Kathrein, Michael L. v. McGrath, Brigid , 166 F. App'x 858 ( 2006 )

UNPUBLISHED ORDER
Not to be cited per Circuit Rule 53
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted February 1, 2006*
Decided February 7, 2006
Before
Hon. RICHARD A. POSNER, Circuit Judge
Hon. KENNETH F. RIPPLE, Circuit Judge
Hon. DANIEL A. MANION, Circuit Judge
No. 05-2833
MICHAEL L. KATHREIN, Appeal from the United States District
Plaintiff-Appellant, Court for the Northern District of Illinois,
Eastern Division
v.
No. 04 C 7324
BRIGID MCGRATH, et al.,
Defendants-Appellees. David H. Coar,
Judge.
Nos. 05-2907 & 05-3523
MICHAEL L. KATHREIN, Appeals from the United States District
Plaintiff-Appellant, Court for the Northern District of Illinois,
Eastern Division
v.
No. 1:05–cv–01718
R.J. SIEGEL,
Defendant-Appellee. Milton I. Shadur,
Judge.
*
After examining the briefs and records, we have concluded that oral
argument is unnecessary. Thus, these appeals are submitted on the briefs and
records. See Fed. R. App. P. 34(a)(2).
Nos. 05-2833, 05-2907 & 05-3523 Page 2
ORDER
These consolidated appeals arise out of a dispute that moved from cyberspace
to the courts of Illinois and finally landed in federal court.1 Michael Kathrein
created an internet website known as “michaelmonar.com.” Outraged at the
website’s content, Michael Monar sued Kathrein in the Circuit Court of Cook
County. To put the dispute in context, Monar is married to Kathrein’s ex-wife, and
in the midst of a contentious divorce and child-custody dispute among Kathrein,
Monar, and Kathrein’s ex-wife, Monar discovered the existence of
michaelmonar.com. The website included sexual and pornographic depictions with
references to Monar, and at times automatically redirected those who accessed it to
other pornographic websites. Monar, who runs a consulting firm, had tried
negotiating with Kathrein for rights to the domain name, but, having no luck, he
brought his state lawsuit alleging that Kathrein had injured his business and
reputation.
During that litigation the state court enjoined Kathrein from posting
pornographic material on michaelmonar.com or creating redirections to other
pornographic websites. Monar later suspected that, despite this injunction, Kathrein
had added another redirection of michaelmonar.com to a pornographic search
engine, and in April 2004 he filed a motion seeking to hold Kathrein in contempt for
violating the injunction. Kathrein responded that, indeed, he had inserted a
command that would redirect users of michaelmonar.com, but he defended his action
with the explanation that the programmed redirection would occur only after an
extremely long delay, some three hundred billion seconds. Monar, skeptical that
there was such a delay feature, then sought and received an order permitting
immediate inspection of Kathrein’s computer by a forensic computer expert.
The expert Monar retained is R.J. Siegel, the defendant in one of the federal
actions underlying these appeals. Pursuant to the state court’s order, Siegel
examined the computer Kathrein produced but concluded that it was not the one
used as the server for the website. Kathrein then admitted switching computers and
claimed that he left the old computer outside his office and did not know who took it.
Both parties then moved for sanctions; Kathrein asserted that Siegel violated the
court’s order by examining, altering, and copying data from his computer that was
1
In an order dated August 31, 2005, we consolidated nos. 05-2907 and
05-3523 for purposes of briefing and disposition. We have also consolidated
no. 05-2833 for decision.
Nos. 05-2833, 05-2907 & 05-3523 Page 3
beyond the scope of the order, while Monar sought to recover the expense of hiring
Siegel to inspect what turned out to be the wrong computer.
