Siebert v. Cedar Rapids Lodge & Suites, LLC, et al

Filing 20

MEMORANDUM OPINION AND ORDER re 1 Bankruptcy Appeal. The Bankruptcy Court's September 28, 2017 Judgment is AFFIRMED (Written Opinion). Signed by Judge Susan Richard Nelson on 4/10/2018. (SMD)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

John F. Seibert,
Appellant,

Case No. 17-CV-04756 (SRN)

v.
MEMORANDUM OPINION
AND ORDER

Cedar Rapids Lodge & Suites, LLC,
James T. Rymes, Rhonda Coborn,
Michael Coborn, Scott Shisler, and
Julie Shisler,
Appellees.

Alexander J. Beeby and Thomas J. Flynn, Larkin Hoffman Daly & Lindgren, Ltd., 8300
Norman Center Drive, Suite 1000, Minneapolis, Minnesota 55437, for Appellant.
Amy J. Swedberg, Maslon LLP, 90 South Seventh Street, Suite 3300, Minneapolis,
Minnesota 55402, and Chloe F.P. Golden and Robert H. Miller, Sheehan Phinney Bass &
Green P.A., 1000 Elm Street, Manchester, New Hampshire 03105, for Appellees.

SUSAN RICHARD NELSON, United States District Judge
Appellant John F. Seibert (“Seibert”) appeals the September 28, 2017 decision of the
United States Bankruptcy Court for the District of Minnesota (“Bankruptcy Court”) in the
matter of Cedar Rapids Lodge & Suites, LLC v. Seibert (In re Seibert), 16-BKY-41993, 16ADV-4103, which granted summary judgment to Appellees Cedar Rapids Lodge & Suites,
LLC, James T. Rymes, Rhonda Coborn, Michael Coborn, Scott Shisler, and Julie Shisler
(“Appellees”) in their adversary proceeding against Seibert. The Bankruptcy Court held
that certain judgment debt that Seibert owes to Appellees was excepted from discharge in
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his bankruptcy. For the reasons set forth herein, the Court affirms the decision of the
Bankruptcy Court.
I.

BACKGROUND
Seibert is a real-estate developer. He was involved in a hotel development project in

Cedar Rapids, Iowa. After the development project failed, Appellees sued Seibert in United
States District Court for the Northern District of Iowa.1 (See Cedar Rapids Lodge & Suites,
LLC v. JFS Dev’t, Inc., No. 09-cv-175 (LRR/JSS) (N.D. Iowa).) Appellees alleged that
Seibert fraudulently induced them to invest in the hotel development project and then
mishandled the financing, construction, and management of the project. (Tr. of Sept. 26,
2017 Hr’g [Doc. No. 12] (“Tr.”), at 43.) The complaint alleged several claims, including
civil racketeering (“RICO”) and fraud. (Id. at 43-44.)
The Bankruptcy Court accurately described the Iowa case as “a lengthy and highly
contentious lawsuit.” (Id.) During two and a half years of litigation, the Iowa court ruled on
many motions to compel and motions for sanctions. (See Cedar Rapids, No. 09-cv-175
[Doc. Nos. 95, 103, 108, 113, 171, 193, 216, 246].) Less than a year after the suit was filed,
the Iowa court granted Seibert’s attorney’s motion to withdraw from the case for Seibert’s
failure to pay fees. (Id. [Doc. No. 95] (Ruling on Pretrial Motions, at 2-4).) After that,
Seibert continued to participate in the litigation pro se. (See Tr., at 44.) The Iowa court
granted Appellees’ motion to compel Seibert to produce certain computer systems and
hardware, and it ordered Seibert to pay the cost of forensic computer examination. (Cedar
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The Iowa case involved several additional plaintiffs and defendants whose
involvement is not relevant here.
2

