Chad Bullock v. Russel Simon ( 2021 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 20-1686
IN RE: CHAD ROBERT BULLOCK,
Debtor.
CHAD ROBERT BULLOCK,
Debtor-Appellant,
v.
RUSSELL C. SIMON,
Trustee-Appellee.
____________________
Appeal from the United States District Court for the
Southern District of Illinois.
No. 19-cv-00310 — Staci M. Yandle, Judge.
____________________
ARGUED DECEMBER 3, 2020 — DECIDED JANUARY 22, 2021
____________________
Before SYKES, Chief Judge, and FLAUM and ST. EVE, Circuit
Judges.
FLAUM, Circuit Judge. Debtor-appellant Chad Robert Bull-
ock filed for bankruptcy but failed to disclose a workers’ com-
pensation claim on his required forms. As a result, when he
received an award for his claim years later, trustee-appellee
2 No. 20-1686
Russell C. Simon moved to require debtor to amend his reor-
ganization plan to commit those proceeds to pay his creditors.
Debtor contended in bankruptcy court that he could exempt
his workers’ compensation claim, but the court disagreed.
Thereafter, debtor complied with the court’s order to amend
his reorganization plan. When he failed to make payments
pursuant to that new plan, the court dismissed his bankruptcy
case. In a separate but related adversary proceeding appealed
to the district court, the district court dismissed the case on
mootness grounds. On appeal, debtor challenges that deci-
sion and seeks to relitigate the exemption issue decided by the
bankruptcy court. That issue is mooted because he complied
with the very order requiring the reorganization plan’s
amendment that he now seeks to challenge and because his
underlying bankruptcy case was dismissed. Therefore, we af-
firm.
I. Background
Debtor petitioned for bankruptcy relief under Chapter 13
of the United States Bankruptcy Code on August 5, 2014. Trus-
tee was then appointed as the successor trustee for debtor’s
bankruptcy case. In filing for bankruptcy, debtor failed to dis-
close on his Schedule B form (list of assets) a pending work-
ers’ compensation claim that he had filed two months earlier
under the Illinois Workers’ Compensation Act, 820 Ill. Comp.
Stat. 305/1. On his Schedule C form (list of exemptions), he
likewise failed to declare an exemption for the same. Based on
this nondisclosure, debtor proposed a sixty-month plan of re-
organization to pay $148 per month in addition to possible tax
refunds. The bankruptcy court confirmed this plan on Octo-
ber 17, 2014.
No. 20-1686 3
Years later, in August 2017, debtor received a workers’
compensation settlement award for $92,430.84. Upon learning
of the award, trustee filed a motion to compel debtor to dis-
close it. Debtor complied, listing the settlement proceeds as
personal property on his Schedule B form and declaring the
proceeds exempt on his Schedule C form under 820 Ill. Comp.
Stat. 305/21 and 735 Ill. Comp. Stat. 5/12-1001(b). On July 20,
2018, trustee then filed a motion to compel debtor to file an
amended plan of reorganization under 11 U.S.C. § 1329(a)
that would provide for the turnover of debtor’s workers’ com-
pensation award to fund distributions to his general unse-
cured creditors. Debtor had spent virtually all the award pro-
ceeds by that point and filed an adversary complaint in his
bankruptcy case seeking a declaratory judgment from the
bankruptcy court that he need not file an amended plan.
In February 2019, the bankruptcy court heard arguments
on trustee’s turnover motion (in the bankruptcy case) and
debtor’s adversary complaint (in the new adversary proceed-
ing), ruling for trustee on both. With respect to trustee’s turn-
over motion in the bankruptcy case, on March 1, 2019, the
court ordered that debtor file an amended plan of reorganiza-
tion to turnover his workers’ compensation award funds and
provide for payment of 100% of debtor’s general unsecured
claims, totaling around $15,000. The court further instructed
that:
[f]ailure to comply with this Order may result
in the dismissal of this case without further no-
tice or hearing. Nothing in this Order shall pro-
hibit the Trustee from seeking leave from this
4 No. 20-1686
Court to impose a permanent bar to the dis-
charge of all scheduled and claimed debts
should this case be dismissed.
