Herbstein, Diego J. v. Bruetman, Martin E. ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-2523
Diego J. Herbstein,
Plaintiff-Appellee,
v.
Martin E. Bruetman,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 92 C 7948--George W. Lindberg, Judge.
Argued January 17, 2001--Decided February 21, 2001
Before Easterbrook, Evans, and Williams, Circuit
Judges.
Easterbrook, Circuit Judge. The refractory Martin
Bruetman is back. Almost a decade ago Bruetman
sustained a $19 million default judgment when he
left for Argentina rather than participate in
discovery during a civil suit in Chicago. We told
the district court to give Bruetman a second
chance if he returned to the United States and
cooperated fully. Philips Medical Systems
International, B.V. v. Bruetman, 982 F.2d 211
(7th Cir. 1992). Bruetman returned but bridled at
following directions. He announced that he would
be the judge of which judicial orders would be
implemented. That defiant stance fell well short
of full cooperation, we held when affirming the
renewed entry of default judgment. Philips
Medical Systems International B.V. v. Bruetman,
8 F.3d 600 (7th Cir. 1993).
Chicago was only one venue for litigation
against Bruetman. Diego Herbstein also had sued
Bruetman, whose disdain for orderly legal process
led to a default judgment of $2.7 million in
federal court in New York. Bruetman did not
bother to appeal that judgment, but neither did
he pay. Herbstein initiated collection
proceedings in Boston (see 1993 U.S. Dist. Lexis
2573 (D. Mass. Feb. 16, 1993)) and Chicago. As
Fed. R. Civ. P. 69(a) provides, enforcement
proceedings are conducted in accord with state
law--for the Chicago proceeding, Ill. S. Ct. R.
277. In January 1993 the district court in
Chicago issued a citation requiring Bruetman to
appear for examination under oath. He did not
appear, and when the examination was rescheduled
he left this country without warning, again
finding Argentina more to his liking.
Eventually the district court issued an order
for Bruetman’s arrest (quaintly called a writ of
"body attachment"), but the papers were returned
unexecuted. The proceeding lingered on the docket
until January 1999, when a private detective
tracked down Bruetman, who had returned to the
United States without notifying the court or
Herbstein. The district judge then gave Bruetman
a way to avoid confinement: he could surrender
his passport to ensure that he remained available
until he had identified all of his assets.
Bruetman handed over the passport, and at long
last he submitted to an examination under oath.
One day proved insufficient and the examination
was adjourned, but before it could resume
Bruetman filed a bankruptcy petition and asserted
that this excused him from attending another
session.
Bruetman soon implored the district court to
release his passport, contending that with the
bankruptcy under way the collection proceeding
should be dismissed. After the bankruptcy court
modified the automatic stay to allow the district
judge to rule on this motion, the judge denied
Bruetman’s request, remarking that he had been
untrustworthy in the past and should be kept
within the United States to allow collection if
the bankruptcy court did not discharge Bruetman’s
substantial debt to Herbstein. Bruetman has
appealed from this order. While the appeal was
pending, Bankruptcy Judge Schmetterer held that
Bruetman’s debt to Herbstein arises from
Bruetman’s fraud and embezzlement, so that 11
U.S.C. sec.523(a)(2)(A) and (a)(4) preclude its
discharge. In re Bruetman, 2000 Bankr. Lexis 1476
(Bankr. N.D. Ill. Dec. 12, 2000).
Appellate jurisdiction is the first issue we
must consider. The collection proceeding remains
pending on the court’s docket, as does the
bankruptcy proceeding. As a rule, appeal must
await the terminating order--the decision that
"’ends the litigation on the merits and leaves
nothing for the court to do but execute the judgment.’"
Van Cauwenberghe v. Biard, 486 U.S. 517, 521-22
(1988), quoting from Catlin v. United States, 324
U.S. 229, 233 (1945). That time has yet to come,
for the district court plans to hold the
collection proceeding (and the passport) until
after the bankruptcy proceeding. Yet we also know
from Cohen v. Beneficial Industrial Loan Corp.,
337 U.S. 541 (1949), that an order to post
security can be immediately appealable, under
what has come to be called the "collateral order
doctrine." Cohen held that an order to post a
bond as security for payment of costs is
immediately appealable because it finally
determines an issue collateral to the merits of
the suit, is unreviewable at the end, and is too
important to leave without the possibility of
review. See also Swint v. Chambers County Comm’n,
514 U.S. 35, 42 (1995). We could not find any
case dealing with the application of the Cohen
principle to passports, but the template fits.
