Charles Petrunak v. Jill Krofta

NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted May 24, 2021*
Decided June 2, 2021
Before
DAVID F. HAMILTON, Circuit Judge
MICHAEL Y. SCUDDER, Circuit Judge
THOMAS L. KIRSCH II, Circuit Judge
No. 20‐1595
CHARLES PETRUNAK, Appeal from the United States District
Plaintiff‐Appellant, Court for the Southern District of Indiana,
Indianapolis Division.
v. No. 1:18‐cv‐03525‐RLY‐MJD
JILL A. KROFTA, et al., Richard L. Young,
Defendants‐Appellees. Judge.
ORDER
Plaintiff Charles Petrunak was a federally licensed pyrotechnician until, on the
recommendation of two government inspectors, his licenses were revoked, causing him
to lose his fireworks business. Over a decade later, a jury found Petrunak guilty of tax
crimes related to $500,000 in supposed business losses that he ascribed to the inspectors.
After his release from prison, Petrunak sued the inspectors and his defense attorney for
constitutional violations under Bivens v. Six Unknown Named Agents of Federal Bureau of
* We have agreed to decide the case without oral argument because the briefs and
record adequately present the facts and legal arguments, and oral argument would not
significantly aid the court. FED. R. APP. P. 34(a)(2)(C).
No. 20‐1595 Page 2
Narcotics, 403 U.S. 388 (1971). The district court granted the defendants’ motions to
dismiss, concluding that several counts were time‐barred, and the rest were barred by
Heck v. Humphrey, 512 U.S. 477 (1994), because Petrunak’s conviction remained intact.
We affirm with respect to the agents and dismiss with respect to the defense attorney,
because he is now deceased and we decline to substitute a successor in interest to
defend claims that are frivolous.
According to Petrunak’s amended complaint, the factual allegations of which we
accept as true, Cheli v. Taylorville Cmty. Sch. Dist., 986 F.3d 1035, 1038 (7th Cir. 2021), in
2001, Jill Krofta and Manuel Vicario of the Federal Bureau of Alcohol, Tobacco,
Firearms and Explosives (ATF) recommended revocation of his pyrotechnics licenses
after they inspected his fireworks business. The inspection revealed a semi‐trailer full of
illegal fireworks on Petrunak’s property. At a June 2003 hearing on the proposed
revocation, Petrunak said that, before the inspection, he had contacted the ATF to
explain that he had procured the fireworks for a show that was cancelled at the last
minute, leaving him with explosives that he could not lawfully dispose of. Both Krofta
and Vicario testified in line with their inspection report, which stated that they found
the illegally stored fireworks “by happenstance.” The administrative law judge relied
on the inspectors’ allegedly false testimony in her decision to revoke his licenses.
That decision caused Petrunak to lose his fireworks business. About five years
later, Petrunak determined that he should deduct his lost income—which he calculated
to be $500,000—from his tax liability. Blaming Krofta and Vicario for his losses, he
adopted a creative but frivolous and ultimately fraudulent form of self‐help: he
prepared and delivered to each an IRS Form 1099, essentially reporting that his
company had paid each of them $250,000. See United States v. Petrunak, 856 F.3d 484, 485
(7th Cir. 2017). He then claimed the $500,000 as business expenses on his corporate and
personal tax returns. See id.Based on these filings, Petrunak was indicted for tax fraud. Attorney Kevin
McShane represented Petrunak, and the case proceeded to trial in 2015. A jury found
Petrunak guilty, and the court sentenced him to two years in prison and one year of
supervision. We affirmed the convictions and sentence. Petrunak, 856 F.3d at 487.
