Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-15-07045/USCOURTS-caDC-15-07045-0/pdf.json

Parties Involved:
Federal Insurance Company
Appellee
United States of America

Stephen Thomas Yelverton
Appellant

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 8, 2016 Decided August 5, 2016

No. 15-7045

UNITED STATES OF AMERICA, EX REL. STEPHEN THOMAS 

YELVERTON,

AND

STEPHEN THOMAS YELVERTON,

APPELLANTS

v.

FEDERAL INSURANCE COMPANY,

APPELLEE

Consolidated with 15-7046, 15-7047

Appeals from the United States District Court

for the District of Columbia

(No. 1:15-cv-00277)

(No. 1:15-cv-00208)

(No. 1:14-cv-02209)

Stephen Thomas Yelverton, pro se, argued the cause and 

filed the briefs for appellant.

Jeffrey L. Tarkenton argued the cause and filed the brief 

for appellees Deborah Marm and Phyllis Edmundson.

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Natalie S. Walker argued the cause and filed the brief for 

appellees Federal Insurance Company, et al.

Before: SRINIVASAN, MILLETT and WILKINS, Circuit 

Judges.

Opinion for the Court filed by Circuit Judge SRINIVASAN.

SRINIVASAN, Circuit Judge: These consolidated appeals 

are the latest chapter in a long line of litigation over a 

bankruptcy settlement agreed to by the trustee whom the 

United States Trustee appointed to represent the bankruptcy 

estate. The debtor’s numerous, frivolous challenges to the 

settlement led the district court to enter a pre-filing injunction 

barring him from filing any new civil actions in the district 

court without court permission. These cases present a 

question about the scope of that injunction: namely, does it 

encompass appeals to the district court from bankruptcy 

court? We conclude that, as written, the injunction does not 

cover those appeals with sufficient clarity, and that the district 

court thus erred in striking these three appeals for violating

the pre-filing injunction. We nonetheless affirm the dismissal 

of two of the three appeals on the merits, and we remand for 

the district court to resolve the third one.

I.

In 2009, Stephen Yelverton filed for bankruptcy. The

bankruptcy trustee entered into an agreement with 

Yelverton’s sisters to resolve the disputed ownership of the 

family business, Yelverton Farms, Ltd. The settlement 

agreement negotiated by the trustee also settled Yelverton’s

various legal claims against his sisters, and the bankruptcy 

estate transferred its interest in the company to Yelverton’s 

sisters in exchange for $110,000. Over Yelverton’s 

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objections, the bankruptcy court approved the agreement. 

Yelverton exhausted all avenues to appeal the approval of that 

agreement, and both the district court and this court affirmed 

it. See Yelverton v. Webster (In re Yelverton), No. 14-7147, 

2015 WL 1606965, at *1 (D.C. Cir. Mar. 9, 2015).

Over the course of the bankruptcy proceedings, 

Yelverton filed “over 40 lawsuits, adversary bankruptcy 

proceedings, or appeals of the bankruptcy court’s rulings,” 

and within those lawsuits “over 150 motions, including over 

50 motions to reconsider, vacate, amend, or obtain relief from 

a judgment or order.” Yelverton v. Webster (In re Yelverton), 

526 B.R. 429, 430, 433 (D.D.C. 2014). In response to 

Yelverton’s many frivolous challenges, the district court 

entered a pre-filing injunction against him on August 6, 2014. 

The injunction barred him from filing “any new civil action in 

[that] Court” without first receiving the court’s permission. 

Id. at 435. This court upheld the pre-filing injunction. 

Yelverton, 2015 WL 1606965, at *1.

Meanwhile, Yelverton continued to file new actions in 

the bankruptcy court. First, on June 5, 2014, he filed a 

complaint against the trustee and his surety bond company for 

breach of fiduciary duty in agreeing to the settlement

(adversary proceeding number 14-10014). The bankruptcy 

court dismissed that lawsuit. Second, on June 16, 2014, 

Yelverton filed a complaint against his sisters alleging a 

violation of the Racketeer Influenced and Corrupt 

Organizations Act and of the bankruptcy stay (adversary 

proceeding number 14-10024). The bankruptcy court 

dismissed that lawsuit too. Finally, on November 26, 2014,

after entry of the pre-filing injunction, Yelverton filed an 

action against the surety bond company alleging fraud and 

breach of fiduciary duty based on the trustee’s failure to 

provide information about the company (adversary 

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proceeding number 14-10043). The bankruptcy court 

dismissed that claim as a violation of the district court’s prefiling injunction and on the merits.

