In the

United States Court of Appeals

For the Seventh Circuit

____________

Nos. 06-1955 & 06-2357

LABORERS’ PENSION FUND, et al.,

Plaintiffs-Appellees,

v.

PAVEMENT MAINTENANCE, INC., and

JOSEPH T. HAUGHEY,

Defendants-Judgment Debtors,

MAT LEASING, INC.,

Respondent-Appellant,

MB FINANCIAL BANK,

Adverse Claimant-Appellee.

____________

Appeals from the United States District Court 

for the Northern District of Illinois, Eastern Division.

No. 02 C 5603—James B. Zagel, Judge.

____________

ARGUED DECEMBER 4, 2007—DECIDED AUGUST 29, 2008

____________

Before RIPPLE, MANION, and WOOD, Circuit Judges.

WOOD, Circuit Judge. MAT Leasing, Inc., challenges an

order entered by the district court during post-judgment
2 Nos. 06-1955 & 06-2357

collection proceedings. Those proceedings stemmed from

a money judgment against Pavement Maintenance, Inc.

(“PMI”), on PMI’s default, in favor of the three plaintiffs

in the litigation: Laborers’ Pension Fund, Laborers’

Welfare Fund, and James S. Jorgenson, the Funds’ Administrator. We refer to the plaintiffs as “the Funds”; collectively, they make up the first set of appellees before us. The

other appellee, MB Financial Bank, entered the postjudgment proceedings in the district court as an adverse

claimant. MB Financial has a perfected security interest

in PMI’s assets; its interest has priority over the Funds’

interest in those assets.

But the appellees are not (at least now) pursuing PMI,

which is not even a party to this appeal. Instead, they

would like to collect from MAT Leasing, a third-party

respondent in the district court and the appellant here.

According to the Funds and MB Financial, MAT Leasing

was indebted to PMI at the time judgment was entered

against PMI. Following traditional principles of garnishment, the creditors to whom PMI owes money are attempting to collect that debt from MAT Leasing.

On March 8, 2006, the district court entered an order

finding that MAT Leasing did owe money to PMI and,

after incorporating a few offsets, it calculated the amount

of debt at $242,647.75. On April 20, 2006, the court ordered

MAT Leasing to turn overthat amount to MB Financial, the

adverse claimant and priority creditor. MAT Leasing has

appealed judgments in favor of the Funds and of MB

Financial; we affirm.
Nos. 06-1955 & 06-2357 3

I

On April 18, 2001, MB Financial extended credit to PMI

in the principal sum of $400,000. MB Financial filed the

documents required to secure its interest and then, on

August 1, 2001, properly perfected it by filing a UCC-1

financing statement. As we have noted, MB Financial’s

priority over the Funds’ interest in PMI’s assets is undisputed.

In the meantime, from 2000 to 2003, MAT Leasing was

toiling away on a job it had obtained to perform repairs

on certain Chicago streets by replacing asphalt. MAT

Leasing removed the original asphalt and subcontracted to

PMI the replacement paving work. PMI replaced the

asphalt using its own equipment and crew of unionized

laborers. PMI did not own any trucks, however, and so it

purchased the trucking services required to pick up fresh

asphalt from a supplier and transport it to the job site from

a company called M.T. Transit. MAT Leasing and M.T.

Transit were owned in part by Michael S. Tadin, Sr., and

his son, Michael S. Tadin, Jr. At PMI’s job sites, Joseph

Haughey supervised PMI’s work. Haughey was a partner

in PMI and the primary contact person between PMI and

its contractors, MAT Leasing and M.T. Transit.

While the repaving project was going on, PMI experienced myriad financial difficulties. Its records were a

mess, its invoices were inaccurate, and it had trouble

making payments to M.T. Transit for its trucking services.

It failed to make timely payments on its loans from MB

Financial or to make timely contributions to the Funds,

which provided coverage to PMI’s employees. Despite
4 Nos. 06-1955 & 06-2357

these problems and its awareness of them, MAT Leasing

continued to deal with PMI. Those dealings occurred

primarily in the form of “handshake agreements” between

MAT Leasing’s head of operations, Mike Tadin, Jr., and

Haughey, PMI’s 50% owner and head of operations.

When asked at an evidentiary hearing about these agreements, Tadin could not recall the details, but he affirmed

that they were entirely verbal; no written documents

exist to memorialize them.

