In re Sharif

• Court: U.S. Bankruptcy Court — Northern District of Illinois
• Writing for the Court: Jacqueline P. Cox, United States Bankruptcy Judge
• Citation: In re Sharif, 564 B.R. 328 (Bankr. N.D. Ill. 2017)
• Decision Date: 16 February 2017
• Docket Number: Case No. 09 B 5868
• Parties: IN RE: Richard SHARIF, Debtor.

564 B.R. 328

IN RE: Richard SHARIF, Debtor.

Case No. 09 B 5868

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

Signed February 16, 2017

Richard Sharif, Chicago, IL, pro se.

Ean L. Kryska, ABM Industries, Inc., Chicago, IL, Bruce E. de' Medici, Oak Park, IL, for Trustee.

Julia Jensen, Smolka Dimonte & Lizak, LLC, Park Ridge, IL, for 3rd Party Plaintiff.

Memorandum Opinion on Rule 9011 Violations (Dkt. No. 257)

Jacqueline P. Cox, United States Bankruptcy Judge

I. Background and Facts

This matter involves a series of related cases that have been heard over the past fifteen years in the District Court for the Northern District of Texas, the Fifth Circuit Court of Appeals, the Bankruptcy Court for the Northern District of Illinois, the District Court for the Northern District of Illinois, the Seventh Circuit Court of Appeals and the U.S. Supreme Court.

This Court's lengthy April 25, 2016 Memorandum Opinion on two motions, a Motion for Leave to Commence an Action Against the Trustee and His Counsel and a Motion for Funds From the Trust ("Motions"), covers information about the trajectory of these matters from 2002 through 2016. Sharifeh v. Sharif (In re Sharif ) 549 B.R. 485 (Bankr. N.D. Ill. 2016). That Opinion included an Order that Attorney Maurice James Salem, Ragda Sharifeh and Haifa Sharifeh show cause why they should not be sanctioned for violating Federal Rule of Bankruptcy Procedure 9011(b)(1–3).

Each respondent, Mr. Salem, Ragda Sharifeh and Haifa Sharifeh, appeared at the June 21, 2016 show cause hearing. Each respondent filed a written response, at Dkts. 297 and 302. This matter was taken under advisement by this Court on October 18, 2016 after each party was heard on the issues herein.

The April 25, 2016 Memorandum Opinion will be included herein in amended form to provide context to the findings that the Motions were presented in violation of Federal Rule of Bankruptcy Procedure 9011 because they were based on insufficient legal grounds, that they were not warranted by existing law and that they had no evidentiary support.

This Court also finds that the Mandate Rule binds the parties and this Court to comply with the letter and spirit of the appellate mandates issued by both the District Courts and the Seventh Circuit Court of Appeals affirming previous rulings that the trust in issue became property of Richard Sharif's bankruptcy estate as of February 24, 2009, the date he filed for bankruptcy relief. In re Continental Illinois Securities Litigation , 985 F.2d 867, 869 (7th Cir. 1993) ("Judicial mandates must be obeyed, and litigation must have an end.") It is time to end this litigation.

This Court finds that the two Motions were presented by Attorney Maurice James Salem and his clients Ragda Sharifeh and Haifa Sharifeh to harass the bankruptcy Trustee, cause unnecessary delay and to increase the cost of litigation. The respondents argue that because the Court did not set a briefing schedule the Trustee did not incur costs in responding to the motions. However, review of the Trustee's Attorney's Application for Compensation dated January 3, 2017 at Dkt. 321, p.7 shows that the fee request covers work done by him in the appeal of the two orders that resolved the Motions. In In re Royal Manor Management, Inc. in affirming the imposition of sanctions against an attorney for vexatiously multiplying proceedings, the Sixth Circuit stated that "[l]itigation tactics that hinder a final resolution of controversies are always unwelcome. In the context of the collective creditor remedy that bankruptcy provides, tactics that delay and reduce the percentage dividend to holders of allowed claims warrant special scrutiny." 652 Fed.Appx. 330, 335 (6th Cir. 2016). The repeated filings herein were aimed at undoing settled issues. They have delayed the resolution of this case and wasted the time and resources of other parties and the Court.

Mr. Salem and his clients have unnecessarily increased the bankruptcy estate's litigation expenses.

For the reasons noted herein this Court will sanction Attorney Maurice James Salem by barring him from ever filing any pleadings in this bankruptcy case or any related adversary proceeding without prior leave of this Court. In addition, a $20,000 fine is being imposed on Mr. Salem pursuant to Federal Rule of Bankruptcy Procedure 9011(c)(2) which states that a sanction imposed for violation of the Rule may include an order to pay a penalty into court.

Ragda Sharifeh and Haifa Haj Sharifeh are ordered to never again file any pleading in this bankruptcy case or any related adversary proceeding.