These cross-motions for sanctions were still pending when Kathrein filed his
first action in federal court. In that suit under 42 U.S.C. § 1983, which was filed in
2004 and assigned to Judge Coar, Kathrein claimed that Monar, his attorneys, and
the judge assigned to Monar’s lawsuit in state court were conspiring to deprive him of
federally protected rights by assuring that he did not get a fair trial in that ongoing
action. That contention prompted the state-court judge, Brigid McGrath, to recuse
herself, and Monar’s lawsuit against Kathrein was then reassigned to another judge,
Paddy McNamara. Judge McNamara considered the cross-motions for sanctions in
December 2004. The court denied Kathrein’s motion that same month but in March
2005, after seeking clarification of Siegel’s fee, granted Monar’s motion and awarded
him $10,288 to cover the expense of the expert’s wasted investigation. Meanwhile,
Judge McNamara in January 2005 also conducted a hearing on, and granted,
Monar’s motion to hold Kathrein in contempt for violating the injunction against
redirecting users of michaelmonar.com to another website.
Kathrein’s response to these rulings was swift. Seven days after being held in
contempt, he amended the federal action pending before Judge Coar to include
Judge McNamara as a defendant. Then in March, after he was ordered to reimburse
Monar for Siegel’s fee, Kathrein filed a second federal lawsuit, this one assigned to
Judge Shadur. Kathrein principally claimed that Siegel, the lone defendant, had
fraudulently inflated his bill to Monar, and he demanded that the court grant him
access to a federal grand jury so that he could present evidence of Siegel’s alleged
“mail fraud.” See 18 U.S.C. § 1341. Kathrein further claimed that Siegel had
violated two federal statutes, the Computer Fraud and Abuse Act, 18 U.S.C. §§ 1001-
1038, and the Stored Communications Act, id. §§ 2701-2712, by inspecting and
copying files on Kathrein’s computer that were outside the scope of the state court’s
authorization. In addition to filing this federal lawsuit, Kathrein also took an
immediate appeal of the sanctions order, which as far as we can tell, is still pending
in the Illinois appellate court. Likewise, it appears that Monar’s state lawsuit
against Kathrein remains unresolved.
The two federal lawsuits, however, have been dismissed. In the first, Kathrein
recognized that the two state-court judges were absolutely immune, but he sought
damages against Monar and his lawyers. And, just as he did in the federal action
against Siegel, Kathrein also sought access to a federal grand jury to investigate
possible criminal conduct by all of the defendants, including the judges. In their
motion to dismiss, the defendants asked Judge Coar to abstain under Younger v.
Harris, 401 U.S. 37 (1971). The court, reasoning that Younger did not apply but that
Nos. 05-2833, 05-2907 & 05-3523 Page 4
“the doctrine of comity” underlying that decision did, dismissed the action. The court
also explained that Kathrein’s request for a grand jury investigation should be
directed to the United States attorney, not the court. Kathrein filed an appeal, which
we docketed as case no. 05-2833.
As for the second federal suit, Siegel characterized the action as a disguised
appeal of the sanctions awarded in state court and urged that it be dismissed under
the Rooker-Feldman doctrine. See Rooker v. Fid. Trust Co., 263 U.S. 413 (1923);
D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983). Judge Shadur initially
questioned whether Rooker-Feldman applied in light of the Supreme Court’s decision
in Exxon Mobil v. Saudi Basic Industries Corporation, 125 S.Ct. 1517 (2005), but
eventually satisfied himself that it did and granted Siegel’s motion to dismiss for lack
of jurisdiction. We have docketed Kathrein’s appeal of that dismissal as case no. 05-
2907. The district court also ordered Kathrein to pay $20,228 to Siegel for his
attorneys’ fees in defending a frivolous lawsuit as a sanction under Federal Rule of
Civil Procedure 11, and we have docketed Kathrein’s appeal of that order as case no.
05-3523.
We start with Judge Shadur’s dismissal of the suit against Siegel and related
award of Rule 11 sanctions. Kathrein contends that the district court (1) was
prejudiced against him and thus denied him a fair hearing; (2) misapplied Rooker-
Feldman; (3) erred in refusing to order a grand jury investigation of Siegel for mail
fraud; and (4) abused its discretion in sanctioning him under Rule 11.