On August 7, 2002, the Funds filed the complaint that

started the present case. They began by suing PMI in the

Northern District of Illinois for delinquent contributions

and an audit. An amended complaint followed on July 10,

2003, adding PMI owner Haughey as a defendant. Four

months later, on November 6, 2003, the district court

entered a default judgment against PMI and Haughey

and in favor of the Funds, in the amount of $59,975.47.

Thereafter, the Funds initiated post-judgment proceedings pursuant to FED. R. CIV. P. 69(a), which instructs

district courts to follow the law of supplementary proceedings of the state in which they sit. The parties and

district court accordingly proceeded under the Illinois

statute governing supplementary proceedings, 735 ILCS

5/2-1402.

The Funds sent citations to discover assets to several

companies, seeking to find out if any of those third parties

owed money to PMI—for if they did, Rule 69(a) and Illinois

law would entitle the Funds to recover the amounts owed.

With those citations still pending, MB Financial appeared

in the district court on March 23, 2004, to assert its own
Nos. 06-1955 & 06-2357 5

interest in PMI’s assets. It claimed, and the Funds did not

dispute, that it held a secured, perfected interest in PMI’s

assets with priority over that of the Funds. Two months

later, on May 25, 2004, the district court entered an Agreed

Order providing that (1) MB Financial’s secured interest

was perfected, valid, and enforceable, with first priority

over PMI’s assets; (2) the Funds’ rights were valid and

enforceable but subordinate to MB Financial’s; and (3) the

citations filed by the Funds, and any additional citations

that third parties might file, would remain in full force

and effect under Illinois Supreme Court Rule 277(f),

“Supplementary Proceedings,” and any recoveries obtained from those citations would apply first to the debt

owed to MB Financial, and then to the debt due to the

Funds.

Two weeks later, on June 2, 2004, attorneys for MB

Financial wrote a letter to MAT Leasing, seeking to collect

on accounts receivable that MB Financial believed were

owed from MAT Leasing to PMI. (A letter also went to

M.T. Transit, but because the matters relating to M.T.

Transit are not pertinent to this appeal, we do not discuss

them further.) The letter noted that “while [PMI’s] records

of invoices are complete, records of payments made to

[PMI] are not, and therefore we are unsure of the actual

balance outstanding.” The letter requested copies of MAT

Leasing’s payments on these “outstanding accounts

receivable,” but MAT Leasing did not oblige. The following

month, on July 7, 2004, the Funds issued a citation to

discover assets to MAT Leasing; MAT Leasing did not

respond to the citation nor did it comply, and so on

October 13, 2004, the Funds filed a motion for rule to show
6 Nos. 06-1955 & 06-2357

cause why the third-party citation respondent MAT

Leasing and its President, Michael Tadin, should not be

held in contempt for the failure to comply. The motion

also asked the court to order the citation respondents to

pay the attorneys’ fees and costs that the Funds incurred

in bringing the motion.

The district court granted the Funds’ motion on

January 11, 2005, and set a rule to show cause hearing

for January 27, 2005. The hearing was conducted as a

status hearing, and as it concluded, another status hearing

was set for April 28, 2005. Counsel for MAT Leasing

entered his appearance on April 15, 2005. Four days later,

the Funds filed a motion for turnover of MAT Leasing’s

assets, along with a notice for presentment of that motion

at the hearing scheduled for April 28. When that hearing

convened, the district judge entered the Funds’ motion

for turnover of MAT Leasing’s assets. Several additional

postponements took place over the next few months, until

on July 7 the court set an evidentiary hearing for September 7, 2005.

At the hearing, the parties focused on the question

whether MAT Leasing owed money to PMI and, if so, how

much. Two witnesses testified: Thomas Murray (President

and the other 50% owner of PMI) and Michael Tadin, Jr.

(head of operations for MAT Leasing). The district court

took the issue under advisement, and on March 8, 2006,

it granted the Funds’ motion for turnover of MAT Leasing’s assets and found that the amount of the debt was

$242,647.75. MAT Leasing filed its notice of appeal from

that order on April 5, 2006; this appeal was docketed as
Nos. 06-1955 & 06-2357 7

No. 06-1955. Then on April 17, MB Financial moved in the

district court for an order requiring MAT Leasing to pay

the amount of money specified in the court’s March 8

order. The court granted that motion three days later, on

April 20. MAT Leasing filed a second notice of appeal

from that decision; it was docketed as No. 06-2357; and

we consolidated the two appeals for our review.

