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Stevens v. Sharif

United States District Court, N.D. Illinois, Eastern Division

February 2, 2017

William J. Stevens, Plaintiff,
v.
Richard Sharif, Defendant.

          MEMORANDUM OPINION AND ORDER

          Honorable Thomas M. Durkin United States District Judge.

         William Stevens, an attorney, alleges that his former client, Richard Sharif, failed to pay him for legal services. R. 1. Sharif has filed a counterclaim for malpractice against Stevens. R. 51. Sharif's sister, Haifa Sharifeh, [1] has filed a motion to intervene in Sharif's malpractice claim on behalf of the Estate of Sharif's mother (the “Estate”). R. 88. Stevens has objected to intervention, and made arguments that the Estate has failed to state a claim. R. 94. For the following reasons, the Court grants the Estate's motion to intervene, but dismisses its claim.

         Background

         Stevens agreed to represent Sharif in bankruptcy proceedings and subsequent appeals. R. 1 ¶ 7. Although neither party addresses the details of the bankruptcy proceedings in this case, the Supreme Court reviewed the facts in Wellness Int'l Network, Ltd. v. Sharif, 135 S.Ct. 1932, 1940 (2015). According to the Supreme Court, Sharif entered into a business contract with Wellness International Network but later sued the company in a federal court in Texas. Id. “Sharif repeatedly ignored Wellness' discovery requests and other litigation obligations, resulting in an entry of default judgment [and an award of attorney's fees] for Wellness.” Id.

         In part as a result of the debt he incurred in the Wellness case, Sharif filed for Chapter 7 bankruptcy in the Northern District of Illinois in 2009. Id. Sharif was unable to discharge his debts, in part, because Wellness discovered a loan application document in which Sharif purported to own over $5 million in assets in a trust established in the name of Sharif's mother (the “Trust”). Id. On July 6, 2010, the bankruptcy court found that the Trust's assets were property of Sharif's bankruptcy estate and subject to Sharif's creditors. See R. 94-1 at 238-55; see also Wellness Int'l, 135 S.Ct. 1932 at 1941. Haifa was listed as one of Sharif's creditors in the bankruptcy proceedings. See R. 94-1 at 319.

         Sharif alleges Stevens committed malpractice when he failed to present evidence that Sharif did not own the Trust. R. 51 ¶ 3. Haifa and the Estate seek to intervene in this claim on the basis that the evidence Stevens allegedly failed to present to the bankruptcy court were documents that Sharif's mother provided to Stevens. See R. 88-1 ¶ 6. Sharif, Haifa and the Estate contend that these documents would have demonstrated that Sharif was not the alter ego of the Trust such that it was not a part of Sharif's bankruptcy estate.

         Sharif, Haifa and the Estate also allege that Stevens committed malpractice when he failed to raise an objection to the bankruptcy court's jurisdiction on appeal based on the Supreme Court's decision in Stern v. Marshall, 564 U.S. 463 (2011). R. 51 ¶ 4. Stevens failed to cite Stern in the initial brief he filed on Sharif's behalf in the district court on August 9, 2011. See Sharif v. Wellness Int'l Network, Ltd., 10 C 5303, R. 17 (N.D. Ill. Aug. 9, 2011). Stevens also failed to cite Stern in the reply brief he filed on September 21, 2011. See 10 C 5303, R. 24. Stevens did, however, move to file a supplemental brief addressing Stern on January 12, 2012, after the Seventh Circuit issued its decision in In re Ortiz, 665 F.3d 906 (7th Cir. 2011), which explained Stern's impact. See 10 C 5303, R. 28. The district court denied this motion and affirmed the bankruptcy court's decision. See Sharifeh v. Fox, 2012 WL 469980 (N.D. Ill. Feb. 10, 2012).

         Haifa's sister Ragda, purportedly acting on behalf of the Trust, joined Sharif's district court appeal, represented by attorney Garett Reidy. Ragda, through Reidy, filed a motion in the district court to withdraw the reference to the bankruptcy court, which was denied. See 10 C 5303, R. 30. Reidy also represented Haifa and Ragda in a state court action attempting to protect the Trust's assets from the bankruptcy court's order, which was filed on July 30, 2010. See R. 94-1 at 258-66.

