Bernegger v King

Filing 9

ORDER signed by Judge J P Stadtmueller on 5/6/11 granting 5 appellants Motion to Consolidate Cases; affirming the bankruptcy court's order denying appellant's Motion to Vacate Order Denying Motion for Waiver of the Filing Fee for an Appea l; denying appellants motion to proceed in forma pauperis on appeal because this court certifies that it has been taken in BAD FAITH; within 14 days from the date of this order the appellant shall forward to the Clerk of the Bankruptcy Court the sum of $250.00 as the full filing fee in this appeal and must notify the district court when payment is made. See Order. (cc: plaintiff, Warden of Duluth Federal Prison Camp, all counsel) (nm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
____________________________________________
PETER M. BERNEGGER,
Plaintiff,
v.

Case No. 10-CV-1158
10-CV-1159

THOMAS J. KING,
Defendant.
____________________________________________

ORDER
On December 23, 2010, pro se appellant Peter M. Bernegger (“Bernegger”)
filed two notices of appeal from two separate orders of the United States Bankruptcy
Court for the Eastern District of W isconsin in bankruptcy case number 07-24994MDM. (Docket #1). Both of these notices of appeal were filed without the required
filing fees. The first bankruptcy court order appealed from, which is the subject of
case number 10-CV-1158, denied Bernegger’s second request to reopen his
Chapter 13 bankruptcy case. The second bankruptcy court order appealed from,
which is the subject of case number 10-CV-1159, denied Bernegger’s application for
a waiver of the filing fee for an appeal of the bankruptcy court’s order regarding
appellant’s motion to reopen his Chapter 13 bankruptcy.

BACKGROUND
Debtor filed his first voluntary bankruptcy petition on December 11, 2006, case
number 06-27055-MDM-13. (Case No. 06-27055-MDM-13, Docket #1). On March
30, 2007, a motion to dismiss was filed for material delay for failing to file a feasible

confirmable plan. The Trustee’s office received a phone call on May 15, 2007, from
the debtor’s attorney stating that the debtor would not oppose the motion to dismiss.
On May 30, 2007, the Order was signed granting the motion to dismiss the case
effective May 16, 2007. (Docket #49). On September 18, 2007, the Order approving
trustee’s final account, discharging trustee, releasing bond of trustee and disposing
of Chapter 13 case was signed. (Docket #55). The bankruptcy case was terminated
on September 25, 2007.
Debtor filed the second case, at issue here, on June 28, 2007, case number
07-24994-MDM-13. (07-24994-MDM-13, Docket #1). The Order confirming the
modified plan was signed on December 4, 2007. (Docket #76). A renewed motion
to dismiss for failing to make plan payments was filed on April 24, 2008. (Docket
#130). On June 9, 2008, the Order granting the renewed motion to dismiss was
entered.

(Docket #140).

Then, on December 22, 2008, the Order approving

trustee’s final account, discharging trustee, releasing bond of trustee, and disposing
of Chapter 13 case was entered. (Docket #147). The debtor’s second bankruptcy
case was terminated on January 7, 2009. On June 30, 2010, the debtor filed a
motion to reinstate case. (Docket #149). The bankruptcy court denied this motion.
(See Order Denying Motion to Reopen Chapter 13 Case, Docket #150). Debtor
again attempted to reopen his case. (Docket #152). Once again, the bankruptcy
court denied debtor’s second motion to reopen based upon similar grounds as the

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first denial. (Docket #153). Debtor appealed this denial as well as the bankruptcy
court’s denial of a fee waiver on appeal.

DISCUSSION
I.

Motion to Consolidate
As an initial matter, the court considers Bernegger’s motion to consolidate

cases 10-CV-1158 and 10-CV-1159 pursuant to Fed. R. Civ. P. 42(a) on the basis
that each case involves the same questions of fact. (Docket #5). The motion to
consolidate was filed in both cases and both motions are unopposed. The court will
grant Bernegger’s motion to consolidate as the appeal in case number 10-CV-1159
is merely a challenge to the bankruptcy court’s denial of a fee waiver or,
alternatively, a motion to appeal in forma pauperis, a matter that does not, to this
court’s knowledge, warrant the opening of a separate appeal.
II.

