United States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

Argued October 3, 2018

Decided November 1, 2018

Before

DANIEL A. MANION, Circuit Judge

DAVID F. HAMILTON, Circuit Judge

MICHAEL B. BRENNAN, Circuit Judge

No. 18-1896

TERRI L. ZAUSA,

Plaintiff,

v.

JACK ZAUSA,

Defendant,

v.

MICHAEL PELLIN,

Third-Party Defendant-Appellee.

Appeal of MAURICE JAMES SALEM,

Attorney for Terri L. Zausa,

Appeal from the United States District 

Court for the Northern District of 

Indiana, Hammond Division.

No. 2:17 CV 352

James T. Moody,

Judge.

NONPRECEDENTIAL DISPOSITION

To be cited only in accordance with Fed. R. App. P. 32.1
No. 18-1896 Page 2

O R D E R

Attorney Maurice James Salem believes that if he files a lawsuit in an Illinois 

federal district court, which dismisses the case for lack of federal subject-matter 

jurisdiction, he can cure the jurisdictional problem by filing the same case in a federal 

district court in a different state. Specifically, he posits that in this case, because the 

named plaintiff and a named defendant are citizens of the same state (Illinois), but an 

improperly named “third-party respondent” is domiciled in another state (Indiana), 

there is complete diversity as long as the lawsuit is not in Illinois federal court. This 

theory is not only confounding, it is frivolous.

Salem filed suit on behalf of his client Terri Zausa, against her former husband 

Jack Zausa, “to enforce a foreign [Illinois] judgment” against him in federal court.1

Although she is the plaintiff, she filed a “third party complaint” against Michael Pellin, 

a debtor of Jack’s, from whom Terri seeks payment of Jack’s debt. Terri first brought her 

claims in the Northern District of Illinois. Judge St. Eve dismissed the case for want of 

subject-matter jurisdiction because the plaintiff (Terri) and a defendant (Jack) are both, 

admittedly, citizens of Illinois. Salem responded by filing the same lawsuit in the U.S. 

District Court for the Northern District of Indiana. Judge Moody of that court ultimately 

sanctioned him under Federal Rule of Civil Procedure 11 because moving the venue of 

the lawsuit did nothing to alter the citizenship of the parties. Salem appeals the entry of 

sanctions. Because the district court did not abuse its discretion, we affirm in all 

respects.

I. Background

Terri Zausa obtained a multi-million-dollar judgment against Jack in Illinois state 

court before this became a federal case. Jack has not been able to pay. Jack’s former 

business partner, Michael Pellin, allegedly owes him roughly $1.8 million for Jack’s 

share of their business, which Pellin purchased in 1990. In recent years, Pellin has not 

met the schedule of payments he owes Jack. Although Jack and Pellin executed a release 

from the purchase agreement in 2004, Terri says that there was no consideration given 

 

1 There are any number of problems, apart from jurisdiction, with the way 

Terri has gone about trying to enforce the judgment against Jack, but the underlying 

enforcement efforts are beyond the scope of this Order.
No. 18-1896 Page 3

for the release, which was solely “for tax purpose[s].” And Pellin purportedly 

continued to make payments to Jack until 2010. Terri now attempts to collect directly 

from Pellin to satisfy Jack’s debt to her. 

Terri’s first crack at collecting from Pellin began when attorney Salem 

represented her in filing an enforcement action in the Northern District of Illinois. Judge 

St. Eve dismissed Terri’s claims against Pellin with prejudice for lack of standing 

because Terri was not a party to Jack and Pellin’s agreements. Since Terri, the original 

creditor, and Jack, the original debtor, were not completely diverse, Judge St. Eve 

dismissed the case without prejudice for lack of subject-matter jurisdiction.

Salem then brought another lawsuit against Jack on Terri’s behalf, this time in 

the Northern District of Indiana. The complaint also named Pellin as “Third-Party 

Respondent.” Contrary to Judge St. Eve’s conclusion, Salem stated that federal 

jurisdiction existed “by reason of complete diversity of citizenship” because Terri and 

Jack Zausa are Illinois residents and Pellin is an Indiana resident.

Pellin moved to dismiss the complaint for lack of subject-matter jurisdiction. He 

pointed to the previous litigation in front of Judge St. Eve and her explanation that 

complete diversity did not exist because, although Terri was attempting to discover 

Indiana-citizen Pellin’s assets, her ex-husband (an Illinois citizen) was the judgment 

debtor.

The jurisdictional theory Salem presented to Judge Moody was:

[I]n Indiana, there is complete diversity jurisdiction because neither 

Defendant Jack Zausa, nor Plaintiff Terri Zausa are domiciled in Indiana. In 

other words, Pellin, the only citizen of Indiana is the party of interest that 

does not share the state of Indiana with any other party. Compared to 

Illinois where Defendant Jack Zausa, another party of interest, shares the 

state with Plaintiff. However, the issue is not whether there is complete 

diversity jurisdiction in Illinois, because we are not in Illinois, the issue is 

whether there is complete diversity jurisdiction in Indiana.