II

MAT Leasing offers three reasons for reversing the

district court’s rulings. First, MAT Leasing argues that the

district court “lost” its subject-matter jurisdiction over

these post-judgment collection proceedings on June 13,

2005, because the Funds and MB Financial failed to

comply with the requirements of Illinois Supreme Court

Rule 277(f), which provides for “automatic termination” of

collection proceedings after six months unless the trial

court grants an extension. Second, assuming the district

court was not divested of its subject-matter jurisdiction,

MAT Leasing contends that the court erred in concluding

that MAT Leasing owed any money to PMI. Lastly, MAT

Leasing claims that even if it owed money to PMI, the

district court clearly erred in its calculation of the

amount. We address each argument in turn.

A 

We first consider MAT Leasing’s argument that the

district court lost its subject-matter jurisdiction in these

post-judgment proceedings by operation of Illinois Supreme Court Rule 277(f), which provides: 
8 Nos. 06-1955 & 06-2357

(f) When Proceeding Terminated. A proceeding under

this rule continues until terminated by motion of the

judgment creditor, order of the court, or satisfaction

of the judgment, but terminates automatically 6 months

from the date of (1) the respondent’s first personal

appearance pursuant to the citation or (2) the respondent’s first personal appearance pursuant to subsequent process issued to enforce the citation, whichever

is sooner. The court may, however, grant extensions

beyond the 6 months, as justice may require. Orders for

the payment of money continue in effect notwithstanding the termination of the proceedings until the judgment is satisfied or the court orders otherwise.

(Emphasis added.) MAT Leasing contends that this

“automatic termination” provision is jurisdictional, and

that the district court therefore lost its authority to hear the

case when it allowed more than six months to elapse

between Tadin’s first appearance (on behalf of MAT

Leasing) on December 13, 2004, and its ruling on March 8,

2006. Rule 277, in MAT Leasing’s view, requires us to

find that the district court’s jurisdiction “expired” on

June 13, 2005, six months after Tadin initially appeared.

The Funds and MB Financial respond that Rule 277 is

nothing more than a procedural mechanism by which postjudgment collection proceedings can terminate if they

take too long and result in prejudice to or harassment of

the judgment debtor. See TM Ryan Co. v. 5350 S. Shore, LLC,

836 N.E.2d 803, 810 (Ill. App. Ct. 2005).

MAT Leasing has no support for its strict jurisdictional

theory. It has not shown us a single instance in which a
Nos. 06-1955 & 06-2357 9

state rule of procedure has been permitted to divest a

federal court of subject-matter jurisdiction, and there is

certainly nothing in FED. R. CIV. P. 69(a) that would

support such an outcome. See FED. R. CIV. P. 82 (rules

“do not extend or limit the jurisdiction of the district

courts”); 28 U.S.C. § 2072. The district court’s subjectmatter jurisdiction was based on the federal-question

statute, 28 U.S.C. § 1331; the federal questions before the

court arose under the Employee Retirement Income

Security Act (“ERISA”), in particular the provisions that

entitled the Funds to their contributions. See 29 U.S.C.

§§ 1132(e)(1), 1145, and 185(a). The district court had

ancillary jurisdiction over the post-judgment proceedings,

and FED. R. CIV. P. 69(a) directed it to state law for the

mechanics of the collection process. State rules of procedure cannot negate subject-matter jurisdiction arising

from a federal statute and federal question.

Although we could stop there, we add that MAT Leasing’s assertion that Rule 277(f) somehow caused the

district court to lose its subject-matter jurisdiction ignores

the well established principle that “jurisdiction is determined by the facts that exist when the suit is filed.”

Olympia Express, Inc. v. Linee Aeree Italiane, S.P.A., 509 F.3d

347, 349 (7th Cir. 2007) (citing Dole Food Co. v. Patrickson,

538 U.S. 468, 478 (2004)). As Olympia Express explained,

“jurisdiction usually refers to a court’s authority to entertain a case, rather than to procedural incidents.” Id. at 350.

If jurisdiction exists at the outset of a suit, subsequent

procedural events will not divest the court of that original

jurisdiction. See, e.g., Kanouse v. Martin, 56 U.S. 198, 208

(1854); Smith v. Widman Trucking & Excavating, Inc., 627

F.2d 792, 798-99 (7th Cir. 1980).
10 Nos. 06-1955 & 06-2357

Further undermining MAT Leasing’s position that

Rule 277(f) sets a jurisdictional, rather than procedural,

requirement is the way in which it has been applied by

Illinois and federal courts. Courts have adopted a flexible

approach to the rule. See Levine v. Pascal, 236 N.E.2d 425,

431 (Ill. App. Ct. 1968). Since the rule does not affect the

federal court’s jurisdiction, its benefits could be forfeited

or waived. Here, MAT Leasing has at least forfeited any

complaint based on failure to comply with the rule,

because it failed to present this argument to the district

court. We might even find that MAT Leasing implicitly

waived the point entirely by continuing its active participation in the district court proceedings long after the

asserted “expiration date” of June 13, 2005.

