Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-13-03837/USCOURTS-ca7-13-03837-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 

---

In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 13-3837

KEVIN B. DUFF, as Receiver for

Central Sleep Diagnostics, LLC,

Plaintiff-Appellee,

v.

CENTRAL SLEEP DIAGNOSTICS, LLC, et al.,

Defendants.

APPEAL OF: GOODMAN TOVROV HARDY & JOHNSON LLC

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 10 C 6162 — Rebecca R. Pallmeyer, Judge.

____________________

ARGUED SEPTEMBER 15, 2014 — DECIDED SEPTEMBER 10, 2015

____________________

Before FLAUM, KANNE, and SYKES, Circuit Judges.

SYKES, Circuit Judge. At the request of defrauded investors 

and creditors, a district judge ordered Central Sleep Diagnostics, LLC, into receivership in November 2010 and issued 

a stay against “all civil legal proceedings of any nature” 

involving Central Sleep, its promotor Kenneth Dachman, his 

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wife, and the other defendants in the underlying fraud case.

The receivership was closed in December 2013, and the 

victims received pennies on the dollar for their claims. 

Adam Goodman was a former attorney for Central Sleep

and one of its creditors based on an unpaid bill for legal 

services. Early in the federal proceedings, Goodman correctly anticipated that the receivership would be unable to pay 

claims in full, so he attempted to outmaneuver the receiver. 

He obtained a judgment for the unpaid fees and submitted a 

claim to the receiver. But he also filed a lien against the 

proceeds of a medical-malpractice lawsuit the Dachmans

had filed in state court. Both the lawsuit and the lien flagrantly violated the district judge’s stay order. Neither 

Goodman nor the Dachmans informed the receiver or the 

judge of these developments. 

That’s not all. The receiver eventually learned of the 

medical-malpractice suit and recovered the settlement 

proceeds for the receivership estate. When the receiver later

proposed a plan of distribution, Goodman objected. He

argued that his lien entitled him to be paid in full directly 

from the proceeds of the medical-malpractice suit, rather 

than pro rata from the receivership estate like the other 

creditors. The judge rejected this argument but offered 

Goodman the opportunity to post a supersedeas bond to 

delay distribution of the receivership estate pending appeal, 

should he wish to seek review of her decision. Goodman did 

not post a bond. The judge approved the receiver’s distribution plan and the funds were distributed.

With the receivership estate now fully distributed and 

the receivership closed, Goodman asks us to overturn the 

judge’s approval of the plan and reopen the receivership to 

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No. 13-3837 3

permit him to recover the full amount of his claim. We 

decline this request, affirm the district court’s order, and 

grant the receiver’s motion for sanctions against Goodman

and his law firm under Rule 38 of the Federal Rules of 

Appellate Procedure.

I. Background

On August 31, 2010, investors in Central Sleep filed suit

in Cook County Circuit Court against the company; Kenneth 

Dachman, its promoter; Dachman’s wife, Katherine Lynn 

Dachman; and several others. The suit asserted claims for 

fraud, RICO violations, conversion, fraudulent conveyance, 

civil conspiracy, and securities fraud. Dachman was also 

criminally charged and convicted for his fraudulent conduct.

See United States v. Dachman, 743 F.3d 254 (7th Cir. 2014) 

(affirming a 120-month prison sentence against Kenneth 

Dachman for related wire-fraud convictions). He spent the 

funds he stole from investors on “a tattoo parlor; family 

vacations and cruises to Italy, Nevada, Florida, and Alaska; a 

new Land Rover; rare books; and to fund personal stock 

trading and gambling.” Id. at 256. 

In the civil case, the investors requested equitable relief,

including disgorgement of profits and the appointment of a

receiver to marshal the company’s remaining assets, collect 

amounts owed to it, and distribute the proceeds. Goodman 

and his law firm, the adverse claimant-appellant in this case,

represented the defendants and removed the case to federal 

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court.1 The defendants fired Goodman soon after, but not 

before racking up a $28,205.36 bill for legal services.

