Court Opinion

ID: 6324336
Source: CourtListenerOpinion
Date Created: 2022-03-17 18:01:57.279887+00
Date Added: 2024-06-11T09:21:51.273109
License: Public Domain

NONPRECEDENTIAL DISPOSITION
                To be cited only in accordance with FED. R. APP. P. 32.1

                United States Court of Appeals
                                For the Seventh Circuit
                                Chicago, Illinois 60604

                               Submitted March 10, 2022 *
                                Decided March 17, 2022

                                         Before

                    DIANE P. WOOD, Circuit Judge

                    MICHAEL Y. SCUDDER, Circuit Judge

                    CANDACE JACKSON-AKIWUMI, Circuit Judge

No. 21-2289

ROBERT J. HUTCHINSON,                           Appeal from the United States District
    Plaintiff-Appellant,                        Court for the Eastern District of Wisconsin.

      v.                                        No. 20-CV-1264

AMERICAN ASSOCIATION FOR                        Nancy Joseph,
LABORATORY ACCREDITATION,                       Magistrate Judge.
INC, et al.,
      Defendants-Appellees.
                                       ORDER

       Robert Hutchinson and Thomas Tefelske, who co-owned Metallurgical
Associates, Inc., reached a court-approved settlement in Wisconsin after a dispute about
their business. Dissatisfied with the state court’s resolution, Hutchinson has sued in
federal court the parties (and others) connected with the state case. He alleges that the

      *
        We have agreed to decide the case without oral argument because the briefs and
the record adequately present the facts and legal arguments, and oral argument would
not significantly aid the court. FED. R. APP. P. 34(a)(2)(C).
No. 21-2289                                                                           Page 2

court-confirmed settlement authorized them to steal assets from Metallurgical. The
district court correctly dismissed the suit in part for lack of subject-matter jurisdiction
and in part for failure to state a claim; therefore we affirm.

       The state case settled in 2016. Hutchinson initiated that suit by asking a state
court to appoint a receiver to manage Metallurgical’s debts. During the receivership,
Tefelske bought some of that business’s assets. Hutchinson, however, disputed whether
Tefelske could lawfully buy Metallurgical’s client records, which Hutchinson believed
were exempt from sale. They eventually reached a settlement, the terms of which the
state court read into the record and incorporated into an order in December 2016. The
order states that Hutchinson agreed to sell the “business books and records” to
Tefelske, and “[t]hese records include, but are not limited to, all customer and job files.”

       Hutchinson unsuccessfully moved to reopen the state judgment. In his view, the
settlement did not decide the ownership of the client records; it merely allowed
Tefelske’s company to control and use the client records, which Hutchinson claimed to
own. The Wisconsin court denied his motion, and the Wisconsin Court of Appeals
affirmed. See Old Metallurgical Assocs., Inc. v. New MAI, Inc., 2019 WI App 21, 386 Wis.
2d 630, 927 N.W.2d 929 (unpublished slip op.) (per curiam).

       Unhappy with the state court’s decision, Hutchinson turned to federal court. He
alleges that Tefelske unlawfully acquired the client records when the state court signed
the order confirming the sale of the records to him. He accuses the receiver and others
of conspiring to “surreptitiously slip[]” that order into a “stack” of orders resolving the
receivership. He also accuses an accreditation association of improperly transferring to
Tefelske’s new company a certificate accrediting the laboratory and equipment that
Tefelske bought from Metallurgical. He invokes the Racketeer Influenced and Corrupt
Organizations Act, see 18 U.S.C. §§ 1961(3), 1962(d), 1964(c), 42 U.S.C § 1985, and state-
law claims of conversion, fraudulent inducement, and fraud.

        The district court (through a magistrate judge presiding by consent) dismissed
the suit. It concluded that most of Hutchinson’s claims sought to challenge the state
court’s December 2016 order adopting the settlement agreement. Those claims, it
reasoned, were blocked by the Rooker-Feldman doctrine. See Rooker v. Fidelity Trust Co.,
263 U.S. 413 (1923); D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983). The district
court dismissed the remaining claim—against the accreditation association—for failure
to state a legal claim.
No. 21-2289                                                                         Page 3

       Hutchinson argues on appeal that Rooker-Feldman does not block any claims.
Under the Rooker-Feldman doctrine, federal district courts may not adjudicate claims
brought by “state-court losers complaining of injuries caused by state-court judgments
rendered before the district court proceedings commenced and inviting district court
review and rejection of those judgments.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp.,
544 U.S. 280, 284 (2005); 28 U.S.C § 1257. The doctrine “applies when the state court’s
judgment is the source of the injury of which plaintiffs complain in federal court.”
Harold v. Steel, 773 F.3d 884, 885 (7th Cir. 2014).

        Rooker-Feldman blocks Hutchinson’s claims. Although, as Hutchinson observes,
he was not initially a party to the state suit, he was a party to the settlement agreement,
and the state court embodied that settlement in its order of December 2016. That order
is a judgment for the purpose of Rooker-Feldman. See Johnson v. Orr, 551 F.3d 564, 568
(7th Cir. 2008). Hutchinson responds that his claim that he owns the client records is
independent of the state judgment, which he insists he does not challenge. But he wants
a federal district to rule that, contrary to the order, he owns the records. And he alleges
that his injury did not occur until the December 2016 order. That is when, in his telling,
the defendants allegedly tricked the state court into adopting the order confirming that
Tefelske’s business had acquired “all business books and records,” including “all
customer . . . files.” Thus, his injury arises precisely from that order. Under Rooker-
Feldman, Hutchinson’s remedy for harm allegedly caused by an erroneous state-court
judgment lay in a state appeal—which he pursued—not in federal district court.
See Kelley v. Med-1 Sols., LLC, 548 F.3d 600, 603 (7th Cir. 2008).

       Hutchinson also contests the dismissal of his claim against the accreditation
association for conversion under Wisconsin law. He contends that the association
wrongfully transferred to Tefelske its certificate accrediting a lab that Tefelske acquired
from their jointly-owned business. A district court normally should exercise its
discretion to dismiss without prejudice a state-law claim, rather than resolve it on the
merits, once it dismisses the federal claims that provide the sole basis for original and
supplemental jurisdiction. Al’s Serv. Ctr. v. BP Prods. N. Am. Inc., 599 F.3d 720, 727
(7th Cir. 2010). But the merits dismissal was straightforward and proper here.
Conversion in Wisconsin requires the unconsented, intentional taking of property
belonging to another. H.A. Friend & Co. v. Pro. Stationery, Inc., 2006 WI App 141, ¶ 11,
294 Wis. 2d 754, 763, N.W.2d 96, 100. Hutchinson concedes that the certification
accredits only the lab equipment and location that he admits Tefelske exclusively owns.
No. 21-2289                                                                       Page 4

He therefore cannot state a claim that the association transferred to Tefelske property
that belongs to Hutchinson.

       Hutchinson’s reply briefs raise new arguments undeveloped in his opening brief;
he has therefore waived them. Klein v. O'Brien, 884 F.3d 754, 757 (7th Cir. 2018).

      On the understanding that the federal claims, blocked by Rooker-Feldman, were
outside of the federal district court’s jurisdiction and therefore dismissed without
prejudice, the judgment of the district court is AFFIRMED.