Johnsson v. Steege

Filing 21

OPINION AND ORDER Signed by the Honorable Sara L. Ellis on 9/29/2015. Mailed notice(ks, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MARGARET ANN JOHNSSON,
Petitioner/Appellant,
v.
CATHERINE L. STEEGE, Trustee,
Respondent/Appellee.

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No. 14 C 4858
Judge Sara L. Ellis

OPINION AND ORDER
This case arises out of a Chapter 7 bankruptcy petition filed by Margaret Ann Johnsson in
the midst of her divorce proceedings. Johnsson appeals the bankruptcy court’s May 14, 2014
denial of her motion for relief from the bankruptcy court’s April 30, 2013 order approving the
Trustee Catherine L. Steege’s (the “Trustee”) settlement agreement with Johnsson’s ex-husband,
Mark Rittmanic. 1 Because Johnsson has not shown that the bankruptcy court abused its
discretion in denying her motion for relief and she cannot challenge the underlying approval of
the settlement agreement in this appeal, the bankruptcy court’s May 14, 2014 order is affirmed.
BACKGROUND
Johnsson filed a Chapter 7 bankruptcy petition on September 21, 2011. Prior to filing for
bankruptcy, Johnsson was engaged in divorce proceedings in state court with her now exhusband Mark Rittmanic. The bankruptcy filing was precipitated by a dispute over the division
of marital property, which Johnsson and Rittmanic had initially agreed to divide in a marital
settlement agreement (the “MSA”). Upon the filing of the bankruptcy petition, Johnsson’s rights
to property of the marital estate became property of the bankruptcy estate pursuant to 11 U.S.C.
1

This Court’s jurisdiction is conferred by 28 U.S.C. § 158(a)(1), which governs appeals from “final
judgments, orders, and decrees” of the bankruptcy court. The bankruptcy court’s May 14, 2014 order
denied Johnsson’s motion for relief with prejudice, making it an appealable order.

§ 541. The Trustee and Rittmanic then engaged in negotiations to settle claims to marital
property, reaching an agreement on April 5, 2013. The Trustee presented the agreement for the
bankruptcy court’s approval pursuant to Bankruptcy Rule 9019. Doc. 198. 2 The agreement
provided that (1) Rittmanic would pay $120,000 to the Trustee ($60,000 at the time of execution
and $60,000 on or before December 13, 2013), (2) the Trustee and Rittmanic mutually released
all claims against the other, and (3) Johnsson retained the ability to pursue a claim for
maintenance in the divorce proceeding. In other words, the Trustee agreed in the settlement to
accept $120,000 for the marital estate claims and released any further claim to marital property,
including Johnsson’s and Rittmanic’s marital residence.
The Trustee’s motion to approve the settlement agreement was set for a hearing before
the bankruptcy court on April 30, 2013. No creditors objected to the settlement, although
Johnsson filed written objections on April 29. Doc. 202. In her filing, she argued that the
settlement was premature, the Trustee was breaching her fiduciary duties, and that the agreement
would harm other creditors such as the mortgage holder on the marital residence who allegedly
had not received notice of the settlement. At the hearing on April 30, the bankruptcy court first
noted that Johnsson’s objection had been filed after the court’s deadline. Nonetheless, the court
allowed Johnsson to orally present her objections to the settlement agreement. Doc. 234 at 5–6.
Johnsson argued that (1) the settlement was undervalued and not based on sufficient
investigation by the Trustee, (2) the settlement did not address certain assets that were
Johnsson’s alone, (3) the settlement agreement released the Trustee from all wrongdoing, and (4)
the settlement agreement was premature. The Trustee responded to Johnsson’s objections,
explaining the decision to settle the case instead of engage in full-blown discovery in light of the
value of the estate, creditors’ claims, and the potential costs of such discovery. The Trustee
2

Docket number references are to filings in the bankruptcy case, No. 11-bk-38307 (Bankr. N.D. Ill.).