As for the adversary proceeding, the bankruptcy court sepa-
rately issued another order on March 1, 2019, denying
debtor’s request for a declaratory judgment. Debtor then filed
an appeal to the Southern District of Illinois for both orders,
igniting two separate litigation tracks, one for the underlying
bankruptcy case and one for the adversary proceeding.
In the bankruptcy case, debtor moved before the bank-
ruptcy court to stay the bankruptcy proceedings without
posting an appeal bond, hoping to delay further proceedings
pending resolution of his appeal of the court’s orders in the
adversary proceeding. The bankruptcy court denied debtor’s
motion to stay; instead, the court granted trustee’s motion for
a supersedeas bond and ordered that the bankruptcy pro-
ceedings would not be stayed unless debtor posted a $15,000
bond to protect the unsecured creditors’ interests.
In lieu of posting the $15,000 bond, debtor twice amended
his plan of reorganization, on May 2 and May 13, 2019, to
comply with the bankruptcy court’s March 1 order. Trustee
objected to both amended plans, but the bankruptcy court
confirmed debtor’s May 13 amended plan. This plan required
debtor to pay a lump-sum payment of approximately $15,000
before the plan’s expiration but was otherwise the same as the
original. Debtor failed to make the final payment under this
plan, so trustee filed a motion to dismiss the bankruptcy case,
which the bankruptcy court granted on November 6, 2019.
Debtor moved to amend or alter the bankruptcy court’s
order dismissing the bankruptcy case, asking the court to:
No. 20-1686 5
(1) modify its dismissal order by removing language that im-
posed a permanent bar to discharge of debts and (2) add lan-
guage to preserve the appeal in the district court. Notably,
debtor did not ask the court to vacate or reconsider dismissal
of the bankruptcy case. Trustee opposed this motion because
debtor failed to raise either argument at the motion to dismiss
hearing. The bankruptcy court agreed and denied debtor’s
motion. Debtor appealed the bankruptcy court’s dismissal in
district court, an appeal still pending but not currently before
us.
Returning to debtor’s first appeal in the district court, from
the bankruptcy court’s March 1 order in the adversary pro-
ceeding, trustee filed a motion to dismiss the case as moot.
The district court granted the motion on two mootness
grounds: (1) debtor could not challenge the order directing
him to amend his reorganization plan once he had voluntarily
complied with that very order, and (2) the March 1 order de-
pended entirely on the underlying bankruptcy case, which
had been dismissed. Alleging both grounds were erroneous,
debtor appealed the district court’s dismissal of the adversary
proceeding.
II. Discussion
“Whether an appeal [of a bankruptcy court decision to the
district court] was properly dismissed as moot is a legal ques-
tion; thus, our review of the district court’s ruling is de novo.”
Hower v. Molding Sys. Eng’g Corp., 445 F.3d 935, 937–38 (7th
Cir. 2006). “Article III of the Constitution limits the jurisdic-
tion of federal courts to ‘cases’ and ‘controversies.’” Ciarp-
aglini v. Norwood, 817 F.3d 541, 544 (7th Cir. 2016) (citing
6 No. 20-1686
Campbell-Ewald Co. v. Gomez, 577 U.S. 153, 160 (2016)). This re-
quirement for jurisdiction remains “throughout the pendency
of an action, not just at the time a case is filed.” Bd. of Educ. of
Downers Grove Grade Sch. Dist. No. 58 v. Steven L., 89 F.3d 464,
467 (7th Cir. 1996). “A case is moot when the issues presented
are no longer ‘live’ or the parties lack a legally cognizable in-
terest in the outcome.” Stotts v. Cmty. Unit Sch. Dist. No. 1,
230 F.3d 989, 990 (7th Cir. 2000) (quoting Powell v. McCormack,
395 U.S. 486, 496 (1969)).
The district court dismissed as moot debtor’s appeal of the
March 1 orders because:
First, while this appeal was pending, [debtor]
amended his Plan to comply with the [March 1]
Order he seeks to appeal. Secondly, the matter
on appeal—the bankruptcy court order requir-
ing [debtor] to amend his Plan—was entirely
dependent upon the existence of the bankruptcy
case. Because the bankruptcy case has been dis-
missed, the question of whether [debtor] must
file an amended plan is irrelevant.
