7th Circuit rebukes counsel involved in attempt to collect debt

The 7th Circuit Court of Appeals had harsh words for counsel on both sides of a lawsuit involving an unpaid educational debt, finding the attorneys have demonstrated “appalling judgment” in this case.

Scott Ian Richardson sued The Koch Law Firm P.C., claiming its post-2007 efforts to collect on an educational loan Richardson incurred while attending Indiana University in 1988 violate two sections of the Fair Debt Collection Practices Act. Since 1998, the law firm hired by IU has attempted to collect a default judgment entered against Richardson in state court. But Richardson has twice filed for bankruptcy, which automatically stays the judgment. Once his second bankruptcy proceeding ended in April 2007, the law firm again attempted to collect on its end.

Judge Jane Magnus-Stinson treated this lawsuit as a collateral attack on the state court’s judgment and dismissed it for want of jurisdiction, invoking the Rooker-Feldman doctrine.

Before this appeal made it before the 7th Circuit, Richardson successfully asked the Bankruptcy Court to reopen his 2000 bankruptcy proceeding. The court stated that the judgment is “invalid,” but did not enjoin its enforcement or award damages under 11 U.S.C. Section 362 (k)(1) as Richardson had sought. Then the state court vacated its own judgment in 2014, so the District Court’s basis for dismissal under the Rooker-Feldman doctrine no longer exists, Judge Frank Easterbrook pointed out.

“Demonstrating appalling judgment, neither side brought this development to our attention, although both sides filed their appellate briefs after the state court vacated its judgment. Because that step affects subject-matter jurisdiction, counsel for both sides—Ruberry, Stalmack & Garvey, LLC, representing the Law Firm, and Richardson, a member of the bar representing himself—had an ethical duty to alert the court. Yet until the judges asked pointed questions at oral argument, neither side was forthcoming. Richardson even professed not to know the status of the state judgment to which he was a party. That assertion is hard to credit, for the state court’s order shows that it was sent to Richardson. But apportioning blame gets us nowhere. What matters now is that the rug has been pulled out from under the district court’s decision,” Easterbrook wrote.

Easterbrook then pointed out how Richardson has still not paid the 1988 debt, did not alert Koch Law Firm or the state court about his 2000 bankruptcy petition, did not appear for trial and did not appeal the bankruptcy court’s 2013 decision, among other things.

“It is hard to see how someone so deficient in the defense of his own interests could be an effective advocate for the interests of clients,” he wrote. “And it turns out that he has not been; Indiana has suspended Richardson from practice at least three times.

“Richardson is on notice: misfeasance or nonfeasance in federal litigation will lead to professional discipline.”

The judgment of the District Court in Scott Ian Richardson v. The Koch Law Firm P.C., 12-3868, is to be modified on the merits, and as modified is affirmed.