In re: Joseph H. Golant

• Decision Date: 12 February 2001
• Docket Number: No. 00-1205,00-1205
• Citation: 239 F.3d 931
• Parties: (7th Cir. 2001) In re: Joseph H. Golant, Debtor. Joseph H. Golant, Appellant, v. Abraham Levy, Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 931

239 F.3d 931 (7th Cir. 2001)

In re: Joseph H. Golant, Debtor.

Joseph H. Golant, Appellant, v. Abraham Levy, Appellee.

No. 00-1205

In the United States Court of Appeals For the Seventh Circuit

Argued September 14, 2000

Decided February 12, 2001

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 98 C 7452--James B. Moran, Judge. [Copyrighted Material Omitted] Before Cudahy, Easterbrook and Ripple, Circuit Judges.

Cudahy, Circuit Judge.

This case involves the latest wranglings in an ongoing dispute between Joseph Golant, a patent attorney, and Abraham Levy, an inventor and one of Golant's former clients. From 1984 to 1990, Golant provided Levy with legal services relating to a product known as the car shade, a folding device placed on the dashboard of a parked car to protect the car's interior from the sun. Levy ceased paying for Golant's services when Golant refused to provide him with more detailed billing records. As a result of Levy's refusal to pay, Golant filed a breach of contract claim against Levy in California state court in 1991. Levy cross- complained, alleging that Golant had overbilled him by $1.5 million.

On March 21, 1996, Golant filed for Chapter 7 bankruptcy protection, 11 U.S.C. sec.sec. 701- 766, before the California trial reached judgment. Levy, apparently worried that his cross-claim against Golant might be discharged in bankruptcy, filed a two-count adversarial complaint in Golant's bankruptcy proceeding on October 28, 1996. Count one of the complaint sought to deny Golant a general discharge of his debts under Section 727(a) of the Bankruptcy Code, 11 U.S.C. sec. 727(a). Count two sought to deny Golant a specific discharge of Levy's debt under Sections 523(a)(4) and (a)(6) of the Bankruptcy Code, 11 U.S.C. sec. 523(a)(4) & (6).

On Levy's motion, the bankruptcy court bifurcated the adversary proceedings and tried count one of Levy's complaint first. In December 1997, Golant appeared pursuant to a notice for deposition and document production that had been served on him by Levy. At that time, Golant refused to tender all of the requested documents. As a result, Levy filed a motion to compel production on March 17, 1998. Over Golant's objection, the bankruptcy court granted Levy's motion and, in an order dated April 23, 1998, required Golant to produce within seven days: (1) documents relating to his credit and debit cards, including evidence of payment of card balances, and (2) documents relating to Golant's prepetition legal services from January 1995 to December 1996, including time records, billing statements, account ledgers and client names and addresses.

While Golant did produce a number of his records, he did not fully comply with the April 23 order. For example, Golant failed to produce his bank statements; bank books and check registers; names and addresses of all of his clients; and documents showing the case numbers, captions and courts in which he represented clients. In addition, Golant tendered a list of 32 clients, but produced billing records for only 19 of them.

In response to Golant's failure to comply with the April 23 order, Levy filed his first motion for entry of judgment as a discovery sanction. The bankruptcy court denied this motion, but, in an order dated May 8, 1998, required Golant to comply with the April 23 order by May 22. The court also warned Golant that it might deny him a discharge of his debts as a discovery sanction if he continued to fail to comply with the April 23 order. Levy filed a second motion for entry of judgment on May 18, 1998, but the court continued this motion to May 27, apparently because Levy had filed it before Golant's time to comply with the April 23 order had expired. Ultimately, Golant did not comply with the discovery orders, and the court set an evidentiary hearing for May 29 to determine the extent of Golant's failure to comply.

At the evidentiary hearing, Golant admitted to creating or receiving time records; billing statements; monthly bank statements for the account used in his practice; deposit slips from deposits of funds into his law account; a ledger for recording fees received; check stubs showing deposits of fees received; and documents with case numbers, captions and courts in which Golant represented clients. However, Golant produced none of these documents, maintaining that they had, for the most part, already been produced. Golant, however, did admit to not producing billing statements for some clients from whom he received money shortly before bankruptcy, even though he was required to produce these statements. Golant also admitted not producing documents evidencing payment of his credit card debts.