Rapids, No. 09-cv-175 [Doc. No. 164] (Order dated Oct. 3, 2011, at 2-3).) When Seibert
failed to pay the cost of the forensic computer examination, the Iowa court granted
Appellees’ motion for contempt of court. (Id. at 7-10.)
Appellees moved several times for sanctions against Seibert, asking the Iowa court to
enter a default judgment for Seibert’s discovery violations. (See id. [Doc. Nos. 105, 136,
204, 238].) The Iowa court consistently declined to enter default judgment as a sanction.
(See id. [Doc. Nos. 108, 193, 216, 246].) The court found insufficient proof of bad faith in
Seibert’s discovery and pretrial practices to justify the harsh penalty of default judgment.
(See id. [Doc. No. 216] (Order dated Jan. 18, 2012, at 3-4, 7-8).) The Iowa court did enter a
sanction against Seibert for failure to comply with witness and exhibit disclosure deadlines.
The court held that Seibert would not be permitted to present witnesses or exhibits at trial
that had not been disclosed in compliance with pre-trial disclosure deadlines. (Id. at 8-10.)
After his attorney withdrew, Seibert continued to actively litigate the Iowa case for
some time, filing motions and briefs opposing Appellees’ motions. (See id. [Doc. Nos. 109,
116, 140-41, 148, 165].) He filed a motion for sanctions against the Plaintiffs’ attorney,
which was denied. (Id. [Doc. Nos. 166, 193].) In late 2011, Seibert was diagnosed with
cancer. He filed a motion to continue the trial date, at his oncologist’s recommendation,
until 90 days after a scheduled surgery. The Iowa court granted the motion to continue. (Id.
[Doc. Nos. 205, 216].) Five months later, Seibert filed a motion to continue the trial date for
90 additional days while he began radiation treatment, which was also granted. (Id. [Doc.
Nos. 237, 246].)

