Kimbrell v. Brown

• Decision Date: 11 July 2011
• Docket Number: No. 10–1029.,10–1029.
• Citation: 651 F.3d 752,55 Bankr.Ct.Dec. 24
• Parties: Melvin KIMBRELL, Plaintiff–Appellant,v.Kary BROWN and Koetter Woodworking, Inc., Defendants–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

651 F.3d 752

55 Bankr.Ct.Dec. 24

Melvin KIMBRELL, Plaintiff–Appellant,

v.Kary BROWN and Koetter Woodworking, Inc., Defendants–Appellees.

No. 10–1029.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 5, 2010.Decided July 11, 2011.

Kenneth B. Beljanski, Attorney, Brown & Brown, Fairview Heights, IL, Thomas Blumeyer Weaver (argued), Attorney, Armstrong Teasdale, St. Louis, MO, for Plaintiff–Appellant.Christopher P. Leritz (argued), Attorney, Leritz, Plunkert & Bruning, St. Louis, MO, for Defendants–Appellees.

Before EVANS, SYKES, and HAMILTON, Circuit Judges.SYKES, Circuit Judge.

Melvin Kimbrell, a citizen of Illinois, brought personal-injury claims against Kary Brown and Brown's employer, Koetter Woodworking, Inc., citizens of Indiana. After Brown notified the district court that he had filed for Chapter 13 bankruptcy, the district court stayed the case as to Brown, as required by the Bankruptcy Code. The district court then dismissed Kimbrell's claims against Koetter Woodworking with prejudice, finding that Kimbrell failed to exercise reasonable diligence in serving process under Illinois Supreme Court Rule 103(b).

Kimbrell appealed the district court's dismissal of his claims against Koetter Woodworking. We dismiss the appeal for lack of jurisdiction. The dismissal of Kimbrell's claims against Koetter Woodworking was not a final judgment because Kimbrell continues to seek adjudication of his claims against Brown.

I. Background

In October 2006 on a road in St. Clair County, Illinois, a tractor-trailer that Kary Brown was driving for Koetter Woodworking collided with a car in which Melvin Kimbrell was a passenger, causing physical injuries to Kimbrell. In October 2008, shortly before the two-year statute of limitations was to expire, see 735 Ill. Comp. Stat.. 5/13–202 (2011), Kimbrell filed personal-injury claims in Illinois state court against Brown and Koetter Woodworking. Kimbrell did not serve process on the defendants until eight months later in June 2009. The defendants removed the case to the Southern District of Illinois based on diversity jurisdiction. Brown then informed the district court that he had filed for Chapter 13 bankruptcy in February 2008. The district court stayed the case as to Brown pursuant to 11 U.S.C. § 362(a)(1), the provision of the Bankruptcy Code that mandates a stay of any proceeding against a bankruptcy petitioner for claims arising out of prepetition events. Koetter Woodworking, on the other hand, moved to dismiss Kimbrell's complaint for failure to exercise reasonable diligence in serving process under Illinois Supreme Court Rule 103(b). The district court noted that Illinois law “does not carry bright lines or finite deadlines” for serving process after filing a complaint. Kimbrell v. Brown, No. 09–cv–511–JPG, 2009 WL 5064384, at *3, 2009 U.S. Dist. LEXIS 118901, at *11 (S.D.Ill. Dec. 17, 2009). Instead, it calls for plaintiffs to “exercise reasonable diligence” in serving process, as measured by “the totality of the circumstances.” Ill. S.Ct. R. 103(b). After weighing the relevant circumstances, which we need not detail here, the district court granted the motion to dismiss. The district court never entered any judgment, however; the docket simply shows the case as “terminated” with respect to Koetter Woodworking, and no such entry appears for Brown.

Kimbrell appealed the district court's dismissal of his claims against Koetter Woodworking. We noted preliminarily that the district court's order of dismissal might not be a final appealable judgment and asked the parties to file memoranda on appellate jurisdiction. The parties did so, and we permitted the appeal to proceed but ordered the parties to more fully address appellate jurisdiction in their merits briefs.

II. Discussion

Kimbrell contends that we have jurisdiction over his appeal because the district court's dismissal of his claims as to Koetter Woodworking was an appealable final judgment under 28 U.S.C. § 1291. The final-judgment rule holds that a decision is final where it “ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment.” Wingerter v. Chester Quarry Co., 185 F.3d 657, 661 (7th Cir.1998) (quotation marks omitted). In other words, “[s]o long as the matter remains open, unfinished or inconclusive” in the district court, “there may be no intrusion by appeal.” Id. The purpose of § 1291 and the final-judgment rule “is to combine in one review all stages of the proceeding that effectively may be reviewed and corrected if and when final judgment results.” Id. at 662.