         Sharif, again represented by Stevens, appealed the district court's decision. See R. 68-1. In his opening brief filed in the Seventh Circuit on April 10, 2012, Stevens again failed to make an argument based on Stern. See Sharif v. Wellness Int'l Network, 12-1349, R. 13 (7th Cir. Apr. 10, 2012). He did, however, include this argument in his reply brief filed on May 30, 2012. See 12-1349, R. 29. Despite Steven's failure to raise a Stern objection in his opening brief, the Seventh Circuit held on August 21, 2013 that a Stern objection could not be waived, and reversed the district court, holding “the bankruptcy court lacked constitutional authority to enter final judgment.” Wellness Int'l Network, Ltd. v. Sharif, 727 F.3d 751, 775-76 (7th Cir. 2013).

         Ragda, again purportedly on behalf of the Trust, also participated in the proceedings in the Seventh Circuit, again represented by Reidy. Ragda argued that she should be a party to the appeal on behalf of the Trust, because the Trust was a party to the bankruptcy court proceedings through Sharif as trustee, and Sharif had resigned his position as trustee. See 12-1349, R. 8-1 (April 9, 2012). The Seventh Circuit denied Ragda's motion to substitute herself as a party on behalf of the Trust in the appeal, see 12-1349, R. 15 (April 23, 2012), and denied Ragda's subsequent motion for reconsideration holding that the “failure to identify a party as an appellant in the notice of appeal is a jurisdictional bar to hearing that party's appeal.” See 12-1349, R. 30 (June 25, 2012).

         In 2015, the Supreme Court reversed the Seventh Circuit's reversal of the bankruptcy court's order, holding that adjudication by an Article III judicial body was a personal right and could be waived by a litigant, as opposed to a constitutional right that cannot be waived. Wellness Int'l, 135 S.Ct. at 1942-47. It remanded the case to the Seventh Circuit, with instructions to decide whether Sharif waived this jurisdictional right by failing to raise a Stern objection until his reply brief. Id. at 1949. On remand, the Seventh Circuit held on August 4, 2015 that Sharif “waited too long to raise his Stern objection because he did not mention the issue until his reply brief, ” and on that basis, the court affirmed the district court's decision against Sharif. Wellness Int'l Network, Ltd. v. Sharif, 617 Fed. App'x 589, 590-91 (7th Cir. 2015).

         On September 16, 2015, Haifa, represented by Maurice Salem (who also represents Sharif and Haifa in this case), brought a motion in the bankruptcy court seeking to vacate the bankruptcy court's order for turnover of the trust's assets to Sharif's creditors. See R. 94-1 at 1. The bankruptcy court denied that motion, stating that it was “not convinced based on the scant record herein that the movant is a party entitled to notice of the motion on which the [turnover] order was based.” Id. at 5. The bankruptcy court continued, “[t]here isn't even a suggestion of evidence or information that the property of the bankruptcy estate dealt with in the [turnover] order belonged to a person or entity not then before the court.” Id. The bankruptcy court noted further that if Haifa disagreed with the turnover order, she should have opposed it at the time, since she was listed as one of Sharif's creditors, and as such would have received notice of the order. Id. The bankruptcy court held that Haifa had failed to “show that she has standing to seek anything from the bankruptcy estate and has not explained what property the trustee holds that rightfully belongs to an entity she represents.” R. 94-1 at 23.

         On November 30, 2015, Haifa, again represented by Mr. Salem, filed an appeal in the district court of the bankruptcy court's order denying the motion to vacate. See Sharifeh v. Sharif, 15 C 10694, R. 1 (N.D. Ill. Nov. 30, 2015). Judge Dow recently denied that appeal on September 26, 2016. See Sharif, 2016 WL 5373199. Haifa has filed a motion to reconsider that is pending as of the date of this opinion.

         Not to be deterred, on February 25, 2016, Haifa, again represented by Mr. Salem, brought another motion in the bankruptcy court challenging the July 6, 2010 ruling. See R. 94-1 at 25-105. The motion was based in part on a purported will by Sharif's mother naming Haifa as executrix. This will contradicted the will produced during the bankruptcy proceedings in 2010, and the bankruptcy court found it “highly suspect” and disregarded it. R. 94-1 at 81. The bankruptcy court's order also described other suspicious activity by Haifa, Ragda, and Mr. Salem in connection with their efforts to reclaim the Trust's assets. The bankruptcy court found that Haifa, Ragda, and Mr. Salem had “shown a complete disregard for the judicial system and blatant attempts at circumventing it, ” by inappropriately repeatedly challenging the “settled” finding that ...


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