In the

United States Court of Appeals

For the Seventh Circuit

Nos. 07-4050, 08-1044

ORLANDO RESIDENCE, LTD.,

Plaintiff-Appellee/Cross-Appellant,

v.

GP CREDIT CO., LLC, et al.,

Defendants-Appellants, Cross-Appellees.

No. 07-4051

SUSAN B. NELSON,

Plaintiff-Appellant,

v.

ORLANDO RESIDENCE, LTD., et al.,

Defendants-Appellees.

Appeals from the United States District Court

for the Eastern District of Wisconsin.

Nos. 04-C-439, 07-C-436—Rudolph T. Randa, Chief Judge.

ARGUED DECEMBER 10, 2008—DECIDED JANUARY 22, 2009
2 Nos. 07-4050, 07-4051, 08-1044

Before POSNER, KANNE, and ROVNER, Circuit Judges.

POSNER, Circuit Judge. For 22 years these parties and

their predecessors have been litigating, in numerous

lawsuits in different courts, a dispute over a piece of

property in Nashville. We were told at argument

without contradiction that the parties have expended

$3 million in legal fees, a figure that exceeds any reasonable estimate of the amount in controversy. Yet

such behavior need not be irrational or a product of spite

or even of bad legal advice. A rational litigant, having

expended $X in unsuccessful efforts to prevail, yet

having additional litigation options that he can

pursue, will compare the cost of those options to the

expected benefit, disregarding the $X he has spent already. That is a sunk cost—a cost he cannot recover

by anything he does and therefore a cost that will not

influence his behavior (if he is rational). Still, from an

overall social standpoint, the money spent on this

litigation—which we cannot quite end today, much as

we would like to—is excessive. But our decision will

bring the end within sight.

In the early 1980s a dispute arose between Samuel

Hardige and Kenneth Nelson. The dispute was settled

by Hardige’s giving Nelson’s company, Nashville Residence Corporation (NRC), a hotel property in Nashville

in exchange for a promissory note of NRC secured by

the property and payable in October 1986 to one of

Hardige’s companies, Orlando Residence, Ltd. NRC

failed to pay the note when due and two months

later Orlando sued NRC on the note in federal district
Nos. 07-4050, 07-4051, 08-1044 3

court in Tennessee, basing federal jurisdiction on

diversity of citizenship. NRC responded by conveying

the property to Nashville Lodging Company (NLC),

another corporation controlled by Nelson, and NLC in

turn transferred the property to Metric Partners Growth

Suite Investors in 1989. The following year, the federal

district court entered judgment against NRC for the face

amount of the note, plus interest.

In 1992 Orlando brought suit in a Tennessee chancery

court against NRC, NLC, Nelson, and Metric, claiming

that the transfer of the property by NRC to NLC, and by

NLC to Metric, was a fraudulent effort to prevent Orlando

from collecting on the judgment that it had obtained

in federal court. In 1995, after a trial, the chancery

court entered judgment for Orlando of $501,934 in compensatory damages and $850,000 in punitive damages.

The defendants appealed. One of the appellants’ arguments was that Orlando did not have standing to sue.

There were two entities named Orlando Residence, Ltd.,

one of which was owned 98 percent by Hardige and the

other 100 percent, and the appellants claimed that the

Orlando entity that owned the promissory note on

which the suit was based was not the one that was the

plaintiff-appellee in the litigation and therefore had no

standing to sue. The Tennessee court of appeals rejected

the argument on the ground that Tennessee law is not

concerned with such trifles as distinguishing between

two commonly owned, identically named entities.

Orlando Residence, Ltd. v. Nashville Lodging Co., 1996 WL

724915, at *2 (Tenn. App. Dec. 18, 1996). They were as

Tweedledum and Tweedledee. But proceeding to the
4 Nos. 07-4050, 07-4051, 08-1044

merits the court found errors in the chancery court’s

decision and remanded for a new trial.

Shortly before the court of appeals’ decision, Orlando

had moved the chancery court to order the hotel property

sold to satisfy Orlando’s judgment, the court had ordered

the sale, and at the sale Orlando had purchased the

property for $100,000. When the court of appeals reversed

the judgment in the fraudulent conveyance suit, the

defendants asked the chancery court to set aside the

sale; they also renewed their argument that Orlando

lacked standing. The chancery court rejected both their

arguments. So the defendants again appealed. The court

of appeals, invoking the doctrine of law of the case,

refused to consider the defendants’ renewed argument

that Orlando lacked standing and went on to affirm

the chancery court’s decision refusing to set aside the

sale. Orlando Residence, Ltd. v. Nashville Lodging Co., 1999

WL 1040544, at *4 (Tenn. App. Nov. 17, 1999).