(Emphasis in original). Unpersuaded, Judge Moody granted Pellin’s motion to dismiss,

citing Terri’s (Salem’s) attempt to establish federal jurisdiction “with a skewed logic that 
No. 18-1896 Page 4

is nearly impossible to follow.” He also noted that Terri, as plaintiff, could not sue 

Pellin as a “Third-Party Respondent.” Because Judge St. Eve had already explained the 

substantial defects in Terri’s lawsuit, and Salem then maintained the absurd approach 

to jurisdiction, Judge Moody ordered Salem to show cause why he should not be 

sanctioned under Federal Rule of Civil Procedure 11(b)(1) or (2). He also cautioned the 

plaintiff to refrain from asserting any more baseless jurisdictional theories.

In response to the show-cause order, Salem reiterated his incorrect 

understanding of diversity jurisdiction. He argued “as long as the parties with interest 

are not in the same state, then complete diversity jurisdiction exists.” Judge Moody 

concluded that there was no credible explanation for Salem’s conduct and granted all 

parties leave to move for attorney’s fees. Salem moved for reconsideration and asserted 

yet again that diversity jurisdiction existed. This time he attempted to explain in greater 

detail that moving the case to federal court in Indiana had solved the jurisdictional 

problem.

After the motion for reconsideration was denied, Pellin petitioned for 

reimbursement of the attorney fees that he had incurred. Salem opposed the motion by 

maintaining—for the fourth time—that diversity jurisdiction existed. He also asked 

Judge Moody to defer the issue of sanctions to the Northern District of Illinois, where he 

had filed a third lawsuit against Pellin that apparently was moving forward.

Judge Moody rejected Salem’s arguments, and in bold-face type declared one

final time: “[C]omplete diversity means that no plaintiff may be from the same state as 

any defendant.” The judge ordered Salem to pay all of Pellin’s attorney’s fees. Judge 

Moody reasoned that sanctions were proper under either Rule 11(b)(1) or (2). He found 

that Salem filed the complaint with either “an unreasonable lack of legal basis” or “an 

intent to harass” Pellin and increase his litigation costs. Judge Moody also declined to 

defer the issue of sanctions to the Northern District of Illinois because that court would 

have no jurisdiction to rule on sanctionable conduct occurring in this case. Salem filed a 

motion for reconsideration, insisting Terri was not really suing “defendant” Jack, so it 

did not matter that the two of them were domiciled in the same state. Judge Moody 

denied the motion because it presented nothing new, and he renounced any further 

efforts “on this frivolous matter.”
No. 18-1896 Page 5

Salem now appeals the district court’s order awarding attorney fees against him 

and the order denying his second motion for reconsideration.

II. Analysis

Salem requests we vacate Judge Moody’s orders imposing sanctions and denying 

reconsideration, as well as the dismissal of the complaint for lack of subject-matter 

jurisdiction. But Salem did not list the latter order in his notice of appeal and did not 

timely appeal it, so we have no power to review it. See Bowles v. Russell, 551 U.S. 205, 

214 (2007). Thus, we need only determine whether Judge Moody abused his discretion 

in imposing sanctions and denying the motion for reconsideration. See Cooter & Gell v. 

Hartmarx Corp., 496 U.S. 384, 403 (1990); Lightspeed Media Corp. v. Smith, 830 F.3d 500, 

505 (7th Cir. 2016).

Salem contends the district court erred in sanctioning him because he correctly 

based federal jurisdiction on diversity of citizenship. He says the district court should 

have considered only Pellin’s Indiana citizenship in determining whether diversity 

existed because Defendant Jack Zausa is a “non-essential party.” Alternatively, Salem 

argues the district court should have realigned the parties to preserve jurisdiction since 

both Terri and Jack Zausa want “to get money from Pellin.”2 Pellin counters that Salem 

did not raise either point in the district court, which would mean he waived these 

arguments. See Coleman v. Hardy, 690 F.3d 811, 818–19 (7th Cir. 2012).

Salem’s contentions are better viewed as restatements of his consistently 

confused theory of diversity jurisdiction, rather than “new” arguments. And, waiver 

aside, Salem’s arguments are frivolous and sanctionable, just as Judge Moody 

concluded. No matter how Salem phrases it, his core assertion is that federal subjectmatter jurisdiction over a given case exists or does not depending on the state in which 

the federal court sits. He habitually misunderstands the tenets of diversity jurisdiction

 

2 This ignores Judge St. Eve’s point, in dismissing Terri’s breach of contract 

claim, that Terri has no standing to sue Pellin because he is not indebted to her.
No. 18-1896 Page 6

and confuses jurisdiction with venue.3 He was so told, by both Judge St. Eve and Judge 

Moody, yet in this appeal he persisted with this faulty assertion. 