On November 1, 2010, the district judge appointed 

James E. Sullivan as receiver for Central Sleep. Along with 

other creditors, Goodman received notice of the receivership. Several months later, in March 2011, Goodman sued 

the defendants in Cook County Circuit Court for his unpaid 

legal fees. Kevin B. Duff, the appellee in this case, succeeded 

Sullivan as receiver.

On June 16, 2011, the district judge entered an order staying nunc pro tunc from October 18, 2010, “[a]ll civil legal 

proceedings of any nature, including, but not limited to ...

actions of any nature involving ... (c) any of the 

[d]efendants.” Soon thereafter the judge entered summary 

judgment for the plaintiffs and awarded $2.5 million in 

damages.

The defendants did not appear in Goodman’s state-court 

suit for unpaid legal fees, so on August 22, 2011, Goodman

moved for default judgment. He then sought limited relief 

from the district court’s stay order, claiming that he had 

been unaware of it until after he filed the default-judgment 

motion when he was contacted by the receiver’s attorney. 

Goodman’s motion stated that he intended “to obtain judgment and begin garnishment proceedings” because 

“[p]resumably, some or all of the six individual defendants 

are gainfully employed.” The receiver and the plaintiffs’ 

attorney both opposed the motion. On September 6, 2011,

 1 Goodman Law Offices LLC is now known as Goodman Tovrov 

Hardy & Johnson LLC. For simplicity, we refer to Goodman personally 

throughout this opinion.

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No. 13-3837 5

the judge entered an order granting limited relief from the 

stay: “Motion for limited relief from [the stay order] granted 

without prejudice to objections, if any, that may be asserted 

should movant succeed in recovering money from 

Mr. Dachman and his co-[d]efendants.”

On September 11, 2011, Goodman obtained a default 

judgment against Central Sleep Diagnostics for $28,205.36,

along with an assessment of $394 in costs. On March 14, 

2012, he obtained default judgments against the individual

defendants for $28,205.36 plus $1,282.14 in costs (with an 

additional $2,100 against Katherine Dachman).

In September 2012 Goodman filed a claim with the receiver for these amounts plus postjudgment interest, along 

with a claim-verification form. The form, signed by Goodman, stated in part: 

Claimant/creditor acknowledges and agrees 

that by submitting this claim verification form, 

claimant/creditor subjects his/her/its claim to 

the jurisdiction of the U.S. District Court for 

the Northern District of Illinois, Eastern Division, which is administering the Receivership 

Estate (“Receivership Court”). Claimant/

creditor further agrees that his/her/its claim 

shall be adjudicated, determined and paid as 

ordered by the Receivership Court. Claimant/

creditor further consents to, and understands 

that the Receivership Court will determine: 

(i) his/her/its right to any money from the Receivership Estate, if any is available; (ii) the 

priority of his/her/its claim; (iii) the scheduling 

and allocation of any assets to be distributed; 

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and (iv) all objections and disputes regarding 

the allowance of his/her/its claim by the Receiver, which shall be submitted to and subject 

to review by the Receivership Court for a final 

ruling without a jury.

Around the same time, Goodman learned that the 

Dachmans had filed a medical-malpractice lawsuit in Cook 

County Circuit Court against a physician and his medical 

practice. That suit—captioned Dachman v. Buyer, 2012 L 

004568—was filed by a different law firm with no connection

to Goodman (as far as we can tell). The receiver and the 

district judge were completely unaware that the Dachmans 

had filed this action, which was a flagrant violation of the 

stay order. Goodman didn’t tell them either.

Instead, on November 5, 2012, Goodman filed a lien in 

the Buyer case against the Dachmans’ interest in any judgment proceeds. This too violated the district court’s stay 

order. After securing the lien, Goodman sought to improve 

his odds of recovery by asking another state judge to declare

the judgment lien “spread of record.”2 That order issued on 

December 4, 2012.

