Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-14-01907/USCOURTS-ca7-14-01907-0/pdf.json

Parties Involved:
Maurice J. Salem
Appellant
Trade Well International
Appellant
United Central Bank
Appellee

Document Text:

In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 14-1907

TRADE WELL INTERNATIONAL,

Plaintiff,

v.

UNITED CENTRAL BANK,

Defendant-Appellee.

APPEAL OF MAURICE J. SALEM,

Appellant.

____________________

Appeal from the United States District Court for the

Western District of Wisconsin.

No. 12-cv-701-wmc — William M. Conley, Chief Judge.

____________________

ARGUED NOVEMBER 19, 2014 — DECIDED FEBRUARY 10, 2015

____________________

Before WOOD, Chief Judge, and KANNE and TINDER, Circuit 

Judges.

WOOD, Chief Judge. Maurice Salem, a member of the New 

York Bar, was admitted pro hac vice in the U.S. District Court 

for the Western District of Wisconsin in connection with 

some commercial litigation. Salem represents Trade Well 

Case: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
2 No. 14-1907

International, a Pakistani company, which was suing United 

Central Bank (the Bank) for damages and the return of 

property that was left behind in a hotel that the Bank owned. 

Problems arose when Salem filed a Notice of Lien on behalf 

of his client; the Notice stated that there was a lien on the 

hotel and purported to provide notice of the litigation. The 

district court, concluding that the Notice was defective in 

several ways, held Salem in contempt of court, revoked his 

pro hac vice status, barred him from practicing in the Western 

District of Wisconsin for three years, and imposed a $500 

fine. Salem, representing himself, has appealed. The Bank 

argues that we have no jurisdiction to entertain his appeal, 

but we conclude otherwise. On the merits, we find that the 

court’s orders must be set aside: nothing Salem did 

warranted a finding of contempt, nor these sanctions.

I

Because we are reversing the district court in spite of the 

substantial discretion the court possesses in this kind of matter, we think it useful to include a full explanation of the underlying facts. Trade Well is a company that provides furnishings for hotels. In February 2010, it entered into a lease 

with Dells Estate LLC, a Wisconsin company that owned a 

hotel called the Dells Island Resort (the Hotel). The lease 

agreement states that Trade Well was to provide certain 

goods and movable items to the Hotel for four years, for a 

fee of $250,000 per year. An inventory of the items to be provided lists furnishings, various linens (mattresses, curtains, 

sheets, towels, bath mats, and table cloths), fixtures (chandeliers, wall-mounted lamps, Jacuzzis, an LED light, signs), a 

reservation system, and remodeling services for several 

rooms. The agreement specified that it is “binding upon” the 

Case: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
No. 14-1907 3

parties’ successors and that at the termination or expiration 

of the lease, “any or all goods/movable properties ... shall 

constitute the property of and be handed over to” Trade 

Well. 

Dells Estate had financed its purchase of the Hotel with a 

mortgage from United Central Bank, a Texas corporation. It 

defaulted on the mortgage in 2010, shortly after Trade Well 

had provided the items called for by the lease. The Bank 

eventually obtained a foreclosure judgment and purchased 

the Hotel at a sheriff’s sale in 2012. At that time, all of the 

leased items were still inside the Hotel. Because the Bank did 

not want to hold the Hotel indefinitely, it promptly started 

looking for a buyer. Trade Well demanded the return of the 

leased property, but the Bank refused. 

When its demands were spurned, Trade Well sued the 

Bank for replevin in federal court (invoking the diversity jurisdiction, 28 U.S.C. § 1332). As a preliminary matter, it 

moved for an order compelling the Bank to permit inspection of the leased items for purposes of taking an inventory 

and ensuring proper storage. The district court granted that 

motion. The inspection revealed that many of the items were 

missing, some were damaged, and some were moldy.

In October 2013 (approximately a year after the suit was 

filed), Trade Well moved to stay the Bank’s sale of the Hotel. 