As evidence that Judge Shadur was prejudiced against him, Kathrein relates
comments allegedly made to him by two unknown attorneys who happened to be
leaving Judge Shadur’s courtroom as Kathrein entered for the first time. He was
told, he says, that the judge “predetermines cases” before hearing them. Kathrein
also points to Judge Shadur’s later observation that Kathrein may be a “wise guy”
and that his conduct in suing the state judges (in the lawsuit before Judge Coar) was
“unpardonable.” Siegel argues, however, that Kathrein has waived any argument
about the district court’s purported bias because he failed to raise the issue in the
district court. We agree.
Parties who believe that the judge assigned to their case is not impartial, see
28 U.S.C. § 455(a), must raise the concern to the district court first. See United
States v. Ruzzano, 247 F.3d 688, 694 (7th Cir. 2001); United States v. Mathison, 157
F.3d 541, 545-46 (8th Cir. 1998); Green v. Branson, 108 F.3d 1296, 1305 (10th Cir.
1997) (applying rule in civil case). Kathrein never did. Even though he later
petitioned this court for a writ of mandamus seeking Judge Shadur’s removal from
his case—albeit nearly three months after the judge had granted the defendant’s
Nos. 05-2833, 05-2907 & 05-3523 Page 5
motion to dismiss—it is Kathrein’s failure to raise the issue before the district court
that dooms his argument. See Ruzzano, 247 F.3d at 694. And although we have
acknowledged the possibility that litigants may excuse their failure to raise recusal
issues in the district court by showing that the bias was undiscoverable until the
proceedings had ended, Kathrein offers no such excuse. See United States v. Ward,
211 F.3d 356, 364 (7th Cir. 2000) (expressing doubt that criminal defendant waived
argument concerning the trial judge’s alleged bias by failing to seek recusal before
sentencing, since defendant did not learn of asserted basis for recusal until after
trial); Ruzzano, 247 F.3d at 694 (recognizing that “extraordinary circumstances”
might excuse failure to seek refusal in timely manner). In fact, Kathrein would have
no such excuse because most of the “incidents of bias” that he complains about
happened before the dismissal of his complaint, or at least before Judge Shadur
awarded sanctions. In any event, we are not convinced that Judge Shadur’s
comments or the speculation of attorneys about a particular judge’s methodology
establish the “deep–seated favoritism or antagonism” that would constitute judicial
bias. See Liteky v. United States, 510 U.S. 540, 555 (1994); Grove Fresh Distribs.,
Inc. v. John Labatt, Ltd., 299 F.3d 635, 640 (7th Cir. 2002); In re Huntington
Commons Assocs., 21 F.3d 157, 158-59 (7th Cir. 1994).
Kathrein is correct, however, that Judge Shadur erred in dismissing the suit
against Siegel under Rooker-Feldman. That doctrine applies only where a litigant
seeks to overturn a state-court judgment, and Kathrein does not seek to do so. The
district court saw Kathrein’s claim that Siegel engaged in fraudulent billing as an
attempt to overturn the state-court’s imposition of sanctions, and his claims under
the Computer Fraud and Abuse Act and Stored Communications Act as an attempt
to overturn the denial of Kathrein’s motion to sanction Siegel for exceeding the scope
of his search authorization. But we have recognized the difference between a claim
that seeks to overturn a state judgment directly and one that is independent because
it alleges a prior injury that a state court failed to remedy. Taylor v. Fed. Nat.
Mortg. Ass’n, 374 F.3d 529, 533 (7th Cir. 2004); Brokaw v. Weaver, 305 F.3d 660,
664-65 (7th Cir. 2002); Long v. Shorebank Dev. Corp., 182 F.3d 548, 555 (7th Cir.