We address each of these mootness arguments below. In light
of our mootness findings, we do not address the merits of the
case.
Debtor’s Compliance with the Bankruptcy Court’s
March 1 Order Mooted Debtor’s Appeal to the Dis-
trict Court
The district court first found this case moot because debtor
complied with the bankruptcy court’s March 1 order by filing
No. 20-1686 7
an amended reorganization plan. Debtor filed two amended
plans in May 2019, the second of which the bankruptcy court
confirmed. Given these facts, debtor’s only real argument on
appeal is that his “compliance was not voluntary” but rather
was “coerced” because the district court stated that failure to
comply with the March 1 order “may result in the dismissal
of this case.” Once the bankruptcy court denied his motion for
stay without bond, he argues, he had no choice but to file an
amended reorganization plan.
That the district court ordered debtor to amend his reor-
ganization plan or risk some negative consequence in litiga-
tion (in this case, dismissal) does not automatically render
debtor’s amended plan coerced. The intuitive appeal of
debtor’s argument only survives if debtor lacked alternative
means to properly present his challenge in court. Yet debtor
could have pursued several other avenues to preserve his
challenge to the exemption issue undergirding this dispute.
Instead, debtor chose to comply with the March 1 order—un-
derstandably to avoid certain consequences—and thus
mooted the instant challenge to that same order.
Debtor could have amended his plan, objected to its con-
firmation, and appealed as needed. See 11 U.S.C. § 1324(a)
(providing “[a] party in interest may object to confirmation of
the plan” at the confirmation hearing). According to the Su-
preme Court, plan confirmation and case dismissal are imme-
diately appealable proceedings:
The relevant proceeding is the process of at-
tempting to arrive at an approved plan that
would allow the bankruptcy to move forward.
This is so, first and foremost, because only plan
8 No. 20-1686
confirmation—or case dismissal—alters the sta-
tus quo and fixes the rights and obligations of
the parties. When the bankruptcy court con-
firms a plan, its terms become binding on debtor
and creditor alike. 11 U.S.C. § 1327(a). Confir-
mation has preclusive effect, foreclosing reliti-
gation of any issue actually litigated by the par-
ties and any issue necessarily determined by the
confirmation order.
Bullard v. Blue Hills Bank, 135 S. Ct. 1686, 1692 (2015) (citation
and internal quotation marks omitted); cf. In re Harvey,
213 F.3d 318, 322 (7th Cir. 2000) (“Forcing parties to raise con-
cerns about the meaning of Chapter 13 filings at the original
confirmation proceedings does not impose an unreasonable
burden on bankruptcy participants. Quite the contrary—it is
perfectly reasonable to expect interested creditors to review
the terms of a proposed plan and object if the terms are unac-
ceptable ….”). Yet debtor stood by when the bankruptcy court
confirmed his modified plan. Months later, and after debtor
failed to make final payments pursuant to that plan, trustee
moved to dismiss. Debtor only then moved to amend or alter
the bankruptcy court’s order, not even challenging the dis-
missal. His opportunity to object to the modified plan had
therefore long passed, “foreclosing relitigation of [the] issue”
that debtor and trustee “actually litigated” before the bank-
ruptcy court and that confirmation of the amended plan “nec-
essarily determined.” See Bullard, 135 S. Ct. at 1692 (citation
and internal quotation marks omitted).
Furthermore, to preserve a challenge to the underlying ex-
emption issue in this adversary proceeding, debtor could
No. 20-1686 9
have posted the $15,000 supersedeas bond, as ordered, to se-
cure a stay of the bankruptcy proceedings. Debtor instead
opted to comply with the March 1 order, submit a modified
plan, and forfeit the merits issue he now raises. Alternatively,
debtor could have simply refused to comply with the March 1
order altogether—which would have resulted in dismissal of
his bankruptcy that he could then appeal. See id. (noting case
dismissal “alters the status quo and fixes the rights and obli-
gations of the parties”). Debtor pursued none of these availa-
ble litigation routes and cannot now reverse course.
