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Litton Loan Servicing, L.P. v. Dennis Schubert

Summarizing by Amir Shachmurove

Wendy Nora v. HSBC Bank USA, N.A.

Case Type:
Case Status:
18-1866 & 18-1889 (7th Circuit, Apr 01,2019) Not Published
The Seventh Circuit affirmed the District Court’s decisions with sanctions.
Procedural context:
In 2010, HSBC Bank USA, N.A. (“HSBC”) filed a foreclosure action in Wisconsin state court against borrowers, Steven and Sondra Lisse. Four years after filing, the circuit court granted summary judgment for HSBC, which was affirmed by the Wisconsin Court of Appeals. Thereafter, both Steven and Sondra Lisse (through their counsel, Wendy Alison Nora (“Nora”)), filed consecutive individual Chapter 13 bankruptcy petitions in the Western District of Wisconsin. Steven’s petition was filed first and was dismissed sua sponte by the court without leave to amend, as the court reasoned that it was filed in an effort to fight the foreclosure judgment with HSBC. After Steven’s petition was dismissed, Sondra’s Chapter 13 petition was filed and eventually voluntarily dismissed, due to the bankruptcy court ruling in favor of HSBC and against Nora on various motions, including HSBC’s relief from the automatic stay. Both petitions extended the deadline for the Wisconsin Supreme Court’s review of the foreclosure judgment. After both bankruptcy petitions were dismissed, Nora filed appeals to the district court on behalf of both Steven and Sondra. In the appeals, Nora made multiple claims against HSBC and its counsel, including fraud and a challenge of the note’s authenticity. Nora also requested numerous extensions for time throughout, including one with a basis under the Americans with Disabilities Act of 1990 (the “ADA”) alleging that a physician recommended that Nora take a leave from practicing law. She later testified that during the granted stay, she continued to practice law on behalf of other clients. Also during the pendency of the appeals, the Wisconsin Supreme Court denied review of the Wisconsin foreclosure judgment, prompting HSBC to begin the process of moving forward with the sale. Shortly thereafter, the Lisses filed multiple motions in Wisconsin circuit court to prevent the sale and which Nora asserted was a basis for allowing her an extension to file her opening brief in Steven’s bankruptcy appeal. In regards to Sondra’s appeal, the district court affirmed the bankruptcy court’s ruling, specifically noting that the Wisconsin foreclosure judgment precluded her from challenging the note’s authenticity. When the district court rejected the extension of time in Steven’s appeal, Nora voluntarily dismissed it. However, in addition to dismissing Steven’s appeal, the district court further ordered Nora to show cause as to why she should not be sanctioned for her frivolous appeal. Another legal battle then arose between Nora and the district court, which entailed an evidentiary hearing with Chief District Judge Peterson, District Judge Conley, and Chief Bankruptcy Judge Furay. The result was the district court fining Nora $2,500 and suspending her from appearing in new matters in the Western District for six months, although these sanctions were stayed until Nora filed another improper filing. Additionally, HSBC filed a motion for fees and costs under FED. R. BANKR. P. 8020 and 28 USC 1927. The district court granted HSBC’s motion and held Steven and Nora jointly and severally liable for its fees and costs. Roughly a week later, the Wisconsin Supreme Court revoked Nora’s law license for one (1) year as a result of conduct outside of this litigation. Due to this decision, the Western District suspended Nora from practice until her license was restored.
Nora’s appeal to the 7th Circuit involved two rulings by the district court: (1) the district court’s sanctions order holding her and Steven jointly liable to HSBC for fees and costs, and (2) the district court’s order suspending her from practice in the Western District of Wisconsin. In regards to the first ruling, the 7th Circuit held that sanctions were appropriate under FED. R. BANKR. P. 8020(a) because Steven’s bankruptcy appeal was frivolous. In its determination, the court stated that the issue as to whether the debtor filed his petition in good faith is a factual finding by the bankruptcy court that will only be reversed when the finding is completely erroneous. Here, the Seventh Circuit noted that while “using a Chapter 13 petition to stave off an impending home foreclosure sale is not necessarily improper,” Nora filed it in an attempt to relitigate HSBC’s foreclosure judgment, which is barred by the Rooker-Feldman doctrine. In regards to the sanctions under 28 USC 1927, the Seventh Circuit found that Nora’s litigation tactics also warranted sanctions under this statute. In regards to the second ruling, the Seventh Circuit once again affirmed the district court’s ruling on the basis that her suspension was reciprocal discipline based on her disbarment by the Wisconsin Supreme Court and not due to her conduct in this litigation, although they believed that her actions in this litigation warranted a suspension in itself. Within this portion of the appeal, HSBC also filed a motion for additional sanctions. The Seventh Circuit granted its request for attorneys’ fees and costs, and lifted the suspension on the previously imposed sanctions in the district court.
Wood, Brennan and St. Eve

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