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indicated that the settlement was reached after engaging in informal discovery, including
interviewing both Johnsson and Rittmanic and making informal discovery requests. She further
stated that she determined that the marital residence, if sold, would bring in less than the
mortgage on that property. The Trustee set out the legal reasoning for the valuation used for
Rittmanic’s business. Responding to Johnsson’s concern about her own property, the Trustee
indicated that any non-marital property—i.e. property Johnsson claimed was purchased only
with her money—was not included in the settlement agreement and that the estate would still be
able to claim that property. The Trustee suggested there was no reason to wait to settle with
Rittmanic and that the release was standard and intended to ensure that Rittmanic did not return
with additional claims against the bankruptcy estate. Having considered Johnsson’s objections
and the Trustee’s and Rittmanic’s responses, the bankruptcy court approved the settlement
agreement, finding that the settlement met the standards of Federal Rule of Bankruptcy
Procedure 9019. See Docs. 204, 234 at 54–58.
Johnsson did not appeal the bankruptcy court’s April 30, 2013 order. Instead, on May
22, 2013, she filed a motion to reject or assume the MSA. Doc. 209. The court held a hearing
on May 28, 2013, found the MSA was subsumed in the settlement agreement, and denied
Johnsson’s motion with prejudice. Doc. 215; see also Doc. 271 at 2–3. Then, on June 11, 2013,
Johnsson filed a motion for partial relief from the Trustee’s settlement agreement with Rittmanic
pursuant to Federal Rule of Bankruptcy Procedure 9024 and Federal Rule of Civil Procedure 60.
Doc. 216. In that motion, Johnsson argued that the current mortgage holder on the marital
residence had not received notice of the settlement motion. She requested that (1) the Trustee
amend the settlement agreement to ensure her mortgage debt was discharged, (2) Rittmanic and
the current mortgage holder remove her from the mortgage, and (3) the Trustee and Rittmanic be

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prohibited from removing her from the title to the marital property until Rittmanic paid the full
settlement amount and refinanced the mortgage on the marital property. After a hearing,
Johnsson’s motion was denied on August 20. Doc. 236.
That same day, Johnsson filed a motion to remove the Trustee, arguing that the Trustee
had mismanaged the case in not pursuing additional assets from Rittmanic, who Johnsson alleged
controlled approximately $8 million that should be part of the bankruptcy estate. Doc. 238. At a
hearing on August 27, 2013, the bankruptcy court denied Johnsson’s motion. Doc. 246.
On March 18, 2014, Johnsson filed the motion that is the subject of this appeal, seeking
relief from the April 30, 2013 court order approving the settlement agreement, or in the
alternative, withdrawal of her bankruptcy petition. Doc. 257. The motion was brought pursuant
to Federal Rule of Bankruptcy Procedure 9024 and Federal Rule of Civil Procedure 60.
Johnsson argued that “[m]istakes have been made by the Trustee, newly discovered evidence
exists that could not have been discovered within the twenty-eight days required to move for a
new trial under Rule 59(b), and fraud, misrepresentation and/or misconduct have all been
committed by the largest opposing party to JOHNSSON’s bankruptcy proceedings, her husband
at the time of the bankruptcy filing, RITTMANIC.” Doc. 257 ¶ 24. Johnsson proceeded to
detail her allegations of the Trustee’s mistakes in entering the settlement agreement, Rittmanic’s
fraud and misrepresentations in negotiating the settlement agreement, and the Trustee’s failure to
obtain certain discovery from Rittmanic. Johnsson claimed that the marital assets totaled
approximately $10 million and that, instead of entering the settlement agreement and leaving her
liable for marital debt, the Trustee should have liquidated the marital assets, paid any creditors
and administrative fees and expenses, and then provided the remainder to Johnsson. She argued
that revoking the settlement agreement and ordering such a liquidation, or in the alternative

