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Bankruptcy-Rooker Feldman Doctrine

By: WISCONSIN LAW JOURNAL STAFF//December 4, 2023//

Bankruptcy-Rooker Feldman Doctrine

By: WISCONSIN LAW JOURNAL STAFF//December 4, 2023//

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7th Circuit Court of Appeals

Case Name: Generation Capital I, LLC v. John Fliss

Case No.: 22-1424

Officials: Flaum, Kirsch, and Jackson-Akiwumi, Circuit Judges.

Focus: Bankruptcy-Rooker Feldman Doctrine

Fliss, Wojciak, and Barr collectively secured a $200,000 bank loan for their jointly owned companies, with each individual personally guaranteeing the loan. Following a default by the borrowers, the bank secured a $208,639.95 consent judgment in a state court, holding the guarantors jointly and severally liable. Subsequently, Wojciak, through his company Capital I, entered into an agreement with the bank to acquire the promissory note and judgment debt for $240,000. He then reached a settlement agreement with the bank, committing to a payment of $240,000. To fulfill this agreement, Wojciak’s other company, Capital II, wired $240,000 to the bank. The state court replaced the bank with Capital I as the plaintiff, and Wojciak sought to enforce the judgment. Capital I initiated a supplemental proceeding, seeking property turnovers.

In response, Fliss and Barr contended, without success, that the debt had been satisfied when the Wojciaks paid $240,000 in exchange for the settlement. Following these developments, Fliss filed a Chapter 13 bankruptcy petition. Wojciak, in turn, had Capital I submit a secured claim, aiming to enforce the judgment totaling $359,967.69, inclusive of post-judgment interest. The bankruptcy court, however, disallowed this claim, determining that Wojciak had utilized Capital I as his alter ego, thereby assuming both the roles of creditor and debtor, leading to the extinguishment of the debt. The district court and Seventh Circuit upheld this decision. The bankruptcy court possessed subject matter jurisdiction to address the claim objection, with the Rooker-Feldman doctrine not posing an obstacle. Capital I failed to establish the presence of a final judgment, a requirement under res judicata and collateral estoppel.

Affirmed.

Decided 11/27/23

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