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Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 

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In the

United States Court of Appeals

For the Seventh Circuit

No. 08-3500

DEXIA CRÉDIT LOCAL,

Plaintiff-Appellee,

v.

PETER G. ROGAN, et al.,

Defendants,

and

JUDITH K. ROGAN,

Citation Respondent-Appellant.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division. 

No. 02 C 8288—Matthew F. Kennelly, Judge.

ARGUED JUNE 3, 2009—DECIDED APRIL 26, 2010

Before EASTERBROOK, Chief Judge, and ROVNER and

SYKES, Circuit Judges. 

ROVNER, Circuit Judge. In a supplementary proceeding

to enforce a judgment against Peter Rogan and related

partnerships, Dexia Crédit Local obtained a preliminary

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injunction barring Judith Rogan, Peter’s wife, from continuing to transfer certain assets. On appeal, Judith

asserts that the district court lacked subject-matter jurisdiction and that the preliminary injunction was improper.

We conclude otherwise and affirm.

I.

This appeal has its genesis in the longstanding Medicare

and Medicaid fraud scheme that Peter Rogan carried out

through Edgewater Medical Center from 1993 to 2001.

See United States v. Rogan, 517 F.3d 449, 451 (7th Cir. 2008).

In 1998 Peter and one of his related partnerships sought

to refinance Edgewater’s bond debt to get a lower

interest rate. Concealing the fraud scheme, they arranged

for Dexia to guarantee Edgewater’s repayment of the

bonds.

Dexia brought this diversity action against Peter and

his related partnerships for fraud, conspiracy, and other

torts relating to this longstanding scheme. See 28 U.S.C.

§ 1332. But Peter abandoned his defense of this suit by

absconding to Canada, and Dexia obtained a default

judgment for $124 million against him and some of his

partnerships. To satisfy its judgment, Dexia served Judith

Rogan with a citation to discover assets. See FED. R. CIV.

P. 69; 735 ILCS § 5/2-1402.

Next, Dexia filed an ex parte motion for a temporary

restraining order (“TRO”) to freeze certain of Judith’s

assets. Dexia asserted in an affidavit that it would sustain

irreparable harm if the Rogans had advance notice of

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No. 08-3500 3

the freeze-order. See FED. R. CIV. P. 65(b). Dexia also

appended documentation to show that Judith was

helping her husband conceal assets by placing his assets

in accounts under her name, opening offshore accounts,

and sending money to him or his creditors from these

accounts. According to Dexia’s motion, she even helped

him flee to Canada by opening new bank accounts

there and transferring several million dollars from

other offshore accounts into these Canadian accounts.

The district court granted the TRO without notice to the

Rogans, concluding that there was good cause to believe

that Judith acted as the alter ego of her husband and

disposed of his assets for his benefit. Under the terms

of the TRO, Judith was prohibited from transferring,

concealing, or dissipating any assets owned or controlled

by Peter and certain defined entities, including trusts

purportedly owned by the Rogans’ children, pending

the court’s determination of Dexia’s request to extend the

TRO into a preliminary injunction under the same terms.

Judith promptly moved to dissolve the TRO on grounds

that it was based solely on Dexia’s affidavit, which was

improper hearsay; that the TRO was vague and overly

broad; and that the district court lacked subjectmatter jurisdiction over her, a non-party. The court

denied Judith’s motion as moot, explaining that it would

address all arguments at a hearing three days later to

determine whether the TRO should be converted into a

preliminary injunction. Dexia’s and Judith’s counsel did

not object.

But Judith could not point to any evidence in the record

to contest Dexia’s assertion that she acted as the alter

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ego of her husband. Although before the preliminary

injunction hearing she submitted an affidavit disputing

her control over various bank accounts, and at the

hearing her former attorney and a former employee

testified that Peter had no interest in some of her assets,

she later withdrew all this evidence. When the hearing

resumed in the afternoon, Judith’s counsel informed the

court that Judith had filed for bankruptcy that morning

and that she was withdrawing her affidavit and the

offered testimony. The next day, however, Dexia

informed the court that Judith’s bankruptcy petition had

been declared a “nullity from its inception” because

she failed to comply with minimum filing requirements.