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enforcing the original MSA, was the only just solution. At the initial hearing on Johnsson’s
motion, the bankruptcy court noted that Johnsson did not comply with Federal Rules of
Bankruptcy Procedure 9013 and 2002 and required her to provide proper notice of her motion to
all creditors and gave her time to file a supplemental brief. Doc. 261. Johnsson did not file a
supplemental brief. The Trustee responded, Doc. 264, and Johnsson filed a reply brief and
notice of service of the motion on May 6, Docs. 265, 267.
The bankruptcy court held a hearing on Johnsson’s motion on May 7. It struck
Johnsson’s reply brief as filed in violation of a court order but nonetheless allowed Johnsson to
argue her motion. After hearing arguments, see Doc. 284, the bankruptcy court issued an
opinion on May 14, 2014, denying Johnsson’s motion for relief from the April 30, 2013 order
approving the settlement with prejudice and denying the alternative motion to grant withdrawal
of the bankruptcy petition without prejudice. Doc. 271.
ANALYSIS
Johnsson appeals from the bankruptcy court’s denial of her Rule 60 motion for relief
from the bankruptcy court’s approval of the settlement agreement between the Trustee and
Rittmanic. 3 The Court reviews the bankruptcy court’s order denying a Rule 60(b) motion for
abuse of discretion. Nash v. Hepp, 740 F.3d 1075, 1078 (7th Cir. 2014); see also In re Spurlock,
564 F. App’x 862, 864 (7th Cir. 2014) (applying abuse of discretion standard to review denial of
Rule 60(b) motion in bankruptcy case). “[R]elief under Rule 60(b) is ‘an extraordinary remedy
and is granted only in exceptional circumstances,’” meaning that a court abuses its discretion
“only when ‘no reasonable person could agree’ with the decision to deny relief.” Eskridge v.

3

Federal Rule of Civil Procedure 60 applies in Chapter 7 proceedings through Federal Rule of
Bankruptcy Procedure 9024.

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Cook County, 577 F.3d 806, 809 (7th Cir. 2009) (quoting McCormick v. City of Chicago, 230
F.3d 319, 327 (7th Cir. 2000)).
Initially, the Court notes that Johnsson’s statement of issues on appeal and the majority of
her briefing is spent discussing errors with the bankruptcy court’s approval of the settlement
agreement, not with the bankruptcy court’s May 14, 2014 denial of her Rule 60(b) motion.
These issues, which should have been raised on direct appeal, are not reviewable on appeal of a
Rule 60(b) motion and are thus not properly before this Court. See Stoller v. Pure Fishing Inc.,
528 F.3d 478, 480 (7th Cir. 2008) (“A Rule 60(b) motion is not a substitute for appeal[.]”);
Cincinnati Ins. Co. v. Flanders Elec. Motor Serv., Inc., 131 F.3d 625, 628 (7th Cir. 1997) (in
reviewing denial of Rule 60(b) motion, court “may not reach the merits of the underlying
judgment”); Provident Sav. Bank v. Popovich, 71 F.3d 696, 698–99 (7th Cir. 1995) (despite
appellant’s “persistent but belated focus on the merits,” because the Seventh Circuit was “limited
to the question of whether a district court’s Rule 60(b) determination involved an abuse of
discretion, [it] do[es] not review the merits of the underlying judgment, and [its] review is far
narrower than it would be on direct appeal”). The Court thus does not address Johnsson’s
complaints about the underlying settlement agreement. Rather, the only issues the Court
considers are those in the bankruptcy court’s May 14, 2014 order that are properly raised by
Johnsson in her appeal. 4
But even what is properly raised is disputed by the Trustee, as Johnsson’s briefs do not
clearly lay out her appellate issues. The Trustee argues that Johnsson has abandoned all but one
argument on appeal—that the bankruptcy court erred in its determination that she was not
entitled to relief under Rule 60(b)(3). Although a pro se litigant’s pleadings are to be construed
4

The Trustee asks the Court to strike Johnsson’s appellate brief, claiming she makes unsupported
accusations against the Trustee and the Trustee’s law firm. Instead of striking Johnsson’s appellate brief,
the Court has only considered Johnsson’s properly supported arguments.

