In re Hakalir
| Decision Date | 26 July 2021 |
| Docket Number | 19 B 5093,19 A 817 |
| Parties | In re: JACOB HAKALIR, Debtor. v. JACOB HAKALIR, Defendant. LOUIS WELTMAN, Plaintiffs, |
| Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois |
Jacob Hakalir ran Jordan Equity Group, and his brother, Evan, ran Andy and Evan Industries. In 2017, Hakalir asked Louis Weltman to lend him money so that Evan's company could invest in a line of children's clothing and Jordan could participate in a real estate venture. Hakalir assured Weltman he could repay the loan. Weltman made the loan. But rather than use the money as he said he would, Hakalir sent most of it to Evan. Hakalir never repaid the loan. Instead, he filed a chapter 7 bankruptcy case.
Before the court for ruling is Weltman's motion for summary judgment on his adversary complaint against Hakalir. Weltman alleges that Hakalir's debt is nondischargeable.
As explained below, the motion will be denied. Weltman failed to serve Hakalir properly with the required notice to pro se litigants explaining summary judgment procedure, and the failure was prejudicial. Weltman's motion also depends almost entirely on Hakalir's failure to answer a request for admissions, and Weltman served the request improperly leaving his motion effectively unsupported. But even if Weltman's facts had been both supported and undisputed they would not prove any of his non-dischargeability claims.
The court has subject matter jurisdiction over this matter under 28 U.S.C. § 1334(b) and the district court's Internal Operating Procedure 15(a). This is a core proceeding. 28 U.S.C. § 157(b)(2)(I).
Summary judgment is appropriate if there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a) (made applicable by Fed.R.Bankr.P. 7056). The court's task on summary judgment is to decide whether any material dispute of fact requires a trial. Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003). In making that decision, the court draws all reasonable inferences from the evidence in the non-movant's favor. Joll v. Valparaiso Cmty. Sch., 953 F.3d 923, 928 (7th Cir. 2020).
When the plaintiff is the movant, he has the initial burden of showing there are no factual disputes. Celotex v. Catrett, 477 U.S. 317, 323 (1986). The movant can meet his burden with many different materials - "depositions, documents, electronically stored information, affidavits or declarations, stipulations . . ., admissions, interrogatory answers," and so on, Fed.R.Civ.P. 56(c)(1)(A) - as long as they are admissible in evidence. Widmar v. Sun Chem. Corp., 772 F.3d 457, 460 (7th Cir. 2014).
The bankruptcy court's local rules set out a procedure for summary judgment motions - one essentially identical to the district court's procedure - designed to simplify decisions about whether material facts are in dispute. See L.R. 7056-1, 7056-2. The movant must submit a statement of facts consisting of short, numbered paragraphs with citations to evidence supporting each statement. L.R. 7056-1(B). The nonmovant must then respond to each statement, admitting or denying it, and including, "in the case of any disagreement," references to supporting evidence. L.R. 7056-2(A)(2)(a). The nonmovant may also submit a statement offering additional facts, again with citations to supporting evidence. L.R. 7056-2(A)(2)(b).
Responding to a statement of facts is straightforward. Maxwell v. Penn Media (In re marchFirst, Inc.), Nos. 01 B 24742, 03 A 1141, 2010 WL 4027723, at *2 (Bankr. N.D.Ill. Oct. 14, 2010). The respondent can admit facts, deny facts (with citations to evidence supporting the denial), or suggest under Rule 56(d) that for specified reasons essential facts cannot be presented. Id. He can also object that the evidence supporting a particular fact is inadmissible. Id. But "[t]here are no other options." Id. Responses of any other kind admit the facts stated. Id.; see also L.R. 7056-1(C), 7056-2(B).
Weltman's motion will be denied. Although Hakalir failed to respond to Weltman's statement of facts as the local rules required (since he cited no evidence for the facts he disputed), Hakalir is pro se. He was therefore entitled under L.R. 7056-3 to a notice explaining summary judgment procedure. Weltman served the notice, but he did so improperly, making the notice he served a nullity. His failure to serve the notice prejudiced Hakalir. To support his motion, Weltman also relied heavily on facts he says Hakalir admitted when he failed to respond to a request to admit. That request, too, Weltman served improperly, so Hakalir's failure to respond admitted nothing. Setting these problems aside, finally, and assuming all of the motion's facts were both supported and undisputed, they would not entitle Weltman to judgment as a matter of law.