Yelverton appealed the bankruptcy court’s dismissal of 

each of his three cases to the district court. He did not seek

the court’s approval under the pre-filing injunction. The 

district court dismissed those appeals as violations of the 

injunction. Yelverton now appeals.

II.

We have already held that the district court acted within 

its discretion in entering the pre-filing injunction against the 

filing of new actions by Yelverton in that court without the 

court’s permission. We now address whether the injunction 

covers an appeal to the district court of an action initially filed 

in the bankruptcy court. The district court concluded that its

injunction barred Yelverton’s appeals from the bankruptcy 

court in the cases now before us, and it accordingly dismissed 

his appeals for breach of the injunction without considering 

them on the merits. We review the district court’s 

interpretation of its injunction de novo. Int’l Ass’n of 

Machinists & Aerospace Workers, AFL-CIO v. E. Airlines, 

Inc., 849 F.2d 1481, 1485 (D.C. Cir. 1988).

The Federal Rules of Civil Procedure require that 

“[e]very order granting an injunction . . . must: (A) state the 

reasons why it issued; (B) state its terms specifically; and (C) 

describe in reasonable detail—and not by referring to the 

complaint or other document—the act or acts restrained or 

required.” Fed. R. Civ. P. 65(d)(1). When the injunction 

pertains to “such a vital constitutional right as access to the 

courts,” due process also calls for “notice and an opportunity 

to be heard.” In re Powell, 851 F.2d 427, 431 (D.C. Cir. 

1988). An injunction must “give adequate notice that 

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particular conduct was enjoined.” Abbott Labs. v. TorPharm, 

Inc., 503 F.3d 1372, 1383 (Fed. Cir. 2007). To ensure that 

“an ordinary person reading the court’s order [can] ascertain 

from the document itself exactly what conduct is proscribed,” 

we resolve “omissions or ambiguities in the order” in favor of 

the enjoined party. Charles Alan Wright et al., 11A Federal 

Practice and Procedure § 2955 (3d ed. 2013); see In re 

Baldwin-United Corp., 770 F.2d 328, 339 (2d Cir. 1985).

The injunction in this case requires Yelverton to obtain 

the district court’s permission “before filing any new civil 

action in [that] Court.” Yelverton, 526 B.R. at 435. We 

therefore must decide whether it is sufficiently clear that 

bringing a bankruptcy appeal to the district court qualifies as 

filing a “new civil action” in that court. Appellees suggest 

two interpretations of that language that would encompass 

Yelverton’s bankruptcy appeals. First, they argue that his

taking a bankruptcy appeal to the district court amounted to

the filing of a new civil case in that court. Second, they 

contend that, because the bankruptcy court is itself a unit of 

the district court, Yelverton filed a new civil action in the 

district court when he initially filed each proceeding in the 

bankruptcy court. We find that neither of those arguments 

supports concluding that the pre-filing injunction covers 

bankruptcy appeals with adequate specificity.

First, it is insufficiently clear that a bankruptcy appeal 

amounts to a “new civil action” in the district court. To be 

sure, bankruptcy appeals are treated as civil cases rather than 

criminal cases. The local rules establish a dichotomy between 

civil and criminal complaints. See Local Civ. R. 40.2; Local 

Crim. R. 57.9. When a new civil case is opened, the 

complaint is entered on the docket along with a civil cover 

sheet. And those cover sheets list bankruptcy as a 

subcategory of “[g]eneral [c]ivil” cases. Civil Cover Sheet, 

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Yelverton v. Fed. Ins. Co. (In re Yelverton), No. 1:15-cv00277 (D.D.C. Feb. 19, 2015); Civil Cover Sheet, Yelverton v. 