On July 22, 2013, the Buyer case settled for $305,000. The 

receiver learned of the suit and settlement about a week 

later, before any money was distributed to Goodman or the 

 2 In Illinois this procedure allows a judgment-lien creditor to perfect a 

lien against a judgment. Having a judgment lien “spread of record” can 

obligate defendants to pay the judgment creditor directly for amounts 

the plaintiff owes the creditor, ahead of any payments to the plaintiffs 

under a judgment or settlement. See Podvinec v. Popov, 658 N.E.2d 433 (Ill.

1995).

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No. 13-3837 7

Dachmans. He filed an emergency request with the district 

court to freeze the settlement funds and impose a judicial 

lien. On July 30 the judge ordered a temporary freeze of the 

settlement proceeds. Two weeks later she granted the receiver’s request to impose a lien and directed the Dachmans’ 

medical-malpractice firm to place the $305,000 settlement 

proceeds in the receiver’s trust account. The firm complied, 

though it later received a portion of the settlement as legal 

fees.

On September 6, 2013, the receiver filed a plan of distribution proposing a pro rata payout of the receivership 

estate, after legal and accounting fees. The plan included the 

Buyer settlement proceeds in the receivership estate; indeed, 

the settlement was the largest asset in the estate. As relevant 

to this appeal, the plan also excluded interest, court costs, 

and collection-related attorney’s fees from the claim calculations. The claimants were identified by number in the public 

record to protect their privacy; the receiver submitted their 

names to the court in camera.

Goodman opposed the receiver’s plan of distribution, arguing that his lien entitled him to recover his entire claim 

amount, plus court costs and interest, directly from the Buyer 

settlement, ahead of all other claimants. He also objected to 

keeping the identity of the other claimants confidential. The

judge rejected these arguments, and on October 24, 2013, 

denied Goodman’s motion to hold back funds from the 

distribution pending an appeal. She set a supersedeas bond 

of $250,000 “[s]hould Mr. Goodman file an appeal.”

Goodman never posted the $250,000 supersedeas bond. 

On November 19, 2013, the judge approved the receiver’s 

amended distribution plan, which listed a total receivership 

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estate of $403,882.68. The judge explicitly found that the 

Buyer proceeds were properly part of the receivership estate 

and that Goodman had no greater right of recovery than any 

other creditor. In the weeks that followed, the estate was 

fully distributed. Goodman received his pro rata share:

$1,733.50. In the meantime, he filed a notice of appeal. The 

receivership was formally terminated on December 31, 2013.

II. Discussion

Goodman argues that the district court erred (1) by disregarding his “perfected lien” against the Buyer settlement 

proceeds, and (2) by approving a distribution plan that 

“crammed down” his claim (that is, excluded postjudgment 

interest and costs) and omitted the names of the other claimants from the public record. The receiver responds that the 

distribution of the entirety of the receivership estate moots

Goodman’s appeal and that, in any case, the appeal is frivolous. By separate motion he asks for sanctions against 

Goodman under Rule 38 of the Federal Rules of Appellate 

Procedure.

A. Mootness

The receiver argues that the distribution of all the receivership assets moots Goodman’s appeal. The appeal is not 

moot in the constitutional sense. Goodman asks us to reverse 

the district court’s order approving the plan and to reopen 

the receivership. If we were to agree, Goodman might ask 

the district court to exercise “equitable powers to recover 

erroneous distributions.” In re Vlasek, 325 F.3d 955, 962 (7th 

Cir. 2003). The district court also would have the power

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No. 13-3837 9

(though certainly not the obligation) to allow Goodman to 

sue the receiver personally for making an illegal distribution. 

Cf. In re Linton, 136 F.3d 544, 545 (7th Cir. 1998) (upholding a 

bankruptcy judge’s denial of leave to sue a bankruptcy 

trustee, while recognizing that “[t]he trustee in bankruptcy 

is a statutory successor to the equity receiver, and it ha[s] 

long been established that a receiver could not be sued 

without leave of the court that appointed him”). In short, 

Goodman has a personal stake in the outcome and at least

some arguably available remedial options to maintain a

justiciable claim under Article III of the Constitution. See

Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523, 1528

(2013) (internal quotation marks omitted).