Salem, its attorney, informed the court that he recently had 

learned from a potential buyer, Edward Krause, that the 

Bank was trying to sell the Hotel along with the leased items. 

Trade Well argued that a stay was warranted, because a sale 

to a third party would transfer possession of the leased items 

and would complicate matters.

Case: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
4 No. 14-1907

The Bank opposed the motion and asked instead that the 

court order Trade Well to take possession of the latter’s 

property. Critically, however, the Bank’s motion was expressly limited to “personal property”; the Bank maintained that 

it owned the hotel’s fixtures, including some installed Jacuzzis. It argued in the alternative that Trade Well should pay it 

for storing the personal property until it was removed and 

post a bond for the estimated storage costs. The Bank did 

not, however, file a counterclaim.

Trade Well responded that its motion was intended only 

to “stop the transfer of possession of the damaged equipment” (emphasis added), because a transfer would make it 

“very difficult, or impossible to determine who caused the 

damage.” Trade Well also charged that the Bank had converted some of the leased items into fixtures (though it did 

not specify which ones it meant). Once again, Salem filed a 

supporting declaration, in which he stated that Trade Well 

sought only to take immediate possession of undamaged 

goods, while leaving the damaged items and fixtures in 

place pending resolution of the suit. While these motions 

were pending, Trade Well amended its complaint to add 

claims of negligence and conversion. It repeated its assertions that the Bank had damaged Trade Well’s property 

through improper storage and had converted some of it. 

At that point, the district court ruled on the pending motions. It stayed the sale of the hotel for 30 days so that Trade 

Well could remove everything listed in the inventory attached to its complaint, with the exception of the Jacuzzis 

and materials related to the remodeling. The order continued, “All items on [the inventory] other than the Jacuzzis 

and remodeling that have not been removed within 30 days 

Case: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
No. 14-1907 5

shall be deemed abandoned by Trade Well absent an extension of this deadline by the court upon good cause shown.”

About two weeks later, Trade Well asked the court to extend the deadline for moving the items and to compel the 

Bank to pay for the moving and storage of damaged items. 

Salem supported the latter part of the motion with a declaration and copies of emails showing that he had contacted 

three moving companies, none of which would take the job 

because some items were moldy. In an order issued in January 2014, the court extended the moving deadline by 21 

days, but it denied the request to compel the Bank to pay for 

moving and storage. This order clarified that Trade Well was 

not required to pick up its personal property; it could also 

opt to abandon the property and then claim damages with 

respect to the abandoned property, subject to the Bank’s defense of failure to mitigate. Trade Well chose the second option and left all of the personal property in the hotel.

This is where matters stood at the time the issues involved in this appeal arose. We take the facts from a declaration that Salem filed in March 2014 in response to an inquiry 

from the district court, as we do not understand anything 

material to be contested. On March 12, Salem went to the 

Register of Deeds in Sauk County, Wisconsin, intending to 

file a “Lis Pendence/Lien” on the hotel. The Register of 

Deeds is an elected county official; Wisconsin law provides 

that any plaintiff who brings “an action where relief is demanded affecting ... real property which relief might confirm or change interests in the real property” must file a lis 

pendens “in the office of the register of deeds of each county 

where any part [of the real property] is situated.” WIS. STAT. 

§ 840.10(1)(a). Fixtures are classified as real property by WisCase: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
6 No. 14-1907

consin law. See Wis. Dep’t of Revenue v. A. O. Smith Harvestore 

Prods., Inc., 240 N.W.2d 357, 360–62 (Wis. 1976); Premonstratensian Fathers v. Badgers Mut. Ins. Co., 175 N.W.2d 237, 239 

n.1 (Wis. 1970). When a lis pendens is filed, “a subsequent 

purchaser or encumbrancer [is] bound by the proceedings in 

the action to the same extent and in the same manner as if a 

party thereto.” Belleville State Bank v. Steele, 345 N.W.2d 405, 

407 (Wis. 1984) (citing WIS. STAT. § 840.10(1)). The statute 

specifies that it applies to actions filed in all courts in Wisconsin, “including United States district courts.” WIS. STAT.