Marm (In re Yelverton), No. 1:15-cv-00208 (D.D.C. Feb. 11, 

2015); Civil Cover Sheet, Yelverton v. Webster (In re 

Yelverton), No. 1:14-cv-02209 (D.D.C. Dec. 24, 2014).

Although the district court’s categorization of bankruptcy 

appeals as civil (rather than criminal) cases implies that 

bankruptcy appeals may be considered “civil actions” in some 

sense, there are important distinctions between the treatment 

of bankruptcy appeals and that of civil actions filed originally 

in district court. According to the Federal Rules of Civil 

Procedure, “[a] civil action is commenced by filing a 

complaint with the court.” Fed. R. Civ. P. 3. Bankruptcy 

appeals, however, are commenced by “filing a notice of 

appeal with the bankruptcy clerk.” Fed. R. Bankr. P. 

8003(a)(1). The bankruptcy clerk transfers the filing to the 

district court clerk, who dockets the appeal without any 

further filings by the debtor in the district court. Fed. R. 

Bankr. P. 8003(d). Thus, when Yelverton appealed each of 

these cases from the bankruptcy court to the district court, he 

filed nothing in the district court. In that light, we find it 

insufficiently clear that bringing a bankruptcy appeal to the 

district court constitutes “filing a new civil action” in the 

district court within the meaning of the pre-filing injunction.

We next consider whether, even if taking an appeal from 

bankruptcy court did not amount to filing a new civil action in 

the district court, the initial filings in the bankruptcy court 

themselves were the filing of a new civil action in the district 

court. It is true, as appellees observe, that the bankruptcy 

court is an arm of the district court. See 28 U.S.C. § 151. But 

that understanding necessarily cannot carry the day for 

appellees with regard to two of the three consolidated cases 

before us (case numbers 14-10014 and 14-10024): each of 

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those proceedings was filed in the bankruptcy court before

entry of the pre-filing injunction. In the third case (number 

14-10043), however, Yelverton initially filed the adversary 

proceeding in the bankruptcy court after the injunction. As to 

that case, consequently, we must consider whether the filing 

of that action in the bankruptcy court amounted to filing a 

new civil action in the district court for purposes of the 

injunction.

We find it insufficiently clear that, by prohibiting the 

filing of new civil actions “in this Court,” the district court

also barred the filing of new actions in the bankruptcy court. 

Although bankruptcy courts are units of the district courts, see 

id., the district court’s opinion and order unsurprisingly speak

of the two courts as distinct entities, not as one and the same. 

For instance, the district court noted that the proceedings 

below “involve[d] appeals of three orders of the bankruptcy 

court.” Yelverton, 526 B.R. at 430. And in describing

Yelverton’s filings before “various courts,” the district court 

separately discussed his submissions in the “bankruptcy 

court” and in “this Court.” Id. at 433. In setting out the terms 

of the pre-filing injunction, the district court specified that the 

injunction applied to new civil actions “in this Court.” Id. at 

435. If the court wanted to prohibit filings in bankruptcy 

court, it could have (and presumably would have) said so 

explicitly.

We are sympathetic to the district court’s efforts to deal

with what it described as “Yelverton’s long history of 

vexatious and harassing filings” and resulting “abuse[] [of] 

the judicial process.” Id. We are unable to find, though, that 

the court’s pre-filing injunction encompassed with sufficient 

clarity Yelverton’s bankruptcy appeals (or his initial filings in 

the bankruptcy court) before us in these consolidated appeals. 

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III.

While the pre-filing injunction did not apply with 

adequate specificity to these bankruptcy appeals, we exercise 

our discretion to consider whether the district court’s 

dismissal of these appeals can be affirmed on the merits. 

“[W]e may affirm a judgment on any ground the record 

supports.” Jones v. Bernanke, 557 F.3d 670, 676 (D.C. Cir. 

