Documente Academic
Documente Profesional
Documente Cultură
No. 09-2356
v.
Brief of Appellants.
Appeal as of Right from a Dismissal Order of
the U.S. District Court for the Northern District of Illinois at Chicago.
Hon. Samuel Der-Yeghiayan, U.S. District Judge.
Lee Thomason
Corporate Counsel
Papa John’s International, Inc.
2002 Papa John’s Boulevard
Louisville, KY 40299
(502) 261-4773
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Case: 09-2356 Save16
Document: Form Filed:
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07/31/2009 Pages: 65
CIRCUIT RULE 26.1 DISCLOSURE STATEMENT
Short Caption: Papa John's Int'l, Inc. and PJ Food Service, Inc. v. Rezko, et al.
To enable the judges to determine whether recusal is necessary or appropriate, an attorney for a non-governmental party or
amicus curiae, or a private attorney representing a government party, must furnish a disclosure statement providing the
following information in compliance with Circuit Rule 26.1 and Fed. R. App. P. 26.1.
The Court prefers that the disclosure statement be filed immediately following docketing; but, the disclosure statement must
be filed within 21 days of docketing or upon the filing of a motion, response, petition, or answer in this court, whichever occurs
first. Attorneys are required to file an amended statement to reflect any material changes in the required information. The text
of the statement must also be included in front of the table of contents of the party's main brief. Counsel is required to
complete the entire statement and to use N/A for any information that is not applicable if this form is used.
[ ] PLEASE CHECK HERE IF ANY INFORMATION ON THIS FORM IS NEW OR REVISED
AND INDICATE WHICH INFORMATION IS NEW OR REVISED.
(1) The full name of every party that the attorney represents in the case (if the party is a corporation, you must provide the
corporate disclosure information required by Fed. R. App. P 26.1 by completing item #3):
Papa John's International, Inc.
(2) The names of all law firms whose partners or associates have appeared for the party in the case (including proceedings
in the district court or before an administrative agency) or are expected to appear for the party in this court:
Former counsel were: (1) Hunton & Williams, (2) Foley & Lardner, (3) Sonnenschien Nath & Rosenthal, LLP
(4) Katten Muchin Rosenman LLP, (5) Seyfarth Shaw LLP, (6) K&L Gates LLP
ii) list any publicly held company that owns 10% or more of the party’s or amicus’ stock:
None
Please indicate if you are Counsel of Record for the above listed parties pursuant to Circuit Rule 3(d). Yes No
lee_thomason@papajohns.com
E-Mail Address:
rev. 01/08 AK
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Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
Table of Contents
Page
i
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Page
CONCLUSION ……………………………………..… 41
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SHORT APPENDIX
The following relevant documents from the proceedings below are provided.
Record
Entry # Date Filed Description
iii
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TABLE OF AUTHORITIES
A. Alphabetically Arranged.
Page
iv
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Page
Corporate Assets, Inc. v. Paloian,
368 F.3d 761 (7th Cir. 2004) ……………………………….. 22
Corley v. Rosewood Care Center, Inc. of Peoria,
142 F.3d 1041 (7th Cir. 1998) ……………………………….. 19
Cruz v. County of DuPage, 1997 WL 370194
(N.D. Ill. 1997) ……………………………….. 27-31
Doe v. Oberweis Dairy,
456 F.3d 704 (7th Cir. 2006),
cert. den’d, 549 U.S. 1278 (2007) ………………..……….. 40
Donovan v. Robbins, 752 F.2d 1170 (7th Cir. 1984) ………………….. 21
Fernandez v. ATA Airlines, Inc., 2006 WL 211818
(N.D.Ill. 2006) ……………………………….. 11
In re 25 Grand Jury Subpoenas Dated Oct. 21, Oct. 22,
and Dec. 3, 1986, 654 F.Supp. 647 (N.D. Ind. 1987) …………… 36
Jutzi-Johnson v. U.S., 263 F.3d 753 (7th Cir. 2001) …………… 23
Kaba v. Stepp, 458 F.3d 678 (7th Cir. 2006) ………………….. 2
Keating v. Office of Thrift Supervision, 45 F.3d 322
(9th Cir. 1995), cert. denied, 516 U.S. 827 (1995) …………… 26
Koester v. American Republic Investments, Inc.,
11 F.3d 818 (8th Cir. 1993) ……………………………….. 26-30
Lambersky v. Petritis, 2002 WL 1285883 (N.D. Ill. 2002) ……. 11
Landis v. North American Co., 299 U.S. 248,
57 S. Ct. 163, 165-66, 81 L.Ed. 153 (1936) ………………….. 19
Lanham Act and 15 U.S.C. §1121 ………………….…………….. 1
Mars Steel Corp. v. Continental Bank N.A.,
880 F.2d 928 (7th Cir. 1989) (en banc) ………………….. 23
Martin Trigona v. Gouletas,
634 F.2d 354 (7th Cir. 1980),
cert. den’d, 449 U.S. 1025 (1980) ………………..……….. 36
Microfinancial, Inc. v. Premier Holidays Intern., Inc.,
385 F.3d 72 (1st Cir. 2004) ……………………………….. 30
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Page
Mostly Memories, Inc. v. For Your Ease Only, Inc.,
526 F.3d 1093 (7th Cir. 2008) ……………………………….. 2
Musser v. Gentiva Health Servs.,
356 F.3d 751 (7th Cir.2004) ……………………………….. 22
Olive Can Co., Inc. v. Martin,
906 F.2d 1147 (7th Cir. 1990) ……………………………….. 19
Pacific Mut. Life Ins. Co. v.
