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Klein v. Estate of Zvunca

United States District Court, E.D. Wisconsin

November 28, 2016



          J.P. Stadtmueller U.S. District Judge

         David Novoselsky (“Novoselsky”), a resident of Pleasant Prairie, Wisconsin, filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Wisconsin. Before the Court is an appeal by Tiberiu Klein (“Klein”), who is proceeding pro se as a creditor of Novoselsky's bankruptcy estate. Klein appeals from an order of Bankruptcy Judge G. Michael Halfenger excusing a violation of the automatic stay pursuant to 11 U.S.C. § 362. Although the facts of the case are difficult to parse, the legal issues before the Court are simple. On this record, the Court must dismiss the appeal for want of jurisdiction.

         1. BACKGROUND

         The history of this case extends from long before the filing of these bankruptcy proceedings. The web of litigation that precedes the task before the Court is complicated but is largely irrelevant to the disposition of the instant appeal. The Court will briefly summarize the history between these parties and then turn to the facts giving rise to Klein's appeal.

         Claudia Zvunca was killed in 2002 when she was struck by a Greyhound bus. Zvunca ex rel. Klein v. Greyhound Lines, Inc., 530 F. App'x 672, 672 (10th Cir. 2013). Her eight-year-old daughter, Cristina, witnessed her death. Id. Klein, a resident of Illinois, was married to Claudia at the time of her death, but he is neither Cristina's biological nor adoptive father. Id.

         An onslaught of litigation, and litigation on that litigation, followed Claudia's death. The Appellate Court of Illinois summarized this legal morass, stating that “from the tragic, but relatively straightforward, facts regarding Claudia Zvunca's death, arose at least 13 lawsuits in various state and federal courts. Among these were legal malpractice suits and two wrongful death actions, proceeding simultaneously in Illinois and Colorado. This court has also had before it over 25 appeals related to this case, many of which were filed by Klein in his continuing attempt to intervene in this matter as the party entitled to represent ‘Cristina's' interests.” Cushing v. Greyhound Lines, Inc., 991 N.E.2d 28, 33 (Ill. Ct. App. 2013). Given the plethora of simultaneously pending actions and the number of parties involved, “the question of ‘who represented whom' was an issue” throughout all the proceedings. Cushing v. Greyhound Lines, Inc., No. 1-10-3176, 2013 WL 2404044, at *9 (Ill. Ct. App. May 30, 2013). Another complicating factor was Klein's penchant for hiring and firing his lawyers with regularity. See Id. This included, at one point, the debtor in the underlying bankruptcy proceedings at issue here, David Novoselsky. Id. It appears that Novoselsky also represented Cristina, her mother's estate, or both for some time during prior proceedings.

         For purposes of this appeal, the Court need only describe two of the several actions brought relating to Claudia Zvunca's death and her estate's representation in prior wrongful-death proceedings. In 2007, Cristina and her mother's estate brought a wrongful death action in the Circuit Court of Cook County, Illinois against several defendants, including Greyhound Lines, Inc. (“Greyhound”) and Motor Coach Industries, Inc. (“Motor Coach”). (Docket #12-1 at 75-76); (Docket #12 at 6). In April 2014, Cristina and her mother's estate brought a similar action in the same court. (Docket #12-1 at 75-76). In the 2014 complaint she included Greyhound, Motor Coach, and various attorneys and representatives involved in prior actions, including Novoselsky. Id. Appellees represent that the 2014 action was filed as a “protective measure, ” while admitting that this action was “duplicative” of the 2007 case “and completely unnecessary to the recovery on behalf of the estate.” (Docket #12 at 6).[1]

         On July 18, 2014, Novoselsky filed a Chapter 11 bankruptcy petition in this District. (Docket #12-1 at 76). Klein joined the bankruptcy as a creditor, filing a proof of claim for $6, 000, 000 for alleged legal malpractice. (14-29136, Docket #38).[2] As a result of Novoselsky's bankruptcy filing, the 2014 Cook County action was placed on that court's “bankruptcy stay calendar” in August 2014 to await the completion of the bankruptcy proceedings. (Docket #12-1 at 76). In September 2014, Cristina filed a motion to remove the 2014 action from the bankruptcy stay calendar in order that she might dismiss some of the defendants, including Motor Coach and Greyhound. Id. Novoselsky opposed the motion, arguing that dismissal of those defendants would impair his claims for contribution against them, which he asserted were assets of his bankruptcy estate. Id. at 76-77. According to Appellees, the Cook County Circuit Court declined to remove the 2014 case from the bankruptcy stay calendar. Id. at 77.

