Opinion
No. 17-2479 No. 18-1364
03-27-2018
DENNIS J. STOLFO, Debtor-Appellant, v. KINDERCARE LEARNING CENTERS, LLC, et al., Creditors-Appellees. IN RE: DENNIS J. STOLFO, Debtor-Appellant.
NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with Fed. R. App. P. 32.1 Before DANIEL A. MANION, Circuit Judge DIANE S. SYKES, Circuit Judge DAVID F. HAMILTON, Circuit Judge Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 17 C 854 Harry D. Leinenweber, Judge. Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 17 CV 0843 Jorge L. Alonso, Judge. ORDER
The court orders these appeals consolidated for purposes of disposition. In appeal No. 18-1364, no appellees were served with process in the district court and none are participating in the appeal. We agreed to decide the cases without oral argument because the appeals are frivolous. FED. R. APP. P. 34(a)(2)(A). --------
Attorney Dennis Stolfo has been filing frivolous motions and pleadings in both state and federal courts since 2011, trying to avoid paying sanctions he incurred for prosecuting a baseless lawsuit. The sanctions award was held nondischargeable in his Chapter 7 bankruptcy, yet Stolfo persisted in refusing to pay it. Most recently he has attempted to relitigate meritless issues by filing motions to reopen proceedings in his bankruptcy and related adversary case. The bankruptcy judge denied those two motions, and two district judges affirmed in separate appeals. We have consolidated Stolfo's two appeals from the district court for decision. We affirm the bankruptcy judge's rulings and reject Stolfo's transparent attempt to avoid paying the sanctions.
In 2004 Stolfo sued KinderCare Learning Centers and two of its employees in the Circuit Court of Cook County. His client, Mary Iacovetti, alleged that the defendants had defamed her and cast her in a false light by lying about the reasons for firing her from KinderCare. But in Iacovetti's deposition she admitted that two of the events they described were true and that she had no personal knowledge of the third. Iacovetti's testimony destroyed the factual basis for her complaint, but Stolfo continued litigating the case on her behalf and opposed a motion for summary judgment. After the court granted the defendants' motion, they moved for sanctions against Stolfo under Rule 137 of the Illinois Supreme Court Rules.
Rule 137 is designed to prevent false or frivolous filings by "penalizing claimants who bring vexatious and harassing actions," Krautsack v. Anderson, 861 N.E.2d 633, 648 (Ill. 2006) (quotation marks omitted), and it provides two grounds for sanctions. First, if a lawyer prosecutes an action that is not "well grounded in fact" or is not "warranted by existing law or a good-faith argument for the extension, modification, or reversal of existing law," a court can impose sanctions. ILL. SUP. CT. R. 137(a). Second, if a lawyer files pleadings or motions "for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation," sanctions are appropriate. Id. Stolfo filed ten frivolous motions after KinderCare's request for sanctions, seriously delaying the circuit court's decision on the matter. The circuit court ultimately entered sanctions against Stolfo—nearly $140,000 in attorney's fees—after finding that he had both (1) continued prosecuting a case that was "not well grounded in fact and was not warranted by existing law," and (2) filed unsupported motions "to delay the hearing" on the sanctions. Stolfo appealed, but the Illinois Appellate Court found his appeals frivolous and ordered him to pay further sanctions.
Stolfo then filed for bankruptcy under Chapter 7 of the bankruptcy code seeking to have the sanctions award, among other debts, discharged. But KinderCare and the two employees filed an adversary complaint, alleging that the unpaid sanctions were a nondischargeable debt under 11 U.S.C. § 523(a)(6) because they were intended to remedy a "willful and malicious injury" inflicted by Stolfo. The bankruptcy court agreed and held the debt nondischargeable, finding that the sanctions judgment conclusively established the existence of a "willful and malicious injury." Stolfo did not appeal the nondischargeability finding.
When KinderCare returned to state court to enforce its sanctions judgment, Stolfo responded with a flurry of motions in the Circuit Court of Cook County and the Illinois Appellate Court, making arguments that both courts found patently frivolous. These included contentions that KinderCare lacked "standing" to receive the sanctions judgment and that the debt to KinderCare had been discharged in bankruptcy (despite the nondischargeability finding). The Illinois courts ordered still more sanctions against Stolfo for making these arguments. By July 2016 they had seen enough. The Appellate Court told Stolfo to stop raising these issues "in any forum" and to "cease and desist from frivolous actions and repetitive pleadings." The court observed, however, that this order was unlikely to have an effect on Stolfo:
It is abundantly clear that attorney Dennis James Stolfo is an unrepentant serial filer who will use any argument, no matter how repetitive, redundant, previously resolved, incomplete, incoherent, inane, frivolous or just plain concocted to continue to delay having to pay the properly ordered sanctions.Accordingly, in December 2016 the Illinois Attorney Registration and Disciplinary Commission instituted proceedings against Stolfo, alleging that he had filed frivolous pleadings and appeals. As far as we can tell, those proceedings are ongoing, and Stolfo remains (as yet) licensed to practice law.
Foiled in the state courts, Stolfo turned back to the bankruptcy court. More than three years after that court held in the adversary case that the sanctions award was nondischargeable, Stolfo filed motions in both the adversary case and the bankruptcy case. His motions, though hard to decipher, essentially sought the same relief—he wanted to reopen his bankruptcy to file his own adversary complaint against KinderCare and its employees to, as he put it, "enforce the discharge" of his debt to them. In the motions he raised many of the arguments already rejected by the state courts. He contended that his debt to KinderCare actually had been discharged because KinderCare did not file a "proof of claim" in his bankruptcy and that KinderCare did not have "standing" to receive the sanctions award. He also referred to an order purportedly issued by a state court for the parties to "file motions" in the bankruptcy court—although he did not submit this supposed court order.
