Layng v. Maksymonko (In re Gelb)
| Decision Date | 31 March 2022 |
| Docket Number | 20-81538,Adversary 21-96006 |
| Parties | In re: LAURA GELB, Debtor. v. PHILIP F. MAKSYMONKO, Defendant. PATRICK S. LAYNG, United States Trustee Plaintiff, |
| Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois |
Alleging attorney Philip F. Maksymonko's "long and repeated history of intentionally refusing or negligently failing to comply with his obligations as Debtor's counsel in this Court," the United States Trustee (the "Trustee") brings this eight-count adversary complaint for the stated purpose of obtaining the attorney's "compliance with his legal and ethical duties." (Compl. at 1, ECF No. 1.) Mr. Maksymonko's apparent inability or unwillingness to follow basic rules and procedures of the bankruptcy court has continued in this matter, as he now effectively ignores the Trustee's adversary complaint by not answering or responding directly to that pleading. Instead, following the Trustee's request for entry of default judgment, the Defendant sent an unfiled "Answer to Motion" to the Trustee, which suggests this proceeding is merely the result of "[t]he Trustee [being] unhappy with the contract that was signed [by] the Debtors." (Pl.'s Reply, Ex. 1, ECF No. 12.) Later the Defendant filed with the court an "Answer to Supplement," which argues that the Trustee's supposed intent in bringing the complaint is to "impress [its] work schedule on others." (ECF No. 20.) The court disagrees with the Defendant's attempt to minimize the seriousness of the Trustee's allegations.
After consideration of the pleadings and the pending motion, the court will enter default judgment against attorney Maksymonko as explained below.
The federal district courts have "original and exclusive jurisdiction" of all cases under title 11 of the United States Code. 28 U.S.C. § 1334(a) The district courts also have "original but not exclusive jurisdiction" of all civil proceedings arising under title 11 or arising in or related to cases under title 11. Id. § 1334(b). The United States District Court for the Northern District of Illinois has referred all of its bankruptcy cases to the bankruptcy judges in this district in its Internal Operating Procedure 15(a).
A bankruptcy court to whom a case has been referred may enter final judgment on any core proceeding under title 11 or in a case under title 11 referred to it. 28 U.S.C. § 157(b)(1). This proceeding is brought under sections 526, 527, 528 and 329 of the Bankruptcy Code and involves matters concerning the administration of the estate and invokes substantive rights that are either provided by the Code or could only arise in the context of a bankruptcy case. Accordingly this is a core proceeding under 28 U.S.C. §§ 157(b)(1) and (b)(2)(A). See In re Cook, 610 B.R. 852, 862 (Bankr. N.D.Ill. 2019) (). A default judgment is a final order, and a "bankruptcy court may enter default judgment on core claims." In re Kiarchek, 509 B.R. 175, 179 (Bankr. N.D.Ill. 2014) (citing We lness Intern. Network, Ltd. V. Sharif, 727 F.3d 751, 778 (7th Cir. 2013)). This court, therefore, possesses authority to enter default judgment in this proceeding.
Philip F. Maksymonko is an attorney admitted to the Illinois bar who practices bankruptcy law in the Northern District Illinois including its Western Division. He has done so for more than thirteen years. On February 22, 2018, attorney Maksymonko commenced a chapter 7 case in this division on behalf of Cirilo Martinez, Case no. 18-80887, and that case and representation is referenced in the Trustee's pending complaint. As described in the complaint, on June 3, 2020, Mr. Maksymonko was found in civil contempt of court in part for his failure to properly disclose fees he received as debtor's counsel or comply with this court's orders, and he has not yet purged the contempt by complying with the contempt decree. Over the next six months, Mr. Maksymonko filed four additional chapter 7 cases in this court: In re Rachel McNulty, Case no. 20-81504 (filed August 24, 2020); In re Laura Gelb, Case no. 20-81538 (filed August 29, 2020); In re Ruben Sobrepena, Case no. 20-81855 (filed November 11, 2020) and In re Fatima Izel, Case no. 20-82036 (filed December 29, 2020).
His alleged practices and behavior in those cases drew the further attention of the Trustee's office and are the basis for the complaint eventually filed by the Trustee on March 5, 2021.
