In the

United States Court of Appeals

For the Seventh Circuit

No. 11-1792

WILLIAM G. NELSON, IV,

Plaintiff-Appellant,

v.

DAVID K. WELCH and CRANE,

HEYMAN, SIMON, WELCH & CLAR,

Defendants-Appellees.

Appeal from the United States District Court 

for the Northern District of Illinois, Eastern Division.

No. 1:07-cv-04825—Robert W. Gettleman, Judge.

ARGUED MAY 23, 2012—DECIDED JUNE 29, 2012

Before EASTERBROOK, Chief Judge, and RIPPLE and

TINDER, Circuit Judges.

TINDER, Circuit Judge. William G. Nelson, a minority

shareholder and major creditor of Repository Technologies, Inc. (“RTI”), believes that RTI’s majority shareholders and David K. Welch and his law firm Crane,

Heyman, Simon, Welch & Clar (“CHSWC”), the law firm

that handled RTI’s bankruptcy, used RTI’s bankruptcy
2 No. 11-1792

to loot RTI, much to his detriment. Nelson filed a variety

of lawsuits to recover his losses and most have run

their course. The suit at issue in this appeal, Nelson’s

suit against Welch and CHSWC, is the last one standing.

The tangled history of litigation between Nelson and

RTI, its majority shareholders, and its bankruptcy law

firm, CHSWC, is detailed in a previous appeal, In re

Repository Technologies, Inc., 601 F.3d 710 (7th Cir. 2010)

(“RTI-1”). The short version, relevant here, is as follows:

In 2007, Nelson sued CHSWC (and Welch, but for simplicity we will refer to the defendants collectively

as CHSWC) in state court alleging that they had

(1) conspired with RTI’s majority shareholders to use

RTI’s Chapter 11 bankruptcy to enrich themselves,

(2) tortiously interfered with RTI’s loan contract with

Nelson, and (3) abused the bankruptcy process. Based

on the abuse-of-process claim, the defendants removed

to federal court. In an attempt to get back to state court,

Nelson amended his complaint to omit the abuse-ofprocess claim. The tactic failed because the district court

(Judge Kocoras) concluded that it still had “arising in”

jurisdiction: Even without his abuse-of-process claim,

and despite their state-law titles, Nelson’s claims

“revolve[d] around his assertion that Welch and his

firm engaged in abuse of bankruptcy process.” RTI-1, 601

F.3d at 716 (quoting the district court). 

The posture of the case shifted again when Judge

Kocoras learned that the bankruptcy court said that

RTI’s Chapter 11 petition was not filed in bad faith and

that the district court (Judge St. Eve) repeated that state-
No. 11-1792 3

ment in affirming the bankruptcy court’s judgment.

Based on Judge St. Eve’s affirmance, Judge Kocoras

concluded that Nelson’s federal cause of action (whatever

was keeping the suit in federal court) was precluded

and dismissed it with prejudice. CHSWC then moved

to dismiss Nelson’s entire complaint on the merits.

Despite his earlier conclusion that all of Nelson’s claims

“revolved around” abuse of the bankruptcy process,

Judge Kocoras denied the motion on the theory that

Nelson might still have state-law claims outside the

bankruptcy context. He remanded those claims to state

court. CHSWC appealed the remand and that became

part of the appeal we’re referring to as RTI-1. 

RTI-1 was a consolidated appeal from RTI’s adversary proceeding (which sought to recharacterize Nelson’s debt as equity) and the district court’s remand

order in Nelson’s suit against CHSWC. (Again, for the

full story, see RTI-1, 601 F.3d at 714-17.) Three results

from RTI-1 matter now. First, because RTI had no assets

and had terminated its business, we concluded that the

adversary proceeding was moot and vacated the judgments below. Id. at 718-19. Second, we reversed the

district court’s remand of Nelson’s state-law claims. We

took this unusual step because

even construing the complaint in the light most favorable to Nelson, . . . all of the allegations supporting

Nelson’s civil conspiracy and tortious interference

claims are predicated on the defendants’ participation

in RTI’s bankruptcy case. Because these state-law

claims are so entangled with Nelson’s federal abuse
4 No. 11-1792

of the bankruptcy process claim, the district court

should have retained supplemental jurisdiction

over the entire lawsuit.

And again:

We . . . are unable to discern from Nelson’s complaint

any theories of liability that do not rely on RTI’s

allegedly improper bankruptcy filing. 

Id. at 727. Third, notwithstanding the dependence

of Nelson’s state-law claims on abuse of the bankruptcy process, we held that dismissal with prejudice of

his abuse-of-process claim did not require dismissal of

his state-law claims because “the district court’s basis

for dismissing the federal abuse of process claim was

flawed.” Id. at 728. Nelson, then, was given another

opportunity to present his claims to the district court.