American Nat. Bank and Trust Co.
of Chicago, 649 F.Supp. 281 (N.D. Ill. 1986) ……. 36
Papa John’s Int’l v. Rezko, 2007 WL 1597944 (N.D. Ill. 2007) ……. 5
Riverboat Casino Cruises, Inc.
v. Triangle Insulation & Sheet Metal Co.,
302 F.3d 667 (7th Cir.2002) ………………..……….. 39
Ruski v. City of Bayonne,
811 A.2d 939 (N.J. Super. App. Div. 2002) ………………….. 38
Salgado by Salgado v. General Motors Corp.,
150 F.3d 735 (7th Cir. 1998) ……………………………….. 21
Securities and Exchange Commission
v. Canandaigua Enterprises Corp.,
339 F.2d 14 (2nd Cir. 1964) ……………………………….. 23
Standard Sanitary Manufacturing Co. v. United States,
226 U.S. 20, 52, 33 S. Ct. 9, 57 L.Ed. 107 (1912) …………… 22
Sverdrup Corp. v. Edwardsville Comm.
Unit School Dist. No. 7, 125 F.3d 546 (7th Cir. 1997) ….… 23
Tranzact Technologies, Ltd. v. Evergreen Partners, Ltd.,
366 F.3d 542 (7th Cir. 2004) ……………………………….. 39
United States v. Arizechi, 2006 WL 1722591 (D.N.J. 2006) ……. 35
United States v. Burr, 25 F. Cas. 30
(No. 14,692d) (C.C. Va. 1807) ………………..……….. 23
United States v. Certain Real Property
Commonly Known as 6250 Ledge Rd.,
943 F.2d 721(7th Cir. 1991) ……………………………….. 26
vi
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Page
vii
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TABLE OF AUTHORITIES
B. Arranged by Precedential Source.
Page
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Page
Seventh Circuit decisions:
Barnes v. Briley, 420 F.3d 673, 676 (7th Cir. 2005) ………………….. 2
Bland v. Fiatallis North America, Inc.,
401 F.3d 779 (7th Cir. 2005) ……………………………….. 21
Corporate Assets, Inc. v. Paloian,
368 F.3d 761 (7th Cir. 2004) ……………………………….. 22
Corley v. Rosewood Care Center, Inc. of Peoria,
142 F.3d 1041 (7th Cir. 1998) ……………………………….. 19
Doe v. Oberweis Dairy,
456 F.3d 704 (7th Cir. 2006),
cert. den’d, 549 U.S. 1278 (2007) ………………..……….. 40
Donovan v. Robbins, 752 F.2d 1170 (7th Cir. 1984) ………………….. 21
Jutzi-Johnson v. U.S., 263 F.3d 753 (7th Cir. 2001) …………… 23
Mars Steel Corp. v. Continental Bank N.A.,
880 F.2d 928 (7th Cir. 1989) (en banc) ………………….. 23
Kaba v. Stepp, 458 F.3d 678 (7th Cir. 2006) ………………….. 2
Martin Trigona v. Gouletas,
634 F.2d 354 (7th Cir. 1980),
cert. den’d, 449 U.S. 1025 (1980) ………………..……….. 36
Mostly Memories, Inc. v. For Your Ease Only, Inc.,
526 F.3d 1093 (7th Cir. 2008) ……………………………….. 2
Musser v. Gentiva Health Servs.,
356 F.3d 751 (7th Cir.2004) ……………………………….. 22
Olive Can Co., Inc. v. Martin,
906 F.2d 1147 (7th Cir. 1990) ……………………………….. 19
Riverboat Casino Cruises, Inc.
v. Triangle Insulation & Sheet Metal Co.,
302 F.3d 667 (7th Cir.2002) ………………..……….. 39
Salgado by Salgado v. General Motors Corp.,
150 F.3d 735 (7th Cir. 1998) ……………………………….. 21
ix
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Page
Page
Other Circuit Courts decisions:
Papa John’s Int’l v. Rezko, 2007 WL 1597944 (N.D. Ill. 2007) ……. 5
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Page
Federal Statutes
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Page
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Jurisdictional Statement
Jurisdiction over this matter in the district court was founded upon
federal statutes, per 28 U.S.C. §1331, and based primarily on the Lanham
Act claims cognizable under 28 U.S.C. §1338 and 15 U.S.C. §1121, as well
as claims under the Copyright Act, Title 17 U.S.C. There too was
U.S.C. §1367.