The receiver also invokes another doctrine, sometimes 

confused with constitutional mootness, known as “equitable 

mootness.” This doctrine “essentially derives from the 

principle that in formulating equitable relief[,] a court must 

consider the effects of the relief on innocent third parties.” 

SEC v. Wealth Mgmt. LLC, 628 F.3d 323, 331 (7th Cir. 2010) 

(quotation marks omitted); accord United States v. Segal, 

432 F.3d 767, 773–74 (7th Cir. 2005); SEC v. Wozniak, 33 F.3d 

13, 15 (7th Cir. 1994), overruled on other grounds by SEC v. 

Enter. Trust Co., 559 F.3d 649 (7th Cir. 2009). An appellate 

court may properly refuse to decide the merits of a challenge 

to a bankruptcy or receivership plan where unwinding the

plan (even if legally justifiable) would be difficult and 

inequitable in light of the complexity of the transactions and 

the reliance interests involved. This is not “real mootness”;

the court has jurisdiction to alter the outcome, but equitable 

considerations make it unfair or impracticable to intervene. 

See In re UNR Indus., 20 F.3d 766, 769 (7th Cir. 1994) (distinCase: 13-3837 Document: 35 Filed: 09/10/2015 Pages: 21
10 No. 13-3837

guishing the concept of equitable mootness from “real 

mootness”).

In evaluating the receiver’s argument for equitable 

mootness, the two key factors are “(1) the legitimate expectations engendered by the plan; and (2) the difficulty of reversing the consummated transactions.” Wealth Mgmt., 628 F.3d 

at 332. This fact-intensive inquiry weighs “the virtues of 

finality, the passage of time, whether the plan has been 

implemented and whether it has been substantially consummated, and whether there has been a comprehensive 

change in circumstances.” Segal, 432 F.3d at 774 (citing cases) 

(quotation marks omitted).

The reliance interests of the other claimants in this case

seem quite significant. We cannot say with certainty how

significant because the extent of their reliance is partly a 

function of their current personal circumstances, which the 

record before us does not disclose. See, e.g., In re Envirodyne

Indus., 29 F.3d 301, 304 (7th Cir. 1994) (noting an insufficient 

record on “whether modification of the plan ... would bear 

unduly on the innocent”). We know that some of the claimants are elderly, and many were very badly harmed by 

Dachman’s fraud. They received about six cents for every 

dollar of their approved claims against Central Sleep. The 

investor with the greatest loss, whose claim of $625,000 was 

approved by the receiver, recovered only around $38,000 

from the estate. A clawback for Goodman would cost the 

others more than 10% of their already meager recovery.

The other claimants also have a right to expect to keep 

what they received. The plan has been not only “substantially consummated,” Segal, 432 F.3d at 774, but fully consummated, and the receivership is now closed. The claimants

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know that Goodman never posted a supersedeas bond after 

his arguments failed and his request for a holdback was

rejected by the district court. And as far as we can tell, the 

other claimants (unlike Goodman) did not try to impede the 

receivership. The “legitimate expectations engendered by 

the plan” weigh against our consideration of Goodman’s

appeal. Wealth Mgmt., 628 F.3d at 332.

The difficulty of undoing the transaction is a closer call. 

In some respects this plan may be simpler to unwind than

others this court has seen. Most importantly, this plan 

involved distribution of cash, which is easy to count and 

value, unlike stock distributions or asset sales. Cf. Segal, 

432 F.3d at 774 (sale of a former business, with consequences 

for employees and competitors); In re Envirodyne Indus., 

29 F.3d at 304 (distributions of stock, some of which were 

already sold); In re UNR Indus., 20 F.3d at 769 (stock sale). 