On remand, considering the same complaint as we

did in RTI-1, the district court (Judge Gettleman, this

time) granted CHSWC’s motion to dismiss. As we did

in RTI-1, the district court observed that Nelson’s statelaw claims are predicated on his allegation that RTI’s

bankruptcy filing was improper and he rejected, as we

did, Nelson’s arguments that pre- and post-petition

conduct by CHSWC independently support his claims.

Simply put, Nelson’s claims depend on the plausibility

of his abuse-of-process allegation. But Judge Gettleman

saw two reasons Nelson could not assert state-law claims

that depend on abuse of process. The first was Judge

Kocoras’ dismissal with prejudice of Nelson’s abuse-ofprocess claim. As Judge Gettleman explained: 
No. 11-1792 5

It is true that Judge Kocoras’ conclusion was predicated on the preclusive effect of Judge St. Eve’s now

vacated affirmance of the bankruptcy court, which

would normally suggest that Judge Kocoras’ dismissal should also be vacated. . . . The Seventh

Circuit did not vacate the dismissal, however (plaintiff did not file a cross-appeal), and [Nelson] has not

asked this court to vacate the dismissal on remand. 

Nevertheless, because in RTI-1 we instructed the

district court to ignore the bankruptcy court’s goodfaith finding, Judge Gettleman assumed the unchallenged dismissal with prejudice of Nelson’s abuse-ofprocess claim wasn’t fatal to his state-law claims.

Judge Gettleman went on to dismiss Nelson’s complaint without relying on the vacated good-faith dictum

by focusing on RTI’s partial success in the adversary action. According to the district court, that

partial success supported a good-faith finding and, therefore, the dismissal of Nelson’s suit. 

Responding to Nelson’s Rule 59(e) motion, Judge

Gettleman denied that he improperly relied on Judge

St. Eve’s vacated order. The fact that Judge St.

Eve’s order was vacated, he said, did not alter the facts

on which the bankruptcy court and the district court

based their decisions. Judge Gettleman then made fresh

findings based on “undisputed facts” and concluded

that partial recharacterization of Nelson’s debt as

equity was proper and that, therefore, the adversary

proceeding was partially successful and the bankruptcy was not filed in bad faith.
6 No. 11-1792

Nelson appeals. Our review is de novo and we may

affirm on any ground supported by the record. Remet

Corp. v. City of Chicago, 509 F.3d 816, 817 (7th Cir. 2007).

Has the record developed or has anything of legal

significance happened since the last appeal? We

remanded, the district court dismissed Nelson’s case

relying on vacated orders, reconsidered, made fresh

findings, and dismissed Nelson’s case again. It was,

however, clearly improper for the district court to rely

on vacated orders and to make findings as the basis

for dismissing a complaint under Rule 12(b)(6). Since

it seems as though all that happened on remand was

error, setting those errors aside, it looks like nothing

happened on remand at all. And if nothing significant

happened, another quick remand (perhaps to a different judge) would be appropriate. But we don’t think

that’s the right result.

One obvious way a case advances is by a court’s

orders, but that’s not the only way, of course. Critical

here (and also obvious) is that a party’s concession or a

party’s inaction can change a case. And that is what has

happened here. Consider what Nelson did not do on

remand. Nelson did not ask the district court to vacate

Judge Kocoras’ dismissal of his abuse-of-process claim.

Nelson did not amend his complaint to allege something that did not depend on abuse of the bankruptcy process. Most importantly, perhaps, Nelson concedes that his abuse-of-process claim is gone and he

concedes that if his state-law claims turn on abuse of

the bankruptcy process, those claims are gone too. Well,

we have said that Nelson’s state-law claims (unchanged
No. 11-1792 7

since RTI-1) turn on his abuse-of-process claims. We’ve

said it repeatedly (and, for good measure, so did Judge

Gettleman). And that means Nelson has no good claims

and his case must be dismissed.

In RTI-1 we concluded that Judge Kocoras’ dismissal

with prejudice of Nelson’s abuse-of-process claim did

not entail dismissal of Nelson’s state-law claims. Now we

think it does, but not because we’re reversing ourselves.

It would have been improper to dismiss Nelson’s case

in RTI-1 because in RTI-1 we mooted and vacated

RTI’s adversary case and, by doing so, undermined

Judge Kocoras’ dismissal of Nelson’s abuse-of-process

claim. After RTI-1, Nelson could have moved to vacate

that dismissal. But he didn’t and it’s too late now.

Instead, Nelson doubled-down on the same complaint

we said depended on abuse of process and (again)

argued that his state-law claims turn on events outside

the bankruptcy. We explained in great detail in RTI-1,

601 F.3d at 725-27, why Nelson’s pre- and post-petitionconduct argument is a loser and we won’t repeat that

discussion here.

Whatever the basis for Judge Kocoras’ dismissal of

Nelson’s abuse-of-process claim, its preclusive effect

has become a fixed point in this case—by Nelson’s concessions and by Nelson’s inaction. Nelson has no claim

against CHSWC that does not depend on abuse of the

bankruptcy process. And that means Nelson has no

good claims against CHSWC. 

AFFIRMED.

6-29-12