On April 29, 2009, the lower court, sua sponte, ordered this “Civil
case terminated,” which constituted an order that was final as to all issues
and to all parties. On that basis, 28 U.S.C. §1291 provides jurisdiction for
this appeal.
timely under Rule 4(a), FED. R. APP. PROC. No cross-appeal was filed,
decisions of this Circuit Court have held that an order dismissing a case
1
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The typical setting for this aspect of the §1291 “final order” issue is
676 (7th Cir. 2005) ("if the plaintiff ‘cannot cure the defects’ in his
complaint, the dismissal in effect was with prejudice and is final for
issue. The order that terminated plaintiffs’ case was "effectively a final
Stepp, 458 F.3d 678, 680 (7th Cir. 2006), quoted in, Mostly Memories, Inc. v.
For Your Ease Only, Inc., 526 F.3d 1093, 1097 (7th Cir. 2008).
Wallace & Tiernan Co., 336 U.S. 793, 69 S. Ct. 824, 93 L.Ed. 1042 (1949).
In Tiernan, the district court dismissed “the action without prejudice” after
below that had stayed all discovery as to all defendants, which foreclosed
2
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another suit does not make the cause unappealable, for denial of relief and
dismissal of the case ended this suit so far as the District Court was
case below “without prejudice,” is final in accord with the Tiernan ruling.
Terminating this case without prejudice “does not make the cause
unappealable.” Id. The lower court was done with the case, and when
that court, sua sponte, ordered this “Civil case terminated,” its order was
3
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While the lower court assessed whether a stay of all discovery might
the “corporate” defendants, the lower court made errors of law regarding
between the certain prejudice to the plaintiffs and any burden to the
stay, or limit, discovery in civil cases where one defendant was indicted.
It was error to dismiss the plaintiff’s case against all defendants, sua
4
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The appellants seek review of two orders by the lower court – the
stay of all discovery against all defendants1 {Dkt. #217}2, and the final
order that sua sponte “terminated” plaintiff’s entire civil case as to all
1.
The Action For Injunctive Relief Against the LLC Franchisees.
1
The Memorandum Opinion is at 2007 WL 1597944 (N.D. Ill. 2007).
2
The Minute Order is dkt. # 217, and the memorandum opinion is dkt. #218. Both
are included in the short appendix, bound herewith.
3
The appellees referred to as “LLC-defendants” are PJ Chicago LLC, Chicago P.J.,
LLC, and East Coast PJ, LLC, as identified in the First Amended Complaint {Dkt. #3}.
5
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inter alia injunctive relief and damages. At the eleventh hour, the LLC
hearing in open court. {Dkt. #14}. Then, the LLCs failed to honor that
individual Antoin Rezko {Dkt. #29}, because he had signed guaranties for
the obligations of the LLC franchisees, Also, defendant Rezko was bound
2.
The Civil Suit Pleaded for Lanham Act and Related Relief.
date for the alleged civil wrongs. That May 2004 termination date is
significant to the discovery stay order, for which review here is sought.
6
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upon termination, that those LLCs would return to plaintiff all of its
the LLC defendants promised to fulfill all of those requirements not later
than June 8, 2004, see, e.g., ¶55 & 56 in the 3rd Amended Complaint.
the franchisor. See, e.g., ¶4 & 52 of the 3rd Amended Complaint.4 The
3.
The Indictment of the Individual Defendant.
injunctive relief related to events after the May 3, 2004 termination of the
4
Also claimed were unpaid royalties and for open invoices for food and supplies.
7
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All the defendants moved to have all discovery in the civil case stayed.
{Dkt. #173}. The motion was granted, as to all defendants and as to all
before the civil wrongs of the LLC franchisees alleged in the plaintiff’s suit.
alleged in ¶16 of Count One, and ¶2 of Count Two, that the mails or wire
were used "on or about October 16, 2001," nearly three years prior to the
5
The Minute Order and Memorandum opinion are in the short appendix, bound
hereto, as well as in the Appendix filed separately herewith.
6
The two-count Indictment, which accompanied defendants’ motion for a stay of
discovery, is included with the Appendix filed separately herewith.
8
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4.