Fee Waiver
First, the court will consider Bernegger’s challenge to the bankruptcy court’s

order denying his fee waiver request. Title 28 U.S.C. § 1930 specifies various
bankruptcy fees. Fees involving appeals from bankruptcy courts are prescribed by
the Judicial Conference pursuant to 28 U.S.C. § 1930(b). The Judicial Conference
Schedule of Fees, Bankruptcy Court Miscellaneous Fee Schedule, reprinted in 28
U.S.C. § 1930 (the “Fee Schedule”), is issued in accordance with § 1930(b). That
schedule, with an effective date of January 1, 2010, provides only limited authority
for waiver of fees. The $250.00 fee established in the Fee Schedule for the filing of

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an appeal – the fee Bernegger wishes to have waived – is found under paragraph
(14) of the Fee Schedule. That paragraph contains no fee-waiver authority or
provision. In a September 27, 2010 order, the bankruptcy court similarly found that
“28 U.S.C. § 1930 Appendix (14) does not provide for a waiver or deferral of the filing
fee.” (Order, Case No. 07-24994-mdm) (Docket #163). As such, the bankruptcy
court did not err in denying Bernegger’s fee waiver request.
III.

Motion for Leave to Appeal In Forma Pauperis
To the extent Bernegger’s motion in the bankruptcy court and his appeal in

this court are construed as a request for leave to appeal in forma pauperis pursuant
to 28 U.S.C. § 1915, the court finds that Bernegger is not entitled to proceed on
appeal in forma pauperis. First, the court notes that under the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 (“BAPCPA”), an amendment was
made to 28 U.S.C. § 1930, adding § 1930(f), a subsection devoted to fee waivers.
Much of § 1930(f) focuses on fee waivers for Chapter 7 debtors and, therefore, is
inapplicable to Bernegger’s case. However, § 1930(f)(3) applies to “other debtors
and creditors,” not just Chapter 7 debtors. Section 1930(f)(3) specifically provides
“[t]his subsection does not restrict the district court or the bankruptcy court from
waiving, in accordance with Judicial Conference policy, fees prescribed under this
section for other debtors and creditors.” 28 U.S.C. § 1930(f)(3). This provision
appears to indicate that the inclusion of authority in § 1930(f) (i.e., “this subsection”)
for waiver of fees for certain Chapter 7 debtors in limited circumstances, does not

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negate other abilities of the district court or the bankruptcy court to waive fees for
“other debtors or creditors.” That said, § 1930(f)(3) does not provide the authority
to waive fees nor does it reference where such authority exists. All § 1930(f)(3)
provides is that any such waiver would have to be “in accordance with Judicial
Conference policy.” In an unpublished decision, the Seventh Circuit has stated that
§ 1930(f) provides both the bankruptcy courts and the district courts with the
authority to allow creditors to proceed in forma pauperis in adversary proceedings.
In re Richmond, 247 Fed.Appx. 831, 832 (7th Cir. 2007).1 The Seventh Circuit did
not extend that ruling to a debtor's application to proceed in forma pauperis on
appeal. However, the court will proceed as if such an extension is proper and under
the assumption that § 1930(f)(3) authorizes this court and the bankruptcy court to
consider motions to appeal in forma pauperis.
Bernegger is currently incarcerated and, therefore, he is required to pay the
statutory filing fee of $250.00 for this appeal. See 28 U.S.C. § 1915(b)(1). If a
prisoner does not have the money to pay the filing fee, as here, he can request to
proceed in forma pauperis. There are three grounds for denying in forma pauperis
status to a prisoner appellant: the prisoner has not established indigence; the
appeal is in bad faith; or the prisoner has three strikes.

1

See 28 U.S.C.

The In re Richmond opinion actually held that, under a previous version of the Bankruptcy
Code, a bankruptcy court had authority to consider a creditor's application to bring an adversary
proceeding in forma pauperis in a pending Chapter 7 bankruptcy proceeding. 247 Fed.Appx. at
832. However, the opinion also noted that under current law – after the addition of §1930(f) – the
bankruptcy and district courts “clearly have the authority to allow creditors to proceed in forma
pauperis.” Id.