The new trial that the court of appeals had ordered in

the first appeal was held in 2000, and the jury returned a

verdict in favor of Orlando for $797,615. The judge gave

the defendants a credit of $100,000, the amount that

Orlando had agreed to pay for the property (formerly

NLC’s) at the judicial sale. On appeal, the court of appeals

held that the judicial sale had been proper and so the

defendants were entitled to no more for their property

interest than Orlando had agreed to pay at the sale. The

court further ruled that NRC’s conveyance of the

property to NLC had indeed been fraudulent, but the

court remanded the case to the chancery court for an
Nos. 07-4050, 07-4051, 08-1044 5

evidentiary hearing on the defendants’ statute of limitations defense. Orlando Residence, Ltd. v. Nashville Lodging

Co., 104 S.W.3d 848 (Tenn. App. 2002).

Back in 1999 NLC had granted a security interest in

its personal property to another entity controlled by

Kenneth Nelson, GP Credit Co., in exchange for a loan.

NLC’s personal property included a lawsuit against

Metric (to which, recall, NLC had conveyed the hotel

property in 1989) in Tennessee. In 2001, GP Credit foreclosed its security interest in NLC’s personal property

and bought the property at the foreclosure sale, including

the suit against Metric. Orlando persuaded the chancery

court to appoint a receiver to hold any proceeds of the

Metric suit that NLC might obtain, to pay Orlando’s

judgment against NLC. GP Credit responded by filing

a diversity suit in a federal court in Wisconsin, GP Credit’s

domicile, to clear its title to the Metric suit. We upheld

the district judge’s judgment in favor of GP Credit,

ruling that GP Credit owned the suit free and clear of any

claim by Orlando. GP Credit Co., LLC v. Orlando Residence,

Ltd., 349 F.3d 976 (7th Cir. 2003).

In 2004, pursuant to the Tennessee court of appeals’

remand, Orlando’s fraudulent conveyance suit was

again retried, and again Orlando won—and again the

chancery court refused to reconsider the earlier rulings

on Orlando’s standing to sue. Because Kenneth Nelson

refused to put in a personal appearance at the trial, the

judge entered a default judgment in favor of Orlando,

and the court of appeals affirmed. Orlando Residence, Ltd. v.

Nashville Lodging Co., 213 S.W.3d 855 (Tenn. App. 2006).
6 Nos. 07-4050, 07-4051, 08-1044

Orlando at last had solid final judgments against NRC,

NLC, and Kenneth Nelson.

The challenge was to collect these judgments. To that

end Orlando had brought the present suit, originally in

the Tennessee chancery court, against NLC, GP Credit,

Kenneth Nelson and his wife Susan, and Hayvenhurst

Pension & Profit Sharing Plan, claiming that Kenneth

Nelson and NLC had made fraudulent conveyances to

the other defendants in an effort to prevent Orlando

from collecting its judgment. GP Credit counterclaimed, claiming unjust enrichment (for which it sought

restitution), intentional interference with a business

relationship, and slander of title. (It later added an additional restitution claim.) The defendants removed the

suit to federal district court on the basis of diversity of

citizenship, and that court then transferred the case to a

federal district court in Wisconsin. The district judge

rejected both of Orlando’s claims and GP Credit’s counterclaims, and both sides have appealed. Susan Nelson

filed a separate suit in the same district court to quiet title

to her property so that it cannot be seized to pay the

judgment against the defendants in Orlando’s suit. The

district judge dismissed that suit, and she appeals.

We begin with Orlando’s appeal. Two years after we

issued our decision in GP Credit’s quiet-title suit against

Orlando, Orlando obtained a default judgment from

the chancery court in Tennessee against GP Credit. Orlando claimed that GP Credit was an alter ego of Kenneth

Nelson and therefore liable on his debt to Orlando. GP

Credit argues that the chancery court did not have juris-
Nos. 07-4050, 07-4051, 08-1044 7

diction to issue the default judgment because it was a

judgment in rem—the res being the lawsuit against

Metric, which had been the property of NLC. As we

explained in our decision (see 349 F.3d at 981), the site of a

res that consists of a lawsuit is the owner’s domicile.

Because GP Credit was the owner of the lawsuit, its

domicile and therefore the site of the lawsuit were Wisconsin. The district judge in the present case thought that

to allow Orlando to obtain the proceeds of the Metric

lawsuit would be inconsistent with our decision

holding that GP Credit owns the suit free and clear of

any claims by Orlando.