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liberally, Erickson v. Pardus, 551 U.S. 89, 94, 127 S. Ct. 2197, 167 L. Ed. 2d 1081 (2007),
perfunctory or unsupported arguments are nonetheless considered waived, even when made by
pro se litigants, Mathis v. New York Life Ins. Co., 133 F.3d 546, 548 (7th Cir. 1998) (“[E]ven pro
se litigants . . . must expect to file a legal argument and some supporting authority. A litigant
who fails to press a point by supporting it with pertinent authority, or by showing why it is sound
despite a lack of supporting authority . . . forfeits the point. We will not do his research for him.”
(omissions in original) (citations omitted) (internal quotation marks omitted)). To the extent that
Johnsson’s briefing challenges the bankruptcy court’s denial of her Rule 60(b) motion, it focuses
on the alleged fraud committed by the Trustee and Rittmanic and the fact that it took her time to
piece together this alleged fraud. Giving Johnsson the benefits due a pro se litigant, the Court
construes this as a challenge to the bankruptcy court’s rulings under both Rule 60(b)(3) and
60(b)(2). Additionally, because Johnsson’s brief generally challenges the result of the settlement
as unjust, which the bankruptcy court construed as a Rule 60(b)(6) ground for relief, the Court
will review that aspect of the bankruptcy court’s ruling as well. But the Court finds Johnsson has
waived any challenge to the remainder of the bankruptcy court’s May 14, 2014 order. See
Anderson v. Hardman, 241 F.3d 544, 545 (7th Cir. 2001) (court “cannot fill the void by crafting
arguments and performing the necessary legal research” for pro se litigants on appeal who do not
provide “more than a generalized assertion of error”).
A.

Rule 60(b)(3): Fraud

Rule 60(b)(3) provides relief from a judgment due to “fraud (whether previously called
intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party.” Fed. R. Civ. P.
60(b)(3). Although Rule 60(b)(3) allows for relief for fraud on the court or fraud by an opposing
party, as the bankruptcy court noted, there was no evidence of fraud on the court, which would

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involve “conduct that might be thought to corrupt the judicial process itself.” Oxxford Clothes
XX, Inc. v. Expeditors Int’l of Washington, Inc., 127 F.3d 574, 578 (7th Cir. 1997). Thus, to
obtain relief under Rule 60(b)(3), Johnsson had to demonstrate that she had a meritorious claim
and that because of fraud, misrepresentation, or misconduct by an opposing party, she was not
able to fully and fairly present her case. Wickens v. Shell Oil Co., 620 F.3d 747, 758–59 (7th Cir.
2010). Such fraud must be shown by clear and convincing evidence. Id. at 759.
In the bankruptcy court, Johnsson argued that Rittmanic committed fraud in representing
the amount of assets in the marital estate. The bankruptcy court rejected her argument under
Rule 60(b)(3), finding that the Trustee, not Rittmanic, was the opposing party on the motion for
settlement and that Johnsson did not allege that the Trustee participated in any of the fraud
allegedly perpetrated by Rittmanic. Doc. 271 at 8. The Court further noted that the issue of
fraud was “subsumed in the Debtor’s objection to the 9019 Motion and in the Debtor’s
subsequent attacks on the Settlement and 9019 Order.” Id.
Here, Johnsson argues that the Trustee and Rittmanic jointly committed fraud in an
apparent attempt to get around the bankruptcy court’s ruling that her allegations against
Rittmanic were not sufficient to bring Rule 60(b)(3) into play. But Johnsson cannot pursue this
new argument on appeal, as it is the first time she is contending that the Trustee participated in
the fraud. See Puffer v. Allstate Ins. Co., 675 F.3d 709, 718 (7th Cir. 2012) (“It is a wellestablished rule that arguments not raised to the district court are waived on appeal.”); Fednav
Int’l Ltd. v. Cont’l Ins. Co., 624 F.3d 834, 841 (7th Cir. 2010) (“[A] party who fails to adequately
present an issue to the district court has waived the issue for purposes of appeal.”). Here, the
bankruptcy court specifically stated in its denial of Johnsson’s Rule 60(b) motion that she
“makes no allegations that the Trustee participated in any alleged fraud committed by