The court granted the preliminary injunction under the

same terms as the TRO, and Judith’s counsel did not

object. At a later hearing, the court explained its decision

by noting that Judith had withdrawn her evidence in

opposition to the injunction and she did not object to its

terms.

After Judith appealed the preliminary injunction, we

ordered her to supplement her jurisdictional statement

to address the citizenship of the named partnershipdefendants. At this point, she discovered that complete

diversity was lacking in Dexia’s original action against

Peter because diversity jurisdiction does not exist where

the party on one side of a case is foreign and the party

on the other side includes both domestic and foreign

parties. See Salton, Inc. v. Phillips Domestic Appliances & Pers.

Care B.V., 391 F.3d 871, 875 (7th Cir. 2004); Allendale Mut.

Ins. Co. v. Bull Data Sys., Inc., 10 F.3d 425, 428 (7th Cir.

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No. 08-3500 5

1993). Judith discovered that Dexia was a French

company and two of the named partnership-defendants

had partners who were Belizean corporations. She then

supplemented her jurisdictional statement on appeal and

identified the citizenship of these partners. In the district

court, she also moved to dismiss Dexia’s citation to discover her assets.

While this appeal was pending, the district court denied

her motion and dismissed the two nondiverse parties,

concluding that they were unnecessary and dispensable.

The court further stated that under Newman-Green, Inc. v.

Alfonzo-Larrain, 490 U.S. 826 (1989), the dismissal of the

dispensable nondiverse parties acted retroactively to

validate any acts occurring before dismissal. Thus, the

court concluded that the judgment in the underlying

action was final and that the Rogans could no longer

challenge Dexia’s citation to discover her assets on jurisdictional grounds.

II.

Judith presents two issues on appeal: (1) whether the

district court had subject-matter jurisdiction over the

case; and (2) whether the district court abused its discretion when it entered the preliminary injunction.

A. Subject-Matter Jurisdiction

Dexia first asserts that Judith’s subject-matter jurisdiction

argument is waived because she never raised it at the

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hearing on the preliminary injunction. But we have an

independent duty to ensure subject-matter jurisdiction,

see Büchel-Ruegsegger v. Büchel, 576 F.3d 451, 453 (7th Cir.

2009); EEOC v. The Chi. Club, 86 F.3d 1423, 1428 (7th Cir.

1996), and neither the parties nor their lawyers may

waive arguments that the court lacks jurisdiction. United

States v. Tittjung, 235 F.3d 330, 335 (7th Cir. 2000); see

also Dave v. Ashcroft, 363 F.3d 649, 652 (7th Cir. 2004).

Judith argues that the district court lacked subjectmatter jurisdiction over Dexia’s original action against

Peter and his related partnerships because the presence

of foreign parties on both sides of the case spoiled

diversity jurisdiction. And if Dexia’s original judgment

was void for lack of jurisdiction, she continues, the court

lacked jurisdiction over Dexia’s citation to discover her

assets. Judith’s jurisdictional challenges, however, come

too late. The judgment against Peter is final. She might

have mounted an attack on subject-matter jurisdiction

before a final decision was entered in Dexia’s original

action, but she did not. “[S]ubject-matter jurisdiction

may not be attacked collaterally.” Travelers Indem. Co. v.

Bailey, 129 S. Ct. 2195, 2205 (2009) (quotation and internal

citation omitted); Kontrick v. Ryan, 540 U.S. 443, 455 n.9

(2004). In any event, the parties have not discussed the

difference between direct and collateral challenges to a

judgment. And even if we could entertain Judith’s collateral attack, we would conclude that the district court

properly dismissed the nondiverse parties under

Federal Rule of Civil Procedure 21 and preserved its

jurisdiction. See Newman-Green, Inc., 490 U.S. at 832; Jass v.