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On August 20, 2012, two days before the final pretrial conference was scheduled to
take place, Seibert sent the Iowa court a letter stating, “due to my health I will not be
attending the pre-trial or trial in the upcoming weeks. I had been hopeful that my condition
would improve, however the effects and side effects of my treatments have not subsided.”
(Id. [Doc. No. 253].) Seibert did not move for another continuance and did not submit any
additional documentation from his oncologist. When Seibert did not appear at the final
pretrial conference, Appellees moved for a default judgment under Federal Rule of Civil
Procedure 55(a). (Id. [Doc. No. 255].)
The Iowa court delayed ruling on the motion for default judgment and scheduled an
evidentiary hearing to determine damages. (Id. [Doc. No. 257].) Seibert moved to continue
the evidentiary hearing. The court denied Seibert’s motion, instructing him that he could
appear telephonically to accommodate his cancer treatments. (Id. [Doc. No. 261].) Seibert
did not appear, in person or remotely, at the evidentiary hearing.2 (Id. [Doc. No. 267]
(Order dated Oct. 24, 2012, at 2).) The court issued an order granting a default judgment for
Seibert’s failure to appear, and awarding $12,176,735.22 for Seibert’s fraud and RICO
violations. (Id. at 3-10.) The Iowa court made no specific factual findings about Seibert’s
liability. Instead, the court stated that the “‘facts alleged in complaint are taken as true,
except facts relating to the amount of damages.’” (Id. at 3 (quoting Everyday Learning
Corp. v. Larson, 242 F.3d 815, 818 (8th Cir. 2001).)
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Appellees presented evidence that Seibert was in fact traveling in Florida during
the evidentiary hearing, for personal and business reasons, but the Bankruptcy Court gave
this fact “no weight” in its decision. (Tr., at 45.)
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On June 30, 2016, Seibert declared bankruptcy under Chapter 7 of the Bankruptcy
Code. (Tr., at 42-43.) Appellees filed an adversary action in the United States Bankruptcy
Court for the District of Minnesota, seeking a determination that Seibert’s judgment debt
from the Iowa case was not dischargeable in bankruptcy. (Appellant’s App. [Doc. No. 16],
Ex. 2 [Doc. No. 16-1] (Adv. Compl.).) Appellees moved for summary judgment, arguing
that the debt was dischargeable under 11 U.S.C. § 523(a)(2)(A), because it was a debt
obtained by “false pretenses, a false representation, or actual fraud.” Appellees asserted that
the Iowa court’s judgment collaterally estopped Seibert from contesting that his judgment
debt was obtained by fraud. (Tr., at 42.)
The Bankruptcy Court agreed. The Bankruptcy Court held that the only contested
issue was whether collateral estoppel is applicable to a default judgment like the one entered
against Seibert. (Tr., at 51.) The Bankruptcy Court stated that “courts agree that a default
judgment can serve as a basis for applying collateral estoppel if the party against whom the
judgment is used had a full and fair opportunity to defend the claims.” (Id. at 52 (citing In
re Bush, 62 F.3d 1319 (11th Cir. 1995); In re Brandl, 179 B.R. 620 (Bankr. D. Minn.
1995)).)
The Bankruptcy Court rejected Seibert’s argument that he did not have a full and fair
opportunity to defend the suit because of his cancer, noting that the Iowa court had
“follow[ed] the recommendations of Mr. Seibert’s oncologist” when it continued the trial
twice. (Id. at 53.) Additionally, the Bankruptcy Court pointed to an admission that Seibert
had made earlier in the adversary proceeding, acknowledging that his decision to take a
default had been informed by his bankruptcy attorney’s advice “not to participate in trial, for
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legal and tactical reasons.” (See In re Seibert, 16-ADV-4103 [Doc. No. 16] (Resp. to Mot.
of Thomas F. Miller to Withdraw, ¶ 3); Tr., at 53-54.) Ultimately, the Bankruptcy Court
found that Seibert “actively and substantially participated” in the Iowa suit, had a full and
fair opportunity to defend the suit, and “specifically chose not to participate in the trial or
damages hearing.” (Tr., at 54.) The Bankruptcy Court held that collateral estoppel applied
to bar Seibert from contesting summary judgment, stating, “[c]ollateral estoppel cannot be
avoided by failing to appear and plead, especially when the party has been actively involved
in the lawsuit up until the final trial or hearing on damages.” (Id. at 54.)
The Bankruptcy Court determined that the damages award and attorneys’ fees award
from the Iowa suit were excepted from discharge in bankruptcy. (Id. at 57-58.) It further
determined that Seibert’s debt from an earlier judgment in that litigation, holding Seibert in
contempt for discovery violations, was discharged in bankruptcy. (Id. at 56.)
Seibert now appeals, arguing that collateral estoppel does not apply to default
judgments. (Appellant’s Principal Br. [Doc. No. 15], at 24-28.) Seibert further argues that
his default judgment should not have preclusive effect, because the Iowa court heard no
contested evidence on the issue of fraud, and because he did not act in bad faith in taking the
default judgment. (Id. at 31-38.) Finally, Seibert asserts that the Bankrupty Court erred by
failing to consider the mitigating circumstances surrounding his default judgment. (Id. at
38-41.)

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II.

DISCUSSION
A. Standard of Review
In an appeal from a bankruptcy court proceeding, this Court acts as an appellate