1999). And Kathrein’s claim that Siegel drafted a fraudulent bill fits into the latter
category because the bill was totaled before the state court relied on it in calculating
an appropriate sanction. Likewise, Kathrein’s claims that Siegel violated federal
statutes by performing an inspection beyond the scope of his authority alleges
injuries that occurred, if at all, prior to the state court’s denial of Kathrein’s motion
for sanctions against Siegel. Thus, while a judgment in federal court for Kathrein on
these claims might undermine the state court’s rulings on the cross-motions for
sanctions, Rooker-Feldman is nevertheless inapplicable. See GASH Assocs. v.
Village of Rosemont, 995 F.2d 726, 728 (7th Cir. 1993) (recognizing that federal
Nos. 05-2833, 05-2907 & 05-3523 Page 6
jurisdiction exists even over an independent claim that incidentally denies a legal
conclusion that a state court has reached).
Moreover, even if we could say that Kathrein truly seeks to overturn state-
court rulings, we still doubt that dismissal under Rooker-Feldman would be
appropriate because the state-court proceedings have not ended. In Exxon Mobil,
the Supreme Court limited Rooker-Feldman to situations where the losing party in
state court files suit in federal court after “state proceedings [have] ended.” 125 S.Ct.
at 1521-22, 1526. One circuit has interpreted Exxon Mobil to mean that state
proceedings will have “ended” when the highest court capable of review has
considered the state decision, or where no party to the case seeks further action. See
Federacion de Maestros de Puerto Rico v. Junta de Relaciones del Trabajo de Puerto
Rico, 410 F.3d 17, 24 (1st Cir. 2005). Under that logic, it is too early in the state
proceedings for the district court to have dismissed under Rooker-Feldman because
Kathrein’s appeal of the sanctions order was pending at the time he commenced his
federal suit and the order denying Kathrein’s motion for sanctions against Siegel was
not severed from the case for immediate appeal and cannot be appealed until the
underlying case is complete.
Still, while we disagree with the district court’s application of the Rooker-
Feldman doctrine, we conclude that dismissal was the correct outcome. To the extent
his federal suit concerns Siegel’s bill to Monar, Kathrein cannot maintain a claim for
fraudulent billing against Siegel under Illinois law because he lacks standing to
challenge the amount of a bill between Siegel and his client. (Kathrein and Siegel
are from different states, and while it appears unlikely that the $75,000 threshold
could be met, see 28 U.S.C. § 1332(a), we assume that it is.) Under Illinois law, a
cause of action based on contract may be brought only by a party to that contract,
someone in privity with a party, or a third-party beneficiary. Kaplan v. Shure Bros.,
Inc., 153 F.3d 413, 418 & n.3 (7th Cir. 1998) (applying Illinois law). The state court’s
order directing Kathrein to pay Monar the amount of Siegel’s fees made Kathrein
none of these. The state court simply used the amount of Siegel’s fees as a reference
in determining what value to place on the costs of Kathrein’s obfuscatory litigation
tactics. Moreover, though Kathrein frequently has invoked the federal mail fraud
statute in this litigation, see 18 U.S.C. § 1341, there is no private right of action
under that criminal provision. See Wisdom v. First Midwest Bank, of Poplar Bluff,
167 F.3d 402, 408 (8th Cir. 1999) (joining Fifth and Sixth Circuits in finding no
private cause of action for mail fraud). Finally, despite the lengthy discussions in his
brief about his claim of fraud and the purported need for a grand jury investigation,
Kathrein nowhere disputes Siegel’s argument that he fails to state a claim under
Nos. 05-2833, 05-2907 & 05-3523 Page 7
either the Computer Fraud and Abuse Act or the Stored Communications Act.2 We
thus uphold the dismissal on the ground that Kathrein failed to state a claim, and for
that reason modify the judgment to reflect that the dismissal is with prejudice. See
Ciarpaglini v. Saini, 352 F.3d 328, 331 (7th Cir. 2003) (explaining that we may
affirm district court’s dismissal on any adequate ground found in record).