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§§ 1915(a)(2)-(3), (g). The appellant has filed the institutional equivalent of his prison
trust account statement for the six-month period immediately preceding the filing of
his appeal, as required under 28 U.S.C. § 1915(a)(2). Under the Federal Rules of
Appellate Procedure, applicable here pursuant to 28 U.S.C. § 158(c)(2), a party who
has been granted leave to proceed in forma pauperis in the district court (or
bankruptcy court) may proceed in forma pauperis on appeal without further
authorization unless the district court certifies that the appeal is not taken in good
faith or determines that the party is not otherwise entitled to proceed in forma
pauperis. Fed. R. App. P. 24(a);
see also 28 U.S.C. § 1915(a)(3).
“Good faith” is an objective standard. Coppedge v. United States, 369 U.S.
438, 446 (1962); Lee v. Clinton, 209 F.3d 1025, 1026 (7th Cir. 2000). An appeal is
taken in “good faith” if it seeks review of any issue that is not clearly frivolous,
Coppedge, 369 U.S. at 446; Lee, 209 F.3d at 1026, meaning that a reasonable
person could suppose it to have at least some legal merit. Lee, 209 F.3d at 1026;
Howard v. King, 707 F.2d 215, 219-20 (5th Cir. 1983). The existence of any
nonfrivolous issue on appeal is sufficient to require the court to grant the petition for
leave to proceed in forma pauperis. Dixon v. Pitchford, 843 F.2d 268, 270 (7th Cir.
1988).
First, the court notes that, on appeal, Bernegger devotes most of his argument
to the purported merits of his claims set forth in his motion to reopen and fails to

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present arguments demonstrating that the bankruptcy court’s reasoning for denying
debtor’s motion to reopen was an abuse of discretion. Bernegger’s only discernible
reason for appealing appears to be that the bankruptcy court had jurisdiction over
his claims – most notably his claims of fraud – and, therefore, the bankruptcy court
was required to reopen his case. What Bernegger fails to account for are the
bankruptcy court’s specific findings with regard to his motion to reopen. The
bankruptcy court found that Bernegger failed to assert new matters not already
considered in the closed bankruptcy case as well as failed to assert claims over
which the court had jurisdiction. (Order Denying Mot. to Reinstate at 1) (Case No.
10-CV-1158, Docket #1-3).2 Furthermore, as to those matters over which the court
might have jurisdiction, the bankruptcy court chose to abstain. (Id.).
Therefore, assuming the bankruptcy court had jurisdiction over Bernegger’s
claims – as he argues it did – then the central question is whether the bankruptcy
court’s decision to abstain from hearing those claims was appropriate, and, in turn,
whether Bernegger’s appeal of that decision presents any non-frivolous issue that
would require this court to grant his petition for leave to appeal in forma pauperis.
Federal Statute 28 U.S.C. § 1334(c)(1) provides that “[n]othing in this section
[granting original and exclusive jurisdiction in bankruptcy cases to federal courts]

2

The numerous claims presented in Bernegger’s motion to reopen include: fraud, abuse
of process, tortious interference with a contract, violation of the fair credit reporting act, transfer of
real property by false pretenses, invasion of privacy, defamation, libel, negligence, violation of
consumer protection laws, and violation of civil rights. (Mot. to Reopen Case) (Docket 1-2, Case
No. 10-CV-1158).