The bankruptcy judge heard both motions at the same time. She denied them summarily, noting that the motions were "all wrong procedurally" and that the Illinois courts already had found against Stolfo on most of the issues he raised.
Stolfo separately appealed the denial of both motions to the district court. The appeal from the denial of his motion in the closed adversary case went to Judge Leinenweber, who affirmed the bankruptcy judge's decision and referred Stolfo for disciplinary proceedings. The appeal from the denial of his motion in the closed bankruptcy case went to Judge Alonso, who followed suit. We now resolve Stolfo's appeals of both Judge Leinenweber's decision (appeal No. 17-2479) and Judge Alonso's decision (appeal No. 18-1364).
The issues in these appeals are simple, even if Stolfo's presentation of them is muddled and sometimes impenetrable. First, we consider whether the bankruptcy judge properly denied Stolfo's motions to reopen the adversary and bankruptcy cases. Stolfo contends that his motions were "based on" In re Kewanee Boiler Corp., 270 B.R. 912 (Bankr. N.D. Ill. 2002). In that case, the bankruptcy court allowed a debtor to reopen its bankruptcy case to file an adversary complaint against a creditor to enforce the statutory discharge injunction. See 11 U.S.C. § 524. But comparing Kewanee Boiler to this case is absurd. First, we note that Kewanee Boiler could arguably support only Stolfo's motion to reopen the bankruptcy case; it provides no basis for reopening a previously closed adversary case. See 270 B.R. at 915. But Stolfo's motion to reopen the bankruptcy case was meritless. Unlike the creditor in Kewanee Boiler, KinderCare and its employees already have obtained a ruling from the bankruptcy court that Stolfo's debt to them is nondischargeable. In other words, there is no "discharge injunction" for Stolfo to enforce with respect to the sanctions judgment. Given that the motion to reopen was meritless and three years late, the bankruptcy judge did not abuse her discretion in denying it. See Redmond v. Fifth Third Bank, 624 F.3d 793, 797 (7th Cir. 2010).
Stolfo argues, though, that the sanctions debt was discharged as a matter of law because neither KinderCare nor the two employees filed proof of their claims in his bankruptcy. Stolfo never raised this argument during the underlying proceedings, so he waived it. See In re Outboard Marine Corp., 386 F.3d 824, 828 (7th Cir. 2004) (noting that a party waives arguments by not raising them until the motion for reconsideration). Even if he had not, his contention is wrong. Creditors were not required to file proof of claims in Stolfo's bankruptcy as he had no assets with which to pay claims. See FED. R. BANKR. P. 2002(e); see also In re Mendiola, 99 B.R. 864, 866-68 (Bankr. N.D. Ill. 1989) (noting that it is unnecessary to file proof of claims in "no asset" bankruptcy). Stolfo cites 11 U.S.C. § 523(a)(3), but that statute merely provides a discharge exception for creditors who are not notified of a bankruptcy in time to file proof of claims or adversary complaints. It does not impose affirmative requirements on creditors. Id. The claims-allowance process, which relates to the distribution of assets from the bankruptcy estate, was simply irrelevant to KinderCare's adversary complaint alleging nondischargeability for willful and malicious injury. See In re Mendiola, 99 B.R. at 866-68.
To the extent Stolfo contends that his motions sought reconsideration of the original nondischargeability finding under Rule 60(b) of the Federal Rules of Civil Procedure, this argument fares no better. Reconsideration under Rule 60(b) is left to the bankruptcy judge's discretion. Stoller v. Pure Fishing Inc., 528 F.3d 478, 480 (7th Cir. 2008); see FED. R. BANKR. P. 9024. It is an inappropriate vehicle in which to rehash arguments that were or could have been dealt with during the adversary proceeding. See Stoller, 528 F.3d at 480; In re Outboard Marine Corp., 386 F.3d at 828. Stolfo has been told countless times that his arguments are meritless, so the bankruptcy judge did not err by rejecting his latest attempt to avoid paying the sanctions.
There is thus no reason to address any of the other arguments Stolfo makes in his nearly incoherent appellate briefs, particularly his request that we "order that all orders and sanctions entered against Stolfo in Illinois trial courts and Appellate Courts are Void." Under the Rooker-Feldman doctrine, we cannot overturn the state courts' underlying sanctions judgments. See D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983); Rooker v. Fid. Tr. Co., 263 U.S. 413 (1923); cf. Richardson v. Koch Law Firm, P.C., 768 F.3d 732, 733-34 (7th Cir. 2014) (explaining that the Rooker-Feldman doctrine applies when the state court's judgment, as opposed to collection attempts, "is the source of the injury of which plaintiffs complain").
Stolfo raises no issue in these appeals that he has not already waived or been repeatedly told is frivolous. We now sanction Stolfo with a fine of $1,000 in each appeal for a total of $2,000. If the fines are not paid within two weeks, we will enter an order under Support Systems International, Inc. v. Mack, 45 F.3d 185, 186 (7th Cir. 1995), barring him from filing papers in any federal court within this circuit except for defense of criminal cases or applications for writs of habeas corpus on behalf of clients. We also direct the clerk of this court to transmit a copy of this order to Illinois's Attorney Registration and Disciplinary Commission for any action it deems appropriate.
The judgments of the district court are AFFIRMED.