to a Rule 9011 motion.
However, neither of those actions are what occurred.

The judge

clearly ruled that she could not or would not issue sanctions under
Rule 16.

The Defendants, at the Rule 16 hearing, explicitly

disavowed the intent and desire even to seek Rule 9011 sanctions or
to convert the Rule 16 motion to a Rule 9011 motion.

Neither did

the judge convert it under her own inherent powers to sanction
litigants.
After losing the Rule 16 motion, Defendants did not revive it,
but filed a new motion for Rule 9011 sanctions.

This puts this

case squarely in the mold of Overnite, which plainly forbids filing
for sanctions after judgment has been rendered in the appellate
court on the merits.
It might be a different matter if Defendants had stood on
their Rule 16 motion and asked Judge Cox to convert her ruling to
a dismissal with prejudice and then appealed that judgment to this
Court.

The Rule 16 motion was a collateral issue properly before

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the Bankruptcy Court post-trial, and appealable in its own right.
But that is not what happened, and instead Defendants instituted a
motion for sanctions post-appeal.

Overnite does not allow that,

and because it is a jurisdictional issue, the bankruptcy was
without power to entertain the motion.
IV.

CONCLUSION

For the reasons stated herein, the Court finds that the
Bankruptcy

Court

was

without

Rule 9011 Motion for Sanctions.

jurisdiction

to

entertain

the

The Rule 9011 Order for Sanctions

is vacated.
IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
DATE:9/5/2012

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