The judge was wrong. The basis on which Orlando

seeks to add GP Credit as a defendant is not that Orlando

owns the Metric lawsuit but that GP Credit is the alter ego

of Kenneth Nelson—which we didn’t know when we

issued our decision—so that property of GP Credit,

including therefore the Metric lawsuit, is available for

satisfaction of Orlando’s judgment against Nelson. The

default judgment established this, and, by suing GP Credit,

Orlando is simply trying to collect its judgment against

Nelson from Nelson’s alter ego. That is entirely proper,

and so its claim should not have been dismissed.

We turn to GP Credit’s counterclaims. The first is that it

is entitled to restitution of $3.3 million, its extravagant

estimate of the value of NLC’s property interest that

was extinguished at the judicial sale of the property to

Orlando for $100,000 lo these many years ago. Remember

that GP Credit acquired NLC’s personal property, which

includes legal claims such as the claim to the value of the
8 Nos. 07-4050, 07-4051, 08-1044

property. But remember too that the Tennessee court of

appeals held that the judicial sale was proper and that

NLC (and hence GP Credit) was entitled to only $100,000,

the proceeds of the sale. That ruling extinguished GP

Credit’s claim by operation of res judicata.

GP Credit contests this conclusion, arguing that the

chancery court never acquired jurisdiction of Orlando’s

suit against NLC because the wrong Orlando Residence,

Ltd. had sued, a mistake that under Tennessee law may

have deprived the court of subject-matter jurisdiction—though we doubt it. Osborn v. Marr, 127 S.W.3d 737,

740 (Tenn. 2004), holds that standing to sue is a jurisdictional prerequisite, but a confusion between alter egos

hardly rises to the level of an absence of standing. No

matter; the question of standing had been litigated, and

answered in Orlando’s favor by the chancery court and

the answer upheld by the Tennesee court of appeals, which

in a subsequent appeal refused to permit the issue to

be relitigated.

GP Credit argues that a decision by a court that lacks

subject-matter jurisdiction can always be attacked collaterally, but that is not true either; and anyway, if Tennessee

would not permit its judgment to be attacked collaterally,

the federal court would be bound. 28 U.S.C. § 1738;

Marrese v. American Academy of Orthopaedic Surgeons, 470

U.S. 373 (1985).

If a court of competent jurisdiction—a court authorized

to decide the kind of case in which the jurisdictional

question arises (which is true of the Tennessee chancery
Nos. 07-4050, 07-4051, 08-1044 9

court)—resolves a jurisdictional issue in a full and fair

hearing, that resolution is entitled to the same collateral

estoppel effect that a ruling on a substantive issue would

be entitled to. E.g., Underwriters National Assurance Co. v.

North Carolina Life & Accident & Health Ins. Guaranty Ass’n,

455 U.S. 691, 706-07 (1982); Durfee v. Duke, 375 U.S. 106,

111-15 (1963); Stoll v. Gottlieb, 305 U.S. 165, 171-72 (1938);

Tennessee ex rel. Sizemore v. Surety Bank, 200 F.3d 373, 381

(5th Cir. 2000) (Tennessee law); United States ex rel.

Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d

244, 250 (9th Cir. 1992). Otherwise there would be

nothing to prevent the incessant relitigation of the

same jurisdictional challenges by the same parties (or

parties in privity with them)—which is just what the

defendants are attempting. (For another attempt, and

another judicial rebuff, see GP Credit Co., LLC v. Orlando

Residence Ltd., No. 01-CV-2294, pp. 9-11 (S.D. Cal. Sept. 20,

2007).)

Many cases go further and hold that if a court of competent jurisdiction “decides a case on the merits after an

adversarial presentation, the judgment cannot be collaterally attacked” even if the parties failed “to

address jurisdiction fully or cogently.” United States v.

County of Cook, 167 F.3d 381, 388 (7th Cir. 1999). (But here

they did.) “A party that has had an opportunity to litigate

the question of subject-matter jurisdiction may

not . . . reopen that question in a collateral attack upon an

adverse judgment.” Insurance Corp. of Ireland, Ltd. v.

Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 n. 9

(1982) (emphasis added); see Chicot County Drainage

District v. Baxter State Bank, 308 U.S. 371 (1940); Bell v.
10 Nos. 07-4050, 07-4051, 08-1044

Eastman Kodak Co., 214 F.3d 798, 801 (7th Cir. 2000) (“to

allow a ground that can be adequately presented in a

direct appeal to be made the basis of a collateral attack

would open the door to untimely appeals . . . . The

losing party could reserve the ground until he had presented it unsuccessfully to the district court in the form

of a Rule 60(b) motion. That is not permitted”); Sterling v.