According to the Trustee's certificate of service, which has not been contested, Mr. Maksymonko was served with a copy of the summons and complaint by mail on or about March 8, 2021. The Defendant did not file an answer to the complaint within 30 days, as required by Fed.R.Bankr.P. 7012(a), file a responsive motion challenging the complaint under Rule 7012, or ask for additional time to answer or otherwise respond to the complaint.
The court held the initial status on the complaint and summons on April 14, 2021, at which the Defendant failed to appear. At that hearing, counsel for the Trustee represented to the court that the Defendant was aware of the hearing. Counsel stated that when the parties spoke by telephone the day before the hearing, the Defendant did not request that it be continued. Nevertheless, the matter was continued to May 5, 2021, to afford the Defendant an opportunity to be heard.
The Defendant appeared at the next hearing approximately ten minutes after it began. When asked for an explanation, the Defendant claimed that he had mis-calendared the April 14 hearing and was late for the May 5 hearing because he had the wrong call-in ID number. The Defendant also claimed that he did not receive the summons and complaint until an unspecified date in April 2021, but nevertheless conceded that he had not sought an extension of the deadline or filed an answer. Specifically, he stated that he had "not responded yet, so the court should do as it wishes." The Defendant demurred when the court asked him whether he intended to engage an attorney to defend him in this action. The court then on the record found him in default and continued the matter for 30 days to allow the Defendant time to consider his position. A written order of default was entered on May 7, 2021.
The Trustee filed its motion for default judgment on May 19, 2021. (ECF No. 9.) Among other items, the Trustee attaches two declarations of James Dreier, a paralegal specialist for the Trustee, in support of the motion, as well as a search report of Mr. Maksymonko pursuant to the Servicemembers Civil Relief Act finding him not to be on active duty. The Trustee presented its motion at the June 9, 2021 status hearing. The Defendant appeared at that hearing. Claiming to have been out of town, he requested seven days to respond to the motion, which was granted. He did not file a response, however. On June 23, 2021, the Trustee nevertheless filed a "reply" in support of its motion. That reply attached a three-page document entitled "Answer to Motion" that was apparently emailed by the Defendant to the Trustee, but never filed. (See Pl.'s Reply at 2, Ex. 1.)
Despite being styled an "Answer," the document neither admits nor denies the factual allegations stated in the complaint. Instead, it argues that his clients would have been confused by more complicated engagement contracts, that what "was put in the Petitions was what was available at the time of filing," that none of the errors or changes in schedules affected "discharge," that a "default should be an extraordinary remedy" and that it would generally be unfair to order him to return all his fees. It concludes with the assertion that (Id. Ex. 1 at 3.)
At the July 28, 2021 hearing on the Trustee's motion, the Defendant conceded that he had not filed his response to the motion. The court continued the matter for an evidentiary hearing to August 11, 2021. At that hearing, the Defendant made an oral request to set aside his default under Rule 55(c). However, upon the Defendant conceding that he was "not sure there is good cause in this case" to set aside the default, the court indicated on the record that it would deny the motion to set aside and was inclined to grant the motion for default judgment. Taking note of the Defendant's continuing objection to the sufficiency of proof as to the amount of the alleged monetary damages, the court continued the hearing and granted the parties leave to file supplementary materials on that point.
They subsequently did so. The Trustee filed its supplement on August 18, 2021, attaching portions of the transcript of a Rule 2004 examination of Ms. Gelb. The Defendant later submitted a response, again styled as an "Answer," which argued only that the evidence regarding Ms. Gelb's alleged lost wages was insufficient and "the Trustee's calculations are simply wrong." (ECF No. 20.) At no time did the Defendant properly answer or otherwise plead in response to the complaint, or request leave to do so.
FINDINGS OF FACT AND CONCLUSIONS OF LAW IN SUPPORT OF DEFAULT JUDGMENT[1]
The Defendant Philip Maksymonko having failed to properly answer the complaint to admit or deny the allegations asserted against him, the court must accept as true all factual allegations asserted against him. Fed.R.Civ.P. 8(b)(6) (made applicable by Fed.R.Bankr.P. 7008). The court accordingly finds:
Parti...
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