Because there is nothing left of Central Sleep, there are no 

investors in a reorganized business whose interests would 

be negatively affected. So there is less risk that in future 

receivership proceedings similarly placed investors will 

underpay for receivership assets out of concern that further 

litigation may reduce asset value. Cf. In re UNR Indus., 

20 F.3d at 770.

In addition, the number of claimants, the sum of money 

at stake, and the size of the distribution plan are all relatively 

small. Goodman would seek to claw back from the 50 other 

claimants approximately $30,000, minus the $1,700 he has 

already recovered. The claimants received total distributions 

that add up to about $243,000. Cf. Wealth Mgmt., 628 F.3d at 

332 ($4.2 million was already distributed to 300 investorclaimants); In re Envirodyne Indus., 29 F.3d at 303 ($141

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12 No. 13-3837

million in stock was already distributed to noteholders); In re 

UNR Indus., 20 F.3d at 769 (15 million shares of stock traded 

in public markets were already distributed). If he were 

successful on appeal, Goodman could seek about $8,400 total 

from the two claimants with the largest distributions; the 

remaining $19,900 would have to come from everyone else—

an average of around $400 per claimant.

But when we consider the difficulty of unwinding the 

receivership distribution in an equitable sense, we are 

mindful of the cumulative practical costs this choice would 

impose on the participants in the plan. When recovery 

amounts get this small—an average of $400 each from most 

of the claimants—there is a real possibility that the net social 

value of a partial do-over would be negative. A claimant 

who prevails on appeal doesn’t internalize the costs that his 

efforts to claw back distributions would impose on everyone 

else, so we cannot simply rely on Goodman to stop collecting when the total costs exceed the remaining potential 

recovery. (This point is reinforced by Goodman’s litigation 

behavior to date.) So while in some cases smaller sums of 

money and fewer participants in a receivership plan could

lessen the reviewing court’s practical concerns, here the

difficulty of reversing this transaction—from equitable and

practical perspectives—tips in favor of preserving the status 

quo.

Because Goodman’s appeal is patently frivolous on the 

merits, however, we need not come to a firm conclusion 

about equitable mootness. See Wealth Mgmt., 628 F.3d at 332 

(concluding that “we need not take the analysis any further” 

because the district court’s decision was being affirmed on 

the merits); Segal, 432 F.3d at 774 (deciding that the difficulty 

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No. 13-3837 13

in “determin[ing] the precise effects” of trying to unwind the 

settlement “prevents us from conclusively holding ... that it 

would be foolish for us to even consider reversing the deal”); 

In re Envirodyne Indus., 29 F.3d at 304 (stating that if there 

were doubts about the lack of merit to the appellant’s argument, the court would remand the case to the district court 

to determine the effect of modifying the plan on the other 

participants). We therefore proceed to the merits of Goodman’s claims.

B. The Merits

1. The “Perfected Lien” Claim

Because the district court has “broad equitable power in 

this area,” we review the court’s decision approving the 

distribution plan deferentially, for abuse of discretion.

Wealth Mgmt., 628 F.3d at 332. Goodman argues that the

judge erred in rejecting his claim to preferential treatment 

based on his “perfected lien” against the settlement proceeds 

in the Dachmans’ medical-malpractice case. He boasts that 

he “found the medical malpractice case about nine months 

before Mr. Duff did, and perfected a security interest in it 

long before Mr. Duff was even aware that the case existed.”

As legal support for this argument, Goodman relies

largely on the Full Faith and Credit Act, which requires 

federal courts to give the judicial acts of the states “the same 

full faith and credit ... as they have by law or usage in the 

courts of such State, Territory or Possession from which they 

are taken.” 28 U.S.C. § 1738. Goodman contends that the

district court violated the Act by failing to recognize and 

accord priority to his state-court lien.