United States, 85 F.3d 1225, 1230-31 (7th Cir. 1996) (concurring opinion) (“this salutary approach exists because

there is a need for finality in the law, and finality would

be disserved if courts had to reexamine the jurisdictional

basis of every prior judgment before giving it preclusive

effect”).

These cases (and the Restatement (Second) of Judgments

§ 12 and comment a (1982)) relax the normal rule of

collateral estoppel—that the issue in question, the issue a

party wants to prevent being reopened, have been “actually litigated.” Id., § 27. They do this because an attempt

to invalidate a judgment is far more problematic than an

attempt merely to relitigate an issue that might have

been but was not litigated in a previous case the judgment in which remains in force.

Against a veritable mountain of authority, GP Credit

cites Dunham v. Stitzberg, 201 P.2d 1000 (N.M. 1948), which

refused to give preclusive effect to a 20-year-old

decision by a probate court that had exceeded its jurisdiction by determining title to real estate. But that was an

example of a decision by a court that, unlike the

Tennessee chancery court, was not a court competent to

make such a determination. The opinion explained that “it
Nos. 07-4050, 07-4051, 08-1044 11

is a matter of common knowledge that [in New Mexico]

probate proceedings are usually ex parte; that probate

judges in this state are, with few exceptions, not lawyers,

and many are ignorant and not fitted for the office. Often

they sign prepared orders and decrees without reading; or

if read, then without understanding the import. If in fact

these courts had the jurisdiction asserted, it would be

exercised in most cases without any real trial to determine the fact of heirship.” Id. at 1014. (GP Credit neglected

to mention that Dunham has been overruled, In re Conley’s

Will, 276 P.2d 906, 909 (N.M. 1954). The ground was

that the probate court did have the jurisdiction that

Dunham held it did not have.)

It is true, as we noted earlier, citing section 1738 of the

Judicial Code and the Marrese decision, that a state is free

to decide how much or how little respect its judgments

should be given in subsequent cases, and other states

and the federal courts are bound to give those judgments

the same effect in their cases. The defendants insist that

the Tennessee courts place no limits at all on the

relitigation of issues of subject-matter jurisdiction, but no

cases support that insistence. Tennessee Dept. of Human

Services v. Gouvitsa, 735 S.W.2d 452, 457 (Tenn. App. 1987),

did deny preclusive effect to the decision of a court that

lacked subject-matter jurisdiction, but the opinion is

silent on whether the issue of jurisdiction had been or

could have been litigated in the earlier case. And the

opinion relied on an old decision by the Supreme Court

of Tennessee, Brown v. Brown, 281 S.W.2d 492 (Tenn. 1955),

which might well not be followed today, as it reflects

the old rather than the modern view of the appropriate
12 Nos. 07-4050, 07-4051, 08-1044

scope of collateral attacks on judgments. See Restatement,

supra, § 12, comment a. No matter; if the Supreme Court of

Tennessee would even today reject the Restatement rule,

there is no indication that it would go further and allow

the issue to be litigated over and over and over again, as

the defendants have tried to do. Tennessee ex rel. Sizemore

v. Surety Bank, supra, 200 F.3d at 381, is to the contrary; and

in Goeke v. Woods, 777 S.W.2d 347, 350 (Tenn. 1989), the

Supreme Court of Tennessee endorsed, albeit in dictum,

the application of collateral estoppel to questions of

jurisdiction: “Res judicata applies to questions of jurisdiction, if jurisdiction is litigated or determined by the

court. The preclusive effect of a dismissal for lack of

jurisdiction is, however, limited to the matters actually

decided, and is not binding as to all matters which

could have been raised” (citation omitted).