A. Latest Motions

On February 15, 2016, Ragda Sharifeh and Haifa Sharifeh filed a Motion for Leave to Commence an Action Against the Trustee and his Counsel. Bankr. 09–05868, Dkt. 253.¹ That same day, Ragda Sharifeh, individually, filed a Motion for Funds from the Trust. Bankr. 09–05868, Dkt. 254. Ragda Sharifeh also filed a notice of dismissal pursuant to Rule 41(a)(1)(A)(I) of the Federal Rules of Civil Procedure in Adversary Proceeding 12–00430. Attorney Maurice James Salem filed each of these pleadings. Each pleading concerns the disposition of the Soad Wattar Revocable Living Trust (hereinafter the "Soad Wattar Trust" or the "Trust"). At the hearing of the motions on February 18, 2016, counsel for Horace Fox, Jr., not individually but as Chapter 7 Trustee (the "Trustee") for Richard Sharif (the "Debtor"), urged the Court to dismiss the adversary proceeding with prejudice and set a briefing schedule for the two Motions. The Court took all the matters under advisement.

On April 25, 2016 this Court denied both Motions. The Motion for Leave to Commence an Action Against the Trustee and his Counsel was denied for failure to establish a prima facie claim against the Trustee.

At the February 18, 2016 presentment hearing, counsel for the movants, Mr. Salem, was asked if there was any statutory or contractual basis for the Motion for Funds from the Trust. He failed to articulate any basis for the request in open court or in his motion. That motion was also denied. Dismissal of Adversary Proceeding 12–00430 was granted without prejudice pursuant to Rule 41(a)(1)(A)(I) of the Federal Rules of Civil Procedure. Federal Rule of Bankruptcy Procedure 7041 applies Rule 41 to adversary proceedings.

II. Jurisdiction

The Court had jurisdiction to hear these matters pursuant to 28 U.S.C. § 1334(a) which provides that district courts have original and exclusive jurisdiction of all cases under title 11, the Bankruptcy Code ("Code"). Under 28 U.S.C. § 157(a), the district courts may refer title 11 cases to the bankruptcy judges in their districts. The District Court for the Northern District of Illinois has promulgated Internal Operating Procedure 15(a) which refers its bankruptcy cases to the judges of this Court.

As allowed by 28 U.S.C. § 157(b)(1), a bankruptcy judge to whom a case has been referred may enter final judgment on core proceedings arising in or under the Bankruptcy Code. Core proceedings include "proceedings affecting the liquidation of the assets of the estate," 28 U.S.C. § 157(b)(2)(O ), and matters concerning the administration of the estate, 28 U.S.C. § 157(b)(2)(A). Ragda Sharifeh's Motion for Funds from the Trust requests the turnover of funds from property of the estate. The remaining matters deal with issues involving the administration of the estate and this bankruptcy case as a whole. The motions are core proceedings in which this Court may enter a final order.

The facts of this case have been the subject of numerous court rulings. However, given the moving parties' repeated attempts to play fast-and-loose with this and other courts, the Court will nonetheless take the time to recite the facts to set forth a complete record. The following facts are taken from the pleadings as well as from matters that the Court can take judicial notice of, such as its docket and the public record. See e.g. , In re Brent , 458 B.R. 444, 455 n.5 (Bankr. N.D. Ill. 2011) ("The court can take judicial notice of matters in its own records.")

III. Pre–Bankruptcy Filing

A. Northern District of Illinois

Wellness International Network, LTD ("WIN") is a producer of health and wellness supplies; it had an agreement with the Debtor for him to be WIN's distributor. When the relationship soured, the Debtor filed a lawsuit in the District Court for the Northern District of Illinois alleging that WIN was involved in an illegal pyramid scheme, that it had violated the Racketeer Influenced and Corrupt Organizations Act, federal securities law and the Illinois Consumer Fraud Act, voiding the contract as a matter of public policy. See Sharif v. Wellness Intern. Network, Ltd. , 376 F.3d 720, 722 (7th Cir. 2004).²

WIN filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6) and under 28 U.S.C. § 1406(a) alleging improper venue. Id. at 723.

On October 20, 2003, WIN also brought a motion to compel arbitration. On October 23, 2003, the court held a hearing on the motion; attorneys for all parties were present. The court found that the motion to compel arbitration was "superfluous" because WIN's motion to dismiss already discussed both venue and the arbitration clause. The court ruled that it would deny the motion not on the merits but due to the pending motion to dismiss. Id. WIN appealed that ruling. WIN then moved to stay the proceedings pending appeal. The motion was fully briefed but at the next status date counsel for the plaintiffs failed to appear. Days later, the court dismissed the case without prejudice for want of prosecution. After the court denied two motions to vacate, the plaintiffs ultimately appealed as well. Id. On appeal, the Seventh Circuit vacated the dismissal order and reversed the denial of WIN's motion to compel arbitration. Id. at 727.

On remand, the court divided the plaintiffs' claims into two categories. The first category included seven claims which the parties agreed were subject to the arbitration clause. The...