Sharifeh v. Fox (In re Sharif)

• Decision Date: 25 April 2016
• Docket Number: Adversary No. 12–00430,Case No. 09–05868
• Citation: 549 B.R. 485
• Parties: In re: Richard Sharif, Debtor. Ragda Sharifeh, in her capacity as successor trustee and successor beneficiary of the Soad Wattar Revocable Living Trust, Plaintiff, v. Horace Fox, Jr., in his capacity as Chapter 7 Trustee of Richard Sharif's bankruptcy estate, Richard Sharif, in his capacity as former Trustee of the Soad Wattar Revocable Living Trust, Wells Fargo Advisors, LLC, and the Green Bank, Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

549 B.R. 485

In re: Richard Sharif, Debtor.

Ragda Sharifeh, in her capacity as successor trustee and successor beneficiary of the Soad Wattar Revocable Living Trust, Plaintiff,

v.Horace Fox, Jr., in his capacity as Chapter 7 Trustee of Richard Sharif's bankruptcy estate, Richard Sharif, in his capacity as former Trustee of the Soad Wattar Revocable Living Trust, Wells Fargo Advisors, LLC, and the Green Bank, Defendants.

Case No. 09–05868

Adversary No. 12–00430

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

Signed April 25, 2016

Maurice J. Salem, Salem Law Office, Palos Heights, IL, Bruce E. de'Medici, Oak Park, IL, for Plaintiff.

Bruce E. de'Medici, Oak Park, IL, Miriam G. Bahcall, Michael R. Cedillos, Greenberg Traurig, Chicago, IL, William Stevens, William J. Stevens, Bridgman, MI, for Defendants.

Green Bank, pro se.

Memorandum Opinion

Jacqueline P. Cox, U.S. Bankruptcy Judge

On February 15, 2016, Ragda Sharifeh and Haifa Sharifeh brought 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, brought a Motion for Funds from the Trust. Bankr.0905868, 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. All three of these matters concern the disposition of the Soad Wattar Revocable Living Trust (hereinafter the "Soad Wattar Trust" or the "Trust"). At the hearing on February 18, 2016, counsel for Horace Fox, Jr., not individually but as Chapter 7 Trustee (the "Trustee") for Richard Sharif (the "Debtor"), urged that the Court dismiss the adversary proceeding with prejudice and set a briefing schedule for the two motions. The Court took all the matters under advisement and will discuss them in this Opinion.

For the reasons stated herein, the Motion for Leave to Commence an Action Against the Trustee and his Counsel should be denied for failure to establish a prima facie case for why the movants should be allowed to sue the Trustee. Moreover, at the February 18, 2016 hearing presenting these motions, counsel for the movants, Maurice J. Salem, was asked if there was any statutory or contractual basis for the Motion for Funds from the Trust. Mr. Salem failed to articulate any such basis for such a request in both open court and in his motion. Therefore that motion should also be denied. Next, dismissal of Adversary Proceeding 12–00430 should be granted without prejudice pursuant to Rule 41(a)(1)(A)(i) of the Federal Rules of Civil Procedure. Finally, per the Court's authority under Rule 9011(c)(1)(B) of the Federal Rules of Bankruptcy Procedure, the Court will issue an Order to Show Cause why Ragda Sharifeh, Haifa Sharifeh and Attorney Maurice Salem should not be sanctioned for violating Rule 9011 of the Federal Rules of Bankruptcy Procedure for filing frivolous pleadings.

I. Jurisdiction

The Court has 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 can refer title 11 cases to 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. These matters, therefore, are core proceedings in which this Court may enter a final order.

II. Background

The facts of this case have been the subject of numerous court rulings and should be familiar to all involved. 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 here for completeness of the record. The following facts are taken from the pleadings as well as from matters that the Court can take judicial notice of, such as the docket and 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.").

A. Pre–Bankruptcy Filing

1. Northern District of Illinois

This bankruptcy case is but the latest in a series of cases that date back to 2002. In 2002, the Debtor, and some co-plaintiffs, filed a lawsuit against Wellness International Network, LTD and its directors (collectively "WIN"). WIN was a producer of health and wellness supplies; it had an agreement with the Debtor for the Debtor 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 actually involved in an illegal pyramid scheme, violations of the Racketeer Influenced and Corrupt Organizations Act, federal securities law, violations of the Illinois Consumer Fraud Act, and criminal violations that allegedly voided the contracts 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. After two extensions for the Debtor and his co-plaintiffs, the motions were fully briefed and ready for ruling. Before ruling, the case was transferred to Judge Der–Yeghiayan, who set an initial status date for October 20, 2003. Only a docket entry reflects the status date and it is not clear whether the plaintiffs' counsel had notice of this as none of the plaintiffs' attorneys appeared that day.

On October 20, 2003, WIN also brought a motion to compel arbitration. On October 23, 2003, the court held a hearing on the motion where 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. See 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. See 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 contained seven claims which the parties agreed were subject to the arbitration clause. The court granted WIN's motion to compel arbitration as to those claims. The second category contained claims which WIN claimed were subject to a forum selection clause indicating that the federal and state courts in Dallas County, Texas were the correct forum. The court agreed and dismissed those claims. See Sharif v. Wellness Int'l Network, Ltd., No. 02 C 3047, 2004 WL 3119025, at *3 (N.D.Ill. Dec. 2, 2004)aff'd sub nom. Muzumdar v. Wellness Int'l Network, Ltd., 438 F.3d 759 (7th Cir.2006).

2. Northern District of Texas

On July 8, 2005, about half a year after the Northern District of Illinois case was dismissed, the Debtor filed a new case against WIN in the United States District Court for the Northern District of Texas. Adv. 09–00770, Dkt. 10, p. 2 (Amended Complaint Objecting to Discharge). The Debtor, as agent for Soad Watter, and his co-plaintiffs, which now included Haifa Kaj and Ragda Sharifeh, brought the suit asserting fraud, RICO violations, and claiming damages of nearly $1 million. Id. The Debtor and his co-plaintiffs did not conduct any discovery in that action and did not cooperate with WIN's efforts to obtain discovery. Id. The Debtor and his co-plaintiffs did not serve initial disclosures and failed to respond to written discovery. Id. The Debtor and his co-plaintiffs had admissions deemed against them for failure to respond to discovery requests. WIN subsequently moved for summary judgment on the grounds that the admissions negated all claims asserted; the Debtor and his co-plaintiffs failed to introduce any evidence in support of the claims. Id. The district court granted summary judgment on those grounds. Id.

The Debtor and his co-plaintiffs appealed the entry of summary judgment to the Fifth Circuit in 2007. Id. The Fifth Circuit affirmed all of the district court's rulings and noted:

A review of the record on appeal demonstrates that Appellants' untimely performance in this court mirrors a lengthy history in the district court of dilatoriness and hollow posturing interspersed with periods of non-performance or insubstantial performance and compliance by Appellants and their counsel, leaving the unmistakable impression that they have no purpose other than to prolong this contumacious litigation for purposes of harassment or delay, or both. The time is long overdue to terminate Appellants' feckless litigation at the obvious cost of time and money to the Defendants by affirming all rulings of the district court but remanding the case to that court for the reinstatement of its consideration of Appellees' motion for attorney's fees. In so doing, we caution Appellants that any further efforts to prolong or

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