The Stay of All Discovery as to All Defendants.
defendants had “not been indicted and, in any event, have no privilege”
that recovery will be delayed and may be reduced because the assets of
defendants may have gone elsewhere.” To hamper that, the lower court
“grant[ed] the stay, but we do so with a direction that all records of the
The bottom line is that no discovery, or any log, ever were provided.7
The defendants Dec. 2006 motion for a stay of all civil discovery
{Dkt. # 173} omitted the arguably material fact that “On November 7,
2006, shortly after Rezko's indictment, the parties [in the criminal case] met
and conferred in accordance with Local Criminal Rule 16.1 [and the]
7
No discovery scheduling order ever was entered, even though plaintiffs moved for a
conference and entry of scheduling order {Dkt. #56}.
9
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defense, and that its production would continue on a rolling basis.” See,
which were responsive to the civil discovery in this case, could have been
5.
Continuing Status Conferences.
After all discovery was stayed, including discovery from the LLC-
10
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defendants affirmatively pled these assertions, knowing that the stay would
shield discovery about this affirmative defense.9 After the stay of all
privilege as to all matters, the civil case stalled. The docket reflects status
conferences in 2007 and 2008, but meaningful actions could not occur.
6.
The Sua Sponte Dismissal Order.
The final ruling below, dismissed the case sua sponte and without
dismissal, and no motions were pending. No procedural basis for the sua
sponte dismissal was stated – “this case is five years old.” Review of a sua
8
To prove an accord and satisfaction, under Illinois law, the LLC defendants would
need to evidence proving “(1) an honest dispute between the parties, (2) a tender with the
explicit understanding of both parties that it was in full payment of all demands, and (3) an
acceptance by the creditor with the understanding that the tender is accepted in full
payment.” Lambersky v. Petritis, 2002 WL 1285883 (N.D. Ill. 2002) (cit. om.).
9
See, e.g., "ATA filed its motion …on its affirmative defenses of accord and
satisfaction ...[and], the Court granted ...leave to conduct discovery before responding to
the motion." Fernandez v. ATA Airlines, Inc., 2006 WL 211818 (N.D.Ill. 2006).
11
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12
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concluded that the civil suit and the criminal indictment, “in substantial
respects, involve the same subject matter.” {Dkt. #218}10 When the
found, but the torts and the crimes differ substantially in time and place.
10
The Minute Order is dkt. # 217, and the memorandum opinion is dkt. #218. Both
are included in the short appendix, bound herewith.
13
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The civil action does not deal with any “actions of these boards for
LLC, and East Coast PJ, LLC, after those former franchisees were
individual Rezko used the mails or wires “on or about October 16, 2001.”
The operative events in the indictment were years before the post-
14
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From the outset, the plaintiff sought injunctive relief to require the
which then was violated. {Dkt. #25}. Thereafter, the defendants signed a
Plaintiffs alleged the LLC-defendants were liable for damages for the
covenants not to compete, and he had signed personal guaranties for the
15
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defendant was indicted, all of the defendants began asserting the privilege
order {Dkt. #218}, the lower court acknowledged that the “records of the
this action,” was a body of documents separate from the “records in the
In 2009, the civil case was reassigned to the Hon. Samuel Der-
“terminated” Plaintiffs’ case sua sponte with only this brief explanation.
In view of the fact that this case is five years old and the
record is unclear as to which Defendants are in or affected
by the Bankruptcy, the instant action is hereby terminated
without prejudice to reinstate once Plaintiffs decide that the
Bankruptcy is no longer an impediment for the case to
proceed against one or more of the Defendants. All pending
dates and motions are hereby stricken as moot. Civil case
terminated.
The age and pace of the case was due to the earlier order that had
16
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Summary of Arguments.
In the absence of guidance from the Seventh Circuit, the lower court
from and are not consonant with the mandatory and permissive guidelines
Dismissal of plaintiffs’ case, sua sponte and without notice, was error.
17
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ARGUMENT
I.
the “corporate” defendants, the order to stay all discovery from those
defendants was error under the decisional law that follows the line of
incident to its power to control its own docket," Clinton v. Jones, 520 U.S.
681, 706, 117 S. Ct. 1636, 137 L.Ed.2d 945 (1997), particularly, in cases
12
This line of authority, later cited herein, was summed up in 9A Fletcher, Cyclopedia
of the Law of Corporations, § 4671, [citations om.], as follows:
An officer of a corporation cannot refuse to testify or produce corporate
documents on the ground that he or she may thereby incriminate the corporation.
Neither a collective entity nor its representatives may refuse to comply with an
order to produce on the ground that the contents of any documents produced in a
response to the order might tend to incriminate them. Without regard to the size of
the corporation, and without regard to whether the subpoena was addressed to the
corporation or to a custodian, a corporate custodian may not resist a subpoena for
corporation records on Fifth Amendment grounds. A “custodian” encompasses any
agent of the corporation who under ordinary principles of corporate law has custody
or control over corporate documents. The custodian of the corporate or entity
records holds those documents in a representative rather than personal capacity,
and the custodian's act of production is deemed an act of the corporation rather
than the act of the individual.