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Rittmanic.” Doc. 271 at 8. The Court cannot consider whether the Trustee’s alleged fraud
warrants relief pursuant to Rule 60(b)(3), as Johnsson never argued that the Trustee’s fraud was a
basis for relief in the first place.
But even considering her argument that Rittmanic and the Trustee engaged in fraud on
the merits, the Court does not find that the bankruptcy court abused its discretion in denying
Rule 60(b)(3) relief. Even if the bankruptcy court erred in requiring the Trustee to be the party
committing the alleged fraud—an argument Johnsson does not make—the bankruptcy court
ultimately found that Johnsson had not demonstrated any fraud by clear and convincing
evidence. Having reviewed Johnsson’s evidence, the Court agrees that she has not made a
plausible showing of fraud or misrepresentations.
Moreover, Johnsson’s claims of alleged fraud did not prevent her from objecting to the
settlement but instead were attacks on the settlement itself. That is not sufficient for Rule
60(b)(3) relief, which requires Johnsson to explain how the alleged fraud prevented her from
fully and fairly presenting her opposition to the settlement to the bankruptcy court. See Arington
v. County of DeKalb, No. 1:04-CV-00171, 2006 WL 617965, at *1 (N.D. Ind. Mar. 9, 2006)
(denying Rule 60(b)(3) motion where plaintiff did not explain how alleged fraud prevented him
from presenting case at summary judgment). In this case, Johnsson repeatedly raised her
objections to the settlement at the hearing on the motion to approve the settlement and then in
several other motions and hearings held after the settlement was approved. At every turn,
Johnsson’s objections focused on how the settlement was undervalued because of Rittmanic’s
alleged fraud and the Trustee’s failure to properly investigate the value of the marital assets. The
bankruptcy court thus appropriately found her allegations of fraud to have been subsumed in her
prior challenges to the settlement and not appropriate grounds for relief pursuant to Rule

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60(b)(3). See Acevedo v. Heinemann’s Bakeries, Inc., 339 F. App’x 640, 643 (7th Cir. 2009)
(allegedly fraudulent affidavit would not be cause to void settlement agreement under Rule
60(b)(3) where plaintiff discovered purported fabrication before judgment was final and it was
“irrelevant for purposes of Rule 60(b)(3) because it did not prevent [plaintiff] from fully and
fairly presenting his underlying motion to void the settlement agreement to the district court”);
Harris v. County of Cook, 202 F.3d 273 (Table), 1999 WL 809719, at *2 (7th Cir. 1999) (“Rule
60(b)(3) protects the fairness of the proceedings, not necessarily the correctness of the verdict,
and our review does not reach the merits of the underlying judgment. Thus, Ms. Harris must do
more than argue that the district court’s grant of summary judgment was wrong, she must explain
how the defendants’ conduct precluded her from defending against it.” (citations omitted)).
B.

Rule 60(b)(2): Newly Discovered Evidence

In a somewhat related argument, Johnsson states in her appellate brief that it took her
some time to gather and present her fraud evidence. To the extent this can be construed as an
argument on appeal that the bankruptcy court abused its discretion in finding she was not entitled
to relief under Rule 60(b)(2), that argument fails. 5 Rule 60(b)(2) provides relief from judgment
based on “newly discovered evidence that, with reasonable diligence, could not have been
discovered in time to move for a new trial under Rule 59(b).” Fed. R. Civ. P. 60(b)(2). To
obtain relief based on Rule 60(b)(2), Johnsson must show (1) the evidence was discovered
following the order approving the settlement agreement, (2) due diligence in discovering the new
evidence, (3) the evidence is not cumulative or impeaching, (4) the evidence is material, and (5)
the evidence is such that it would probably produce a new result. Jones v. Lincoln Elec. Co., 188
F.3d 709, 732 (7th Cir. 1999). Although Johnsson mentioned four allegedly new pieces of
evidence in her Rule 60(b) motion, the only one conceivably raised on appeal relates to the
5

The Trustee does not address this argument, deeming it waived.