court. See 28 U.S.C. § 158(a). Section 158(a)(1) grants the Court appellate jurisdiction
“from final judgments, orders, and decrees,” whereas §§ 158(a)(2)-(3) confers appellate
jurisdiction from certain interlocutory orders. See In re M & S Grading, Inc., 526 F.3d 363,
368 (8th Cir. 2008).
On appeal, the Bankruptcy Court’s legal conclusions are reviewed de novo and its
findings of fact are reviewed for clear error. Tri-State Fin., LLC v. First Dakota Nat’l
Bank, 538 F.3d 920, 923-24 (8th Cir. 2008). “Under the clearly erroneous standard, we
will overturn a factual finding only if it is not supported by substantial evidence in the
record, if it is based on an erroneous view of the law, or if we are left with the definite
and firm conviction that an error was made.” Roemmich v. Eagle Eye Dev., LLC, 526
F.3d 343, 353 (8th Cir. 2008) (citation and internal quotation marks omitted).
B. Applicable Law
1. Summary Judgment
Summary judgment is proper if, drawing all reasonable inferences in favor of the
non-moving party, there is no genuine issue as to any material fact and the moving party
is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Morriss v. BNSF Ry.
Co., 817 F.3d 1104, 1107 (8th Cir. 2016). The party moving for summary judgment
bears the burden of showing that the material facts in the case are undisputed. Id.
at 1042. However, a party opposing summary judgment “‘may not rest upon the mere
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allegation or denials of his pleading, but . . . must set forth specific facts showing that
there is a genuine issue for trial,’ and ‘must present affirmative evidence in order to
defeat a properly supported motion for summary judgment.’” Ingrassia v. Schafer, 825
F.3d 891, 896 (8th Cir. 2016) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
256-57 (1986)).
2. Collateral Estoppel
The Iowa default judgment was issued by a federal court, so federal principles of
collateral estoppel will determine whether it has preclusive effect. See Heiser v. Woodruff,
327 U.S. 726, 731-32 (1946); In re Docteroff, 133 F.3d 210, 214 (3d Cir. 1997). Collateral
estoppel, also known as issue preclusion, has five elements:
(1) the party sought to be precluded in the second suit must have been a party,
or in privity with a party, to the original lawsuit; (2) the issue sought to be
precluded must be the same as the issue involved in the prior action; (3) the
issue sought to be precluded must have been actually litigated in the prior
action; (4) the issue sought to be precluded must have been determined by a
valid and final judgment; and (5) the determination in the prior action must
have been essential to the prior judgment.
Sandy Lake Band of Miss. Chippewa v. United States, 714 F.3d 1098, 1102-03 (8th Cir.
2013) (quoting Robinette v. Jones, 476 F.3d 585, 589 (8th Cir. 2007)). The parties in this
case disagree as to whether the default judgment meets the “actually litigated” requirement.
(Appellant’s Primary Br., at 24-28; Appellees’ Br. [Doc. No. 18], at 28-33.)
The general rule is that a default judgment does not give rise to collateral estoppel.
“‘In the case of a judgment entered by confession, consent, or default, none of the issues is
actually litigated.’” Arizona v. California, 530 U.S. 392, 414 (2000) (quoting Restatement
(Second) of Judgments § 27 cmt. e (Am. Law Inst. 1982)). Several circuits have recognized
8

