Wisconsin District Court Rejects Effort to Attack Illinois Sanctions Award

David Novoselsky was sanctioned in the sum of $100,000 in the Circuit Court of Cook County for actions related to a case he was handling. For some reason, Novoselsky then filed a lawsuit in the federal district court for the Eastern District of Wisconsin to challenge the sanctions award.

His lawsuit was dismissed and the District Court awarded further sanctions for the filing of a frivolous lawsuit.

The district court dismissed the case for lack of subject matter jurisdiction under the Rooker-Feldman doctrine. That doctrine generally prohibits federal courts from reviewing State Court judgments.

The district court also awarded sanctions pursuant to Rule 11 and 28 U.S.C. §1927.

The court first ruled that the Rule 11 letter sent to Novoselsky constituted “substantial compliance” with the safe harbor requirement in Rule 11. That usually requires the moving party to serve an actual draft motion for sanctions on the other party. The letter was deemed sufficient in this case.

The district court then found that Novoselsky’s arguments for jurisdiction were frivolous:

The Court agrees that these arguments were frivolous. It will address each in turn. First, and easiest, is Novoselsky’s claim that subject-matter jurisdiction could be premised on the Declaratory Judgment Act. It cannot. Rueth v. U.S. E.P.A., 13 F.3d 227, 231 (7th Cir. 1993). There is no ambiguity in the case law on this point; in any event, Novoselsky has apprised the Court of none. He should have known that this was an untenable argument.

Second, Novoselsky contended that the amount in controversy was satisfied as to Stevens because Judge Propes’s sanctions order “requires not only the payment of the face amount of $75,000 but interest accruing” on that sum. (Docket #23 at 5). However, the diversity statute, 28 U.S.C. § 1332, excludes interest. That statute requires that “the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs.” 28 U.S.C. § 1332(a). In her order, Judge Propes awarded Cushing the sum of $25,000 and Stevens $75,000. Neither meets the amount-in-controversy requirement standing alone. Anthony v. Sec. Pac. Finan. Servs., Inc., 75 F.3d 311, 315 n.1 (7th Cir. 1996). Judge Propes’ order that interest accrue on the amounts does not change things, since that interest is incidental, arising only by virtue of delay in payment, and is not itself a basis for the present suit. See Principal Mut. Life. Ins. Co v. Juntunen, 838 F.2d 942, 943 (7th Cir. 1988); 14AA Charles Alan Wright et al., Fed. Prac. & Proc. § 3712 (2011). Whatever post-judgment interest has accrued on these awards cannot be considered.

Moreover, the two amounts cannot be aggregated in order to cross the jurisdictional threshold; that is permitted “only if the defendants are jointly liable; however, if the defendants are severally liable, plaintiff must satisfy the amount in controversy requirement against each individual defendant.” LM Ins. Corp. v. Spaulding Enters. Inc., 533 F.3d 542, 548 (7th Cir. 2008). Novoselsky did not credibly contend that payment to Stevens would affect his obligation to Cushing, or vice versa, other than to baldly state that Judge Propes awarded them as a “unitary sum.” (Docket #23 at 6); Batson v. Live Nation Entm’t, Inc., 746 F.3d 827, 833 (7th Cir. 2014) (finding an argument “forfeited because it was perfunctory and underdeveloped”). A plain reading of her order reveals that the two awards are distinct despite being issued at the same time. Thus, this argument too was wholly meritless.[6]

Third, and finally, is Novoselsky’s allegation that personal jurisdiction existed over Movants. The Fourteenth Amendment’s Due Process Clause protects a defendant from being haled into court in a state where it has no meaningful connections. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 464 (1985). Due process requires that for personal jurisdiction to exist over a nonconsenting, out-of-state defendant, the defendant must have “certain minimum contacts with it such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'” Int’l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).

However, for specific personal jurisdiction—the only type arguably relevant in this case—mere minimum contacts are not enough. uBID, Inc. v. GoDaddy Grp., Inc.,623 F.3d 421, 429 (7th Cir. 2010). It is also important that the plaintiff’s claims arise from or relate to the defendant’s contacts with the forum State. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984)Int’l Shoe, 326 U.S. at 317-18. Specific personal jurisdiction exists only where the defendant’s contacts with the forum state “directly relate to the challenged conduct or transaction.” Tamburo v. Dworkin, 601 F.3d 693, 702 (7th Cir. 2010).