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prevents a [bankruptcy court] in the interest of justice, or in the interest of comity with
State courts or respect for State law, from abstaining from hearing a particular
proceeding arising under title 11 or arising in or related to a case under title 11.” Id.
Here, the bankruptcy court was well within its discretion to abstain from hearing
Bernegger’s state law claims over which it had jurisdiction, including specifically his
allegations of fraud against Attorney Jay Pitner (“Pitner”) of Gray & Associates L.L.P.
(“Gray & Associates”) and W ashington Mutual Bank f/k/a W ashington Mutual Bank,
FA (“W ashington Mutual”).3 Indeed, the bankruptcy court’s decision to abstain was
even more prescient in that Bernegger currently has pending a state court case
against W ashington Mutual in W aupaca County, W isconsin, in case number
2009CV312.4 Accordingly, it was appropriate for the bankruptcy court to abstain
from hearing Bernegger’s claims against W ashington Mutual in the interest of comity
with the W isconsin state courts. Because the appellant has not offered any bona
fide arguments supporting his appeal in any of his submissions to the court, his
petition to proceed in forma pauperis on appeal will be denied.
3

According to the debtor, Pitner, on behalf of creditor Washington Mutual, made fraudulent
creditor claims in Bernegger’s 2008 (and 2006) bankruptcy case. Bernegger seems to argue that
the proof of claim filed by Pitner on behalf of Washington Mutual misrepresented the value of his
property. Furthermore, Bernegger argues that Washington Mutual lacked standing to proceed with
debt collection against him as it allegedly did not own the financial instrument at issue. In addition,
Bernegger sets forth his claims against Thomas J. King, who was the standing Chapter 13 Trustee
of Bernegger’s bankruptcy cases, alleging that King had an obligation to bring to the bankruptcy
court’s attention the fraud alleged by debtor
4

The court may take judicial notice of documents and reports contained in the public record.
See, e.g., Radaszewski ex rel. Radaszewski v. Maram, 383 F.3d 599, 600 (7th Cir. 2004) (taking
judicial notice of administrative findings); Menominee Indian Tribe of Wis. v. Thompson, 161 F.3d
449, 456 (7th Cir.1998) (“Judicial notice of historical documents, documents contained in the public
record, and reports of administrative bodies is proper.”).

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Furthermore, the record of the bankruptcy court in this case and the court’s
review of the records of other cases in this district demonstrate that appellant is a
“frequent filer” whose primary purpose is to assert dubious claims, raise meritless
legal points, or take other action to delay or undo resolutions in his civil cases. For
instance, in case number 07-CV-1028, United States District Judge W illiam C.
Griesbach dismissed Bernegger’s claims against several financial institutions and
their attorneys, including Gray & Associates and W ashington Mutual, finding not only
that all of Bernegger’s claims failed on the merits, but also that Bernegger brought
his lawsuit in bad faith and with the primary purpose of harassing the defendants.
(Case No. 07-CV-1028, Docket #187). In fact, the records from case number 07CV-1028 demonstrate that Bernegger’s claims in his motion to reopen to the
bankruptcy court and his claims on appeal are likely barred by the doctrine of issue
preclusion. The doctrine of issue preclusion limits the litigation of issues that have
been decided in a previous action, provided the party against whom the prior
decision was asserted had a full and fair opportunity to litigate that issue in the
earlier proceeding. See Allen v. McCurry, 449 U.S. 90, 96, 101 S.Ct. 411 (1980); see
also Stephan v. Rocky Mountain Chocolate Factory, Inc., 136 F.3d 1134, 1136 (7th
Cir. 1998). Based on these records, Bernegger clearly asserted the same causes
of action in case number 07-CV-1028 as he attempted to assert in his motion to

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reopen, and now as well on appeal.5 All of these claims were disposed of against
Bernegger, after he was given a full and fair opportunity to litigate the issues.6
In addition to the lawsuit brought by Bernegger in case number 07-CV-1028,
he also pursued an action in this district against his former business partner for
damages and injunctive relief, which was finally dismissed because Bernegger failed
to comply with a court order to show cause. (See Case No. 08-CV-156). The court
in that case similarly denied one of Bernegger’s motions to appeal in forma pauperis
because it found the appeal was taken in bad faith. (Case No. 08-CV-157, Docket
#70).
Lastly, the court is aware of another case, case number 08-CV-977, filed by
Bernegger in this district against two United States Probation Officers and four
unnamed W aupaca County officials asserting various federal statutory and state

5

Admittedly, Bernegger argues Thomas King, the standing Chapter 13 trustee during his
bankruptcy case, erred by failing to alert the bankruptcy court to the alleged fraud of Pitner and
Washington Mutual. However, in case number 07-CV-1028, a branch of this court has already
determined that Bernegger’s underlying claims of fraud fail on the merits. Bernegger’s inclusion
of King as an appellee appears to be an unsuccessful attempt to get a second bite at the apple.
6