On September 8, 1998, the bankruptcy court entered a default judgment in favor of Levy on his adversary complaint as a discovery sanction under Federal Rule of Civil Procedure 37 (made applicable to bankruptcy proceedings by Federal Rule of Bankruptcy Procedure 7037). The court discussed Golant's failure to comply with its discovery orders and noted that Golant's "persistent refusal to abide [by] the provisions of the Bankruptcy Code and Rules is frustrating to the court, to say the least." Levy v. Golant (In re Golant), No. 96 B 007376, slip op. at 6 n.5 (Bankr. N.D. Ill. Sept. 8, 1998). The court further noted that "[t]here was no way that this Court could have tried this case . . . and no way that the court can try it now due to [Golant's] own actions and failures to act." Id. at 7. As a result of the sanction, Golant was denied a general discharge in bankruptcy. Golant appealed to the district court, which affirmed.

I

Before we address the merits of Golant's argument, we must determine whether we may properly exercise jurisdiction over this appeal. "[A] court of appeals has jurisdiction over a bankruptcy appeal only if the bankruptcy court's original order and the district court's order reviewing the bankruptcy court's original order are both final." In re Rimsat, Ltd., 212 F.3d 1039, 1044 (7th Cir. 2000) (and authority cited therein); see also 28 U.S.C. sec. 158(d).

We first consider the finality of the bankruptcy court's original sanction order. In the context of a bankruptcy proceeding, "[w]here an order terminates a discrete dispute that, but for the bankruptcy, would be a stand-alone suit by or against the trustee, the order will be considered final and appealable." Rimsat, 212 F.3d at 1044. Ordinarily, "a request for a declaration of nondischargeability is conceived as kicking off a separate, adversary proceeding within the framework of the overall bankruptcy proceeding, Bankruptcy Rule 7001(6), so that an order declaring the debt either dischargeable or not is a final, appealable order." In the Matter of Marchiando, 13 F.3d 1111, 1113-14 (7th Cir. 1994) (citing In re Riggsby, 745 F.2d 1153, 1154 (7th Cir. 1984)). Thus, had the bankruptcy court decided Levy's complaint on the merits, the court's order would easily qualify as the kind of final, appealable order over which we routinely exercise jurisdiction. However, the bankruptcy court did not decide Levy's complaint on the merits, and we must decide whether this wrinkle alters our jurisdiction.

In the bankruptcy context, most forms of discovery sanction had been considered final and appealable until Rimsat noted, without deciding, that this view may no longer be tenable in light of Cunningham v. Hamilton County, Ohio, 527 U.S. 198 (1999). See Rimsat, 212 F.3d at 1044 (discussing In re Wade, 991 F.2d 402, 406 (7th Cir. 1993)). In Cunningham, the Supreme Court ruled that an order imposing monetary sanctions upon an attorney in a civil case was not an immediately appealable final decision. 527 U.S. at 209-10. Thus, as noted by Rimsat, Cunningham might certainly be read to preclude the interlocutory review of monetary sanctions in bankruptcy cases as well.

However, Cunningham cannot be understood to preclude the immediate review of the entry of default judgment, at least in the bankruptcy context. The entry of default judgment is simply much more "final"--effectively terminating a party's litigation in court--than the imposition of monetary sanctions, which merely alter the litigation's course. Indeed, we were unable to uncover any cases discussing how Cunningham might alter the long-held view that sanctions which completely eliminate the possibility of a decision on the merits--such as a default judgment or dismissal--are "final" for the purpose of appeal. See, e.g., Ordower v. Feldman, 826 F.2d 1569, 1573 (7th Cir. 1987) (order in civil case dismissing complaint for untimely service is "final"); Aurora Bancshares Corp. v. Weston, 777 F.2d 385, 386 (7th Cir. 1985) (order in civil case dismissing suit as a sanction for discovery abuse is "final"). Consequently, regardless of how Cunningham might apply to the review of monetary sanctions in a bankruptcy proceeding, Cunningham does not preclude the review of a sanction imposing a default judgment. Therefore, the bankruptcy court's order here is a final, appealable order.

As noted, however, it is not enough for the bankruptcy court's order to be final; the district court's decision on appeal must be final as well. "[A]n order is considered 'final' for purposes of 28 U.S.C. sec. 158(d) when it 'finally determines' one creditor's position . . . ." In the Matter of Gould, 977 F.2d 1038, 1041 (7th Cir. 1986). A creditor's position has been finally determined when there is no need to remand a case to the bankruptcy court for further significant proceedings with regard to that creditor. See In the Matter of Lopez, 116 F.3d 1191, 1192 (7th Cir. 1997); In the Matter of Riggsby, 745 F.2d 1153, 1155 (7th Cir. 1984). Thus, "in cases like ours where the bankruptcy court is affirmed, 'the affirmance [is] a final decision appealable to us.'" In the Matter of Weber, 892 F.2d 534, 538 (7th Cir. 1989) (quoting In re Fox, 762 F.2d 54, 55 (7th Cir. 19...