The sole allegation connecting Movants with the State of Wisconsin was their decision to preserve Judge Propes’ sanctions award by filing proofs of claim and an adversary complaint for nondischargeability in Novoselsky’s ongoing bankruptcy proceedings in this district. See (Docket #1 ¶ 7) (“[T]he dispute over the sum in controversy in this complaint arises from claims brought against Plaintiff by Defendants seeking relief against Plaintiff in the Courts of the Eastern District of Wisconsin.”). Those actions have nothing at all to do with Novoselsky’s claims in this case.

As the allegations of the complaint itself make clear, this case rests entirely on the parties’ interactions in Illinois. Novoselsky engaged in sanctionable conduct there, Judge Propes’ sanctions award was issued there, and the parties disputed the legality and interpretation of the sanctions award there. Id. ¶¶ 8-11. Indeed, even the several other cases that Novoselsky thought had some bearing on the sanctions award were all either Illinois state or federal cases. See id. ¶¶ 12-28. Although not relevant to the propriety of personal jurisdiction over Movants, it is worth noting as well that the breach-of-contract claim against the Estate was likewise based solely in agreements and conduct that occurred in Illinois. See id.¶¶ 29-33. Thus, while it is true that Movants sought to reap their sanctions award from Novoselsky’s bankruptcy estate, his claims regarding the sanctions award have no connection whatsoever to this State. Personal jurisdiction over Movants was not plausible in this case. See Burger King, 471 U.S. at 474-75 (a defendant must have sufficient contacts with the forum, related to the suit at bar, that it “should reasonably anticipate being haled into court [in the forum State]” on that suit).

Novoselsky’s opposition to Movants’ motion to dismiss did not help matters. It was scattered, incoherent, and quite clearly the product of no meaningful legal research. For instance, without any citation to authority, Novoselsky maintained that the Declaratory Judgment Act “on its face does provide for jurisdiction.” (Docket #23 at 5). This is simply not true.

The brief also fell well short on the matter of personal jurisdiction. Novoselsky stressed that Movants tried to obtain sanctions despite—for reasons he did not cogently explain—the need for those sanctions to be paid to the Estate. Id. at 8-9. This, he reasoned, represented Movants’ affirmative choice to enter Wisconsin and fight Novoselsky here over the sanctions award. See id. But here again, his brief is devoid of appeal to any authority other than, apparently, his own intellect.

Litigants of all kinds—and perhaps especially lawyer-litigants— should be expected to conduct reasonably careful research in finding that jurisdictional premises for suit are satisfied. Novoselsky did not do so, and that failure is worthy of sanctions. Movants’ cited cases support this view. First, in International Shipping Co., S.A. v. Hydra Offshore, Inc., 875 F.2d 388, 393 (2d Cir. 1989), plaintiff’s counsel was sanctioned for filing a complaint that on its face ran afoul of the complete diversity requirement of 28 U.S.C. § 1332. In particular, he had named aliens on both sides of the dispute, thereby clearly and unequivocally destroying diversity. Id. at 391. The jurisdictional defect was unmistakable to a reasonably prudent lawyer. Id.

Even more apt is a comparison to a prior instance in which a federal court meted out sanctions against Novoselsky. In MB Financial, N.A. v. Stevens, 678 F.3d 497, 498 (7th Cir. 2012), the Seventh Circuit affirmed a sanctions award against Novoselsky for frivolously removing an Illinois state case to federal court. The problems with removal were manifold— Novoselsky was not a party in the state case, much less a defendant; he did not secure any of the defendants’ consent to remove; removal was not proper because the defendants were all Illinois citizens; and the time for removal had long since expired. Id. at 498-99.

Here, as in numerous prior cases, Novoselsky offered outlandish jurisdictional claims backed up by uninformed, spurious arguments. The problems in this case would be plain to any lawyer of reasonable ability after consultation with pertinent authorities. Novoselsky apparently eschewed those authorities in favor of his own beliefs about what the law is. Consequently, the Court finds that Novoselsky’s jurisdictional contentions in this case were frivolous, violated Rule 11(b)(2), and are deserving of an appropriate sanction.[7]

In sum, the court awarded sanctions in the form of attorney’s fees, but the left the specific amount of those fees for a further hearing.

via NOVOSELSKY v. ZVUNCA, Dist. Court, ED Wisconsin 2017 – Google Scholar

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