18
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where the "proponent of a stay bears [its] burden of establishing its need."
Id., at 708. See also, Landis v. North American Co., 299 U.S. 248, 254-55, 57
“calls for the exercise of judgment, which must weigh competing interests
for a stay of all civil discovery against non-indicted companies, based upon
court was found that sets forth what factors control decisions to stay civil
abuse of discretion in this Circuit. “Our standard of review for the district
discretion." Olive Can Co., Inc. v. Martin, 906 F.2d 1147, 1152 (7th Cir.
1990) (civil RICO case). "District judges enjoy broad discretion in settling
case." Corley v. Rosewood Care Center, Inc. of Peoria, 142 F.3d 1041, 1052 (7th
19
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Cir. 1998) (subs. hist. om.)(civil RICO case). A stay of all discovery from
corporate parties, which are not targeted by any criminal charges, should
are reviewed as mixed questions of law and fact. See, generally, "We
novo." U.S. v. Pate, 105 Fed. Appx. 597, 599 (5th Cir. 2004), and U.S. v.
Matute-Santos, 168 Fed. Appx. 343, 346 (11th Cir. 2006) ("We review
20
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America, Inc., 401 F.3d 779, 787 (7th Cir. 2005). “While we generally apply
Cargile v. Barrow, 2009 WL 222947 (Ohio App. 1st Dist. Jan. 30, 2009). An
errors. “Even when the standard is abuse of discretion, review for errors
of law is plenary.” Donovan v. Robbins, 752 F.2d 1170, 1178 (7th Cir. 1984).
Also, any factual determinations are reviewed. “In applying [the abuse of
ensure that it invoked the correct legal standards and that its findings of
fact are not clearly erroneous.” Salgado by Salgado v. General Motors Corp.,
150 F.3d 735, 739 at fn. 4 (7th Cir. 1998). In general, “a court abuses its
21
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on which the court rationally could have relied.” Corporate Assets, Inc. v.
Paloian, 368 F.3d 761, 767 (7th Cir. 2004).13 Here, appellants request that
for an abuse of discretion, but this appeal only regards the LLC-
Older cases, and the leading cases on stays due to indictment of one
defendant, recognize that a district court may stay civil cases, defer civil
v. U. S., 226 U.S. 20, 52, 33 S. Ct. 9, 57 L.Ed. 107 (1912) ("the most
13
“A court does not abuse its discretion unless ... (1) the record contains no evidence
upon which the court could have rationally based its decision; (2) the decision is based on
an erroneous conclusion of law; (3) the decision is based on clearly erroneous factual
findings; or (4) the decision clearly appears arbitrary.” Musser v. Gentiva Health Servs.,
356 F.3d 751, 755 (7th Cir.2004).
22
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situation is that they depend upon the discretion of the court in the
particular case").
for decision, appellate courts can do little more than sustain the district
339 F.2d 14, 19 (2nd Cir. 1964), C.J. Friendly. “Deferential review is not
Unit School Dist. No. 7, 125 F.3d 546, 550 (7th Cir. 1997). Such
25 F. Cas. 30, 35 (No. 14,692d) (C.C. Va. 1807), Marshall, C. J., quoted in,
Albemarle Paper Co. v. Moody, 422 U.S. 405, 416, 45 L.Ed.2d 280, 95 S. Ct.
2362 (1975). See too, Jutzi-Johnson v. U.S., 263 F.3d 753, 759 (7th Cir. 2001)
court either"), and Mars Steel Corp. v. Continental Bank N.A., 880 F.2d 928,
23
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936 (7th Cir. 1989) (en banc), (“District courts must make findings and
This Circuit panel’s decision in Winters v. Fru-Con Inc., 498 F.3d 734,
742 (7th Cir. 2007) “review[ed] for abuse of discretion the district court's
choice of factors to include within th[e] framework" for its decision to bar
experts, and it reviewed de novo whether the lower court “identified and
to review the “choice of factors” and “legal standards” for a lower court to
stay all civil discovery from unindicted, corporate defendants that were the
those were applied; to review factual determinations for clear error; and, to
review for an abuse of discretion the factors chosen by the lower court in
Chicago LLC, Chicago P.J., LLC, and East Coast PJ, LLC, which were
14
See also, Wilton v. Seven Falls Co., 515 U.S. 277, 281, 115 S. Ct. 2137,
132 L.Ed.2d 214 (1995) (certiorari granted to resolve standards "govern[ing] a district
court's decision to stay a declaratory judgment action in favor of parallel state litigation").