Even if we were inclined to overlook MAT Leasing’s

forfeiture, it would still lose, because Illinois courts do not

apply Rule 277 in the rigid way MAT Leasing has advocated. Illinois courts are unwilling to terminate proceedings under this provision where the “extension[s] complained of” were entered at the parties’ agreement or at

the request of the party currently challenging the court’s

authority, or where the extensions did not lead to harassment of the complaining party. See, e.g., Nat’l Bank of

Albany Park v. Newberg, 289 N.E.2d 197, 201 (Ill. App. Ct.

1972). It is significant that the expiration date that MAT

Leasing advocates occurred after MAT Leasing had itself

caused, requested, or agreed to multiple continuances

and delays in the proceedings. It is odd, at best, that

MAT Leasing is trying to benefit from more than six

months’ delay in the resolution of this case, when much of

that delay resulted from its own requests for or acquies-
Nos. 06-1955 & 06-2357 11

cence in more time. There is no evidence that MAT Leasing

has suffered any prejudice, harassment, or injustice as a

result of the delays. The company was afforded ample

opportunity to be heard and never challenged the length

of time involved until after filing this appeal. Following

either the Illinois cases or common sense, there is no call

to apply Rule 277(f) in the circumstances of this case.

Both state and federal courts construe Rule 277 liberally.

We have not found examples of cases where a reviewing

court found that a lower court’s ruling was invalid as a

result of Rule 277(f)’s operation. The text of the rule

supports this interpretation. It says that despite the sixmonth limit, “[t]he court may . . . grant extensions beyond

the 6 months, as justice may require.” Nothing in the rule

requires a party to seek or request an extension from

the court in order to avoid termination. Rather, the rule

allows the court to “grant extensions . . . as justice may

require.” MAT Leasing is simply incorrect to say that the

“plain language” of Rule 277(f) requires the plaintiffs to

seek an extension, and its attempt to graft such a requirement onto the rule is without merit.

Even under MAT Leasing’s theory of the rule, it appears

that the district court did enough to grant the kind of

extension that the rule contemplates. In the Agreed Order

entered on May 25, 2004, the court stated:

The citations filed herein by Laborers, and any additional third party citations issued by Laborers shall

remain in full force and effect pursuant to Supreme

Court Rule 277(f), and any recoveries obtained therefrom shall be applied first to the indebtedness due

to MB and then to the indebtedness due Laborers.
12 Nos. 06-1955 & 06-2357

This order expressly referred to Rule 277(f), noting that

the citations issued in this proceeding would continue to

have full effect under that provision. This statement,

combined with the court’s written orders entering each

continuance of the proceedings, probably satisfy the

rule’s condition that a judge may extend the proceedings

beyond six months. We can detect no basis for finding, as

MAT Leasing urges, that the district court had no authority

to enter these orders. The district court had subject-matter

jurisdiction under 28 U.S.C. § 1331, and it did not lose

that power through anything associated with Illinois

Supreme Court Rule 277(f). We therefore move on to

MAT Leasing’s arguments on the merits.

B

MAT Leasing’s two remaining challenges both deal

solely with the validity of the district court’s factual

findings, which we will reverse only for clear error. See

McMahon Food Corp. v. Burger Dairy Co., 103 F.3d 1307 (7th

Cir. 1996). MAT Leasing first challenges the finding that

it owed any money at all to PMI; should we reject that

argument, its last resort is a challenge to the district

court’s calculation of the amount owed. We conclude

that neither finding was clearly erroneous.

To support its position that it owed no money to PMI,

MAT Leasing asserts implausibly that there is “no evidence” of any indebtedness from MAT Leasing to PMI; it

also contends that the district court’s orders are invalid

because the existence of the debt is “substantially disputed.” Contrary to the claim that there is no evidence
Nos. 06-1955 & 06-2357 13

of any debt, the record reveals considerable evidence of

the debt, including PMI’s computer records and the

testimony of PMI President Thomas Murray. Murray

testified that according to PMI’s records, MAT Leasing

owed PMI a total of $236,007.40 for services rendered,

which remained unpaid at the time of the September 2005

hearing. Murray also testified to the status of specific

invoices, including Invoice 743, which reflected an additional $57,710 owed to PMI. The existence of the debt was

established at the hearing by Murray’s testimony and by

invoices kept in the ordinary course of business and

generated from PMI’s computer records.