2009). Because we review the bankruptcy court’s decisions 

on questions of law de novo, ALCOM Am. Corp. v. Arab 

Banking Corp., 48 F.3d 539, 539 (D.C. Cir. 1995) (per 

curiam), our standard of review would not vary if there were

an intervening district court decision on the merits. The 

parties have presented arguments on the merits, and we have 

sufficient information to resolve the merits of two of the three 

consolidated appeals before us. We do so in an effort to avoid 

unnecessary delay and waste of judicial resources on remand. 

See In re W.R. Grace & Co., 115 F. App’x 565, 568 (3d Cir. 

2004). We lack sufficient information to resolve the third 

case (case number 15-7047, the appeal of bankruptcy 

proceeding 14-10014), however, so we remand that case for 

the district court to decide it.

A.

In case number 15-7046 (the appeal of bankruptcy 

proceeding 14-10024), we affirm the bankruptcy court’s 

finding that Yelverton failed to state a claim against his sisters 

under the Racketeer Influenced and Corrupt Organizations 

Act (RICO) and for actions taken in violation of a stay. See 

Fed. R. Civ. P. 12(b)(6). We need not reach the bankruptcy 

court’s other grounds for dismissal. 

Under RICO, it is “unlawful for any person employed by 

or associated with any enterprise engaged in, or the activities 

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of which affect, interstate or foreign commerce, to conduct or

participate, directly or indirectly, in the conduct of such 

enterprise’s affairs through a pattern of racketeering activity.”

18 U.S.C. § 1962(c). A RICO violation involves four 

elements: “(1) conduct (2) of an enterprise (3) through a 

pattern (4) of racketeering activity.” W. Assocs. Ltd. P’ship v. 

Mkt. Square Assocs., 235 F.3d 629, 633 (D.C. Cir. 2001)

(quotation omitted). A “pattern” for RICO purposes requires 

at least two related predicate acts committed within a ten-year 

period. Id. The statute lists a number of crimes as possible 

predicate acts, including mail fraud, wire fraud, and extortion. 

18 U.S.C. § 1961(1)(B).

The bankruptcy court assessed each of Yelverton’s eight 

alleged predicate acts in detail and found that none stated a 

claim under RICO, especially under the heightened pleading 

requirements for allegations of fraud. Yelverton v. Marm (In 

re Yelverton), No. 14-10024, 2014 WL 7141938, at *10-*12

(Bankr. D.D.C. Dec. 12, 2014); see Fed. R. Civ. P. 9(b). Five 

of the alleged predicate acts involve his sisters’ supposedly 

false allegation that his shares in the farm might be owned by 

a third party to whom he had pledged his shares as collateral 

for a loan. Yelverton, 2014 WL 7141938, at *7, *11. As the 

bankruptcy court concluded, Yelverton’s sisters would not 

have committed fraud by questioning the ownership of his

shares. Id. at *11. 

The remaining three alleged predicate acts fare no better. 

Yelverton claims that one of his sisters “marr[ed]” the value 

of the family business, Yelverton Farms, by agreeing not to 

renew a lease of her land to the company. Id. at *12. But 

those facts do not demonstrate fraud: as the owner of the 

land, she had the right not to lease it. Yelverton next claims 

that his sisters made false representations about the value of 

Yelverton Farms during settlement negotiations, but he does 

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not plead these claims with the particularity required by Rule 

9(b). Id. Finally, Yelverton claims that the trustee assigned 

to his bankruptcy case extorted his ex-wife to waive her 

marital claim to the estate, but that allegation does not involve 

Yelverton’s sisters at all. Id. We therefore affirm the 

bankruptcy court’s holding that Yelverton did not sufficiently 

plead the two predicate acts necessary to make out a claim 

under RICO.

We also affirm the bankruptcy court’s dismissal of 

Yelverton’s other claim in bankruptcy proceeding 14-10024, 

involving his sisters’ alleged violation of an automatic stay 

imposed during the pendency of related litigation in North 

Carolina. As the bankruptcy court explained in detail, none of 

his sisters’ actions violated the stay. Id. at *6-10. They were 

free to engage in settlement negotiations initiated by 

Yelverton’s trustee and to defend themselves against actions 

filed by Yelverton. He therefore failed to state a claim for a 

violation of the stay. For these reasons, the bankruptcy court 

properly dismissed adversary proceeding 14-10024.