24
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LLC, Chaib Investments, LLC and Newco Pizza LLC, which continued
no rights against self-incrimination. The factors that the lower court felt
were determinative differ from those other circuits use. To deny all
choosing what level of review is proper, the broader issue is whether the
II.
A.
Varied Tests Across the Circuits, and None in this Circuit.
case basis. In several circuits, multifactor tests guide lower courts when
the request to stay regards criminal charges against one defendant in the
25
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civil case. The determinative factors vary among the Circuits, and across a
a stay, defendant must make a strong showing either that the two
that the two trials will so overlap that effective defense of both is
(8th Cir. 1993). In the Eighth Circuit, a stay would be granted only when
indictment, and that “he cannot protect” against loss of the privilege, or
If a defendant in an 8th Circuit court was on the 7th Circuit side of the
Mississippi River, then that civil case might stayed without the “strong”
15
In one case with possible relevance, a specific showing of prejudice was required.
The “failure to indicate with precision how he would be prejudiced if the civil action went
forward while the criminal action was pending in state court is yet another factor which
leads the Court to the conclusion that he was not entitled to a stay." United States v.
Certain Real Property Commonly Known as 6250 Ledge Rd., 943 F.2d 721, 730 (7th Cir.
1991) ("blanket assertion of the privilege does not provide a sufficient basis for a district
court to grant a stay," at fn. 9).
26
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In the Ninth Circuit, the factor given primacy is “the extent to which
Thrift Supervision, 45 F.3d 322, 324-25 (9th Cir. 1995), cert. denied, 516 U.S.
delay; (2) the burden which any particular aspect of the proceedings may
of its cases, and the efficient use of judicial resources; (4) the interests of
persons not parties to the civil litigation; and (5) the interest of the public
in the pending civil and criminal litigation.” Id. Here, the lower court did
not indicate that the primary factor in Keating carried much weight when it
27
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multifactor test from any Seventh Circuit decision, the district judge in
Cruz had “extracted” from caselaw “some general guidelines for when a
stay should be granted [that] include (1) whether the two actions involve
the same subject matter; (2) whether the two actions are brought by the
government; (3) the posture of the criminal proceeding; (4) the effect on
the public interests at stake if a stay were to be issued; (5) the interest of the
prejudice to plaintiffs of a delay; and (6) the burden that any particular
The “guidelines” that the Judge in Cruz had “extracted” from “the
cases cited by the parties,” do not include the primary factor of the Fifth
Amendment right from the Ninth Circuit’s Keating decision, and not the
“strong showing[s]” that the Eighth Circuit required in the Koester case.
courts provoke the concern that the “discretion” to stay, based on Fifth
circuit court might reverse the stay ruling here, as not aligned with its
16
The Cruz case was a §1983 case that overlapped a criminal investigation.
28
Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
precedent. All cases that apply the ‘same’ Fifth Amendment should be
After applying the factors from the Cruz decision, the lower court
here stayed all discovery against all the corporate defendants in the civil
Using those same factors from Cruz, the state court of Illinois refused
Apartments, LLC, 378 Ill.App.3d 105, 109, 881 N.E.2d 423 (Ill. App. 1st
Dist. 2007). The decision here to stay discovery, and the denial of a stay
of civil discovery in CHB, hinge on the first factor from the Cruz case –
whether the indictment and the civil suit “involve the same subject
matter.” That ‘sameness’ is not a stated factor in the Keating case from the
Circuit cases. When the First Circuit reviewed a decision not to stay an
entire civil case, it set forth the “five factors that typically bear on the
prejudice to the plaintiff should a delay transpire; (ii) the hardship to the
29
Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
defendant, including the burden placed upon him should the cases go
forward in tandem; (iii) the convenience of both the civil and criminal
courts; (iv) the interests of third parties; and (v) the public interest.” Then,
to that list, it “add[ed] (vi) the good faith of the litigants (or the absence of
it) and (vii) the status of the cases.” Microfinancial, Inc. v. Premier Holidays
Intern., Inc., 385 F.3d 72, 78(1st Cir. 2004). Factors (i), (ii) and (v) in
Here, the lower court did not consider, or under Cruz would not
have considered, the “good faith of” the LLC-defendants “or the absence
of” that in seeking to shield those LLCs behind the privilege assertion of
error in the stay analysis, but here where no Seventh Circuit case sets out
the pertinent factors, the lower court limit its decision to the Cruz factors.
The appellants urge this Court to adopt a multifactor test that sets as
amendment rights are implicated,” from the Keating case, and requires the
Seventh Circuit test, which sets out the appropriate factors would be
30
Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
should accords with the “interests of justice” analysis from the Supreme
Court’s Kordel decision, (“District Court denied the motion upon finding
privilege log was provided, or required, which shrouded all details about
the LLCs, and their representative and managers. In granting a stay of all
discovery from the LLC-defendants, the lower court applied the Cruz
lower court. If applied, the Cruz factors of no privilege and real prejudice
B.
