Appeal from the United States District Court for the Northern District of Indiana, Hammond Division. No. 87-C-105, Rudy Lozano, Judge.
Manion and Kanne, Circuit Judges, and Pell, Jr., Senior Circuit Judge.
PELL, JR., Senior Circuit Judge
Plaintiffs-appellants William Hapaniewski ("Hapaniewski") and Edward Janski ("Janski") appeal the district court's denial of their motion to transfer venue and extend time to perfect service of process. They also appeal the district court's dismissal of their complaint, entry of sanctions against them pursuant to Fed.R.Civ.P. 11, and denial of their emergency Fed.R.Civ.P. 60(b) motion to reconsider their request to transfer venue and extend time to perfect service.
On April 13, 1981, Hapaniewski filed suit against the City of Chicago Heights ("City") in Illinois state court, claiming violations under state and federal statutory law (42 U.S.C. § 1983) and under the state and federal constitutions.*fn1 On City's motion, the Illinois trial court dismissed Hapaniewski's claims as time-barred by a two-year statute of limitations. The Illinois Appellate Court affirmed, and a subsequent petition for rehearing and motion for leave to appeal to the Illinois Supreme Court were denied.
On February 12, 1987, Hapaniewski filed a complaint in federal district court reciting the same four counts from the state court action but adding two new counts against the judges in the state trial and appellate courts. Although the complaint recited "Northern District of Illinois -- Eastern Division" as its heading, the complaint was actually filed in the "Northern District of Indiana -- Hammond Division." (Civil No. 87-C-105). In April of 1987, Hapaniewski filed a petition for a writ of certiorari to the United States Supreme Court. On July 28, 1987, the United States District Court for the Northern District of Indiana -- Hammond Division issued a Rule 36(b) Notice which indicated that the complaint would be dismissed unless good cause could be shown why service of process had not been made on the defendants within the required 120-day period. See N.D.Ind. Local Rule 36(b).
On August 5, 1987, both Hapaniewski and Janski (who are brothers and attorneys) filed responses in the Northern District of Indiana--Hammond Division, asking for an additional thirty days to perfect service of process. Two weeks later, Janski obtained approval to act as counsel until local counsel could be retained. At the granting of this motion, the court directed that Hapaniewski had until September 16, 1987 to perfect service. On September 14, 1987, however, Hapaniewski filed a motion seeking to have the court transfer venue "in the interest of justice" under 28 U.S.C. § 1406(a), and also requesting an additional thirty-day extension to perfect service of process. On October 5, 1987, while the motion to transfer was pending, the United States Supreme Court vacated the Illinois Appellate Court's judgment which had affirmed the dismissal of Hapaniewski's state court case on statute of limitation grounds. Hapaniewski v. City of Chicago Heights, 484 U.S. 806, 108 S. Ct. 53, 98 L. Ed. 2d 17 (1987) (remanded in light of Goodman v. Lukens Steel Company, 482 U.S. 656, 107 S. Ct. 2617, 96 L. Ed. 2d 572 (1987)).
On April 17, 1988, the United States District Court for the Northern District of Indiana -- Hammond Division filed its judgment denying the motion to transfer venue, dismissing the action, and imposing sanctions on both Hapaniewski and Janski. The court denied the motion to transfer venue because it found: (1) the plaintiffs easily could have filed their complaint in an Illinois federal district court; (2) the plaintiffs conceded and the court could not disagree that the court could not assert personal jurisdiction in any way over the defendants; (3) the plaintiffs as attorneys should have known that venue was improperly laid; and (4) this error, surfacing seven months after the initial filing of the complaint and five months after the statute of limitations had run, was not the kind of innocent "mistake" found in Goldlawr, Inc. v. Heiman, 369 U.S. 463, 467, 8 L. Ed. 2d 39, 82 S. Ct. 913 (1962). The district court also noted that the defendants would "be greatly prejudiced because the statute of limitations [had] run and defendants [had] not received notice of the suit . . . ."
The court additionally determined that the suit was "frivolous, vexatious and not warranted by existing law . . . ." The court analyzed the three elements required for application of res judicata. See Torres v. Rebarchak, 814 F.2d 1219, 1222 (7th Cir. 1987). The court reviewed Illinois case law and concluded that the dismissal by the Illinois state court on statute of limitations grounds "[operated] as a dismissal on the merits." (citations omitted). The court reasoned that since the prior Illinois state proceeding had preclusively decided all "issues actually litigated" and also "those issues which could have been litigated," and since the state court judgment was a final adjudication of the matter, res judicata barred retrial in federal court.
Finally, the district court determined that both Hapaniewski and Janski violated Rule 11 for failing to properly inquire about the legal viability of their claims. The court specifically relied on the "established doctrines of full faith and credit" and res judicata in finding a violation of Rule 11 and imposing a $1,500.00 fine on each attorney. The local counsel, Steve H. Tokarski, was not fined because his name did not appear on any document of Hapaniewski's, but was warned by the court to "not take his position lightly . . . ."
Hapaniewski and Janski filed an emergency motion to reconsider the sanctions order and the denial of the motion to transfer venue, and a motion to stay the order pending appeal. The court denied the request, indicating that res judicata was a valid reason for imposing sanctions on the appellants despite the fact that the Supreme Court vacated the state court decision. The district court reasoned that the Supreme Court's action did not affect its decision but noted that pursuing the writ of certiorari was the proper method for redressing the, state court's decision. The court also cited the appellants failure to file in the proper forum and failure to allege jurisdiction over the defendants as proper reasons for invoking sanctions. Finally, the district court reviewed its decision to dismiss rather than transfer the case, and determined ...