This case raises the question whether a district court's dismissal of claims against one defendant constitutes a final judgment when in the same case, the plaintiff's claims against another defendant were automatically stayed under 11 U.S.C. § 362(a)(1). Under this provision of the Bankruptcy Code, a petition for bankruptcy

operates as a stay, applicable to all entities, of the commencement or continuation ... of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title.

Id. The automatic stay “is designed to protect debtors from all collection efforts while they attempt to regain their financial footing.” In re Schwartz, 954 F.2d 569, 571 (9th Cir.1992); see also Easley v. Pettibone Mich. Corp., 990 F.2d 905, 910 (6th Cir.1993). By halting litigation against the debtor, the stay “gives the debtor a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.” H.R.Rep. No. 95–595, at 340 (1978), reprinted in 1978 U.S.C.C.A.N. 5963, 6296–97.

Kimbrell maintains that his lawsuit against Brown was void ab initio because it was filed during the pendency of Brown's bankruptcy petition in violation of the automatic-stay provision. Therefore, his argument goes, the only “true” defendant in the case was Koetter Woodworking, so the district court's order dismissing the claims against that defendant disposed of all claims against all “true” parties and is therefore a final appealable judgment.

Kimbrell may or may not be correct that his lawsuit against Brown was void ab initio. We have recognized that there is a “debate among the circuits over whether [actions filed in violation of the automatic stay] are void or merely voidable.” Middle Tenn. News. Co., Inc. v. Charnel of Cincinnati, Inc., 250 F.3d 1077, 1082 n. 6 (7th Cir.2001). We have had “no occasion to ... forage into the debate,” id., and this case doesn't present an opportunity to do so. Even assuming that Kimbrell's suit as to Brown was “void ab initio ” in the sense that other courts have used this term to describe actions filed in violation of the automatic stay, the Bankruptcy Code allows for later adjudication of such suits, which precludes finality under the circumstances presented here.

The Code gives the bankruptcy court broad authority to grant relief from the automatic stay “such as by terminating, annulling, modifying, or conditioning” the stay in various enumerated circumstances. 11 U.S.C. § 362(d). As an example of the operation of this rule, in Sikes v. Global Marine, Inc., 881 F.2d 176, 177 (5th Cir.1989), the plaintiffs, like Kimbrell here, filed a complaint against a defendant that had, unbeknownst to them, filed for bankruptcy. Upon learning of the automatic stay, the plaintiffs moved the bankruptcy court for relief, which the bankruptcy court granted. Id. at 180. Therefore, the claims were ordered to proceed to judgment in the district court. Id. at 180–81; see also In re Schwartz, 954 F.2d 569, 572–73 (9th Cir.1992) (recognizing that § 362(d) “gives the bankruptcy court wide latitude in crafting relief from the automatic stay”).

In addition, under 11 U.S.C. § 108(c), when a plaintiff receives notice that a defendant's automatic stay has been terminated, he may pursue a claim against that defendant within 30 days of receiving such notice, even if the applicable statute of limitations expired during the stay.¹ See also Easley, 990 F.2d at 912. The automatic stay also tolls the statute of limitations under Illinois law, providing another basis for plaintiffs to press claims that would otherwise become time-barred during the stay. See 735 Ill. Comp. Stat.. 5/13–216 (2011).

Kimbrell appears to have used the bankruptcy stay to engage in procedural maneuvering in contravention of the final-judgment rule. He has taken contradictory positions here and in the district court about whether his claim against Brown remains alive. At oral argument we pressed Kimbrell's counsel about the inconsistency of his positions, and he was unable to offer any explanation:

COUNSEL: We are treating the suit against Mr. Brown as having been void ab initio....

THE COURT: Apparently, that's not been communicated to the district court....

COUNSEL: I don't think the trial court has been advised that the claim against Mr. Kary [Brown] is void ab initio, ... that there is no pending claim.

THE COURT: Don't you think they might want to know?

COUNSEL: Probably....

THE COURT: You haven't communicated this idea that the lawsuit is void?

COUNSEL: I've raised various issues with trial [co]counsel, but there has been no communication with the district court advising them of this.

THE COURT: Well, what are we to make of that? Because apparently ... your cocounsel is keeping the case alive, and you're telling us it's void. I don't think you can have it both ways.

COUNSEL: I think that's a fair assessment, Your Honor.... I don't have a response other than it has not been communicated.

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