It is notable that MAT Leasing does not argue that PMI

failed to render services to MAT Leasing for which money

was owed. Instead, it contends that it had an arrangement with PMI that offset its obligations to pay PMI.

Specifically, MAT Leasing argues that it applied receivables that it owed PMI to PMI’s balance with M.T. Transit,

the trucking company. MAT Leasing’s claim is that its use

of funds owed to PMI to pay off PMI’s other debts effectively cancelled out the amount that MAT Leasing otherwise would have owed. But MAT Leasing’s only evidence

of any such arrangement with PMI is Tadin’s testimony at

the hearing regarding his series of “handshake agreements” with Haughey. As we noted earlier, Tadin conceded that those agreements were verbal only, that no

written documents exist to explain or support them, and

that even he could not recall the details of them. The

district court weighed the evidence before it and concluded that there was “no credible evidence that PMI

agreed to any reduction of the value [of its] invoices,” nor
14 Nos. 06-1955 & 06-2357

was there any evidence to support MAT Leasing’s claim

that it was entitled to offset its indebtedness to PMI by

transferring monies to M.T. Transit. It was well within

the district court’s discretion to accord minimal weight

to Tadin’s testimony, particularly where MAT Leasing had

ample opportunity to call Joseph Haughey—the person

purportedly on the other end of these handshake deals—to

testify about the alleged adjustments in payment that

underlie MAT Leasing’s claim, but it declined to do so.

We add that to the extent MAT Leasing argues, on the

basis of language in 735 ILCS 5/2-1402 (the Illinois

statute that governs post-judgment proceedings) that we

should invalidate the district court’s orders because the

debt’s existence was “substantially disputed,” the appellees correctly point out that the parts of the statute that

apply to third-party respondents like MAT Leasing (as

opposed to judgment debtors such as PMI) do not even

mention the notion of a “substantial dispute.” Compare 735

ILCS 5/2-1402(c)(1), pertaining to the judgment debtor

and implicating the idea of an obligation that “is not

substantially disputed,” with § 1402(c)(3) and (c)(4),

pertaining to parties other than the judgment debtor and

containing no such language, instead authorizing courts

to “[c]ompel any person cited, other than the judgment

debtor, to deliver up any assets so discovered” during a

post-judgment collection proceeding ((c)(3)), and to

“[e]nter any order upon or judgment against the person

cited that could be entered in any garnishment proceeding” ((c)(4)).

All of this leads to the conclusion that the argument

that MAT Leasing raises based on a “substantial dispute”
Nos. 06-1955 & 06-2357 15

over the amount owed is irrelevant. As the appellees

point out, the very purpose of the evidentiary hearing

was to resolve the question whether MAT Leasing owed

money to PMI and, if so, how much. MAT Leasing did not

oppose the hearing, and the district court conducted the

proceeding just as it should have: it accepted and weighed

the evidence offered by both parties, made credibility

judgments where necessary, and made factual findings

based on the evidence and the record before it. We cannot

conclude that the district court clearly erred in finding

that MAT Leasing owed a debt to PMI.

In its final attempt to undermine the district court’s

decision, MAT Leasing argues that even if it did owe

money to PMI, the district court committed clear error in

its calculation of the amount, which it placed at

$242,647.75. The district court’s calculation accounted

for some of the credits and offsets that MAT Leasing

advocated, but MAT Leasing contends on appeal that

there are six categories of additional credits that the district court should have applied to further reduce the

amount of the debt. We have reviewed the parties’ briefs,

the record, and the district court’s thorough explanation

of how and why it calculated the amount that MAT Leasing’s owed, and we are satisfied that the court did not

clearly err in reaching its findings. Indeed, it appears to us

that the “credits” MAT Leasing now urges us to apply are

either utterly irrelevant to the debt owed from MAT

Leasing to PMI (e.g., checks Tadin paid to Haughey for PMI

but that Haughey took for his personal use; and the

turnover order for assets of another company, Pacific

Construction), or there is, as the district court found,
16 Nos. 06-1955 & 06-2357

insufficient evidence in the record to support them (e.g.,

the offsets for oral agreements that Tadin says he made

with Haughey).

* * *

The judgment of the district court is AFFIRMED.

8-29-08