Midwest CRE Acquisitions Inc v. Aspen Huron, LLC et al

Filing 55

ORDER: For the reasons stated herein, the Court overrules Midwest CRE Acquisitions, Inc.'s ("Midwest") Objections to Magistrate Judge Schenkier's Report and Recommendation 52 and adopts the Report and Recommendation 51 in its entirety. Consistent with the Recommendation, the parties are directed to meet and confer about the amount of fees to be paid. Signed by the Honorable Virginia M. Kendall on 12/29/2016. Mailed notice. (jj, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Midwest CRE Acquisitions Inc.,
Plaintiff,
v.
Aspen Huron, LLC et al.,
Defendants.

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16 C 3547
Judge Virginia M. Kendall

ORDER
For the reasons stated herein, the Court overrules Midwest CRE Acquisitions, Inc.’s
(“Midwest”) Objections to Magistrate Judge Schenkier’s Report and Recommendation [52] and
adopts the Report and Recommendation [51] in its entirety.
Consistent with the
Recommendation, the parties are directed to meet and confer about the amount of fees to be paid.
BACKGROUND
Although the facts are laid out in detail in Judge Schenkier’s Recommendation, briefly, on
March 8, 2016, the United States Bankruptcy Court for the Northern District of Illinois
confirmed the sale of a property in Chicago, Illinois to Aspen Huron LLC (“Aspen”) and granted
the property free and clear of all claims against it. (See Dkt. No. 5-1.) Midwest appealed the
judgment of the bankruptcy court to this Court. The Court granted Aspen’s motion to dismiss
the appeal finding that Midwest had failed to move for a stay of the property sale pending its
appeal to this Court and that Aspen was a good faith purchaser. (See Dkt. No. 27.) After the
Court denied Midwest’s motion for reconsideration, see Dkt. No. 40, the Court referred Aspen’s
motion for sanctions against Midwest and Midwest’s attorney, Barney & Karamanis LLP
(“Barney”), to Magistrate Judge Schenkier. (See Dkt. No. 47.)
On November 22, 2016, Judge Schenkier recommended that this Court grant the motion in part.
Specifically, he recommended that sanctions be awarded pursuant to Federal Rules of
Bankruptcy Procedure Rule 8020 against Midwest CRE as well as Barney and Karamanis LLP,
and that Aspen’s request for sanctions pursuant to Federal Rule of Appellate Procedure Rule 38
and 28 U.S.C. § 1927 be denied. (See Dkt. No. 51.) Midwest timely filed its Objections to the
Recommendation on December 12, 2016. (Dkt. No. 52.)

LEGAL STANDARD
Section 636(b)(1)(A) of the Federal Magistrates Act and Federal Rule of Civil Procedure 72(a)
govern this Court’s review of nondispositive magistrate judge decisions. See 28 U.S.C. §
636(b)(1)(A) (providing that a district judge “may reconsider any pretrial matter ... where it has
been shown that the magistrate judge's order is clearly erroneous or contrary to law”); Fed. R.
Civ. P. 72(a) (“The district judge ... must consider timely objections and modify or set aside any
part of the order that is clearly erroneous or is contrary to law.”). “In short, the district judge
reviews magistrate judge discovery decisions for clear error.” See, e.g., Precision Dose, Inc. v.
United States, No. 12 C 50180, 2014 WL 805994, at *1 (N.D. Ill. Feb. 28, 2014) (citing See
Weeks v. Samsung Heavy Indus. Co., 126 F.3d 926, 943 (7th Cir. 1997)). “The clear error
standard means that the district court can overturn the magistrate judge's ruling only if the district
court is left with the definite and firm conviction that a mistake has been made.” Weeks, 126 F.3d
at 943.
DISCUSSION
Judge Schenkier found that sanctions were appropriate both because Midwest’s grounds for
appeal were frivolous and based on Midwest’s conduct before this Court. (Dkt. No. 51 at 11-13.)
Midwest objects to both findings, arguing that it brought its appeal in good faith and that its
conduct was not deleterious. (Dkt. No. 52.)
I.