Petrunak then moved to vacate his sentence under 28 U.S.C. § 2255, arguing that
McShane provided ineffective assistance of counsel by mounting a defense based on
Petrunak’s confusion over his tax liabilities instead of establishing that the ATF
inspectors were lying. The district court denied relief, concluding that McShane’s
No. 20‐1595 Page 3
choices were strategic and defensible. Petrunak v. United States, No. 1:17‐cv‐04396‐WTL‐
DLP, 2019 WL 6458244, at *5 (S.D. Ind. Feb. 1, 2019). We denied a certificate of
appealability. Petrunak v. United States, No. 19‐1582 (7th Cir. Mar. 31, 2020).
After his release from prison, Petrunak sued Krofta and Vicario under Bivens for
conspiring to commit perjury at the 2003 administrative hearing and the 2015 criminal
trial in violation of his right to due process under the Fifth Amendment. He also sued
McShane for refusing to question the inspectors about their supposed perjury at his
trial, in violation of his Sixth Amendment right to effective assistance of counsel.
The district court, accepting the recommendation of a magistrate judge, granted
the defendants’ motions to dismiss. It determined that the claims against Krofta and
Vicario about their testimony at the 2003 administrative hearing were untimely and
dismissed them with prejudice. The court dismissed the remaining counts without
prejudice. It concluded that claims against the agents regarding their alleged perjury at
the criminal trial and the ineffective‐assistance claim against McShane, were barred
under Heck because Petrunak’s conviction had not been overturned.
After Petrunak filed a notice of appeal, the district court sua sponte amended the
judgment as to McShane. There was a “simpler reason[] than originally articulated by
the Magistrate Judge and adopted by this court,” the court reasoned, to dismiss the
ineffective‐assistance claim: “a Bivens action cannot be maintained against appointed
federal defenders because they do not act under the color of law and a civil rights action
cannot be used to challenge a criminal conviction.” So, it modified the judgment to
reflect a dismissal of the claim against McShane with prejudice.
We begin with two preliminary issues, the first of which is a jurisdictional
question we asked the parties to brief: whether the modified judgment is before us on
appeal. It is not. A district court lacks jurisdiction to substantively alter its judgment
while an appeal is pending because a timely filed notice of appeal transfers the
jurisdiction over judgments to the court of appeals. See United States v. Brown, 732 F.3d
781, 783 (7th Cir. 2013). Modifying a judgment from a dismissal without prejudice
under Heck to a dismissal with prejudice on different grounds enlarges the rights of the
appellee. Alejo v. Heller, 328 F.3d 930, 937 (7th Cir. 2003). Thus, the modified judgment
had no effect. Brown, 732 F.3d at 787. (Federal Rule of Civil Procedure 62.1 provides a
path for a district court that believes a judgment pending on appeal should be modified,
but that path was not used here.)
No. 20‐1595 Page 4
Second, there is some question about whether Petrunak’s constitutional claims
are cognizable under Bivens. Bivens allows for some Fifth Amendment due‐process
claims, see Davis v. Passman, 442 U.S. 228 (1979) (sex discrimination), but the Supreme
Court has not yet declared Sixth Amendment violations actionable under Bivens.
See Ziglar v. Abbasi, 137 S. Ct. 1843, 1857 (2017) (creating new Bivens action is a
“‘disfavored’ judicial activity”). We need not decide this issue because Petrunak’s
complaint does not state any plausible claim for relief on the merits.
Turning to the merits, Petrunak first argues that the district court should have
concluded that Krofta and Vicario are equitably estopped from enforcing the statute of
limitations because they threatened him in 2001 with criminal proceedings if he
contested their actions. Equitable estoppel tolls the limitations period if the defendant
takes actions designed to prevent the plaintiff from suing in time. Easterling v. Thurmer,
880 F.3d 319, 323 (7th Cir. 2018). Petrunak has alleged no affirmative action by the
inspectors that prevented him from timely suing over their testimony at the 2003
hearing. Any threats in 2001 could not have been designed to prevent Petrunak from
suing over testimony Krofta and Vicario did not give until the hearing two years later.