B. 

We also affirm the dismissal of the claims in case number 

15-7045 (the appeal of bankruptcy proceeding 14-10043). 

Yelverton claims that the United States Trustee’s surety, the 

Federal Insurance Company, committed several species of 

fraud: fraudulent concealment, fraudulent misrepresentation, 

and constructive fraud. He also alleges that the surety

breached a fiduciary duty by failing to disclose information. 

We affirm the dismissal of those claims because Yelverton’s 

complaint does not allege the requisite elements of any of 

them. See Fed. R. Civ. P. 12(b)(6). Again, we need not reach 

the bankruptcy court’s other grounds for dismissal.

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First, the bankruptcy court correctly dismissed the claim 

for breach of fiduciary duty. Yelverton brought his claim

only against the surety bond company, the Federal Insurance 

Company, not the United States Trustee. But the facts 

underlying his fiduciary-duty claim relate only to the United 

States Trustee. In particular, he contends that the Office of 

the United States Trustee gave him the incorrect name and 

address for the surety. Yelverton never alleges that the surety 

owed him a fiduciary duty or that the surety took any action 

that could violate such a duty. As the bankruptcy court noted 

in its opinion, Yelverton does not “establish[] a ground for 

liability on the part of the Trustee’s surety based on alleged 

misconduct of the United States Trustee.” United States ex 

rel. Yelverton v. Fed. Ins. Co. (In re Yelverton), No. 14-

10043, 2014 WL 7212967, at *3 (Dec. 17, 2014).

Second, we affirm the dismissal of the fraudulentconcealment claim. Fraudulent concealment requires proof of

three elements: “(1) that defendants engaged in a course of 

conduct designed to conceal evidence of their alleged wrongdoing and that (2) the plaintiffs were not on actual or 

constructive notice of that evidence, despite (3) their exercise 

of diligence.” Larson v. Northrop Corp., 21 F.3d 1164, 1172 

(D.C. Cir. 1994) (quotation and alteration omitted). 

Yelverton makes no allegations sufficient to satisfy the first 

element, conduct designed to conceal wrongdoing. At most, 

Yelverton’s complaint alleges that the United States Trustee 

provided erroneous information and failed to correct it. The 

complaint does not allege that the surety did anything at all, or 

even that the Trustee tried to conceal evidence of its own 

wrongdoing.

Third, we affirm the dismissal of the fraudulentmisrepresentation claim. Fraudulent misrepresentation 

requires: “(1) a false representation, (2) in reference to a 

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material fact, (3) made with knowledge of its falsity, (4) and 

with intent to deceive, (5) with action taken in reliance upon 

the representation.” Nader v. Allegheny Airlines, Inc., 626 

F.2d 1031, 1036 (D.C. Cir. 1980). Yelverton’s allegations do 

not satisfy those elements. He does not claim the surety itself 

gave him any false information. And even with respect to the 

Trustee, he does not claim the Trustee intended to deceive 

him or knew the information it gave him was false.

Finally, we affirm the dismissal of the constructive-fraud 

claim. Constructive fraud, like fraudulent concealment,

requires that the defendant make a false representation in 

reference to a material fact with knowledge of its falsity. See 

Himmelstein v. Comcast of the Dist., LLC, 908 F. Supp. 2d 

49, 59 (D.D.C. 2012). Because these requirements overlap 

with the requirements for fraudulent misrepresentation, 

Yelverton’s constructive-fraud allegations fall short for the 

same reasons as his fraudulent-misrepresentation claim. 

Because he failed to allege facts sufficient to make out any of 

his claims, the bankruptcy court properly dismissed adversary 

proceeding 14-10043.

* * * * *

In sum, the district court erred in applying the pre-filing 

injunction to Yelverton’s appeals from the bankruptcy court. 

We nonetheless affirm the dismissal of the appeals in 

adversary proceeding numbers 14-10024 and 14-10043 for 

failure to state a claim. With regard to adversary proceeding 

number 14-10014, we reverse and remand to the district court

for further proceedings consistent with this opinion.

So ordered.

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