this general rule. See Bush, 62 F.3d at 1323; In re Leonard, 644 F. App’x 612, 617 (6th Cir.
2016); In re Jordana, No. 99-6194, 2000 WL 783401, at *1 (10th Cir. June 20, 2000). But
several circuits have also recognized an exception to the general rule when the party against
whom preclusion is asserted substantially participated in the prior litigation before the
default judgment. The leading cases are In re Daily, 47 F.3d 365 (9th Cir. 1995), In re
Bush, 62 F.3d 1319 (11th Cir. 1995), and In re Docteroff, 133 F.3d 210 (3d Cir. 1997).
In Daily, the FDIC sought to prevent Daily from discharging his judgment debt in
bankruptcy. 47 F.3d at 366. In the prior action for fraud and RICO violations, Daily had
resisted the FDIC’s discovery requests for nearly two years, until the FDIC moved for
sanctions. Id. at 367. Both parties fully briefed and argued the motion, and the court found
that Daily’s “strategy of delay and evasiveness” had “significantly interfered with the
judicial process.” Id. The court entered a default judgment against Daily as a sanction
under Federal Rule of Civil Procedure 37. Id. The bankruptcy court applied collateral
estoppel to prevent Daily from opposing the FDIC’s adversary action. Id.
The Ninth Circuit affirmed. The court acknowledged the general rule that default
judgments are not actually litigated, but emphasized that Daily’s had not been “an ordinary
default judgment,” because “Daily did not simply decide the burden of litigation
outweighed the advantages of opposing the FDIC's claim and fail to appear. He actively
participated in the litigation, albeit obstructively, for two years before judgment was entered
against him.” Id. at 368. The court held:
A party who deliberately precludes resolution of factual issues through
normal adjudicative procedures may be bound, in subsequent, related
proceedings involving the same parties and issues, by a prior judicial
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determination reached without completion of the usual process of
adjudication. In such a case the “actual litigation” requirement may be
satisfied by substantial participation in an adversary contest in which the party
is afforded a reasonable opportunity to defend himself on the merits but
chooses not to do so.
Id. The court further noted that the policy reasons supporting the ordinary rule against
granting preclusive effect to a default judgment did not apply in that case: “It cannot be said,
for example, that the RICO action involved so small an amount or was brought in such an
inconvenient forum that the costs of litigation ultimately outweighed the burden of a default
judgment.” Id. at 368 n.6 (citing Restatement (Second) of Judgments § 27 cmt. e (Am. Law
Inst. 1982)).
In re Bush also involved an adversary proceeding to except a judgment debt from
discharge in bankruptcy. 62 F.3d at 1322. The creditor had sued Bush in federal district
court for fraud. Bush had initially been represented, but his counsel withdrew after several
months, claiming inability to reach him. Id. at 1321. Bush then failed to produce trial
exhibits, misrepresented that he was out of town when he was supposed to appear for a
deposition, and failed to appear at a pre-trial conference. Id. The court entered a default
judgment against Bush as a sanction under Federal Rule of Civil Procedure 37. Id. at
1321-22. In the adversary proceeding, the bankruptcy court gave this decision preclusive
effect and held the debt nondischargeable. Id. at 1322.
The Eleventh Circuit affirmed. The court agreed with the Ninth Circuit’s reasoning
in Daily and held that collateral estoppel may bar relitigation after a default judgment
“[w]here a party has substantially participated in an action in which he had a full and fair
opportunity to defend on the merits, but subsequently chooses not to do so, and even
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attempts to frustrate the effort to bring the action to judgment.” Id. at 1325. The court
observed that “Bush had ample warning from the prior court and could reasonably have
foreseen the conclusive effect of his actions.” Id.
In re Docteroff has a similar factual background. Docteroff’s creditor filed an
adversary action against him to prevent him from discharging a judgment debt in
bankruptcy. 133 F.3d at 214. In the prior action, Docteroff initially participated by filing an
answer and noticing the plaintiff for a deposition, but then he “repeatedly and in bad faith”
refused to submit to depositions or respond to discovery requests. Id. at 213. The court
entered a default judgment as a sanction under Federal Rule of Procedure 37. Id. at 213-14.
The bankruptcy court gave the judgment preclusive effect and excepted the judgment debt
