Maurice Salem v. Horace Fox, Jr

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17‐1615
ESTATE OF SOAD WATTAR, et al.,
Intervenors‐Appellants,
v.
HORACE FOX, JR.,
Trustee‐Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 16‐cv‐4699 — Robert M. Dow, Jr., Judge.
____________________
No. 18‐2197
IN RE: RICHARD SHARIF.
Debtor,
APPEAL OF: MAURICE SALEM
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 17‐cv‐1500 — Robert M. Dow, Jr., Judge.
____________________
2 Nos. 17‐1615, 18‐2197 & 22‐2826
No. 22‐2826
HAIFA SHARIFEH,
Intervenor‐Appellant,
v.
HORACE FOX, JR.,
Trustee‐Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 18‐cv‐8508 — Martha M. Pacold, Judge.
____________________
SUBMITTED APRIL 13, 2023* — DECIDED APRIL 21, 2023
RE‐ISSUED JUNE 16, 2023†
____________________
Before EASTERBROOK, WOOD, and KIRSCH, Circuit Judges.
PER CURIAM. In 2010, the United States Bankruptcy Court
for the Northern District of Illinois ruled that all assets held
by the Soad Wattar Revocable Living Trust—including the
Wattar family home—were part of the bankruptcy estate of
* We have agreed to decide each of the three cases discussed in this
opinion without oral argument, because the briefs and the record ade‐
quately present the facts and legal arguments, and thus oral argument
would not significantly aid the court. FED. R. APP. P. 34(a)(2)(C).
† An earlier version of this opinion was originally issued as a nonprec‐
edential order. Upon request of the bankruptcy judges of the Northern
District of Illinois, the court has decided to revise and re‐issue it as a for‐
mal opinion.
Nos. 17‐1615, 18‐2197 & 22‐2826 3
Richard Sharif. Sharif was the son of Soad Wattar, now de‐
ceased. As the sole trustee of the Wattar trust, Sharif had full
control of its assets. Sharif’s sisters, Haifa and Ragda Sharifeh,
soon launched an effort to keep the trust proceeds out of their
brother’s bankruptcy estate; their strategy was to show that it
was they who owned the trust assets, not their brother.
At issue in these appeals are the bankruptcy court’s rul‐
ings on three motions: (1) Haifa’s 2015 motion to vacate the
court’s decision that all trust assets belonged to the bank‐
ruptcy estate; (2) the sisters’ joint 2016 motion for leave to sue
the Chapter 7 trustee assigned to Sharif’s bankruptcy for pur‐
ported due‐process violations; and (3) Ragda’s 2016 motion
seeking both reimbursement of money she allegedly spent on
the family home and the proceeds from Wattar’s life insur‐
ance policy, which the court had found to be an asset of the
trust and therefore part of the bankruptcy estate. The bank‐
ruptcy court denied all three motions and sanctioned the sis‐
ters and their lawyer, Maurice Salem. Each ruling was af‐
firmed on appeal to the district court. We are no more per‐
suaded by the appellants’ arguments (to the extent they de‐
velop any) than were the judges who already rejected them,
and so we affirm.
I
Sharif filed for Chapter 7 bankruptcy in 2009. His mother,
Soad Wattar, had established a living trust, of which he was
the sole trustee. (His sisters would later argue that a 2007 trust
amendment had made Ragda the sole trustee, but that led no‐
where.) When Wattar died in March 2010, Sharif produced a
will that named him executor of her estate and provided for
all Wattar’s assets to pass into the trust. In June 2010, in a cred‐
itor’s adversary proceeding against Sharif, the bankruptcy
4 Nos. 17‐1615, 18‐2197 & 22‐2826
court ruled that the trust’s assets were part of the bankruptcy
estate because Sharif had sole control over them and treated
them as if they were his personal property. On the motion of
the Chapter 7 bankruptcy trustee, Horace Fox, the bankruptcy
court then ordered the trust assets to be turned over to the
bankruptcy estate. (The parties refer to this as the turnover
order.)
While Sharif appealed this ruling, see Wellness Interna‐
tional Network, Ltd. v. Sharif, 727 F.3d 751 (7th Cir. 2013),
rev’d, 575 U.S. 665 (2015), Haifa and Ragda sought control of
the trust assets, first in state court and then as intervenors in
Sharif’s bankruptcy case. None of their efforts succeeded. By
the bankruptcy court’s count, at least ten rulings between
2010 and 2015 addressed who owned the trust assets and
ruled against the sisters. Among these decisions was our 2015
affirmance of the bankruptcy court’s initial decision that the
trust and Sharif were alter egos, issued on remand from the
Supreme Court of the United States. See Wellness Int’l Net‐
work, Ltd. v. Sharif, 617 F. App’x 589, 591 (7th Cir. 2015).