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14 No. 13-3837

The first obvious problem with Goodman’s argument is 

that the Full Faith and Credit Act does not apply when the 

claim or issue before a federal court was never actually 

decided in state court. Applying the Full Faith and Credit

Act requires “tak[ing] up the question: What matters did the 

[state-court judgment] legitimately conclude?” Baker by 

Thomas v. Gen. Motors Corp., 522 U.S. 222, 237 (1998). Here, 

there is no state-court judgment addressing the relative 

priority of Goodman’s claim to the Buyer settlement proceeds as against the receiver’s. The state court’s order 

spreading the lien of record meant only that Goodman 

should have priority over the plaintiffs in the case—that is, 

the Dachmans. The state court never considered, much less 

decided, whether Goodman or the receiver would have 

priority. How could it? Goodman never informed the state 

judge of the receivership, nor did he give the receiver notice 

of the state proceedings. 

The district judge therefore had no need to address the 

validity of Goodman’s lien when deciding that the Buyer 

proceeds belonged to the receivership estate; it was sufficient that the receiver had a superior claim. And the receiver’s claim was properly prioritized over Goodman’s later 

“perfected lien.” Receivers can displace even prior security 

interests in receivership property in some circumstances. See, 

e.g., Gaskill v. Gordon, 27 F.3d 248, 251 (7th Cir. 1994) (prioritizing a receiver’s lien for fees over a preexisting mortgage 

where the mortgagee acquiesced in the receivership). A

receivership court can certainly use its equitable powers to 

give the receiver’s judgment priority over a state-court lien 

obtained by a claimant subsequent to that judgment.

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In any event, because Goodman obtained the lien in violation of the district court’s order, the judge could simply

disregard the lien. This is the second glaring problem with 

Goodman’s argument. In her September 2011 order, the 

judge lifted the stay for a narrowly limited purpose. Goodman was permitted to obtain a state-court judgment and 

perhaps garnish the defendants’ wages, subject to objections 

by the receiver. Because Goodman’s motion to lift the stay did 

not request permission to pursue any collection actions

beyond this, the federal stay remained in effect with respect 

to other potential sources of recovery, including the proceeds of the Buyer case. And the September 2011 order 

partially lifting the stay was specifically conditioned on the 

receiver’s right to object to Goodman’s efforts in state court;

under no reading of that order was Goodman authorized to 

perfect a lien against the Buyer proceeds without giving the 

receiver notice and an opportunity to object.

The Full Faith and Credit Act directs courts to apply the 

“law or usage in the courts” of the rendering state in analyzing the preclusive effect of state-court judgments. 28 U.S.C. 

§ 1738; see also Marrese v. Am. Acad. of Orthopaedic Surgeons, 

470 U.S. 373, 380 (1985); Czarniecki v. City of Chicago, 633 F.3d 

545, 548 n.3 (7th Cir. 2011). Illinois courts do not enforce 

liens obtained in violation of a federal stay. See, e.g., Cohen v. 

Salata, 709 N.E.2d 668, 672 (Ill. App. Ct. 1999) (vacating a 

lower-court order after deciding that a bankruptcy automatic stay order had deprived the state court of subject-matter 

jurisdiction over the claim in the first place). Goodman does 

not argue otherwise; instead he maintains that he never 

violated the stay in obtaining or perfecting the lien. For the 

reasons we’ve already explained, that claim cannot be taken 

seriously.

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Goodman also altogether ignores the fact that the malpractice case itself was from beginning to end conducted by 

the Dachmans in violation of the federal stay. We could 

easily affirm on this basis too. A state-court action that 

violates a federal stay order is voidable in federal court, if 

not void ab initio. See Middle Tenn. News Co. v. Charnel of 

Cincinnati, Inc., 250 F.3d 1077, 1082 n.6 (7th Cir. 2001) (acknowledging debate between circuits over whether actions 

taken in violation of a bankruptcy automatic stay order “are 

void or merely voidable”); accord Kimbrell v. Brown, 651 F.3d 

752, 755 (7th Cir. 2011). Irrespective of Goodman’s own 

violation of the stay order, the Dachmans’ violation of the 

stay brought the proceeds of that action properly within the 

discretion of the receivership court.