Kathrein, then, is left with an argument that the district court’s sanction in
the amount of $20,338 was inappropriate. In light of our conclusion that Rooker-
Feldman does not apply, and respecting the district court’s role in determining Rule
11 sanctions in the first instance, see Johnson v. Cherry, 422 F.3d 540, 553 (7th Cir.
2005), we vacate and remand the sanctions award for the district court to determine
whether sanctions are warranted for Kathrein’s filing of a complaint that fails to
state a claim.
Before leaving Kathrein’s suit against Siegel, we address an argument he
makes both here and in his appeal from the dismissal of his other federal complaint.
In both federal actions Kathrein sought and was denied an order compelling a
federal grand jury to investigate alleged crimes committed by the various
defendants. In challenging those denials, Kathrein persists with his frivolous
contention that he is entitled to appear before a grand jury to present his allegations.
See Korman v. United States, 486 F.2d 926, 933 (7th Cir. 1973) (holding that
authority to convene federal grand jury is vested in district court); cf. Cook v. Smith,
834 P.2d 418, 420-21 (N.M. 1992) (recognizing New Mexico’s procedure permitting
citizens to petition for convening a grand jury as rare). Kathrein admits that the
goal of his proposed investigation is to lead to the prosecution of the individuals that
he has sued, but a private citizen lacks standing to demand the prosecution of
2
The Computer Fraud and Abuse Act provides a civil remedy for one who
suffers damage by reason of a violation of the Act. 18 U.S.C. § 1030(g). A violation
can occur, however, only where there is damage to a “protected computer.” Id.§ 1030(a)(5)(A)(i). A protected computer is one used exclusively by a financial
institution or the United States, or that is used in interstate commerce. Id.
§ 1030(e)(2). The Stored Communications Act also provides a civil remedy, but a
violation occurs only as a consequence of accessing a “facility through which an
electronic communication service is provided.” Id. § 2701(a). An “electronic
communication service” is one that provides the ability to send or receive signals
that affect interstate commerce. Id. § 2510(15), (12); see 18 U.S.C. § 2711 (making
definitions in § 2510 applicable to the Stored Communications Act).
Nos. 05-2833, 05-2907 & 05-3523 Page 8
another. See Linda R.S. v. Richard D., 410 U.S. 614, 619 (1973); Johnson v. City of
Evanston, Ill., 250 F.3d 560, 563 (7th Cir. 2001).
This brings us to Kathrein’s action under § 1983 against Monar, his lawyers,
and the two state judges. In his opening brief Kathrein asserts that Judge Coar, by
dismissing the complaint, deprived him of his Seventh Amendment right to a jury
trial. His brief, however, includes nothing more than a short history of the
amendment and does not address the reason given by the district court for the
dismissal. The defendants accordingly contend that Kathrein has waived any
challenge to the dismissal, although they also go on to diligently anticipate and
respond to arguments that Kathrein might have made but did not. In his reply brief
Kathrein finally addresses the points the defendants flagged for him (his reply brief
is more than twice the length of his opening brief), but this comes too late. See Hess
v. Reg-Ellen Mach. Tool Corp., 423 F.3d 653, 665 (7th Cir. 2005) (holding that issues
raised for first time in reply briefs are waived). We thus affirm the dismissal. See
Landstrom v. Ill. Dept. of Children and Family Servs., 892 F.2d 670, 678 (7th Cir.
1990) (noting that failure to challenge district court’s holding waives claim of error in
that ruling).
Accordingly, in case no. 05-2907 we MODIFY the dismissal to be with
prejudice, and, as modified, AFFIRM the judgment of the district court. In case
no. 05-3523 we VACATE the award of Rule 11 sanctions and REMAND for the
district court to reconsider the propriety of sanctions in light of our conclusion that
Kathrein’s complaint against Siegel fails to state a claim. Finally, in case
no. 05-2833 we AFFIRM the judgment dismissing Kathrein’s complaint.