Prudential Health Care Plan, Inc., 88 F.3d 1482, 1492 (7th

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Cir. 1996). Under Rule 21, a district court can dismiss

dispensable, nondiverse parties either before or after a

final judgment. Newman-Green, Inc., 490 U.S. at 827, 832

n.6; see also Grupo Dataflux v. Atlas Global Group, L.P., 541

U.S. 567, 572-73 (2004); Caisse Nationale de Credit Agricole

v. CBI Indus., Inc., 90 F.3d 1264, 1271 (7th Cir. 1996).

B. The Preliminary Injunction

Judith next makes a host of challenges to the district

court’s entry of the preliminary injunction. She asserts,

for instance, that the district court failed to make

findings of fact and conclusions of law in violation of

Federal Rule of Civil Procedure 52; that the court failed

to specify its reasons for the injunction, to state its

terms specifically, and to describe in reasonable detail

the acts restrained in violation of Federal Rule of Civil

Procedure 65(d); that the injunction was overly broad;

and that the injunction could not be issued against her, a

non-party. Dexia responds that these arguments are

waived because they were not renewed when the court

entered the preliminary injunction.

We decline to find waiver here. Although arguments not

raised before the district court may not be raised for the

first time on appeal, Bus. Sys. Eng’g, Inc. v. Int’l Bus. Machs.

Corp., 547 F.3d 882, 889 n.3 (7th Cir. 2008), this rule is not

meant to be overly formalistic; rather, the requirement

that parties appeal only issues that have first been presented to the district court maintains the efficiency,

fairness, and integrity of the judicial system for all parties.

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See Republic Tobacco Co. v. N. Atl. Trading Co., Inc., 381 F.3d

717, 728 (7th Cir. 2004); Boyers v. Texaco Ref. & Mktg., Inc.,

848 F.2d 809, 812 (7th Cir. 1988). It is true that Judith did

not reassert her objections to the preliminary injunction,

but she objected on the same grounds to the TRO

which contained identical terms and was issued by the

court for identical reasons, and the district court explained

that it would address Judith’s concerns regarding the

TRO when it considered the preliminary injunction. To

require her to re-raise her objections would be an overly

formalistic application of waiver.

As to the merits, Judith first argues that the injunction

violates Federal Rule of Civil Procedure 65(d) because

it lacks specific terms, a reasonable description of the

acts restrained or required, and reasons why it was

issued. See FED. R. CIV. P. 65(d)(1). We disagree. The

preliminary injunction directly addressed the key issue—whether Judith controlled certain of Peter’s assets

and transferred funds from these accounts to elude

his creditors. And it described in reasonable detail

that Judith was prohibited from transferring, converting,

encumbering, concealing, or otherwise dissipating these

assets for the benefit of her husband or any of the entities

her husband controlled. Further, the court provided its

reasons for the injunction: Judith was doing everything

in her power to help her husband conceal his assets

from creditors. The injunction is sufficiently precise and

self-contained, and we require nothing more to comply

with Rule 65. See PMC Inc. v. Sherwin-Williams, Co., 151

F.3d 610, 619 (7th Cir. 1998); Bd. of Educ. v. Ill. State Bd. of

Educ., 79 F.3d 654, 657 (7th Cir. 1996).

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Next, Judith asserts that the district court in two

respects did not comply with Federal Rule of Civil Procedure 52, which requires a court to substantiate the

issuance of an injunction with findings and conclusions

of law. See FED. R. CIV. P. 52(a)(2). First, she asserts without elaboration that the court was required to conduct

an evidentiary hearing. But the court need not conduct

an evidentiary hearing unless one is called for as a result

of a fact issue created by the response to a motion for

a preliminary injunction. See, e.g., In re Aimster Copyright

Litig., 334 F.3d 643, 653-54 (7th Cir. 2003); Promatek

Indus., Ltd. v. Equitrac Corp., 300 F.3d 808, 814 (7th Cir.

2002); Ty, Inc. v. GMA Accessories, Inc., 132 F.3d 1167,

1171 (7th Cir. 1997). Here, Judith raised no issue of fact;

rather she withdrew her evidence and did not object

when the court entered the injunction.