§ 840.10(4). 

The Register of Deeds, Brent Bailey, at first refused to accept Salem’s filing, telling him that he needed a Wisconsin 

attorney to file the document. That advice was not accurate. 

In fact, the statute says only that a lis pendens that is prepared 

by a member of the State Bar of Wisconsin need not be authenticated. Id. § 840.10(1)(b). It does not prohibit filings 

submitted by others. They need only authenticate the document; this can be done by “[a]ny public officer entitled by 

virtue of his or her office to administer oaths, and any member in good standing of the State Bar of Wisconsin.” Id.

§ 706.06(2). At the time, however, no one spotted the error. 

Salem responded instead by accurately informing Bailey that 

the district court had admitted him pro hac vice. With that information in hand, Bailey said that Salem could file the document himself so long as he had “a number from the Court 

identifying him.” Not sure what number to use, Salem called 

the clerk of the district court, who told him that the only 

identifier for an attorney admitted pro hac vice is the date of 

admission and the attorney’s name. Salem furnished that information to Bailey, who then accepted the paper.

Case: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
No. 14-1907 7

The actual document Salem prepared, and Bailey filed, is 

entitled “Notice of Lien.” It refers to the Wisconsin statute 

governing construction liens. See id. §§ 779.01, 779.06. The 

content of Salem’s notice, however, more closely resembles a 

lis pendens under § 840.10 than a lien under § 779.06. As required by § 840.10(1)(a), Salem’s Notice identifies the parties 

to the litigation, explains the purpose of the action (to recover “two million dollars in damages”), and describes the real 

estate affected. The stated purpose of his Notice—“to give 

notice to subsequent purchasers of this property, that the 

owner’s right to sell the property to you may be limited by 

the pending action”—also suggests that in substance the Notice was a lis pendens. The Wisconsin Supreme Court has held 

that “the sole purpose of a lis pendens is to give constructive 

notice to third parties of pending judicial proceedings involving real estate.” Kensington Dev. Corp. v. Israel, 419 

N.W.2d 241, 245 (Wis. 1988). That device does not create or 

serve as a lien on real property. It is also notable that a construction lien must be filed with the clerk of the circuit court, 

not with the Register of Deeds. WIS. STAT. § 779.06(1). 

The Bank’s lawyer asked Salem to withdraw the Notice, 

but Salem refused. The Bank then asked the district court to 

strike the Notice, revoke Salem’s pro hac vice admission, and 

assess costs and attorney’s fees jointly against Trade Well 

and Salem for any amounts relating to the Notice. The Bank 

argued that it was about to close on its sale of the Hotel and 

asserted, without citing any legal authority, that the relief it 

requested was proper because “the Closing cannot occur 

without removal of the Notice of Lien from the Real Estate.” 

The Notice was invalid, the Bank said, because it was either 

an improper claim for a construction lien, or it was a lis penCase: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
8 No. 14-1907

dens that was ineffective because it had neither been prepared by a member of the Wisconsin Bar nor authenticated.

The district court took up the Bank’s motion in a telephone conference, during which it ordered Salem to file a 

response to the Bank’s motion and to show cause why he 

“should not be held in contempt for filing the Notice without 

any arguable right to do so.” In response, Salem filed the 

declaration we have been discussing. He explained that he 

had recorded the document in order to protect Trade Well’s 

interests after he had learned that the Bank was on the brink 

of being taken over by the Federal Deposit Insurance Corporation and was about to sell the Hotel at a below-market 

price through an insider deal. He also maintained (consistently with his position that this was a lis pendens) that there 

was no basis for the Bank’s contention that the Notice prevented it from selling the Hotel to a willing buyer.