No 5th Amendment Privilege Protects The LLC-Defendants.
31
Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
order, can serve effectively to balance the relative interests of the parties.
under criminal indictment. These threshold factors from the Cruz case did
not favor a stay that shielded the LLC-defendants from all discovery.
The lower court recognized that stay of all discovery would cause
could face any “burden” from the criminal proceedings. Indeed, the LLC-
defendants from providing discovery was shown. It thus was error, based
on a fair application of the Cruz factors, to stay all discovery in this case as
32
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C.
factors applicable only to the individual defendant, was error. While the
Seventh Circuit has not ruled how the “collective entity” and the “act of
Longstanding precedent holds, and the lower court here agreed, that
the privilege, may not resist production of corporate records, even if the
361 (1911) (“If the corporation were guilty of misconduct, he could not
33
Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
withhold its books to save it; and if he were implicated in the violations of
law, he could not withhold the books to protect himself from the effect of
one owner, may not shield its records upon the individual owner’s asserted
personally.” Bellis v. U. S., 417 U.S. 85, 88, 94 S. Ct. 2179, 40 L.Ed.2d 678
privilege against self-incrimination). The Bellis case, and those that follow
it, make clear the even one-person corporate and “collective entities” have
inescapable fact that an artificial entity can only act to produce its records
itself is not entitled to claim any Fifth Amendment privilege." Id., at 90.
34
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S., 487 U.S. 99, 100, 108 S. Ct. 2284, 101 L.Ed.2d 98 (1988), which held
that “the custodian of corporate records may [not] resist a subpoena for
such records on the ground that the act of production would incriminate
discovery was error based on the foregoing principles from the White,
Wilson, Bellis and Braswell decisions.18 “There is no question but that the
Braswell, supra, at 102. The lower court erred in cloaking the “corporate
17
The “corporate custodians of 'one-man corporations' cannot assert a Fifth
Amendment privilege with respect to the production of corporate documents.” U.S. v.
Arizechi, 2006 WL 1722591 (D.N.J. 2006); accord, U.S. v. Feng Juan Lu, 248 Fed. Appx.
806, 2007 WL 2753030 (9th Cir. 2007).
18
See, footnote 12, supra, quoting a treatise summary of the holdings in these cases.
35
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Oct. 22, and Dec. 3, 1986, 654 F.Supp. 647, 652 (N.D. Ind. 1987).
those records.” Pacific Mut. Life Ins. Co. v. American Nat. Bank and Trust Co.
of Chicago, 649 F.Supp. 281, 284 (N.D. Ill. 1986) (the “effect of permitting
a privilege log; but quare: what privilege could these “corporate” entities
assert.
19
The individual "defendant was obligated to comply with the subpoena for the
partnership records despite the fact that they may have incriminated him." U.S. v. Kuta,
518 F.2d 947, 954 (7th Cir. 1975). "Trigona's claim of commingling [of personal and
business records] was speculative and overbroad and that the privilege was claimed in bad
faith in order to hinder the appellees ...[and the] evasiveness of this witness, his discredited
claims of lack of memory, his failure to offer any credible explanation as to how answers to
seemingly innocuous questions might be incriminating, his personal interest in frustrating
the efforts of the appellees to collect upon their judgment are ‘peculiarities of the case’
which the trial court could properly consider." Martin Trigona v. Gouletas, 634 F.2d 354,
362 (7th Cir. 1980), cert. den’d, 449 U.S. 1025 (1980).
36
Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
The lower court’s stay order acknowledged that the records of the
individual defendant. It granted the stay, but “with a direction that all
records of the corporate defendants and all records in the possession of the
status of the records, i.e., corporate or individual, as well as with the focus
20
On the issue of the “extent to which the collective entity rule and the act of
production doctrine limit one another ...the Seventh Circuit has not yet chosen a side.”
Pacific Mut. Life, supra.
37
Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
The lower court assessed only the impact that a stay could have on
III.
After the civil case stalled without any way to pursue discovery, the
lower court dismissed it, sua sponte, and “terminated [the] civil case,”
Evergreen Partners, Ltd., 366 F.3d 542, 549 (7th Cir. 2004), citing, S. Ill.