Bernegger even filed a motion under Fed. R. Civ. P. 60 in case number 07-CV-1028
seeking relief from the court’s final order and judgment dismissing his claims. In the Rule 60
motion, Bernegger argued precisely what he now argues before this court (and before the
bankruptcy court), namely that new state and federal investigations of the mortgage industry call
into question the validity of the foreclosure of Bernegger’s mortgage. With the Rule 60 motion,
Bernegger attached several exhibits in an attempt to support his claims, including newspaper
articles, affidavits of former and current mortgage brokers, a partial credit report, a Wells Fargo
mortgage document related to an unnamed borrower, and a list of representative clients of Gray
& Associates. (Case No. 07-CV-1028, Docket #211). The court found that none of the materials
he submitted in support of his allegations of fraud and misconduct directly addressed the specific
facts of his case. All of the documents Bernegger submitted to the bankruptcy court in his motion
to reopen, as well as to this court in his notice of appeal, are contained in the exhibits he filed with
the court in case number 07-CV-1028, further proof that Bernegger’s assertions regarding the new,
highly relevant information relating to his claims are without merit.

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common law claims. Though the case was dismissed on qualified immunity grounds,
the court warned Bernegger that his vexatious litigation tactics, which apparently
included attacks on the character of counsel for the defendants, would result in not
only dismissal, but also sanctions. (Case No. 08-CV-977, Docket #27 at 17).
In light of his frequent filer status, the dubious nature of his lawsuits, and the
fact that all of the claims raised in Bernegger’s motion to reopen his Chapter 13
bankruptcy case and his appeal to this court appear to have been fully and fairly
litigated and disposed of in case number 07-CV-1028, this court further concludes
that Bernegger’s appeal should be certified as not having been taken in good faith.7
Thus, the appellant’s request to proceed in forma pauperis on appeal is denied.
However, the appellant incurred the filing fee by filing the notice of appeal.
Newlin v. Helman, 123 F.3d 429, 433-34 (7th Cir. 1997), rev’d on other grounds by,
Walker v. O’Brien, 216 F.3d 626 (7th Cir. 2000); Lee v. Clinton, 209 F.3d 1025 (7th
Cir. 2000). Dismissal of the appeal does not relieve him from the obligation to pay
the full filing fee of $250.00. See Newlin, 123 F.3d at 434. The fee may be collected
from the prisoner’s trust account using the mechanism of § 1915(b). Id. However,
this payment is owed to the bankruptcy court, not the district court.
Accordingly,

7

The court warns Bernegger that as a prisoner, he has come perilously close to his three
strikes. See 28 U.S.C. § 1915(g).

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IT IS ORDERED that appellant’s motion to consolidate (Docket #5, Case No.
10-CV-1158; Docket #5, Case No. 10-CV-1159) cases 10-CV-1158 and 10-CV1159 be and the same is hereby GRANTED;
IT IS FURTHER ORDERED that the bankruptcy court’s order denying
appellant’s Motion to Vacate Order Denying Motion for W aiver of the Filing Fee for
an Appeal is AFFIRMED;
IT IS FURTHER ORDERED that appellant’s motion to proceed in forma
pauperis on appeal is hereby DENIED because this court certifies that it has been
taken in BAD FAITH;
IT IS FURTHER ORDERED that within 14 days from the date of this order the
appellant shall forward to the Clerk of the Bankruptcy Court the sum of $250.00 as
the full filing fee in this appeal. The appellant must also notify the district court when
payment is made. The appellant's failure to comply with this order will result in
dismissal of this appeal. The payment shall be clearly identified by the case name
and number assigned to this action.
IT IS FURTHER ORDERED that copies of this order be sent to the warden of
the institution where the plaintiff is confined.
Dated at Milwaukee, W isconsin, this 6th day of May, 2011.
BY THE COURT:

J.P. Stadtmueller
U.S. District Judge
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