Posting a passport as security, like posting a
bond as security, is unrelated to the merits of
the case and correspondingly can’t be reviewed
after a final decision. No court would prevent
Herbstein from executing on assets located during
the proceeding just because Bruetman should have
been allowed to travel abroad while it was
pending. Whether a litigant enjoys an element of
personal freedom such as ability to travel is
certainly no less important than whether that
litigant must post a bond. Cf. Kent v. Dulles,
357 U.S. 116 (1958).
So the critical question is whether the
district court’s order finally determines the
disposition of the passport while the case
continues. Herbstein suggests that the decision
may have been temporary rather than final;
perhaps Bruetman could have his passport back if
he asked again, with better support. Bruetman
told the district court that he needed the
passport to attend a medical conference in
Canada; maybe if he had a better reason the
district judge would act favorably. Although we
cannot rule out the possibility that Bruetman
could yet induce the judge to change his mind, we
read the judge’s decision as conclusive. When
denying Bruetman’s motion for release of the
passport, the judge did not say that the
conference was an insufficient reason. The judge
said, rather, that Bruetman had demonstrated his
faithlessness and might well leave the United
States indefinitely if given the opportunity.
Bruetman’s conduct affords ample cause for that
concern. Because the district judge’s reason is
unrelated to a particular trip that Bruetman
might want to take, the decision to withhold the
passport must be deemed conclusive. All
components of the collateral order doctrine have
been satisfied, and we have appellate
jurisdiction.
As for the merits of Bruetman’s appeal: it is
to laugh. Just as the district judge said,
Bruetman has demonstrated a propensity to leave
the country when the heat is turned up, so if
Herbstein is to have a fighting chance of
locating assets on which to execute, Bruetman
must be kept here until the examination process
ends. Bruetman’s only realistic alternative to
handing over his passport was to be imprisoned
(for civil contempt of court) while the process
ran its course. Someone who had always followed
the rules would have a much stronger position.
Judges can’t routinely immobilize litigants. Even
in cases under the equity jurisdiction (which
this is not), judges must respect traditional
limitations on their powers, Grupo Mexicano de
Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527
U.S. 308, 321-24 (1999), unless positive law
enlarges them--and no law or rule of which we are
aware authorizes impoundment of passports as a
form of security. Cf. Guzell v. Hiller, 223 F.3d
518 (7th Cir. 2000). But a judge does have the
power to imprison a recalcitrant litigant for
contempt, implying the lesser power to set
conditions on freedom. Surrendering one’s
passport is a common condition of release on
bail, which is Bruetman’s effective status. (This
perspective reinforces the jurisdictional
conclusion, for orders setting terms of bail are
appealable. Stack v. Boyle, 342 U.S. 1 (1951).)
Just as a litigant held in civil contempt has the
keys in his own pocket--for he will be released
as soon as he cooperates--so Bruetman can get his
passport back whenever he pleases. All he need do
is complete the examination, fully disclosing all
of his assets. Then the proceedings will end and
Bruetman will be free to travel (though his
assets must stay behind). Bruetman’s enduring
refusal to cooperate--first by failing to appear
for examination, then by leaving the country,
next by concealing his return to the United
States, and now by using bankruptcy as the excuse
for refusing to undergo more questioning--amply
justifies restricting his ability to skip the
country yet again.
Nonetheless, Bruetman insists, the collection
proceeding should be dismissed without taking any
further evidence. He gives two reasons: the
bankruptcy proceeding and the long duration of
the collection proceeding. Neither carries the
day. A bankruptcy court does not attempt to
enforce judgments; the court determines
creditors’ entitlements, but after these have
been fixed it remains essential to lay hands on
the debtor’s assets, so there is room for
collection proceedings such as this. Even if the
default judgment were treated as creating an
ordinary unsecured debt subject to discharge,
Bruetman still would have to surrender all of his
assets (other than those covered by an
exemption). Bruetman has fought tooth and nail to
avoid revealing his assets; we cannot imagine why
an asset-discovery proceeding under way for eight
years should be dismissed and Herbstein forced to
start from scratch in the bankruptcy--especially
when the bankruptcy might itself be dismissed as
filed in bad faith. The collection proceeding has
outlasted the six-month line in Ill. S. Ct. R.
277(f), but that rule adds: "The court may,
however, grant extensions beyond the 6 months, as
justice may require." Justice requires an
extension, so that Bruetman’s shenanigans do not
defeat his creditor’s rights. Herbstein is
entitled to six months of cooperation from
Bruetman. See RTC v. Ruggiero, 994 F.2d 1221,
1228 (7th Cir. 1993). So far as we can see,
however, he has received only one day of
cooperation in an eight-year period. This
citation proceeding will continue until Herbstein
has received his due.
Affirmed