Debtor cites a non-bankruptcy case in which we held that
compliance with a district court’s order to pay a portion of the
jury costs did not render appeal of that order moot. See
McKinney v. Ind. Mich. Power Co., 113 F.3d 770, 772 (7th Cir.
1997). But unlike here, the plaintiff’s counsel in McKinney
“promptly appealed the district court’s order” to pay costs;
moreover, the check “submitted to the court’s clerk noted that
the check was in ‘payment/deposit of [a] disputed sum.’” Id.(alteration in original) (emphasis added). While debtor ini-
tially pursued a challenge to the exemption issue at a hearing
before the bankruptcy court, he failed to maintain that pur-
suit. Instead he filed an amended plan—a plan the bank-
ruptcy court confirmed without his objection—and allowed
the court to dismiss his case, thus mooting his challenge to the
very order he now appeals.
The Dismissal of Debtor’s Underlying Bankruptcy
Case Mooted Debtor’s Appeal to the District Court
As a second basis for finding mootness, the district court
held that dismissal of debtor’s bankruptcy case—upon which
the March 1 orders depended—rendered any challenge to the
10 No. 20-1686
March 1 orders “irrelevant.” Without an underlying bank-
ruptcy case, the argument goes, no reorganization plan re-
mained to enforce.
“An appeal should be dismissed as moot when, by virtue
of an intervening event, a court of appeals cannot grant any
effectual relief whatever in favor of the appellant.” Dorel Juv.
Grp., Inc. v. DiMartinis, 495 F.3d 500, 503 (7th Cir. 2007) (inter-
nal quotation marks omitted) (quoting Calderon v. Moore, 518
U.S. 149, 150 (1996)). We must ask whether the relevant inter-
vening event renders it impossible for us to “‘fashion some
form of meaningful relief’ to the appellant in the event he pre-
vails on the merits.” Flynn v. Sandahl, 58 F.3d 283, 287 (7th Cir.
1995) (quoting Church of Scientology v. United States, 506 U.S.
9, 12 (1993)).
To illuminate this principle in the bankruptcy context, we
turn to In re Statistical Tabulating Corp., 60 F.3d 1286 (7th Cir.
1995), in which we acknowledged the “general rule” that
“[d]ismissal of a bankruptcy proceeding normally results in
dismissal of related proceedings because federal jurisdiction
is premised upon the nexus between the underlying bank-
ruptcy case and the related proceedings,” id. at 1289.
In that case we held that a bankruptcy court retained ju-
risdiction to decide an issue remanded to it even though it had
already dismissed the underlying Chapter 11 bankruptcy
case. Id. at 1287. After filing for bankruptcy, the bankruptcy
court issued an agreed order in a government-initiated adver-
sary proceeding determining that Lasalle (creditor and
lienholder) had priority over the government (creditor) in its
claims to the debtor’s assets. Id. On Lasalle’s motion, the court
liquidated and permitted turnover of the debtors’ assets to
satisfy Lasalle’s lien. Id. When the government “belatedly”
No. 20-1686 11
learned of this motion, it appealed to the district court, chal-
lenging the turnover as improper because it contravened the
terms of the agreed order. Id. Lasalle later moved to complete
the turnover and to dismiss the case, which the bankruptcy
court granted. Id. at 1288. Subsequently in the pending ap-
peal, the district court found for the government and re-
manded to the bankruptcy court to reconsider the agreed or-
der’s priority determination. Id. at 1288. By that point the
bankruptcy court had dismissed the underlying case and de-
termined it lacked jurisdiction to consider the issue on re-
mand, which the district court affirmed. Id.We reversed the district court because “the bankruptcy
court should have accepted the mandate of the district court
and revisited the agreed order as directed.” Id. at 1290. “[A]n
inferior court has no power or authority to deviate from the
mandate issued by the appellate court.” Id. (alteration in orig-
inal) (quoting Briggs v. Pa. R.R. Co., 334 U.S. 304, 306 (1948)).
We held that there are exceptions to the “general rule that
when the underlying case is dismissed, all related proceed-
ings are dismissed.” Id. at 1289. Specifically, we agreed with
other courts that “bankruptcy courts have discretion to retain
jurisdiction over adversary proceedings.” Id. The bankruptcy
court, in our view, should have exercised that discretion be-
cause “the integrity of the appellate process is at serious risk
if a bankruptcy court can deprive a district court of jurisdic-
tion over an appeal by simply dismissing the underlying
bankruptcy.” Id.