         A year and a half later, on January 15, 2016, Cristina filed a motion with the bankruptcy court seeking relief from the automatic stay under 11 U.S.C. § 362 so that she could dismiss Greyhound and Motor Coach from the 2014 Cook County action. See Id. at 78-79.[3] Novoselsky again objected, contending that dismissal of those defendants would impair his potential claims for contribution. (Docket #12 at 6-7). Klein objected too, asserting that the potential contribution claims Novoselsky might have against Greyhound and the other defendants in the 2014 case “[have] significant value.” (Docket #12-1 at 96). Klein also stated, without explanation, that the dismissal would prevent Novoselsky from asserting counterclaims against Cristina and Claudia's estate for malicious prosecution and for unpaid attorney's fees. See Id. at 96-99.

         The bankruptcy court held two hearings on the motion. The first occurred on February 10, 2016, and the second was held one month later. Id. at 108-15. In the interim between the two hearings, Cristina, apparently under the impression that the Court was sure to rule in her favor, requested in Cook County that the 2014 action be taken off the bankruptcy stay calendar and then dismissed the entire 2014 action, including Novoselsky, with prejudice. (Docket #12 at 7). Cristina's counsel informed the bankruptcy court of the dismissal at the March 10, 2016 continued hearing. Id.

         Klein had appeared at both hearings and argued against granting relief from the stay. Id. At the March 10, 2016 session, Klein asserted that taking the 2014 action off the bankruptcy stay calendar was a violation of the stay. Id. After hearing the parties' arguments-which are not available to this Court because the hearing was audio-recorded and never transcribed-the bankruptcy court found that “the state court proceeding that resulted in an order dismissing the debtor was a continuation of a judicial proceeding against the debtor” and was “thus a technical violation” of the automatic stay. (Docket #12-1 at 112-14).[4]

         Nevertheless, the bankruptcy court concluded that there was cause to grant relief from the stay and annul the stay retroactively so as to sanction the dismissal. Id. According to Appellees, Cristina apprised the bankruptcy court that the 2014 action had “no value” because the same wrongful death claims were nearly trial-ready in the 2007 case. (Docket #12 at 8). Cristina further asserted that having both cases pending at the same time could create thorny procedural problems. Id. Appellees state that the trustee of the bankruptcy estate agreed with them. Id. at 8-9. The bankruptcy court concluded, therefore, that “there [was] good reason for the Estate of Claudia Zvunca to have wanted to dismiss the [2014 Cook County] case, ” since “that case stood in the way of the litigation of the Estate's 2007 state court case based on the Illinois pending case rule.” (Docket #12-1 at 113.) Further, “absent Novoselsky's bankruptcy, the estate would have simply dismissed the action, but the automatic stay was thought to have prevented that course.” Id. Moreover, “[a]lthough certain creditors contended that the Illinois court's dismissal might eliminate valuable claims that are property of the estate, ” the bankruptcy court found that “none of those arguments was convincing.” Id. In its order, the court did not explain what these arguments were or why the court found them wanting. See id.

         On April 5, 2016, Klein appealed the bankruptcy court's order. (Docket #1). On June 20, 2016, the trustee abandoned certain of Novoselsky's contingent claims, including the potential claim for attorney's fees that Klein believed Novoselsky could have asserted against Cristina and her mother's estate. (Docket #12-1 at 117-19). Appellees assert that Klein has been trying to purchase this and other of Novoselsky's legal claims for a nominal amount. Id.

         On April 20, 2016, Klein filed with the bankruptcy court a motion to reconsider its order granting relief from the automatic stay. Id. at 121. The bankruptcy court denied the motion on July 6, 2016, noting that Klein had identified no basis for setting aside the prior order. Id. at 122. The court observed that Klein's arguments were similar to those presented regarding the original order and that repetition of the argument was not a proper basis for reconsideration. Id.[5] This appeal followed.

         2. ...

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