from discharge, and the Third Circuit affirmed. Id. at 214. The court noted that the default
was “not a typical default judgment where a defendant neglects or elects not to participate in
any manner because of the inconvenience of the forum selected by the plaintiffs, the
expense associated with defending the lawsuit, or some other reason.” Id. at 215. Instead,
“for several months, Docteroff participated extensively in the lawsuit” before he
“[a]pparently . . . realized the meritlessness of his position and decided to frustrate orderly
litigation by willfully obstructing discovery.” Id. The court concluded that “a party such as
Docteroff, who deliberately prevents resolution of a lawsuit, should be deemed to have
actually litigated an issue for purposes of collateral estoppel application.” Id. (citing Daily,
47 F.3d at 368).
Several courts in other circuits have applied this exception as formulated in Daily,
Bush, and Docteroff. See Leonard, 644 F. App’x at 617 (“[Preclusion] interests do come
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into play when default is entered as a procedural sanction for lack of good-faith
participation in the litigation process.”); In re Corey, 583 F.3d 1249, 1253 (10th Cir. 2009)
(agreeing with the holdings in Daily, Bush, and Docteroff); Herbstein v. Bruetman, 266 B.R.
676, 685 (N.D. Ill. 2001) (“In this atypical setting for default judgment, where Dr. Bruetman
participated extensively then failed to comply with an express court order issued multiple
times at a risk of incurring default, . . . Dr. Bruetman should not now be able to sidestep the
collateral estoppel doctrine and litigate an issue in this forum that was forestalled in New
York due solely to Dr. Bruetman's decisions.”), aff’d, 32 F. App’x 158 (7th Cir. 2002) (“On
the merits, we affirm for the reasons given by the district judge.”). But see In re Gilson, 250
B.R. 226, 234-35 (Bankr. E.D. Va. 2000) (rejecting the exception as subjective and difficult
to evaluate).
Overwhelmingly, the cases applying this exception point to some degree of bad faith
or obstructive litigation conduct on the part of the defendant prior to the default judgment.
See Jordana, 2000 WL 783401, at *1 (applying preclusion when a party “has engaged in
serious obstructive conduct resulting in a default judgment”); Docteroff, 133 F.3d at 215
(applying preclusion when a party “deliberately prevents resolution of a lawsuit”); Bush, 62
F.3d at 1325 (applying preclusion when a party “attempts to frustrate the effort to bring the
action to judgment”); Daily, 47 F.3d at 368 (applying preclusion when a party “deliberately
precludes resolution of factual issues through normal adjudicative procedures”); In re Sly,
280 B.R. 261, 267 (Bankr. N.D. Fla. 2002) (finding that preclusion does not apply, because
Sly’s behavior “did not rise to the level of serious misconduct or obstructive behavior”); see
also 18A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 4442
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n.8 (2d. ed. 1987) (“The Docteroff decision presents an exceptional rule, not to be applied
rigidly in all instances of procedural default, using bad faith as the hallmark.” (internal
quotation marks omitted)).
The Eighth Circuit has not considered whether or in which circumstances collateral
estoppel should apply to a default judgment. Finding the cases outlined above to be
persuasive, the Court holds that collateral estoppel may apply to a default judgment when
the party against whom the judgment was entered substantially participated in the litigation
and engaged in bad faith conduct to frustrate the legal process prior to the default. When
these circumstances are present, it should not matter whether the default was entered under
Rule 37 or Rule 55 of the Federal Rules of Civil Procedure, because giving the default
judgment preclusive effect will further the policy of collateral estoppel and discourage
obstructive conduct. See Restatement (Second) of Judgments § 27 cmt. e (Am. Law Inst.
1982) (“[E]ven if it was not litigated, the party’s reasons for not litigating in the prior action
may be such that preclusion would be appropriate.”); see also Corey, 583 F.3d at 1252
(“The purposes of issue preclusion are promoted by such preclusion: [the creditor] is not
again subjected to the burdens of litigating the fraud issue and the fraud issue is resolved
consistently by the two courts. Moreover, imposing preclusion on Mr. Corey is neither
unfair to him nor likely to discourage constructive behavior (such as compromise in
litigation); on the contrary, applying preclusion doctrine here is likely to discourage
obstructive and delaying tactics.”).