Because Goodman has given us no nonfrivolous argument to support his claim that the district court erred in 

disregarding his “perfected lien,” we will not disturb the 

court’s reasonable inclusion of the entire Buyer settlement in 

the receivership estate without regard to the lien.

2. Other Challenges to the Plan of Distribution

Goodman raises two additional challenges to the judge’s 

approval of the receiver’s distribution plan. First, he argues 

that the judge erred in approving a plan that “crammed 

down” his claim by excluding postjudgment interest and 

court costs. Second, he argues that the decision to keep the 

claimants’ identities out of the public record was improper.

These claims are equally flimsy.

Goodman asserts that because his state-court default 

judgment against Central Sleep awarded court costs and 

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Illinois law allows postjudgment interest, 735 ILL. COMP.

STAT. 5/2-1303, those amounts must be recognized as part of 

his claim in the receivership proceedings. Again he relies on

the Full Faith and Credit Act, but he makes a number of 

obvious errors in his analysis. For starters, the district judge

never questioned either the validity of the state-court judgment or its amount. And Goodman continues to overlook

the fact that his ability to execute on his state-court judgment 

was strictly limited by the terms of the district judge’s

September 2011 order granting relief from the stay and his

consent to the equitable jurisdiction of the receivership 

court. To repeat: the judge’s order granted Goodman limited 

relief from the stay subject to objections by the receiver. The

receiver’s proposed plan of distribution disallowed, as a 

matter of equity, Goodman’s claim of entitlement to court 

costs and postjudgment interest, something other claimants 

could not receive. The judge was entitled to agree.

Goodman hasn’t explained how the judge otherwise 

abused her discretion. His inability to do so is no surprise; 

the judge’s approval of the plan was clearly correct. The 

exclusion of this small portion of Goodman’s claim was 

entirely appropriate because many claimants were prevented by the district court’s stay order from filing state-court 

actions. Other claimants had filed the receivership action in 

the first place and also could not separately pursue their 

claims in state court. To treat the claimants equally across 

the board, the final distribution plan reasonably excluded

claim amounts attributable to penalties, interest, and attorney’s fees.

Goodman’s argument with respect to the confidentiality 

of claimants’ identities fares no better. A district court’s 

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decision to keep a litigant’s name confidential is reviewed for 

abuse of discretion. Doe v. Elmbrook Sch. Dist., 658 F.3d 710, 

721–24 (7th Cir. 2011), reversed on other grounds en banc, 

687 F.3d 840, 842–43 (7th Cir. 2012) (adopting the panel’s 

analysis on anonymity). We are at least as deferential to a 

decision to keep other aspects of the record under seal.

Goodman mounts only a feeble challenge to the judge’s 

decision, citing a single case, Mueller v. Raemisch, 740 F.3d 

1128 (7th Cir. 2014), and relying on generalized references to 

bankruptcy-court practice. Neither Mueller nor general 

bankruptcy practice helps him here.

While secrecy in judicial proceedings is generally disfavored (as we made clear in Mueller, see 740 F.3d at 1135–36), 

Goodman makes no effort to explain why the limited confidentiality allowed here is not appropriate in the context of 

this receivership. Indeed, the litigants’ names are public.

Goodman insists that the names of all the other claimants—

the victims of Dachman’s fraud—be made public. To the 

extent that this argument relies on Mueller, that case is not

even remotely analogous. In Mueller we criticized a decision 

to allow sex-offender plaintiffs to litigate anonymously in a 

constitutional challenge to a state sex-offender registration 

law. Our criticism was largely premised on the fact that their

status as sex offenders was already a matter of public record;

we also noted they were perpetrators, not victims. See id. It 

should be self-evident that this reasoning does not apply 

here.