These rulings also included the bankruptcy court’s denial
of Haifa’s 2015 motion on behalf of her mother’s estate to va‐
cate the turnover order. See Fed. R. Civ. P. 60(b)(4). When the
trustee opposed the motion, Haifa attached to her reply brief
a theretofore‐unknown second will. Dated April 28, 2007—
two days after the will Sharif had produced five years ear‐
lier—it purported to name Haifa the executor of their
mother’s estate. Haifa argued that the turnover order was in‐
valid because the court had no power to dispose of the Wattar
estate’s assets until the true executor received notice, and
Haifa allegedly had not been notified at the proper time.
Nos. 17‐1615, 18‐2197 & 22‐2826 5
The bankruptcy court denied Haifa’s motion after making
some critical findings: (1) Haifa had in fact received notice of
the proceedings; (2) the second will was forged; (3) even if it
were genuine, Haifa still lacked an interest in the disputed as‐
sets, which were property of the trust no matter who the will’s
executor was; and (4) in any event, laches barred Haifa’s claim
because she had unreasonably delayed pursuing it. Along the
way, the court found that Haifa’s testimony that she had not
received notice of the bankruptcy proceedings or turnover or‐
der was not credible. The district court (Judge Pacold) af‐
firmed.
In 2016, the sisters requested leave of the bankruptcy court
to sue Trustee Fox and his attorney for violating their rights
when the trustee moved for the transfer of trust assets to Sha‐
rif’s bankruptcy estate. Advance permission from the bank‐
ruptcy court is required to sue a trustee for actions taken in
that capacity. See In re Linton, 136 F.3d 544, 545 (7th Cir. 1998).
The sisters, now represented by Maurice Salem, identified
their prospective suit as a Fifth Amendment due‐process
claim under Bivens v. Six Unknown Named Agents of Federal Bu‐
reau of Narcotics, 403 U.S. 388 (1971). At the same time, Ragda
moved for funds from the bankruptcy estate to reimburse her‐
self for mortgage and tax payments she claimed to have made
on the family home between 2010 and 2015. She also asserted
that she was the proper beneficiary of Wattar’s life insurance
policy and was owed the proceeds because they were exempt
from bankruptcy under Illinois law. See 735 ILCS 5/12‐1001(f).
The bankruptcy court denied the sisters leave to sue after
concluding that they failed to make the required initial show‐
ing that their claims had some foundation. Their one‐page
motion trailed off midsentence, and the attached complaint
6 Nos. 17‐1615, 18‐2197 & 22‐2826
sought to sue Fox and his attorney under Bivens for depriving
them of property without “notice and a hearing.” As for
Ragda’s motion, the bankruptcy court concluded that she
cited no statutory or contractual basis for recouping her al‐
leged expenditures on the home. Indeed, Ragda conceded
that the payments were voluntary. Further, the bankruptcy
exemption she invoked for the insurance proceeds did not ap‐
ply to her; it is for dependents of the insured, which Ragda
was not. Furthermore, only debtors can invoke exemptions,
and Ragda had no claim to be the debtor.
The bankruptcy court then ordered Salem, Ragda, and
Haifa to show cause why they should not be sanctioned. After
receiving their responses and holding a hearing, the bank‐
ruptcy court concluded that their 2016 motions violated Fed‐
eral Rule of Bankruptcy Procedure 9011 because they lacked
a basis in law or evidence. The court further concluded that
the motions had been filed “to harass the bankruptcy trustee,
cause unnecessary delay and … increase the cost of litiga‐
tion,” and actually had increased the bankruptcy estate’s liti‐
gation expenses. After reviewing in detail the history of the
decade‐plus bankruptcy litigation and the sisters’ attempts to
siphon off assets controlled by Sharif (and his other creditors),
the court further determined that Salem, Ragda, and Haifa
displayed “repeated disregard for the facts and the law” and
that “[t]ime and again, [they] have shown a complete disre‐
gard for the judicial system, making blatant attempts to cir‐
cumvent it.” On that basis, the court issued sanctions: it
barred Salem, Ragda, and Haifa from any further filings in the
bankruptcy case and fined Salem $20,000. On appeal, the dis‐
trict court (Judge Dow) affirmed the denial of the motions and
imposition of sanctions.