Second, she argues that the court did not comply with

Rule 52 by not making Rule 52’s requisite factual

findings in a written order accompanying the injunction.

But at a later hearing, the court pronounced its reasons

and conclusions orally, stating that the justifications for

the TRO would substantiate the court’s findings for the

preliminary injunction. Pronouncing its decision orally

on the record is acceptable. See FED. R. CIV. P. 52(a)(1);

EEOC v. Severn Trent Serv., Inc., 358 F.3d 438, 442 (7th

Cir. 2004). Further, we note that Rule 52 facilitates

judicial review, see Mayo v. Lakeland Highlands Canning

Co., 309 U.S. 310, 316 (1940); Freeland v. Enodis Corp., 540

F.3d 721, 739 (7th Cir. 2008), by ensuring a sufficient

record from which we can render a decision. See Miranda

v. Bennett, 322 F.3d 171, 175 (2d Cir. 2003); Davis v. New

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York City Hous. Auth., 166 F.3d 432, 436 (2d Cir. 1999);

Tekkno Labs., Inc. v. Perales, 933 F.2d 1093, 1097 (2d Cir.

1991). In this case, there were no contested matters;

Judith withdrew all her evidence, and the district court

provided its reasons and conclusions orally. Based on

the record before us, we conclude that the court adequately complied with Rule 52.

Judith’s next argument is somewhat difficult to follow.

She contends that when Dexia withdrew its Rule 65(b)

affidavit, the absence of that affidavit somehow rendered

Dexia’s documentary evidence unauthentic and inadmissible. But Judith misconstrues the course of events:

Dexia did not withdraw the affidavit, but instead submitted it in order to comply with Federal Rule of Civil

Procedure 65(b)(1), which requires a party seeking an

ex parte TRO to certify that the movant would suffer

irreparable harm. See FED. R. CIV. P. 65(b)(1). And even

if Dexia’s evidence was inadmissible under the Federal

Rules of Evidence, we have recognized that a district

court may grant a preliminary injunction based on less

formal procedures and on less extensive evidence than a

trial on the merits. See, e.g., Ty, Inc., 132 F.3d at 1171; SEC

v. Cherif, 933 F.2d 403, 412 n.8 (7th Cir. 1991); see also

Johnson v. Couturier, 572 F.3d 1067, 1083 (9th Cir. 2009);

Cobell v. Norton, 391 F.3d 251, 261 (D.C. Cir. 2004);

Levi Strauss & Co. v. Sunrise Int’l Trading Inc., 51 F.3d

982, 985 (11th Cir. 1995). We find no error here.

Next, Judith contends that the injunction is overly

broad because it requires her to exercise control over her

children’s trusts and prohibits her from using certain of

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her own assets. But the injunction here was tailored to

the scope of her alleged misconduct, and we cannot say

the court abused its discretion. See Lineback v. Spurlino

Materials, LLC, 546 F.3d 491, 505 (7th Cir. 2008); Gaddy v.

Abex Corp., 884 F.2d 312, 318 (7th Cir. 1989). When the

district court fashioned the broad injunction, it noted the

elaborate steps Judith had taken to evade creditors.

Further, the court relied upon evidence that Judith

did not dispute at the time of the injunction—evidence

documenting the extensive support she provided her

husband to conceal his assets, including her use of

offshore accounts and various trusts to funnel money

to Canada.

Last, Judith contends that the district court improperly

entered an injunction against her because she was not a

party to the underlying case. But one need not be a party

to be susceptible to an injunction. Under Illinois law—

which governs Dexia’s proceedings to execute its judgment, see FED. R. CIV. P. 69(a)—restraining orders are

proper against third-party defendants and citation respondents. See 735 ILCS § 5/2-1402; Star Ins. Co. v. Risk

Mkt. Group Inc., 561 F.3d 656, 662-63 (7th Cir. 2009); Cacok

v. Covington, 111 F.3d 52, 54 (7th Cir. 1997).

Accordingly, we AFFIRM the ruling of the district court.

4-26-10

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