Goodman also seeks support from general bankruptcy

practice, but the Bankruptcy Code specifically provides that 

“a paper filed in a case under this title ... [is a] public record” subject to limited exceptions. 11 U.S.C. § 107(a). A 

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No. 13-3837 19

federal receivership is not governed by the Bankruptcy 

Code. Goodman has not explained why a receivership 

court’s broad discretion does not include the discretion to 

treat as confidential the names of the claimants. Nor has he 

given us any reason to think that the judge abused her

discretion here.

C. Rule 38 Sanctions

Rule 38 of the Federal Rules of Appellate Procedure allows us to “award just damages and single or double costs” 

when an appeal is frivolous. Rule 38 sanctions compensate 

the aggrieved party and deter future frivolous appeals.

McCoy v. Iberdrola Renewables, Inc., 769 F.3d 535, 536–37 (7th 

Cir. 2014). An appeal is frivolous “when the result is obvious 

or when the appellant’s argument is wholly without merit.” 

Id. at 538. Sanctions may also be appropriate if an appeal is 

filed for an inappropriate purpose, In re Hendrix, 986 F.2d 

195, 201 (7th Cir. 1993), or if the arguments made are merely 

cursory, Clark v. Runyon, 116 F.3d 275, 279 (7th Cir. 1997). We 

do not impose Rule 38 sanctions lightly, however. Reasonable lawyers often disagree, and “this court’s doors are open 

to consider those disagreements brought to us in good 

faith.” Harris N.A. v. Hershey, 711 F.3d 794, 801 (7th Cir. 2013).

Rule 38 requires either notice from the court or a separate 

motion by the appellee, and a reasonable opportunity to 

respond. The receiver filed a separate Rule 38 motion and

Goodman has responded. In light of the record and Goodman’s oral argument, we conclude that the appeal is both

frivolous and deserving of sanction.

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20 No. 13-3837

As we’ve explained, much of Goodman’s briefing is

based on his obvious misunderstanding of the Full Faith and 

Credit Act. We’re particularly troubled, however, by Goodman’s inexplicable insistence that he owed no duty to keep 

the district judge or the receiver informed of his activities in 

state court. We emphasize again that the judge granted only 

limited relief from the stay for Goodman to obtain a judgment and garnish wages, and this limited relief was explicitly conditioned on the receiver’s right to object. As an officer 

of the court, Goodman surely understood his obligation to 

respect this order. Instead he ignored it, and he advances an 

argument that would have us treat its limitations as meaningless.

Goodman’s challenge to the confidentiality of the claimants’ identities is just as problematic. He argued in his 

principal brief that the receiver implemented a “secret 

claims-handling process” in which even the district judge 

herself was denied access to the claimants’ identities. That is 

false. If he had simply read the receiver’s explanation of the 

distribution plan, he would have known that the receiver 

submitted the claimants’ identities to the district court in

camera. The receiver noted Goodman’s error in his response

brief. To his credit, in his reply brief Goodman retracted this

wild and unfounded argument. But that doesn’t make up for 

his lack of care in the first place. And as we’ve noted, his

legal authority for this claim is woefully inadequate.

These are indications that Goodman’s appeal was not only frivolous but egregiously so. There are compelling indications of lack of diligence or, just as likely, outright bad faith. 

Goodman’s failure to post a supersedeas bond pursuant to 

the district court’s order ensured that the receivership funds 

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No. 13-3837 21

were fully distributed by the time the case reached us. 

Goodman’s insistence on pursuing this appeal thus put the 

receiver to needless personal expense. Because the receivership estate no longer contains any assets, Duff’s counsel was 

forced to defend the appeal pro bono.

This discussion leaves little doubt that Goodman’s appeal 

is frivolous and sanctionable under Rule 38. The receiver

may submit, within 28 days of the issuance of this opinion,

an affidavit and supporting papers specifying his damages 

from this frivolous appeal. Goodman may file a response not 

later than 28 days of the receiver’s submission.

AFFIRMED; SANCTIONS ORDERED.

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