Nos. 17‐1615, 18‐2197 & 22‐2826 7
These events resulted in three separate appeals to this
court. We initially consolidated the appeals of the rulings on
the 2016 motions and sanctions, while Haifa’s appeal of the
denial of her motion to vacate proceeded in parallel. We now
conclude that further consolidation is desirable. All three ap‐
peals spring from the same bankruptcy case and rest on a
common factual background, and so it makes sense to resolve
them together. We note that Salem has been suspended from
the practice of law and, because he is proceeding pro se, he
may represent only himself. Nevertheless, in their joint brief
Haifa and Ragda adopt Salem’s appellate arguments about
their 2016 motions and sanctions. See Fed. R. App. P. 28(i).
II
On appeal, Haifa challenges the denial of her 2015 motion
to vacate the turnover of trust assets; Haifa and Ragda chal‐
lenge the denial of their 2016 motions; and the two sisters and
Salem all challenge the sanctions. Each of the challenged rul‐
ings pertains to a discrete matter within the overarching
bankruptcy, and the bankruptcy court disposed of each one
definitively. Both the district court and this court thus have
jurisdiction over the appeals. 28 U.S.C. §§ 158(a), (d)(1); Ritzen
Grp., Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582, 586–87 (2020).
We review the bankruptcy court’s findings of fact for clear er‐
ror and the legal conclusions of both the bankruptcy court and
district court de novo, with special deference to the bankruptcy
court’s assessment of credibility. In re Dimas, 14 F.4th 634,
639–40, 642 (7th Cir. 2021). We may affirm on any basis sup‐
ported by the record, as long as it was raised below and the
appellants had the opportunity to contest it. McHenry County
v. Raoul, 44 F.4th 581, 588 (7th Cir. 2022); In re Airadigm
8 Nos. 17‐1615, 18‐2197 & 22‐2826
Commcʹns, Inc., 616 F.3d 642, 652 (7th Cir. 2010) (bankruptcy
appeal).
A. Motion to Vacate the Turnover of Trust Assets
Recall that in 2015 Haifa moved to vacate the court’s order
requiring the trust assets to be turned over to the bankruptcy
estate. Haifa contends that this step was necessary because,
after the bankruptcy court’s ruling, she obtained a newer ver‐
sion of the second will—this one certified by a Syrian court—
that proves its veracity. She repeats her argument that her
mother’s estate was not bound by the turnover order because
she, as purported executor, never received notice.
Though Haifa primarily challenges the bankruptcy court’s
finding that the second will is a forgery, we can resolve her
appeal without wading into that morass. Even if Haifa were
really the executor, she simply waited too long to assert the
estate’s rights. In the bankruptcy and district courts, the trus‐
tee raised the equitable defense of laches, which cuts off the
right to sue when (1) the plaintiff has inexcusably delayed
bringing suit, and (2) that delay harmed the defendant. See
Teamsters & Emps. Welfare Tr. v. Gorman Bros. Ready Mix, 283
F.3d 877, 880 (7th Cir. 2002). Haifa does not meaningfully dis‐
pute the assertion that the delay was prejudicial to the bank‐
ruptcy estate, nor could she: if the second will controls, the
trustee has been allocating assets improperly for years. We
therefore focus on whether the delay is excusable.
Haifa’s explanation for her years‐long delay in producing
and seeking to enforce the second will is unconvincing. She
first argues that she lacked notice of the bankruptcy proceed‐
ings or turnover order. But even if, despite being a creditor,
she was not served with filings or copies of rulings, we see no
Nos. 17‐1615, 18‐2197 & 22‐2826 9
error in the bankruptcy court’s determination that Haifa had
actual notice. Among other things, the record shows that
Haifa and Ragda filed a state‐court complaint in July 2010 that
discussed the bankruptcy and the alter‐ego order. Haifa gives
us no reason not to defer to the bankruptcy court’s assess‐
ment—based on inconsistent statements in other proceedings
and her participation in the state‐court litigation—that
Haifa’s testimony about when she learned of the bankruptcy
was not credible. Dimas, 14 F.4th at 642.
Haifa next argues that she could not act until 2015 because
the Supreme Court was considering a decision of this court,
which, according to Haifa had “vacated” the turnover order
in Sharif’s appeal. Our decision, Haifa says, meant that the
probate estate was “winning the trust” back from the bank‐
ruptcy estate, and she had to wait for her brother’s Supreme
Court appeal to conclude. That was not the nature of Sharif’s
appeal. But, in any case, we issued our decision in August
2013, meaning that Haifa had three years before then to chal‐
lenge the turnover order. After all, she purports to have been
aware of the second will from the time it was executed in 2007
and does not explain why she did not invoke it as soon as her
brother began to act as executor. Further, Haifa’s assertion is
simply that she was the executor, and in that capacity was en‐
titled to notice—she never has disputed that even under her
version of the will, her mother’s assets passed directly to the
trust, which Haifa has never controlled. In short, her reasons
for waiting are muddled at best and do not outweigh the prej‐
udice to the bankruptcy estate.