38
Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
Riverboat Casino Cruises, Inc. v. Triangle Insulation & Sheet Metal Co., 302
F.3d 667, 678 (7th Cir.2002). That opportunity was not provided here.
hazardous for three reasons: (1) they often conflict with the traditional
opportunity to … argue against dismissal; and (3) they tend to defeat the
very purpose they are designed to serve -- judicial efficiency.” Id. Cf., Ruski
v. City of Bayonne, 811 A.2d 939, 941 (N.J. Super. App. Div. 2002), a “trial
disposition's sake is not the goal of our system.” The order here that
terminated the plaintiff’s case was “case disposition for disposition's sake,”
The Riverboat Casino case set limits, which were not heeded before
the brief minute order below “terminated” the case. A district court lacks
unfettered power to dismiss sua sponte, where the plaintiff has (1) no
“proper notice that the district court was considering” a dismissal, and (2)
39
Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
the order that terminated the case. Supra, 302 F.3d at 678. The lower
court gave plaintiffs no notice that the case might be terminated, and no
terminated the case prematurely.” Doe v. Oberweis Dairy, 456 F.3d 704, 718
(7th Cir. 2006), cert. den’d, 549 U.S. 1278 (2007). The appellants request
that the panel "Reverse the district court's sua sponte order dismissing the
lawsuit." CPL, Inc. v. Fragchem Corp., 512 F.3d 389 (7th Cir. 2008).
Based on the foregoing, the sua sponte dismissal was error, and that
40
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Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
In view of the likelihood that no counsel will appear for appellees, the
August 6, 2009
-S- Charles L. Thomason
_______________________
Charles L. Thomason
Counsel for Appellants
42
Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
I certify that this brief complies with the type volume limitation set
32(a)(6), because this brief has been prepared using a proportionally spaced
FORM 6.
CERTIFICATE OF COMPLIANCE WITH
TYPE-VOLUME LIMITATION, TYPEFACE REQUIREMENTS,
AND TYPE STYLE REQUIREMENTS
1. This brief complies with the type-volume limitation of Fed. R. App. P.
32(a)(7)(B) because:
X__this brief contains 8707 words, excluding the parts of the brief exempted by Fed.
R. App. P. 32(a)(7)(B)(iii), or
__this brief uses a monospaced typeface and contains [state the number of ] lines of
text, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii).
2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5)
and the type style requirements of Fed. R. App. P. 32(a)(6) because:
x__this brief has been prepared in a proportionally spaced typeface using MS-Word
in Calisto MT font 14 point or
__this brief has been prepared in a monospaced typeface using [state name and
version of word processing program] with [state number of characters per inch and
name of type style].
(s) _Charles L. Thomason_______________________________
Attorney for ____Appellants_____________________
Dated: _____6 AUG 2009_______________________
43
Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
August 6, 2009
-S- Charles L. Thomason
_______________________
Charles L. Thomason
Counsel for Appellants
44
Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
CERTIFICATE OF SERVICE
The undersigned certifies that two complete copies of the foregoing Brief of
Appellants was served by U.S. MAIL upon counsel for the Appellees, on this 6th day of
I declare under penalty of perjury that the above is true and correct.
45
Case: 09-2356 Document: 16 Filed: 07/31/2009 Pages: 65
I certify that all materials required by Circuit Rule 30(a) and Circuit
August 6, 2009
-S- Charles L. Thomason
_______________________
Charles L. Thomason
Counsel for Appellants
46
Case
Case:
1:04-cv-03131
09-2356 Document:
Document16217 Filed:
Filed
07/31/2009
03/02/2007 Pages:
Page 165of 1
Case
Case:
1:04-cv-03131
09-2356 Document:
Document16218 Filed:
Filed
07/31/2009
03/02/2007 Pages:
Page 165of 2
Case
Case:
1:04-cv-03131
09-2356 Document:
Document16218 Filed:
Filed
07/31/2009
03/02/2007 Pages:
Page 265of 2
Order Form (01/2005) Case
Case:
1:04-cv-03131
09-2356 Document:
Document16246 Filed:
Filed
07/31/2009
04/29/2009 Pages:
Page 165of 1
In view of the fact that this case is five years old and the record being unclear as to which Defendants are in
or affected by the Bankruptcy, the instant action is hereby terminated without prejudice to reinstate once
Plaintiffs decides that the Bankruptcy is no longer an impediment for the case to proceed against one or more
of the Defendants. All pending dates and motions are hereby stricken as moot. Civil case terminated.
04C3131 Papa John’s International, Inc., et al. Vs. PJ Chicago, LLC, et al. Page 1 of 1
Case
Case:
1:04-cv-03131
09-2356 Document:
Document16248 Filed:
Filed
07/31/2009
05/22/2009 Pages:
Page 165of 2
Notice of Appeal to United States Court of Appeals for the Seventh Circuit
Plaintiffs, Papa John's International, Inc. and P.J. Food Service, Inc., appeal to the
United States Court of Appeals for the Seventh Circuit from the final order, entered on
April 29, 2009, by the United States District Court for the Northern District of Illinois
{dkt. # 246}, that "terminated" plaintiffs’ case, as well as earlier interlocutory orders.
The parties to the orders appealed from and the names and addresses of their
Respectfully submitted,