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C. Analysis
Seibert argues that no exception applies which would permit collateral estoppel
based on his default judgment, because the Iowa court did not make any findings of fact
about his fraud, and because it explicitly rejected any finding of bad faith. (Appellant’s
Primary Br., at 31-38.) But the exception does not require factual findings in the prior
action in order to give a default judgment preclusive effect. See supra Part II.B. What
matters is that the party against whom collateral estoppel is asserted abused the litigation
process, not that the prior court actually decided the issue in question. See, e.g., Daily, 47
F.3d at 368-69 (“[D]enying preclusive effect to the RICO judgment on the ground that the
issues relevant to discharge were not fully tried in that proceeding would permit Daily to
delay substantially and perhaps ultimately avoid payment of the debt by deliberate abuse of
the judicial process.”).
Seibert is correct that the exception permitting a default judgment to have preclusive
effect ought to apply only when there has been bad faith litigation conduct. Seibert argues
that the Iowa court specifically rejected Appellees’ arguments that he had acted in bad faith.
(Appellant’s Primary Br., at 15-17.) But these decisions by the Iowa court concerned
Appellees’ earlier motions for sanctions, based on Seibert’s failure to comply with a motion
to compel and his failure to make certain pretrial disclosures. (See Cedar Rapids, No. 09cv-175 [Doc. No. 216] (Order dated Jan. 18, 2012, at 3-4, 7-10).) They do not foreclose the
conclusion that, based on his entire course of conduct in the litigation, Seibert acted in bad
faith. Further, the Bankruptcy Court held that Seibert’s debt arising from those decisions
was not excepted from discharge. (Tr., at 56.)
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The Bankruptcy Court did not expressly consider whether Seibert obstructed or
frustrated litigation of the Iowa case in bad faith. But the evidence on the record is
sufficient for this Court to find as a matter of law that he did. Seibert does not allege that
any of the Bankruptcy Court’s findings were clearly erroneous, so the Court considers it
admitted that Seibert “actively participated in the Iowa lawsuit over a nearly three-year
period of time,” and that he “admitted he made the decision not to participate in the trial and
take a default judgment for legal and tactical reasons.” (Tr., at 44, 53.) Seibert claimed that
his health prevented him from attending the pretrial conference. But he had already
obtained two continuances based on his oncologist’s recommendation, and he made no
attempt to obtain another before the final pretrial conference. The Bankruptcy Court also
found that Seibert was traveling for personal and business reasons in Florida at the time he
failed to appear telephonically for the post-default damages hearing. (Id. at 45.) The
Bankruptcy Court gave no weight to this fact, but this Court considers Seibert’s willful
refusal to appear, even telephonically, when he was physically able to travel to be further
proof of bad faith conduct during the Iowa litigation.
Seibert’s failure to appear for the final pretrial conference prevented Appellees from
trying the case to its conclusion after they had expended significant resources to litigate the
case for years. His actions are comparable to those of the defendant in Kelley v. Ahern, 541
B.R. 860 (W.D. Wis. 2015). In Kelley, the court noted that the defendant “forced [the
plaintiffs] to expend the time and resources necessary to litigate the case until the very end,
defaulting only after the parties had been litigating for almost three years.” Id. at 864. The
court found a strong case for preclusion, even though the defendant’s counsel had
15

withdrawn for failure to pay fees, because the defendant continued to litigate pro se “for
almost two years” before the default, making it “difficult to see Ahern’s decision to skip the
trial as anything other than a tactical decision.” Id.
Here, like in Kelley, Seibert’s tactical decision to take a default judgment on the eve
of trial was intended to frustrate the legal process. His averments that his health prevented
him from appearing are belied by his failure to move for a continuance, and by his
admission that his decision was for “legal and tactical reasons.” Seibert must be bound by
the Iowa court’s default judgment. To hold otherwise would “give litigants who abuse the
process and dignity of the court an undeserved second bite at the apple.” Docteroff, 133
F.3d at 215. The Court holds that the Iowa court’s default judgment estops Seibert from
contesting the dischargeability of his judgment debt.
III.

CONCLUSION
Based on the foregoing, and all the files, records, and proceedings herein, IT IS

HEREBY ORDERED THAT the Bankruptcy Court’s September 28, 2017 Judgment is
AFFIRMED.

Dated: April 10, 2018

s/Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge

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