As for the claims that Krofta and Vicario conspired to lie at his criminal trial,
Petrunak argues generally that the district court erred by concluding that Heck’s
favorable‐termination rule applied to his case. The Heck doctrine bars a Bivens claim that
necessarily implies the invalidity of a criminal conviction unless the plaintiff can show
that the conviction has been invalidated. Heck, 512 U.S. at 486–87; Clemente v. Allen,
120 F.3d 703, 705 (7th Cir. 1997) (holding Heck bar applies to Bivens claims). Petrunak’s
claims—that but for Krofta and Vicario’s false testimony, he would not have been
convicted of the tax crimes—present a direct challenge to the validity of his conviction.
Because Petrunak’s conviction has never been reversed—indeed, similar arguments
failed on appeal and under 28 U.S.C. § 2255—Heck bars those claims.
That leaves Petrunak’s claims against attorney McShane. On the day the district
court dismissed the complaint, but before it entered judgment, the defendants filed
what was apparently meant to function as a notice of McShane’s death: a copy of a
document substituting another defense attorney for McShane in Indiana state court,
citing his death as the reason. Weeks later, the court nonetheless entered judgment for
the defendants including McShane, who therefore became a party to this appeal. In May
2020, when McShane’s civil attorney withdrew from representing him in this appeal, we
directed Petrunak to ask McShane’s attorney surrogate whom to name if he wished to
move to substitute a new appellee under Federal Rule of Appellate Procedure 43(a)(1).
No. 20‐1595 Page 5
Petrunak responded in January 2021, when he moved for further instructions, making
clear that he wished to make a substitution but could not get a clear answer from the
attorney surrogate regarding whom to substitute. We construed the request for
instructions as a suggestion of death under Rule 43(a)(1) and said that we would take
up the substitution issue with the merits.
Although it is well beyond the 90 days for a substitution of party based on death,
see FED. R. APP. P. 43(a); FED. R. CIV. P. 25(a), we do not fault Petrunak for not following
protocol given the confusing nature of the proceedings on this issue. Petrunak should
have been looking for a personal representative, but instead was told to track down the
lawyer standing in for McShane in his capacity as an attorney. It would be unfair to
dismiss the appeal based on the failure to make a timely substitution when Petrunak
has been diligent in his efforts to untangle the issue, which can be tricky for licensed
attorneys, particularly if no estate has been opened with a personal representative.
Nevertheless, the better course is to dismiss the appeal against McShane.
Petrunak has not found the proper representative, but the identity of the prospective
substitute appellee makes no difference in the end. Even if Petrunak had timely moved
to substitute an appropriate representative of McShane’s, we would have denied it.
See Otis Clapp & Son, Inc. v. Filmore Vitamin Co., 754 F.2d 738, 743 (7th Cir. 1985)
(decision whether to substitute parties lies within court’s discretion). Petrunak’s
purported Bivens claim against McShane for ineffective assistance is frivolous for
several reasons. First, the claim is based on McShane’s failure to impeach the agents’
testimony at his trial leading to his criminal conviction and is thus barred by Heck. In
addition, as the district court explained, a civil‐rights suit cannot be used to challenge a
criminal conviction, see Preiser v. Rodriguez, 411 U.S. 475, 488–90 (1973), and a defense
attorney in federal court is not a government actor when defending a client and is not
amenable to suit under Bivens. See Polk County v. Dodson, 454 U.S. 312, 317–18 (1981)
(public defender in state court does not act under color of state law for purposes of
42 U.S.C. § 1983 when defending client); Haley v. Walker, 751 F.2d 284, 285 (8th Cir. 1984)
(applying Polk County to Bivens claim against federal defense attorney); Cox v.
Hellerstein, 685 F.2d 1098, 1099 (9th Cir. 1982) (same). No matter the timing, there would
be no point in putting the parties and others to the trouble of tracking down or even
forcing appointment of a personal representative for McShane’s estate to file an
appellate brief opposing these frivolous claims. We therefore deny permission to
substitute and DISMISS the appeal as to McShane.
In all other respects, we AFFIRM.