Nora v. HSBC Bank USA, N.A. (In re Rinaldi)

• Citation: 778 F.3d 672
• Decision Date: 11 February 2015
• Docket Number: Nos. 13–3865,14–1887.,s. 13–3865
• Parties: In re: Desa L. RINALDI and Roger P. Rinaldi, Debtors–Appellants, and Wendy A. Nora, Appellant, v. HSBC Bank USA, N.A., et al., Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

778 F.3d 672

In re: Desa L. RINALDI and Roger P. Rinaldi, Debtors–Appellants

and

Wendy A. Nora, Appellant

v.HSBC Bank USA, N.A., et al., Appellees.

Nos. 13–3865

14–1887.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 28, 2014.

Decided Feb. 11, 2015.

Wendy Alison Nora, Access Legal Services, Minneapolis, MN, for Debtor–Appellant.

Stephanie L. Dykeman, Litchfield Cavo, Brookfield, Brett B. Larsen, Noah D. Fiedler, Hinshaw & Culbertson, Milwaukee, WI, for Appellee.

Before BAUER, POSNER, and TINDER, Circuit Judges.

Opinion

TINDER, Circuit Judge.

This appeal arises from the bankruptcy of Desa and Roger Rinaldi, whose attorney, Wendy Nora, complicated the underlying proceedings by filing numerous vexatious motions, similar to her conduct in PNC Bank, N.A. v. Spencer, 763 F.3d 650 (7th Cir.2014). Nora also challenges a sanction against her for submitting frivolous filings. We uphold the decisions against both the Rinaldis and Nora.

I. Background

In 2005, Roger Rinaldi signed a note promising to repay a mortgage loan from Wells Fargo and, along with his wife Desa, agreed to secure the loan with the couple's property in Bristol, Wisconsin. Within four years, he defaulted on the loan, and HSBC Bank initiated a Wisconsin foreclosure action as assignee of the mortgage. The Rinaldis counterclaimed against HSBC, Wells Fargo, and the lawyers involved in the foreclosure, alleging that the mortgage paperwork produced by HSBC had been fraudulently altered and that HSBC lacked standing to enforce the mortgage. The Rinaldis lost at summary judgment and did not appeal. A year later, however, the state court vacated its foreclosure judgment after HSBC agreed to modify the loan rather than foreclose. The Rinaldis then filed a new state lawsuit reasserting their counterclaims against the same parties. The defendants moved to dismiss, but before the state court ruled on the motion, the Rinaldis filed for bankruptcy, automatically staying the state case.

In the bankruptcy proceeding, HSBC filed a proof of claim based on the mortgage. The Rinaldis objected and filed adversary claims against the parties that they had counterclaimed against in the state action, alleging fraud, abuse of process, tortious interference, breach of contract, and violations of RICO and the Fair Debt Collection Practices Act. The bankruptcy court found in favor of HSBC's proof of claim and recommended denial of the adversarial claims.

In October 2013, the district court affirmed the bankruptcy court's decisions on the proof of claim and adopted its recommendations on the adversary claims. The court concluded that it did not even need to reach the merits of the proof-of-claim decision because the Rinaldis failed to designate the record or issues for appeal as required by the Federal Rules of Bankruptcy Procedure. The court also rejected the Rinaldis' appeal on the merits, explaining that HSBC had produced documents showing that it was entitled to enforce the mortgage. The court further dismissed each of the Rinaldis' adversary claims as meritless, noting that their submission on those claims was “an unfocused, stream-of-consciousness-style recitation of general grievances the debtors have asserted in various forms since the origination of this litigation in state court.” The court warned the Rinaldis that they would likely face sanctions if they filed additional frivolous filings because their litigation tactics had “quite obviously been vexatious and time- and resource-consuming” and their filings were “nigh-unintelligible.”

Within two weeks, the Rinaldis moved to alter or amend the judgment under Federal Rule of Civil Procedure 59(e), rehashing their arguments about the mortgage. Not only were these arguments meritless, the district court decided, but “the Rinaldis, through their attorney Wendy Nora, have at every turn filed briefs that have done little to clarify the matters under consideration while further confusing matters” (emphasis in original). The court added that Nora's briefs were rambling, failed to comply with court rules, contained many spelling and grammatical errors, cited legal authority sparingly if at all, repeated rejected arguments, and used “irrelevant and argumentative language that has no place in a legal brief.” The court warned that “any further frivolous submissions will result in an award of appropriate sanctions against the Rinaldis' attorney” (emphasis in original).

In December 2013, the Rinaldis appealed to this court, but then in March 2014, they moved to dismiss their case in the bankruptcy court. They asserted that the bankruptcy court had shown a “willingness to override state law” in regard to the validity of their mortgage, so they had “decided not to engage in litigation of their new issues in this Court and wish to be set free from the underlying bankruptcy.” They added that they “wish to proceed to state court” with “newly discovered evidence” that the mortgage is void. The bankruptcy court granted the Rinaldis' motion, though it warned them that the dismissal might moot their pending appeal.

Meanwhile, Nora moved in the district court to withdraw as the Rinaldis' attorney, and then, before the court ruled on that motion, moved to intervene in the case and for relief under Federal Rule of Civil Procedure 60(b). In April 2014, the district court allowed Nora to withdraw but denied the other two motions, explaining that Nora had no standing to intervene and that the court had no intention of altering its decision about the Rinaldis' claims. Further, the court explained that, because of its earlier warning and the fact that these motions were frivolous, the court had “no choice but to impose sanctions against Ms. Nora.” The court ordered Nora to pay $1,000 and warned that further frivolous filings would result in higher sanctions. Nora appealed this order on behalf of herself and the Rinaldis.

II. Discussion

On appeal, the Rinaldis again rehash their arguments about alleged problems with their mortgage. The appellees raise a host of reasons to reject the Rinaldis' arguments, including urging us to dismiss their appeal as moot because of the dismissal of the bankruptcy case. The Rinaldis argue that their appeal is not...