Don Rishell and Pegula Rishell, LLC v. Alvion Properties, Inc

Filing 19

ORDER GRANTING IN PART AND DENYING IN PART 2 Motion to Dismiss filed by Alvion Properties, Inc., and 6 Motion to Dismiss filed by Robert Eggmann. Pegula Rishell, LLC, is DISMISSED with prejudice. The appeal may proceed only as to Don Rish ell individually. The parties are ORDERED to address the issue of standing within their respective briefs. Don Rishell shall order from the court reporter any further transcripts he requires and make arrangements for payment thereof by October 19, 2016. Alvion Properties, Inc., may file a designation of additional items to be included in the record by October 19, 2016. Appellant's brief is due November 18, 2016. Appellee's brief is due December 19, 2016. A reply brief, if any, is due January 2, 2017. Signed by Judge Nancy J. Rosenstengel on 10/5/2016. (mlp)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
DON RISHELL AND PEGULA
RISHELL, LLC,
Appellants,
vs.
ALVION PROPERTIES, INC.,
Appellee.

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Case No. 3:16–CV-00511-NJR
Bankruptcy Case No. 15-40462

MEMORANDUM AND ORDER
ROSENSTENGEL, District Judge:
Debtor/Appellee Alvion Properties, Inc. (“Alvion”) and Robert Eggmann
(“Eggmann”), Disbursing Agent for Alvion, have each filed a Motion to Dismiss the
Appeal in this matter (Docs. 2 and 6). For the reasons stated below, the motions to
dismiss are granted in part.
BACKGROUND
On May 14, 2015, Alvion filed a voluntary petition for Chapter 11 bankruptcy in
the United States Bankruptcy Court for the Southern District of Illinois, Case No.
15-40462. On December 14, 2015, Don Rishell (“Rishell”), acting pro se, filed an informal
proof of claim on behalf of himself and Pegula Rishell, LLC, to which Alvion objected on
January 13, 2016. At a hearing on February 29, 2016, the Bankruptcy Court ordered
Rishell and Pegula Rishell, LLC, to retain counsel by March 28, 2016, and to file a formal
proof of claim by April 11, 2016. A written order to that effect was entered on March 2,
2016. Rishell and Pegula Rishell, LLC, failed to comply with the Bankruptcy Court’s oral
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and written orders. On May 5, 2016, the Bankruptcy Court sustained Alvion’s objection
to the informal proof of claim and denied the claim.
On May 9, 2016, Rishell and Pegula Rishell, LLC, appealed the Bankruptcy
Court’s order to this district court (Doc. 1). Alvion and Eggmann filed the instant
motions to dismiss (Docs. 2 and 6), arguing that Pegula Rishell, LLC, filed a notice of
appeal without representation by an attorney despite previous admonitions by the
Bankruptcy Court. Furthermore, Rishell and Pegula Rishell, LLC, failed to file the
designation of the record on appeal and statement of issues as required by Bankruptcy
Rule 8009(a). Therefore, they argue, the appeal should be dismissed.
On June 28, 2016, the Court ordered Rishell and Pegula Rishell, LLC, to show
cause why the Court should not dismiss this action with prejudice pursuant to Federal
Rule of Bankruptcy Procedure 8003(a)(2) and/or Federal Rule of Civil Procedure 41(b)
for failure to prosecute and/or for failure to comply with a court rule (Doc. 7).
Subsequent to the Court’s Order to Show Cause, and after the Court granted an
extension of time, Rishell and Pegula Rishell, LLC, timely filed a designation of the items
to be included in the record on appeal and a statement of issues to be presented (Doc.
18). However, Pegula Rishell, LLC, still did not obtain counsel.
ANALYSIS
The Seventh Circuit clearly prohibits limited liability companies and corporations
from appearing pro se in federal court. United States v. Hagerman, 545 F.3d 579, 581-82 (7th
Cir. 2008). “The right to conduct business in a form that confers privileges, such as the
limited personal liability of the owners for tort or contract claims against the business,

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carries with it obligations one of which is to hire a lawyer if you want to sue or defend on
behalf of the entity.” Id. at 581. “Pro se litigation is a burden on the judiciary and the
burden is not to be borne when the litigant has chosen to do business in entity form. Id. at
582. The requirement that an LLC appear through a licensed attorney is reflected in this
district court’s local rules, which permit a business entity, other than a sole
proprietorship, to:
appear and act without counsel in a case or proceeding before this Court
only for the purpose of attending the 341 meeting, filing a request for
notice and service of documents, filing a change of address, filing a proof
of claim, and submitting a ballot. For all other purposes, such entity shall
appear and act only through an attorney.
Local Bankruptcy Rule 9010(b), as promulgated by this Court pursuant to Local Rule
Br9029.1 (emphasis added).
Appealing the Bankruptcy Court’s order is not one of the actions a business entity
is permitted to take without the representation of a licensed attorney. Pegula Rishell,
LLC, has been warned on numerous occasions to obtain counsel, yet it has failed to do
so. Furthermore, while Rishell can appear pro se, he cannot represent the interests of the
LLC in federal court. See Hagerman, 545 F.3d at 581-82; Lattanzio v. Comm’n On Massage
Therapy Accreditation, 481 F.3d 137, 139-40 (2d Cir. 2007) (per curiam) (LLC may appear in
federal court only through licensed counsel); In re Heyl, 770 F.3d 729, 730 (8th Cir. 2014)
(member or manager of LLC lacks standing to appeal the bankruptcy court’s adverse
ruling with regard to claim belonging to LLC); Sears v. U.S. Tr., 734 F.3d 810, 819 (8th Cir.
2013) (sole shareholders of closely held S corporation lacked standing to pursue

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bankruptcy appeal on behalf of corporation, as their interest in litigation was merely
derivative of corporation’s interest).
CONCLUSION
For these reasons, the motions to dismiss (Docs. 2 and 6) are GRANTED in part
and DENIED in part. Pegula Rishell, LLC, is DISMISSED with prejudice pursuant to
Rule 41(b) of the Federal Rules of Civil Procedure. Because Don Rishell is permitted to
appear pro se, his appeal of the Bankruptcy Court’s denial of his informal proof of claim
may go forward. In briefing the issues on appeal, however, the Court ORDERS the
parties to address whether the claim at issue belongs to Don Rishell or to Pegula Rishell,
LLC, and, accordingly, whether Don Rishell has standing to bring the claim on his own
behalf.
It is FURTHER ORDERED that, pursuant to Bankruptcy Rule 8009(b)(1) and (4),
Don Rishell shall order in writing from the court reporter a transcript of such parts of the
proceedings not already on file as he considers necessary for the appeal, and file a copy
of the order with the bankruptcy clerk by October 19, 2016. At the time of ordering, Don
Rishell must make satisfactory arrangements with the reporter for paying the cost of the
transcript.
It is FURTHER ORDERED that, pursuant to Bankruptcy Rule 8009(a)(2), Alvion
Properties, Inc., may file with the bankruptcy clerk and serve on the appellant a
designation of additional items to be included in the record by October 19, 2016.
It is FURTHER ORDERED that Don Rishell shall file his appellant’s brief, in
compliance with Bankruptcy Rules 8014, 8015, and 8018(b), by November 18, 2016.

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Alvion Properties, Inc., shall file its appellee’s brief by December 19, 2016. A reply brief,
if any, may be filed by Don Rishell by January 2, 2017.
IT IS SO ORDERED.
DATED: October 5, 2016
____________________________
NANCY J. ROSENSTENGEL
United States District Judge

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