NONPRECEDENTIAL DISPOSITION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 November 16, 2011*
Decided November 16, 2011
Before
JOHN L. COFFEY, Circuit Judge
JOEL M. FLAUM, Circuit Judge
KENNETH F. RIPPLE, Circuit Judge
No. 11‐2100
In the Matter of: STEVEN D. DYE, SR., Appeal from the United States District
and PATRICIA L. DYE, Court for the Eastern District of Wisconsin.
Debtors.
No. 11‐C‐218
STEVEN D. DYE, SR., and
PATRICIA L. DYE, Rudolph T. Randa,
Plaintiffs‐Appellants, Judge.
v.
DEUTSCHE BANK NATIONAL
TRUST CO., et al.,
Defendants‐Appellees.
O R D E R
Steven and Patricia Dye are before us a second time on a matter that we fully
resolved in 2008. Since 2004 when Ameriquest Mortgage Company foreclosed on their
home, the Dyes have engaged in a pattern of abusive litigation to thwart execution of that
*
After examining the briefs and record, we have concluded that oral argument is
unnecessary. Thus, the appeal is submitted on the briefs and record. See FED. R. APP. P.
34(a)(2)(C).
No. 11‐2100 Page 2
judgment. Their present appeal arises from an adversary proceeding filed in bankruptcy
court to challenge the foreclosure. The Dyes tried this same tactic in a previous bankruptcy
case, and we told them then that their effort to relitigate the foreclosure claim was improper.
See Dye v. Ameriquest Mortg. Co., 289 F. App’x 941 (7th Cir. 2008).
The Dyes refinanced their home with a loan from Ameriquest in 2002 and defaulted
after making two payments. A Wisconsin circuit court entered a judgment of foreclosure for
Ameriquest in June 2004 and ordered a sheriff’s sale of the home within six months. See WIS.
STAT. § 846.101(2). But that deadline was stayed while the Dyes appealed the foreclosure
judgment in the Wisconsin appellate court, and afterward the Dyes thwarted the sales
process with their successive bankruptcy actions, all of which they filed as personal
reorganizations under Chapter 13 of the Bankruptcy Code. As far as we know, a sale of the
house has never been finalized.
The Dyes filed their first Chapter 13 petition in March 2005, see 11 U.S.C. § 301, but
dismissed that case voluntarily. They filed a second petition in October 2005, and within
that case they commenced an adversary proceeding claiming that Ameriquest had violated
the Truth in Lending Act, 15 U.S.C. §§ 1601–1667f, by misrepresenting the amount of time
they had to back out of the loan agreement. In March 2007 the bankruptcy court granted
summary judgment for Ameriquest on that claim, and the Dyes pursued interlocutory
appeals, first to the district court and then to us. The district judge upheld the bankruptcy
court’s ruling, as did a panel of this court. See Dye, 289 F. App’x at 944–45. We concluded
that the doctrine of claim preclusion bars the Dyes from litigating disputes which could
have been raised in the Wisconsin foreclosure action, including their claim under the Truth
in Lending Act. Id. at 941.
Our decision was issued in August 2008, and more than a year later the bankruptcy
court dismissed the second Chapter 13 case because the Dyes had defaulted on their
confirmed payment plan. See 11 U.S.C. § 1307(c)(6). The bankruptcy court concluded that
the Dyes had used the Chapter 13 process to continue challenging the mortgage loan and
forestall giving up their house. The Dyes unsuccessfully appealed the dismissal of the
Chapter 13 case to the district court, and Ameriquest then returned to state court and
moved for confirmation of a sheriff’s sale, which apparently had gone forward. See WIS.
STAT. § 846.165. The court scheduled a hearing for February 17, 2010, but the Dyes
preemptively filed a third Chapter 13 petition on February 2 and took advantage of the
automatic stay to stop the foreclosure judgment from being fully executed. The Dyes
submitted a payment plan but failed to commence payments within 30 days, 11 U.S.C.
§ 1326(a), which prompted the bankruptcy trustee to move for dismissal, id. § 1307(c)(4). In
July 2010, while the trustee’s motion was pending, the Dyes filed a new adversary action
No. 11‐2100 Page 3
against Ameriquest, this time also naming as defendants Deutsche Bank National Trust
Company and American Home Mortgage Servicing.
That complaint, which the Dyes amended in October 2010, is difficult to decipher. At
its core, though, the Dyes’ adversary action disputes the validity of their mortgage, rehashes
their claim against Ameriquest under the Truth in Lending Act, and seeks to unwind the
foreclosure. No allegations of wrongdoing are made against the other two defendants, and
we surmise that they are named because they hold or are servicing the note. (The Dyes also
captioned their amended complaint to include as a defendant the law firm that represented
Ameriquest in the foreclosure action in state court, but the law firm is not identified as a
party in the body of the complaint.)
Deutsche Bank and American Home Mortgage Servicing moved to dismiss the
adversary action for lack of service and failure to state a claim. Without first ruling on those
issues, however, the bankruptcy court granted the trustee’s pending motion to dismiss the
Chapter 13 case because the Dyes were not making their promised payments. Then on
January 12, 2011, with the underlying bankruptcy case now over, the bankruptcy court
declined to exercise jurisdiction over the adversary action and dismissed the Dyes’
amended complaint.
The Dyes appealed this last ruling to the district court on January 25. From that date
they had 14 days to designate the contents of the record and file a statement of the issues to
be presented. See FED. R. BANKR. P. 8006. But they did not do either, and neither did they file
a brief. The district court had notified the Dyes on March 1, 2011, that they had only 14
more days to file their brief, FED. R. BANKR. P. 8009, and even after the court had later
rejected their motion for an extension of time, the Dyes did not submit their brief.
