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In re Taylor

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

July 17, 2017

CHARLES E. TAYLOR, II, Debtor, Defendants-Appellee. PATRICIA J. CAIARELLI, as Guardian, Plaintiff-Appellant,

         Appeal from: No. 12 A 1188


          Gary Feinerman Judge

         Patricia Caiarelli, acting as guardian for her minor son, sought relief under Federal Rule of Civil Procedure 60(b)(6) from a 2013 bankruptcy court order dismissing for lack of standing her adversary proceeding against the debtor, Charles Taylor II (“Taylor”). Docs. 1, 1-4. The bankruptcy court denied Caiarelli's motion, and she appeals. Doc. 1. The bankruptcy court's judgment is affirmed.


         Except where noted, the background is taken from the bankruptcy court's opinion, Caiarelli v. Taylor (In re Taylor), No. 12 A 1188 (Bankr. N.D.Ill. Oct. 12, 2016) (reproduced at Doc. 1-4).

         In 2005, William Ross Taylor (“William”)-Taylor's brother and Caiarelli's ex-husband-died in a boating accident. Caiarelli's and William's minor son, Alexander, was the primary beneficiary of William's estate. Taylor was, initially, the estate's personal representative; he was later replaced by Michael Longyear.

         In 2006, on Alexander's behalf, Caiarelli sued Taylor in Washington state court, alleging that he misappropriated from the estate funds intended for Alexander. The case proceeded to a jury trial, after which, in December 2011, the state court awarded the estate a $1.4 million judgment. On April 3, 2012, Longyear executed a document on the estate's behalf that purported to assign the state court judgment to Caiarelli for collection.

         Three weeks later, on April 23, 2012, Taylor filed for Chapter 11 bankruptcy. On July 31, 2012, Caiarelli commenced this adversary proceeding against Taylor. Caiarelli sought, essentially, a finding that Taylor's judgment debt to the estate was non-dischargeable and a ruling that Alexander was entitled to some of Taylor's property.

         Taylor moved to dismiss the adversary proceeding on the ground that Caiarelli lacked standing to enforce the state court judgment. Taylor argued that Caiarelli had failed to prove that the judgment was actually assigned to her, pointing to a letter from the state judge questioning whether Caiarelli had completed all the steps necessary to effectuate the assignment. After reviewing the state judge's letter and hearing argument on its significance, Doc. 10 at 286-322, the bankruptcy court held that Caiarelli had failed to establish her standing to bring the adversary proceeding and dismissed it on March 20, 2013. Id. at 254, 322-329. The dismissal order was docketed the next day, March 21. Doc. 5-2 at 13. Caiarelli did not appeal the dismissal to the district court, nor did she move the bankruptcy court for reconsideration.

         Instead, Caiarelli returned to the Washington state court, where she filed a motion to ratify the estate's attempted assignment to her of its judgment against Taylor. The motion was granted, and the state court entered an order ratifying the assignment on the morning of April 2, 2013, retroactive to the date of the assignment's execution. Doc. 12 at 98. Caiarelli's decision to obtain the ratification order set off a kerfuffle back in the bankruptcy court; two days later, on April 4, Taylor moved for sanctions, contending that Caiarelli's state court motion violated both the statutory discharge and plan injunctions then in effect. Doc. 15 at 262. The bankruptcy court granted the motion after an evidentiary hearing and entered a civil contempt order against Caiarelli and her attorneys, which led to monetary sanctions and vacatur of the ratification order.

         Caiarelli appealed the contempt order; the district court reversed the order and, on further appeal, the Seventh Circuit affirmed the district court. See In re Taylor, 793 F.3d 814 (7th Cir. 2015). In relevant part, the Seventh Circuit held that Caiarelli's seeking the ratification order was neither an impermissible attempt to collect a debt covered by the statutory discharge and plan injunctions, id. at 819-21, nor an impermissible “collateral attack” on the bankruptcy court's dismissal order, id. at 821-22, but rather simply an effort to “muster additional evidence” in preparation for bringing a Rule 60(b) motion in the bankruptcy court-which would be, the Seventh Circuit added, a permissible means by which to seek to undo the judgment, id. at 821. But the Seventh Circuit cautioned:

The bankruptcy court retains exclusive jurisdiction to determine whether Caiarelli has standing to pursue the adversary proceeding against Taylor. Upon receipt of the ratification order, the bankruptcy court is free to take it, leave it, or otherwise do with it what it pleases. See also McCormick, 230 F.3d at 327 (a court's decision to reinstate a case under Rule 60(b) amounts to “discretion piled on discretion.”) (internal quotation marks and citation omitted). As Appellees' counsel aptly noted at oral argument, the road to collection is an ‘uphill battle.'

Id. at 822 (citation omitted).

         Undaunted, Caiarelli commenced the charge. She first returned to Washington state court and, on October 9, 2015, secured reinstatement of the ratification order. More than four months later, on February 18, 2016, Caiarelli moved the bankruptcy court for relief from the dismissal order under Rule 60(b)(6), a catchall provision under which a party may, “[o]n motion and just terms, ” obtain relief from a judgment ...

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