Our analysis in Statistical Tabulating reveals why the dis-
trict court was within its rights to decline to exercise jurisdic-
tion below. Here, there is no “higher court” (a district court or
12 No. 20-1686
court of appeals) that “mandate[d]” the bankruptcy court re-
visit the exemption issue. See id. at 1290. Left to its own de-
vices, then, the district court appropriately exercised its dis-
cretion to fall back on the general rule that dismissal of an un-
derlying bankruptcy case results in dismissal of related pro-
ceedings. Were it to exercise jurisdiction it could not “fashion
some form of meaningful relief” to debtor, Flynn, 58 F.3d at
287 (citation omitted), because any resolution of the propriety
of ordering debtor to amend his plan would not have affected
the now-dismissed bankruptcy case. On this exact point, as
the Fifth Circuit said:
[T]he pre-discharge dismissal of a bankruptcy
case returns the parties to the positions they
were in before the case was initiated.… [D]ismis-
sal of a bankruptcy case restores the status quo
ante.… [S]ince the Bankruptcy Court dismissed
Debtor’s bankruptcy plan without granting a
discharge, the court’s acceptance of that plan
was negated and the parties were no longer
bound by its terms.
Debtor’s arguments to the contrary fail to ap-
preciate the nature of a Chapter 13 plan as an
exchanged for bargain between the debtor and
the debtor’s creditors[.] As such, when [debtors]
fail[] to fulfill their … end of the bargain because
of the dismissal of their case, a resulting finding
that their confirmed Chapter 13 plan is termi-
nated serves to prevent [debtors] from obtain-
ing the benefit of those terms in a plan which [is]
advantageous to the debtor. Debtor broke his
No. 20-1686 13
agreement … when his failure to make pay-
ments resulted in the bankruptcy’s being dis-
missed without a discharge. He cannot now
seek relief under that same agreement and can-
not convincingly argue that equity is on his side.
In re Oparaji, 698 F.3d 231, 238 (5th Cir. 2012) (some alterations
in original) (citations and internal quotation marks omitted).
Debtor’s overdue qualms with his amended plan therefore no
longer matter because his bankruptcy case dismissal “re-
store[d] the status quo ante.” Id.Although it is true that debtor appealed the dismissal of
the underlying bankruptcy case in a separate appeal to the
district court, that court has not yet resolved the appeal. By
contrast, in Statistical Tabulating, the government secured a fa-
vorable judgment on a live issue, which the district court then
ordered the bankruptcy court to reconsider post-dismissal.
The current facts do not present the same posture that might
result in a “serious risk” to the “integrity of the appellate pro-
cess” because no court has ordered the bankruptcy court to
reconsider the merits or reopen the case. See Stat. Tabulating,
60 F.3d at 1289. While debtor’s separate appeal remains pend-
ing, we will not speculate about the counterfactual of the dis-
trict court ruling in debtor’s favor. Therefore, the district court
was free to rely on the general rule that a bankruptcy dismis-
sal results in the dismissal of related proceedings. See, e.g., In
re Whaley, 772 F. App’x 346, 348 (7th Cir. 2019) (“[T]he district
court correctly concluded that [debtor’s] post-dismissal mo-
tion … was moot.”).
14 No. 20-1686
Debtor attacks this logic by pointing to cases revealing that
“it is a fairly routine matter in federal jurisprudence for dis-
missals of cases to be reviewed and if deemed inappropriate,
reviewing courts have the power to reverse or vacate an order
dismissing the case.” Even accepting his view that “Appellate
Courts do have the power to vacate an order dismissing a
case,” a view debtor roots in out-of-circuit and non-Chapter
13 cases, vacating the order in question is not appropriate
here. We therefore affirm the district court’s dismissal of this
case as moot due to the underlying dismissal of debtor’s bank-
ruptcy case.
III. Conclusion
The district court’s determination that debtor’s case is
moot is legally sound and we AFFIRM that judgment.