The Magistrate Judge Did Not Err in Holding that Midwest’s Appeal was Frivolous

“An appeal is frivolous ‘when the result is obvious or when the appellant's argument is wholly
without merit.’” Duff v. Cent. Sleep Diagnostics, LLC, 801 F.3d 833, 844 (7th Cir. 2015)
(McCoy v. Iberdrola Renewables, Inc., 769 F.3d 535, 536–37 (7th Cir. 2014)).
Judge Schenkier held that the appeal was frivolous because the majority of the issues that
Midwest raised before this Court were moot due to Midwest’s failure to seek a stay of the Sale
Order and that the only remaining issue, whether Aspen was a good faith purchaser, was waived
because Midwest did not assert it before the bankruptcy court. (See Dkt. No. 51 at 11; see also
Dkt. No. 27 (this Court’s Order dismissing claim).) Midwest now contends that Judge
Schenkier’s finding that its appeal was frivolous is incorrect because its arguments raised
legitimate questions of law. (Id. at 3.) However, the crux of Midwest’s position is that the same
issues that were rejected by this Court on multiple occasions and subsequently rejected by Judge
Schenkier should be construed as legitimate questions of law. For example, Midwest contends
that it presented a legitimate question of law that the bankruptcy court erred by failing to find
that Aspen was a good faith purchaser. (See Dkt. No. 52 at 5.) Yet, Midwest presented and this
Court rejected that same argument on two separate occasions, holding each time that Midwest’s
position was not supported by the law or the facts. (See Dkt. No. 27 at 3-4 (granting motion to
dismiss and finding that bankruptcy court “explicitly held that Aspen was a good faith
purchaser”); Dkt. No. 40 at 3 n.3 (denying motion to reconsider and holding again that the
“bankruptcy court made an explicit finding that Aspen was a good faith purchaser and Midwest
does nothing but extend previously rejected contentions here.”). Apparently undeterred,
Midwest raised the same argument before Judge Schenkier, who rejected it on the same grounds.
(See Dkt. No. 51 at 12.) Even more, Midwest continues to rely on In re Wieboldt Stores, Inc., 92
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B.R. 309 (N.D. Ill. May 18, 1988) and Katten v. Bailey, 95 C 2720, 1995 WL 584239 (N.D. Ill.
Oct. 2, 1995) despite the fact that this Court and Judge Schenkier have thrice explicitly held that
those cases are distinguishable from the facts here.
Given that its objections are nothing more than reiterations of contentions that this Court and
Judge Schenkier have rejected time again, Midwest fails to meet the clear error standard. As
such, its Objections are overruled as to this first issue.
II.

The Magistrate Judge Did Not Err in Holding that Midwest’s Conduct was
Sanctionable

Judge Schenkier further held that sanctions are appropriate because of Midwest’s conduct before
this Court. Judge Schenkier detailed Midwest’s (1) routine disregard for this Court’s procedures
and deadlines, including Midwest’s missing the deadline to file its opposition to Aspen’s motion
for sanctions by 12 days, see Dkt. No. 37, and (2) presenting the unfounded position that the
Court lacked jurisdiction over this appeal that Midwest itself filed. 1 In addition, Judge Schenkier
noted, consistent with this Court’s finding, that Midwest’s complete misrepresentation of Judge
Tharp’s ruling in the related appeal was troubling. Such conduct, both in terms of failing to
respect the Court’s orders regarding deadlines and procedures and misrepresenting the law in its
briefing, is certainly grounds for sanctions. See In re Sokolik, 635 F.3d 261, 269 (7th Cir. 2011)
(affirming award of sanctions motion where the party ignored deadlines and procedural
requirements, relied on doctrines that were inapplicable or otherwise waived, and made several
misstatements in the record.). Midwest’s response not only fails to justify its untimeliness –
rather, it simply directs the Court to the record – but also entirely fails to address its
misrepresentation of Judge Tharp’s ruling.
Given Judge Schenkier’s detailed review of the record and the law, Midwest’s unsubstantiated
objections are rejected.
CONCLUSION
For the reasons stated above, the Court overrules Midwest’s Objections to Magistrate Judge
Schenkier’s Report and Recommendation [52] and adopts the Report and Recommendation [51]
in full.

________________________________________
Virginia M. Kendall
United States District Court Judge
Northern District of Illinois
Date: December 29, 2016

1

Notably, Midwest has not raised that jurisdictional issue here.

3