The district court was unmoved by Salem’s explanation 

and held him in contempt of court. It concluded that Trade 

Well had no good-faith basis to seek a construction lien because it had offered no evidence that it furnished materials 

or labor for improvements to the Hotel within six months of 

filing the Notice, as required by Wisconsin Statutes

§ 779.06(1). Even if the Notice were construed as a lis pendens, the court continued, the filing was unjustified because 

the action involved “personal, rather than real, property.” 

The judge was also offended by Salem’s invocation of his pro 

hac vice status in connection with his filing of the Notice, 

deeming it an “outrageous” abuse. Invoking its inherent authority, the court revoked Salem’s pro hac vice status, referred 

him to the State Bars of Wisconsin and New York for disciplinary action, and fined him $500. Although the Bank had 

Case: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
No. 14-1907 9

not said anything about a counterclaim, the court granted 

“leave to file a counterclaim seeking a temporary restraining 

order, preliminary injunction, permanent injunction and 

damages related to the filing of the ‘lien.’” Last, the court ordered Trade Well to retain new counsel within ten days and 

either to withdraw the Notice within seven days or “file a 

bond in the full amount of the sale price of the hotel.” 

Salem responded with a motion for reconsideration, in 

which he argued that he could not be held in contempt because he had not violated a court order. He also moved to 

file an appearance, explaining that he had become a “duly 

admitted attorney” in the court after the revocation of his pro 

hac vice status (he did not say how). The court denied the 

motion to reconsider, but in so doing it hedged on the nature 

of the $500 fine, which it now described as imposed pursuant to its inherent powers for conduct “far below” the standards it expected from attorneys appearing before it. The 

court did not withdraw the finding of contempt, or any of 

the sanctions that accompanied it. Instead, it clarified that 

the $500 was payable directly to the Bank. It then imposed 

additional sanctions against Salem, barring him from obtaining pro hac vice status in the district court for the next three 

years. The judge added that, to the extent that the fine needed to be based on a violation of a court order, he could identify two such violations: (1) Salem’s failure to justify his filing 

of the Notice, and (2) his continuing to represent Trade Well 

in the litigation by filing two motions on the company’s behalf and seeking full admission to the bar of the Western District of Wisconsin “by manipulating an unsuspecting deputy 

clerk.” 

Case: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
10 No. 14-1907

Salem filed a notice of appeal within 30 days of these orders. Three months later, the Bank filed a counterclaim 

against Trade Well for slander of title; it sought damages, 

costs, attorney’s fees, and a declaratory judgment that the 

Notice Salem had filed was void. Trade Well never hired 

new counsel, and so the Bank moved for default under Federal Rule of Civil Procedure 55(a). In response, Salem filed 

two briefs as an “interested party.” In them, he explained 

that he is Trade Well’s only authorized agent in the United 

States, and that the company had been trying to find new 

counsel. The judge struck Salem’s briefs and fined him another $500, again payable to the Bank. Ultimately, the court 

held a hearing to determine the amount of damages and entered a default judgment for the Bank in the amount of 

$30,304.67. Final judgment in the case was entered on October 24, 2014. 

II

The only part of this messy case that is before us is Salem’s appeal from the various measures the court took 

against him. He contends that they must be set aside, for the 

reason that the court had neither a legal nor a factual basis 

for its actions. The Bank argues that we lack appellate jurisdiction, because the contempt orders were not final and appealable at the time Salem filed his notice of appeal. We can 

dispose of the jurisdictional argument quickly. An adjudication of contempt is immediately appealable by a nonparty 

such as Salem. United States v. Dowell, 257 F.3d 694, 698 (7th 

Cir. 2001); United States v. Myers, 593 F.3d 338, 344 & n.9 (4th 

Cir. 2010). Furthermore, since the case is now over, our jurisdiction is also secure because a premature notice of appeal 

takes effect when the final judgment is entered. FED. R. APP.

Case: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
No. 14-1907 11

P. 4(a)(2). The only part of Salem’s case not before us is the 

propriety of the second $500 sanction imposed against him, 

because he did not amend his notice of appeal to include 

that. We are also not concerned with any possible appeal by 

Trade Well contesting the default judgment or the finding of 

a failure to prosecute.