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valuation of the marital residence. But at the hearing on the motion to approve the settlement
agreement, the bankruptcy court “expressly considered the fact that the parties had a different
opinion as to value, and questioned the weight of a Zillow estimate. In so doing, the court
determined that the uncertainty in that regard was part of the reason the parties were driven to
settle.” Doc. 271 at 7. Thus, the bankruptcy court found that any evidence in relation to the
value of the marital residence was not newly discovered and any challenge to the court’s
conclusion on that issue should have been brought in an appeal, not in a Rule 60(b) motion. The
Court cannot find any basis to conclude that this was an abuse of discretion, as Johnsson
repeatedly argued in opposition to the settlement agreement that her marital residence was
undervalued and the bankruptcy court even acknowledged that he gave no legal weight to Zillow
estimates in considering whether to approve the settlement agreement. See Doc. 234 at 44:14–
19. Because Johnsson is inappropriately trying to attack the underlying merits of the bankruptcy
court’s decision upholding the settlement agreement by arguing newly discovered evidence of
the marital residence’s value, the Court affirms the bankruptcy court’s decision on her Rule
60(b)(2) challenge. See Stoller, 528 F.3d at 480 (in considering Rule 60(b) motion, court cannot
review issues that should have been raised on direct appeal)
C.

Rule 60(b)(6): Catch-All Provision

Finally, the Court addresses whether the bankruptcy court abused its discretion in
denying relief under Rule 60(b)(6), Rule 60(b)’s catch-all provision. Rule 60(b)(6) is reserved
for “extraordinary circumstances” that demonstrate that the underlying judgment is unjust. West
v. Schneiter, 485 F.3d 393, 395 (7th Cir. 2007); Margoles v. Johns, 798 F.2d 1069, 1073 (7th
Cir. 1986). The bankruptcy court acknowledged that Johnsson was frustrated with the
bankruptcy process, as in hindsight it appeared she might receive less than if she had not filed for

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bankruptcy, but found that Johnsson’s frustration and desire for a different result was not the
appropriate test for determining whether the Trustee’s settlement with Rittmanic was
appropriate. That test instead is whether the settlement is in the best interest of the estate,
considering the value of the settlement in comparison with the probable costs and benefits of
litigating. In re Doctors Hosp. of Hyde Park, Inc., 474 F.3d 421, 426 (7th Cir. 2007). Although
Johnsson may regret her decision to file for bankruptcy, that decision—by all appearances
entered into freely and voluntarily—does not satisfy Rule 60(b)’s requirement of extraordinary
circumstances. See Ackermann v. United States, 340 U.S. 193, 198, 71 S. Ct. 209, 95 L. Ed. 207
(1950) (petitioner’s choice not to appeal “was a risk, but calculated and deliberate and such as
follows a free choice” and he could not “be relieved of such a choice because hindsight seems to
indicate to him that his decision not to appeal was probably wrong”); Nelson v. Chertoff, No. 07CV-2991, 2010 WL 1856192, at *3 (N.D. Ill. May 10, 2010) (decision to voluntarily dismiss
lawsuit, which may have been a mistake in hindsight, did not qualify as a basis for relief under
Rule 60(b)(6)). Thus, given the limited ability to review the bankruptcy court’s order, the Court
affirms the May 14, 2014 order denying Johnsson’s motion for relief from the April 30, 2013
order approving the settlement agreement.
CONCLUSION
For the foregoing reasons, the bankruptcy court’s order denying the debtor’s motion for
relief from the April 30, 2013 court order approving the settlement agreement is affirmed.

Dated: September 29, 2015

______________________
SARA L. ELLIS
United States District Judge

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