This persistence in asserting frivolous arguments warrants sanctions against an 

attorney. A district court may sanction a lawyer who submits frivolous legal arguments 

not warranted “by existing law or by a nonfrivolous argument for extending, 

modifying, or reversing existing law or for establishing new law.” FED. R. CIV. P. 

11(b)(2); see Berwick Grain Co., Inc. v. Ill. Dep’t of Agric., 217 F.3d 502, 504 (7th Cir. 2000). 

A “frivolous” argument is one that is baseless or made without a reasonable inquiry 

into the facts and law. Berwick Grain Co., Inc., 217 F.3d at 504. A district judge may also 

sanction a lawyer or party who presents a pleading to the court “for any improper 

purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of 

litigation.” FED. R. CIV. P. 11(b)(1). Consistently asserting a theory—as attorney Salem 

did here—directly contrary to federal statute (28 U.S.C. § 1332) as interpreted by all 

federal case law is frivolous.

Salem’s other arguments also lack merit. Although Terri and Jack share an 

interest in tapping Pellin for the money, it does not follow that the court must realign 

them as parties on the same side to create complete diversity. See Am. Motorists Ins. Co. 

v. Trane Co., 657 F.2d 146, 150–51 (7th Cir. 1981). Jack owes Terri money, so they are 

therefore “in open conflict” with respect to her attempts to collect. See id.; Kruger v. 

Cartwright, 996 F.2d 928, 931, 932 n.5 (7th Cir. 1993). Salem’s continued obstinance about 

how the parties’ interests relate is either a failure to see or a refusal to accept reality. See 

Serritella v. Markum, 119 F.3d 506, 512–13 (7th Cir. 1997).

Salem also argues that, even if the district court lacked diversity jurisdiction, 

upholding sanctions against him would chill litigation of novel issues. He hypothesizes 

this “may be a case of first impression,” and raises policy concerns about frustrating 

creative advocacy and inefficiently sparking satellite litigation over sanctions. This is 

not a case of first impression. The Supreme Court and every federal circuit and federal 

district court have repeatedly explained: “A case falls within the federal district court's 

‘original’ diversity ‘jurisdiction’ only if diversity of citizenship among the parties is 

 

3 In his reply brief, he states, “Judge St. Eve directed Appellant to go to the 

proper jurisdiction, which Appellant believed to be Indiana.” (Emphasis added.) 
No. 18-1896 Page 7

complete, i.e., only if there is no plaintiff and no defendant who are citizens of the same 

State.” E.g., Wisc. Dep’t of Corr. v. Schacht, 524 U.S. 381, 388 (1998) (italics in original). 

Salem did not encounter a unique set of circumstances, nor has he proposed a novel 

legal theory; he brought a wrong-headed enforcement action replete with standing and 

subject-matter jurisdiction defects.

Finally, Salem argues that Judge Moody erred by declining Salem’s request to 

“defer the issue of sanction[s] to the U.S. District Court in Illinois where there is another 

action commenced against Pellin.” Salem does not develop this third point, nor does he 

cite any on-point legal authority supporting his contention. The argument is 

underdeveloped and conclusory, see Puffer v. Allstate Ins. Co., 675 F.3d 709, 718 (7th Cir. 

2012), but in any case, it is also frivolous. The third lawsuit to which Salem refers was 

filed on behalf of Jack as plaintiff and against Pellin as defendant, to directly collect 

Pellin’s debt to Jack. Accordingly, it seems that the parties are completely diverse, and 

Jack has standing to collect his own debts. Salem, therefore, is wrong to infer that the 

possible sustainability of that lawsuit validates the jurisdictional theory behind Terri’s

two previous cases, just because they all relate to the same debts.

Salem also contests the denial of his motion to reconsider the order that he pay 

Pellin’s attorney’s fees. As the discussion above demonstrates, the district court was 

well within its discretion to sanction Salem for repeatedly presenting frivolous 

jurisdictional arguments. It had even greater discretion not to reconsider that ruling, 

especially in light of Salem’s inability to coherently argue that the court erred. See Cent. 

States, Se. & Sw. Areas Pension Fund v. Hunt Truck Lines, Inc., 204 F.3d 736, 743 (7th Cir. 

2000) (“Since the judge was not wrong on the merits, he had nothing to correct.”).

Now that this court and two federal district courts have explained to Salem the 

fundamental flaws in his jurisdictional theories, we presume Salem has been educated 

on the matter and will not make the same error again.

AFFIRMED