Two weeks after the missed briefing deadline, Ameriquest moved to dismiss the
appeal. The lender argued that the appeal lacked merit and also that the Dyes had failed to
designate the record, identify the issues on appeal, or file a brief. The Dyes never
responded. After waiting another month without receiving a brief from the Dyes, the
district court granted Ameriquest’s motion and dismissed the appeal for failure to
prosecute. See FED. R. BANKR. P. 8001(a). The court found that the Dyes had failed to comply
with the deadlines for identifying the issues, designating the record on appeal, and filing
their appellate brief. Because the Dyes had not explained these omissions, the district court
reasoned, they could not argue excusable neglect. The court also reviewed the Dyes’
continuing “vendetta” against Ameriquest and concluded that they had filed the appeal as
part of a pattern of bad‐faith litigation.
No. 11‐2100 Page 4
This ruling ostensibly underlies the Dyes’ present appeal, but in their opening brief
they simply rehash their allegations that Ameriquest engaged in misconduct during the
negotiation and execution of their mortgage. The Dyes ask us to remand, not because of any
error by the district court in dismissing their bankruptcy appeal for failure to prosecute, but
because they want to resume their adversary action against Ameriquest. Only in their reply
brief do the Dyes say anything about the proceedings in the district court—they contend
that the district judge should have granted their motion for an extension of the briefing
deadline–but arguments raised for the first time in a reply brief are waived. Padula v.
Leimbach, 656 F.3d 595, 605 (7th Cir. 2011); Mendez v. Perla Dental, 646 F.3d 420, 423–24 (7th
Cir. 2011).
Ordinarily we review a bankruptcy court’s decision directly. Kovacs v. United States,
614 F.3d 666, 672 (7th Cir. 2010); In re Smith, 582 F.3d 767, 777 (7th Cir. 2009). But here the
Dyes essentially bypassed review by the district court, and thus the propriety of the
bankruptcy judge’s order dismissing the Dyes’ adversary action is not properly before us
unless we conclude that the district court abused its discretion in dismissing the Dyes’
appeal to that court. See In re Telesphere Commc’ns, Inc., 177 F.3d 612, 616 (7th Cir. 1999); In re
Bulic, 997 F.2d 299, 301–02 & n.3 (7th Cir. 1993). As we have noted, the Dyes waived their
only challenge to the district court’s decision, and, regardless, that ruling was not an abuse
of discretion. Failure to take the proper procedural steps after filing a notice of appeal is
“ground for such action as the district court or bankruptcy appellate panel deems
appropriate, which may include dismissal of the appeal.” FED. R. BANKR. P. 8001(a). The
district court pointed to the Dyes’ failure to designate the record and issues on appeal, FED.
R. BANKR. P. 8006, and to file their appellate brief, FED. R. BANKR. P. 8009. Though the court
could have overlooked these failures if given a valid reason, see FED. R. BANKR. P. 9006(b);
In re KMart Corp., 381 F.3d 709, 713 (7th Cir. 2004); Bulic, 997 F.2d at 302–03, the Dyes never
offered any reason. They did not even respond to Ameriquest’s motion to dismiss. And
while dismissal can be a harsh sanction, see In re Scheri, 51 F.3d 71, 73–74 (7th Cir. 1995);
Bulic, 997 F.2d at 302; see also Maynard v. Nygren, 332 F.3d 462, 467–68 (7th Cir. 2003), in this
instance the Dyes have not disputed the district court’s conclusion that they filed their
bankruptcy appeal in bad faith to further their effort to undo the foreclosure judgment.
We could stop here, but it is worth noting that bankruptcy judges have discretion to
dismiss an adversary proceeding after the underlying bankruptcy case has ended. A
bankruptcy court can decline to exercise jurisdiction over an isolated adversary proceeding.
See Chapman v. Currie Motors, Inc., 65 F.3d 78, 80–82 (7th Cir. 1995); In re Statistical Tabulating
Corp., 60 F.3d 1286, 1289 (7th Cir. 1995). Like a district court that determines whether to
exercise supplemental jurisdiction over a state‐law claim after the federal claim has been
dismissed, the bankruptcy court will look at whether the adversary proceeding is closely
related to the bankruptcy. See In re Johnson, 575 F.3d 1079, 1083–84 (10th Cir. 2009); In re 5900
No. 11‐2100 Page 5
Assocs., 468 F.3d 326, 330 (6th Cir. 2006); In re Valdez Fisheries Dev. Ass’n, 439 F.3d 545, 548
(9th Cir. 2006); Chapman, 65 F.3d at 81. The Dyes’ dispute with Ameriquest had no
remaining ties to bankruptcy law. “The bankruptcy proceeding having ended, the
adversary proceeding became a dispute of no interest to anyone except the two adversaries,
and their dispute revolved entirely around” a state‐court proceeding. See Chapman, 65 F.3d
at 82.
What is more, this dispute should never have been before the bankruptcy court a
second time. We ruled in 2008 that the Dyes no longer can litigate the validity of their
mortgage or any claim that could have been raised in the Wisconsin foreclosure action. Dye,
289 F. App’x at 944. Yet three years later the Dyes have wasted the time of several courts by
requesting the same relief amidst incomprehensible filings. More than seven years have
passed since the Wisconsin court entered its foreclosure judgment, which still binds the
Dyes, and it is time for their abuse of the bankruptcy process to end.
AFFIRMED.