The district court gave other reasons, including collateral
estoppel, for rejecting Haifa’s attempt to invalidate the
10 Nos. 17‐1615, 18‐2197 & 22‐2826
turnover order. We have no reason to reach these issues and
express no opinion on them.
B. The 2016 Motions
Next, both sisters assert that the district court applied the
wrong standard when it reviewed the bankruptcy court’s de‐
nial of their motion for leave to sue the trustee. They assert
that the district court should have reversed because the bank‐
ruptcy court failed to assess whether they made a prima facie
case for the trustee’s violation of their rights. But the bank‐
ruptcy court committed no such error. In its lengthy order dis‐
cussing the motion’s failings, the court simply made an as‐
sessment with which they disagree.
The bankruptcy court correctly concluded that the motion
did not set forth a prima facie case for a right to relief against
the trustee. It made no case at all: the motion trails off and
does not even present a complete argument. And the argu‐
ment it does attempt to present is frivolous. The sisters did
not explain then—nor do they now—why they could sue a
Chapter 7 trustee under Bivens.
The Supreme Court has repeatedly “emphasized that rec‐
ognizing a cause of action under Bivens is ‘a disfavored judi‐
cial activity.’” Egbert v. Boule, 142 S. Ct. 1793, 1802 (2022)
(quoting Ziglar v. Abbasi, 582 U.S. 120, 135 (2017)). To deter‐
mine whether a plaintiff has stated a Bivens claim, we first
must “ask whether the case presents ‘a new Bivens context’—
i.e., is it ‘meaningful[ly]’ different from the three cases in
which the Court has implied a damages action.” Id. at 1803
(quoting Ziglar, 582 U.S. at 139). If so, we consider whether
“there are ‘special factors’ indicating that the Judiciary is at
least arguably less equipped than Congress ‘to weigh the
Nos. 17‐1615, 18‐2197 & 22‐2826 11
costs and benefits of allowing a damages action to proceed.’”
Id. (quoting Ziglar, 582 U.S. at 136). “[E]ven a single reason to
pause” is sufficient to bar the recognition of a new Bivens the‐
ory. Id. (internal quotations omitted).
The proposed claim here fails both steps. First, there is no
doubt that the sisters’ claim that the Chapter 7 trustee and his
counsel violated their Fifth Amendment due‐process rights
represents a new Bivens context. See id. at 1803 (stating that
cases involving “a new category of defendants” represent
new contexts (internal quotations omitted)). Second, the
unique nature of a bankruptcy trustee’s role is more than suf‐
ficient reason to pause before recognizing a Bivens action
against a trustee. Trustees have attributes of both private and
state actors. They are not federal employees; they are private
representatives appointed or elected to protect a bankruptcy
estate. See 11 U.S.C. § 701(a)(1) (granting the U.S. Trustee the
power to appoint a “disinterested person” from “the panel of
private trustees” as an interim trustee). Nor are Chapter 7
trustees fully on the government’s payroll. Aside from a nom‐
inal fee of $60 to $120 per case, trustees are paid by the bank‐
ruptcy estate, not the federal government. See 11 U.S.C.
§§ 330(b), 330(e) (nominal flat fees); 11 U.S.C. §§ 326(a), 330(a)
(variable compensation tied to the value of assets in the es‐
tate). And like public defenders, who the Supreme Court has
held are not state actors for purposes of section 1983 claims
despite their government employment, see Polk County v.
Dodson, 454 U.S. 312, 325 (1981), private trustees must repre‐
sent the interests of the bankruptcy estate, not the interests of
the government. See Dechert v. Cadle Co., 333 F.3d 801, 802 (7th
Cir. 2003) (explaining that trustees “hav[e] fiduciary obliga‐
tions exclusively to the estate in bankruptcy”). Indeed, like
public defenders, trustees may sometimes find themselves to
12 Nos. 17‐1615, 18‐2197 & 22‐2826
be the state’s adversaries. See, e.g., United States v. Nordic Vil‐
lage Inc., 503 U.S. 30 (1992) (abrogated by statute) (involving a
suit brought by a trustee against the IRS).
In some contexts, however, the bankruptcy trustee may be
viewed as a sort of “court officer.” See Norton Bankr. L. & P.