On the merits, we begin by observing that it is unclear 

whether the district court meant to hold Salem in criminal 

contempt or civil contempt. See Mañez v. Bridgestone Firestone 

N. Am. Tire, LLC, 533 F.3d 578, 589 (7th Cir. 2008) (describing 

different ways to characterize a fine imposed by a district 

judge). Salem splits it down the middle: he suggests that the 

$500 fine was under the civil contempt authority, but that the 

revocation of his pro hac vice status and the three-year bar on 

readmission are criminal contempt sanctions. He relies on 

the Supreme Court’s decision in International Union, United 

Mine Workers of America v. Bagwell, 512 U.S. 821 (1994), in 

which the Court explained that “a contempt sanction is 

considered civil if it is remedial, and for the benefit of the 

complainant,” but criminal if it is punitive. Id. at 827–28

(internal quotation mark omitted). The sanctions relating to 

Salem’s admission to practice do seem punitive, rather than 

coercive or compensatory. It is hard to pin down the $500 

fine. Although it was initially imposed as part of the 

contempt order, the judge’s statements in connection with 

the motion for reconsideration might imply that the fine was 

a penalty for misconduct that did not qualify as contempt. 

For our purposes, the ultimate characterization does not 

matter, because the sanctions cannot stand no matter how 

they are classified. Salem was punished for out-of-court 

conduct, and so any alleged contempt was indirect. See BagCase: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
12 No. 14-1907

well, 512 U.S. at 827 n.2. If the court meant to invoke criminal 

contempt, the sanctions are improper because the judge neither gave Salem notice that he was being charged with criminal contempt, nor asked the government to prosecute the 

contempt. See 18 U.S.C. § 401; FED. R. CRIM. P. 42(a); see also 

United States v. Britton, 731 F.3d 745, 749–50 (7th Cir. 2013). 

The order is no better, understood as a civil contempt 

measure. Before holding a person in civil contempt, a district 

court “must be able to point to a decree from the court which 

sets forth in specific detail an unequivocal command which 

the party in contempt violated.” Mañez, 533 F.3d at 591

(quoting Grove Fresh Distribs., Inc. v. John Labatt, Ltd., 299 F.3d 

635, 642 (7th Cir. 2002)) (internal quotation marks omitted); 

see also Hornbeck Offshore Servs., L.L.C. v. Salazar, 713 F.3d 

787, 792 (5th Cir. 2013); John T. ex rel. Paul T. v. Del. Cnty. Intermediate Unit, 318 F.3d 545, 552 (3d Cir. 2003). The problem 

is not that the district judge failed to point to the particular 

order or orders that Salem violated when he filed the Notice; 

it is that no such order exists. 

The Bank suggests that the district court did not hold Salem in contempt, but rather imposed sanctions under its inherent power to correct abuse of proceedings. The Supreme 

Court, however, has cautioned that the use of inherent powers should be “exercised with restraint and discretion.”

Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1991); see also Law 

v. Siegel, 134 S. Ct. 1188, 1194 (2014) (“Courts’ inherent sanctioning powers are ... subordinate to valid statutory directives and prohibitions.”). At a minimum, the court must be 

sure of both the factual and legal basis on which it is acting. 

Here, the record reveals misunderstandings on both fronts. 

The judge sanctioned Salem “for filing the Notice without 

Case: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
No. 14-1907 13

any arguable right to do so.” That conclusion rested principally on the proposition that Trade Well had claimed an entitlement only to personal property, not to real property. But 

Trade Well’s claim was not so limited. Its original complaint, 

supplemented by the attached inventory, covered both fixtures and personal property. Fixtures, as we already have 

noted, are considered to be real property under Wisconsin 

law. And even if the character of the leased items Trade Well 

was trying to protect was not obvious at the outset, all ambiguities were cleared up after it claimed an entitlement to fixtures in its amended complaint. The district court recognized 

as much in its earlier order setting a deadline for Trade Well 

to remove its personal property; that order specified that, 

unlike the personal property, the Jacuzzis and “remodeling” 

were to remain in the Hotel. 

