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Scott Wallis v. Alan Levine

April 27, 2012

SCOTT WALLIS, APPELLANT,
v.
ALAN LEVINE, ET AL. APPELLEES.



The opinion of the court was delivered by: Judge George W. Lindberg

MEMORANDUM OPINION AND ORDER

Before the court is Scott Wallis's appeal from the September 20, 2011 decision of the bankruptcy court sua sponte dismissing his adversary complaint, and the bankruptcy court's November 1, 2011 decision denying his motion to reconsider. For the reasons stated below, the bankruptcy court's decisions are affirmed.

I. Procedural Background

Appellant is a former officer and shareholder of USA Baby, Inc., the debtor in a Chapter 7 bankruptcy proceeding, In re USA Baby, Inc., number 08 B 23564. On June 1, 2010, appellant and another officer and shareholder, Ron Eriksen, filed pro se adversary complaint number 10 A 01212 in the bankruptcy proceeding. The 118-page adversary complaint asserted 35 counts relating to breach of the automatic stay, violations of the Racketeering Influenced and Corrupt Organizations Act ("RICO"), and civil rights violations. The complaint named more than 100 defendants, including law firms, state court judges and court clerks, three Illinois counties, the States of Illinois and Ohio, and the United States, among others.

On July 20, 2010, the bankruptcy court sua sponte dismissed the adversary complaint for lack of standing and jurisdiction. The bankruptcy court found that any claims relating to violations of the automatic stay or RICO belonged to the debtor's estate, and could only be brought by the trustee. In addition, the bankruptcy court concluded that to the extent that appellant and Eriksen had asserted any individual claims, the bankruptcy court did not have jurisdiction over them. On appeal, this court found that the bankruptcy court erred in dismissing the adversary complaint without first giving appellant an opportunity to be heard, and remanded the case to the bankruptcy court for further proceedings. See Wallis v. Levine, No. 10 C 5497 (N.D. Ill. Mar. 11, 2011).

On August 23, 2011, the bankruptcy court gave appellant until September 13, 2011 to file a written response addressing the merits of the issues raised in the bankruptcy court's initial dismissal order and in motions to dismiss filed by the parties. The bankruptcy court also instructed appellant to attach a proposed amended complaint to his response if he sought to amend the complaint. The bankruptcy court warned appellant that if he failed to respond on the merits of the issues (such as by filing a discovery request instead of a response, for example), the court would dismiss the adversary complaint again. The bankruptcy court set the case for hearing on September 20, 2011.

Between August 23, 2011 and September 20, 2011, appellant filed more than 100 motions for default, 4 motions to strike various appellees' motions to dismiss, a motion to strike another appellee's answer, a "Memorandum of Law in Support of Default Judgment and Response in Opposition to Pre-Appeal Motions to Dismiss," a motion for leave to conduct discovery and supporting memorandum, and a motion for leave to amend his adversary complaint after conducting discovery.

On September 20, 2011, after hearing appellant's oral argument, the bankruptcy court again sua sponte dismissed appellant's adversary complaint. The bankruptcy court noted that it had given appellant an opportunity to respond in writing, and that appellant had still failed to address the issues of standing and jurisdiction. The bankruptcy court rejected appellant's oral argument that appellees should have provided notice to the trustee in Ron Eriksen's personal bankruptcy case, on the basis that appellant lacked standing to make the argument. The bankruptcy court also rejected appellant's oral argument that he can bring his claims as a result of the abandonment of the debtor's estate's claims to him, on the basis that these claims are not within the scope of the bankruptcy court's jurisdiction. The bankruptcy court stated that it continued to believe that its original grounds for dismissing the adversary complaint were correct, and concluded that the case should be dismissed again. Appellant filed a motion to reconsider the September 20, 2011 dismissal decision, which the bankruptcy court denied on November 1, 2011.

Appellant filed a pro se appeal of the bankruptcy court's September 20, 2011 dismissal decision, and the November 1, 2011 order denying his motion to reconsider. Eriksen is not a party to this appeal.

II. Issues on Appeal

Appellant's numerous issues for appeal can be condensed as follows:

1. Whether the bankruptcy court's procedure leading to its sua sponte dismissal was erroneous because:

a. the bankruptcy court failed to follow this court's instructions on remand;

b. the bankruptcy court denied appellant leave to conduct discovery and leave ...


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