3d § 28:1, Westlaw (database updated May 2023). From this
perspective, “a trustee in bankruptcy is working in effect for
the court that appointed or approved him, administering
property that has come under the court’s control by virtue of
the Bankruptcy Code.” In re Linton, 136 F.3d at 545. For that
reason, courts have long held that a plaintiff seeking to sue a
trustee “concerning actions taken by him in the course of his
trusteeship must obtain the permission of the bankruptcy
court.” See id. at 545–47 (discussing the development of the
doctrine and affirming its applicability to suits against trus‐
tees in state court). Relatedly, courts have recognized that
trustees enjoy some degree of immunity for acts taken pursu‐
ant to court orders or within the scope of their trusteeship,
though the contours of this doctrine remain unsettled. See,
e.g., In re McKenzie, 716 F.3d 404, 413 (6th Cir. 2013) (explain‐
ing that, although “[b]ankruptcy trustees serve in a variety of
functions and may be immune for some but not all of those
functions, … a bankruptcy trustee is ordinarily entitled to
quasi‐judicial (or derivative) immunity from suit by third par‐
ties for actions taken in his official capacity”); In re Harris, 590
F.3d 730, 742 (9th Cir. 2009) (“Bankruptcy trustees are entitled
to broad immunity from suit when acting within the scope of
their authority and pursuant to court order.” (quoting Bennett
v. Williams, 892 F.2d 822, 823 (9th Cir. 1989))).
In sum, the unique nature of the trustee’s role is sufficient
to counsel hesitation before recognizing an implied cause of
Nos. 17‐1615, 18‐2197 & 22‐2826 13
action for money damages against a trustee, especially in light
of Congress’s broad power to “establish … uniform Laws on
the subject of Bankruptcies throughout the United States.”
U.S. Const. art. I, § 8, cl. 4. We therefore decline to recognize
the proposed Bivens claim.
The sisters also develop no argument supporting a legal
basis for Ragda to recoup the mortgage and tax payments she
allegedly made, or to receive the life insurance proceeds that
were payable to the trust as beneficiary (and then transferred
to the bankruptcy estate). The sisters’ challenges to the denial
of the 2016 motions are underdeveloped and unsupported by
law. Indeed, we would have been within our rights to con‐
sider them waived, see Puffer v. Allstate Ins. Co., 675 F.3d 709,
718 (7th Cir. 2012), but we have attempted to address the ar‐
guments we can discern.
C. The Bankruptcy Court’s Sanctions
We review for abuse of discretion the bankruptcy court’s
imposition of sanctions on Ragda, Haifa, and Salem. See In re
Rinaldi, 778 F.3d 672, 676 (7th Cir. 2015). Those sanctions in‐
cluded a bar on further filings in the bankruptcy case plus a
$20,000 fine for Salem. We find no such abuse here—indeed,
we find nothing wrong with the court’s action. Salem princi‐
pally argues that sanctions were inappropriate because the
motions he filed were not “another attempt to obtain the same
relief” sought in previous motions and were therefore not re‐
petitive. While this may be true in the narrow sense—no party
previously sought to sue the bankruptcy trustee under
Bivens—the bankruptcy court reasonably concluded that
these motions represented yet another refusal to accept its de‐
cision that the trust assets were part of the bankruptcy estate.
14 Nos. 17‐1615, 18‐2197 & 22‐2826
Salem’s focus on repetitiveness misses the point. The
bankruptcy court determined that no argument in the 2016
motions was supported by fact or law and that the motions
were intended to harass the trustee and increase the cost of
litigation. See Fed. R. Bankr. P. 9011(b)(1)–(2). As discussed
above, the appellants present no legal basis for their motions,
even as they appeal the rulings. And they do not address the
bankruptcy court’s finding that those motions were intended
to harass the trustee and needlessly increase the cost of litiga‐
tion. They offer only the bare and incorrect assertion that the
bankruptcy court’s lengthy sanctions order failed to address
certain issues. The burden is on the appellants to tell us why
the sanctions were so off‐base that imposing them was an
abuse of discretion. They cannot prevail when they fail to en‐
gage with the reasons why the bankruptcy court imposed,
and the district court upheld, the sanctions. See Klein v.
OʹBrien, 884 F.3d 754, 757 (7th Cir. 2018). We add that barring
these litigants from further filings in the bankruptcy action
was a sensible response to their frivolous attempts to under‐
mine long‐settled issues.
III
We have considered appellants’ other arguments, includ‐
ing Salem’s umbrage at the documentation of his history of
litigation misconduct outside of these cases and a frivolous
suggestion that the sanctions chill protected speech. None has
merit. We thus AFFIRM the judgments of the district courts.