GP Credit’s next counterclaim, which charges Orlando

with tortious interference with an advantageous business

relationship, grows out of our previous decision. After we

confirmed GP Credit’s title to the lawsuit against Metric

free of Orlando’s claims, Metric offered to settle the suit

for $650,000 if Orlando would dissolve the receivership

that the chancery court in Tennessee had created to hold

the proceeds of the suit, in which Orlando asserted an

interest. Orlando refused, the suit was settled for only

$150,000, and GP Credit seeks the difference from Orlando. The claim is frivolous, even if one assumes (and

why not?) that a settlement between commercial enterprises could be deemed a business relationship for purposes of the tort. It is hardly tortious conduct merely to

refuse to incur the expense of dissolving a receivership; the
Nos. 07-4050, 07-4051, 08-1044 13

benefit of dissolution would have been entirely to GP

Credit, so it should have sought the dissolution. There is

no evidence that Orlando even knew about Metric’s

settlement offer to GP Credit and the condition attached

to it. And it would not have been in Orlando’s interest

to block the settlement. It has a judgment that GP Credit is

an alter ego of Kenneth Nelson, against whom it has a

money judgment; the more GP Credit obtained from

Metric in a settlement, the larger the potential pool of

assets out of which Orlando could satisfy its judgment

against GP Credit. Anyway Orlando had a valid interest

in the maintenance of the receivership. We had ordered it

dissolved because Orlando had no interest in the Metric

suit. But we were not aware that GP Credit was an alter

ego of Nelson—which Orlando gave a legitimate interest

in any settlement that Metric made with GP Credit.

GP Credit’s slander of title counterclaim fails for the

same reason: Orlando had a valid reason to question GP

Credit’s right to keep the proceeds of a settlement with

Metric.

GP Credit’s last counterclaim seeks restitution of a

$150,000 bond that NLC had been required to post in the

Metric lawsuit. NLC deposited the money in the

Tennesee chancery court, and the court gave the money

to Orlando after the default judgment that determined

that GP Credit is an alter ego of Kenneth Nelson. GP Credit

contends that the bond belongs to it by virtue of our

decision upholding its quiet-title action, and that the

chancery court did not have jurisdiction to issue the

default judgment because it was a judgment in rem (the
14 Nos. 07-4050, 07-4051, 08-1044

bond being the res) and the site of a res that consists of a

lawsuit is, as we know, the owner’s domicile. GP Credit

was the owner of the lawsuit, and hence of the bond that

it posted in the suit, and its domicile is Wisconsin. But

this reasoning overlooks the fact that the bond had been

deposited in the Tennessee court; the res was thus in

Tennessee, not Wisconsin. As we explained, the basis on

which Orlando was given the bond money was not that

Orlando owned the Metric lawsuit but that GP Credit is

the alter ego of Kenneth Nelson, so that any property of

GP Credit is fair game for satisfying Orlando’s judgment against Nelson.

We turn last to Susan Nelson’s suit. As part of its efforts

to collect its judgment, Orlando brought a suit in a Wisconsin state court to establish that property that Mrs. Nelson

claims to be her own is actually property owned jointly

with her husband and thus is available to pay a judgment against him. Wis. Stat. § 803.045(3); Courtyard Condominium Ass’n, Inc. v. Draper, 629 N.W.2d 38, 42 (Wis. App.

2001). That suit is pending. After it was filed, Mrs. Nelson

brought her present suit to quiet title to her property—that

is, to establish that it really is her property rather than

being jointly owned with her husband. The district

judge dismissed the suit because when two in rem suits

involving the same res are pending in different courts the

court in which the second suit was filed must dismiss its

suit. Penn General Casualty Co. v. Commonwealth of Pennsylvania ex rel. Schnader, 294 U.S. 189, 195-96 (1935); Kline v.

Burke Construction Co., 260 U.S. 226, 229 (1922); United

States v. $506,231 in U.S. Currency, 125 F.3d 442, 447-48 (7th
Nos. 07-4050, 07-4051, 08-1044 15

Cir. 1997). We are given no reason to depart from that

sensible rule.

To summarize, the judgment of the district court is

reversed insofar as it rejected Orlando’s alter ego claim

against GP Credit but in all other respects is affirmed.

The time has come to put an end to the defendants’

stubborn efforts to prevent Orlando from obtaining the

relief to which it is entitled. The district judge should give

consideration to enjoining the defendants from further

maneuvers to evade the judgments that Orlando has

obtained against them. The authority for issuing such an

injunction (a “bill of peace,” as it is called) is well established. See, e.g., Allendale Mutual Ins. Co. v. Bull Data

Systems, Inc., 10 F.3d 425, 431 (7th Cir. 1993); Newby v.

Enron Corp., 542 F.3d 463, 472-73 (5th Cir. 2008); Safir v. U.S.

Lines, Inc., 792 F.2d 19, 24 (2d Cir. 1986); Molski v. Evergreen

Dynasty Corp., 500 F.3d 1047, 1056-59 (9th Cir. 2007) (per

curiam).

AFFIRMED IN PART, REVERSED IN PART,

AND REMANDED WITH DIRECTIONS.

1-22-09