Weltman's motion fails right out of the gate because he failed to serve Hakalir with the required notice describing summary judgment procedure in terms he could understand.
In answering the motion, Hakalir did not file a separate response under L.R. 7056-2 to Weltman's facts and a memorandum of law. He submitted a single, four-page document entitled "response" that purported to answer Weltman's L.R. 7056-1 statement of facts. In the response, Hakalir admitted some facts and denied others - but he cited no evidence to support his denials, as the local rules require. See L.R. 7956-2(A)(2)(a). Without evidentiary support, the denials would constitute admissions. Chuipek v. Gilmore (In re Gilmore), 590 B.R. 819, 832 (Bankr. N.D.Ill. 2018); Maxwell, 2010 WL 4027723, at *2 (). So ordinarily Hakalir would have admitted all of Weltman's facts.
Ordinarily, but not here. Hakalir is not a lawyer and is pro se. Because he is pro se, he had a right to receive the notice under Local Rule 7056-3 giving unrepresented parties a plain-English explanation of summary judgment procedure. See L.R. 7056-3; see also Timms v. Frank, 953 F.2d 281, 285 (7th Cir. 1992); Lewis v. Faulkner, 689 F.2d 100, 102 (7th Cir. 1982). Weltman served Hakalir with a notice, but the notice was the one prescribed in the district court's local rule (L.R. 56.2), not the bankruptcy court's local rule. (Dkt. No. 50). Weltman later corrected the error and served the notice under L.R. 7056-3. (Dkt. No. 55).
Both times, though, Weltman served the notice improperly. Service had to comply with Rule 5 of the Federal Rules of Civil Procedure, see Fed. R. Civ. P. 5(a)(1)(E) () (made applicable by Fed.R.Bankr.P. 7005). Rule 5 allows for service to a registered user of the court's electronic-filing system or "by other electronic means that the person consented to in writing." Fed.R.Civ.P. 5(b)(2)(E). Weltman served Hakalir with the L.R. 7056-3 notice by email. Hakalir is not a registered user of the court's CM/ECF system, and nothing in the record shows he consented in writing to email service. Service of the notice by email was therefore invalid. It was as if Weltman had never served Hakalir with the notice at all.
Granted, failing to give a L.R. 7056-3 notice is not always fatal. Summary judgment need be denied only if the failure was prejudicial. Timms, 953 F.2d at 286. Here, though, it was. Had Hakalir supported his denials of Weltman's facts with evidence, the denials would have produced factual issues for trial. For example, Weltman said that in deciding to lend Jordan money he relied on certain representations Hakalir made. Hakalir denied making most of them (L.R. 7056-2(A) Response ¶¶ 13(b), (d), (g)) and denied making another with fraudulent intent (id. ¶ 13(d)). Because Hakalir is pro se, he evidently failed to realize he had to support his denials. (A simple verification would have done the trick.) That was prejudicial. See Dirig v. Wilson, 609 Fed.Appx. 857, 860-61 (7th Cir. 2015) ().
Because Weltman failed to serve the required L.R. 7056-3 notice properly and the failure was prejudicial, his motion for summary judgment must be denied.
Weltman's motion would have to be denied even if he had given Hakalir the required notice. Weltman failed to meet his burden to show no factual issues for trial - again, because of a service problem.
Weltman supports his motion largely with facts he says Hakalir admitted by default when he failed to answer Weltman's Rule 36 request to admit, Fed.R.Civ.P. 36 (made applicable by Fed.R.Bankr.P. 7036)). That is, of course, an acceptable way to support a summary judgment motion. The recipient of a Rule 36 request typically has 30 days to respond; if he does not, he admits the facts asserted in the request. Fed.R.Civ.P. 36(a)(3). The resulting admissions "conclusively establish[ ]" the facts, unless the defaulting party seeks and receives leave to withdraw the admissions. Fed.R.Civ.P. 36(b). The admissions can "serve as the factual predicate for summary judgment." United States v. Kasuboski, 834 F.2d 1345, 1350 (7th Cir. 1987). Weltman served Hakalir with a request to admit, Hakalir did not answer it, and Hakalir has never asked to withdraw the resulting admissions.
Again though, the problem lies in the way Weltman accomplished service. Weltman served the request by email (L.R. 7056-2(A) Response ¶ 9), just as he did the L.R. 7056-3 notice. Service of ...
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