Moreover, even though the judge correctly noted that 

Trade Well could not file a claim for a construction lien because it would be untimely, see WIS. STAT. § 779.06(1), he 

went too far when he opined that “no construction is involved in this case.” To the contrary, the record indicates that 

Trade Well had done some remodeling in the Hotel. A construction lien may be obtained by any person who “furnishes ... materials ... used or consumed for the improvement of 

land.” Id. § 779.01(3). The term “materials” includes, among 

other things, “construction materials” and “fixtures.” Id.

§ 779.01(2)(bm). The court did not explain why none of the 

items Trade Well had provided fit that definition.

The court’s central mistake, however, was its conclusion 

that Trade Well had no basis for filing a lis pendens. That is 

what the Notice most closely resembled, and because the 

underlying litigation between Trade Well and the Bank inCase: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
14 No. 14-1907

volved real property (in the form of fixtures), Trade Well was 

compelled by statute to file its notice in the office of the Register of Deeds. Id. § 840.10(1)(a). The references in Salem’s 

Notice to the statute on construction liens and its use of the 

word “lien” are, at best, evidence of a mistake or maybe 

carelessness on Salem’s part. Negligence, however, is not 

enough to support a finding of bad faith. See Grochocinski v. 

Mayer Brown Rowe & Maw, LLP, 719 F.3d 785, 799 (7th Cir. 

2013); Maynard v. Nygren, 332 F.3d 462, 471 (7th Cir. 2003). 

And sanctions under the court’s inherent power should not 

be imposed unless there is bad-faith conduct or willful disobedience of an order. Grochocinski, 719 F.3d at 799. Neither is 

present here. 

Both the judge and the Bank realized that Salem’s Notice 

was most likely a poorly drafted or hasty lis pendens. That is 

why the judge asserted that Salem had “abused ... his pro hac 

vice privileges” by filing the Notice as a non-member of the 

Wisconsin Bar and without proper authentication. Once 

again, however, this record does not support a finding of the 

necessary bad faith to support sanctions. It is not even clear 

to us that the court’s understanding of Wisconsin law was 

correct. Salem was candid with the Register of Deeds of Sauk 

County, and the Register was the elected official responsible 

for these filings. Neither the court nor the Bank has cited any 

authority, nor can we find any, supporting the proposition 

that the Register lacked the discretion to accept Salem’s Notice, along with the identifying information Salem furnished. 

(Salem represents that he also volunteered to find a local 

lawyer, if that was necessary, but he was told that he did not 

need to do so.) In addressing Salem’s motion for reconsideration, the court stated that Salem had “disingenuously” attempted to blame his problems on the Sauk County Register, 

Case: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15
No. 14-1907 15

but it did not explain why Salem’s account was disingenuous. No one has ever accused Salem of lying about what 

took place. It is possible that the Register did not understand 

his own authority, but it is hard to see how that translates 

into misconduct by Salem. Nothing indicates that Salem’s 

reliance on the Register’s advice was in bad faith.

Finally, the court’s stated reason for the first $500 fine 

strikes us as inadequate to justify that measure. As we have 

explained, Salem’s filing of the Notice was justified, and so 

the fine cannot be based on the notion that it was not. Alternatively, the court tried to justify the fine on the basis of the 

papers Salem lodged with the court after his pro hac vice status was revoked. But those actions could not justify the fine, 

because it was imposed while Salem was still permitted to 

appear in the case and before he filed those later motions. 

III

Salem probably made mistakes in this case that a member of the Wisconsin Bar would have avoided, but his conduct did not justify the measures that the district court took 

against him. We therefore VACATE the orders before us holding Salem in contempt and imposing sanctions.

Case: 14-1907 Document: 47 Filed: 02/10/2015 Pages: 15