Court Opinion

ID: 2917527
Source: CourtListenerOpinion
Date Created: 2015-09-10 22:00:46.984397+00
Date Added: 2024-06-11T15:21:44.171694
License: Public Domain

In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 13-3837
KEVIN B. DUFF, as Receiver for
Central Sleep Diagnostics, LLC,
                                                   Plaintiff-Appellee,

                                 v.

CENTRAL SLEEP DIAGNOSTICS, LLC, et al.,
                                                          Defendants.

APPEAL OF: GOODMAN TOVROV HARDY & JOHNSON LLC
                     ____________________

         Appeal from the United States District Court for the
           Northern District of Illinois, Eastern Division.
           No. 10 C 6162 — Rebecca R. Pallmeyer, Judge.
                     ____________________

 ARGUED SEPTEMBER 15, 2014 — DECIDED SEPTEMBER 10, 2015
                ____________________

   Before FLAUM, KANNE, and SYKES, Circuit Judges.
   SYKES, Circuit Judge. At the request of defrauded investors
and creditors, a district judge ordered Central Sleep Diag-
nostics, LLC, into receivership in November 2010 and issued
a stay against “all civil legal proceedings of any nature”
involving Central Sleep, its promotor Kenneth Dachman, his
2                                                No. 13-3837

wife, and the other defendants in the underlying fraud case.
The receivership was closed in December 2013, and the
victims received pennies on the dollar for their claims.
    Adam Goodman was a former attorney for Central Sleep
and one of its creditors based on an unpaid bill for legal
services. Early in the federal proceedings, Goodman correct-
ly anticipated that the receivership would be unable to pay
claims in full, so he attempted to outmaneuver the receiver.
He obtained a judgment for the unpaid fees and submitted a
claim to the receiver. But he also filed a lien against the
proceeds of a medical-malpractice lawsuit the Dachmans
had filed in state court. Both the lawsuit and the lien fla-
grantly violated the district judge’s stay order. Neither
Goodman nor the Dachmans informed the receiver or the
judge of these developments.
    That’s not all. The receiver eventually learned of the
medical-malpractice suit and recovered the settlement
proceeds for the receivership estate. When the receiver later
proposed a plan of distribution, Goodman objected. He
argued that his lien entitled him to be paid in full directly
from the proceeds of the medical-malpractice suit, rather
than pro rata from the receivership estate like the other
creditors. The judge rejected this argument but offered
Goodman the opportunity to post a supersedeas bond to
delay distribution of the receivership estate pending appeal,
should he wish to seek review of her decision. Goodman did
not post a bond. The judge approved the receiver’s distribu-
tion plan and the funds were distributed.
   With the receivership estate now fully distributed and
the receivership closed, Goodman asks us to overturn the
judge’s approval of the plan and reopen the receivership to
No. 13-3837                                                   3

permit him to recover the full amount of his claim. We
decline this request, affirm the district court’s order, and
grant the receiver’s motion for sanctions against Goodman
and his law firm under Rule 38 of the Federal Rules of
Appellate Procedure.

                        I. Background
    On August 31, 2010, investors in Central Sleep filed suit
in Cook County Circuit Court against the company; Kenneth
Dachman, its promoter; Dachman’s wife, Katherine Lynn
Dachman; and several others. The suit asserted claims for
fraud, RICO violations, conversion, fraudulent conveyance,
civil conspiracy, and securities fraud. Dachman was also
criminally charged and convicted for his fraudulent conduct.
See United States v. Dachman, 743 F.3d 254 (7th Cir. 2014)
(affirming a 120-month prison sentence against Kenneth
Dachman for related wire-fraud convictions). He spent the
funds he stole from investors on “a tattoo parlor; family
vacations and cruises to Italy, Nevada, Florida, and Alaska; a
new Land Rover; rare books; and to fund personal stock
trading and gambling.” Id. at 256.
    In the civil case, the investors requested equitable relief,
including disgorgement of profits and the appointment of a
receiver to marshal the company’s remaining assets, collect
amounts owed to it, and distribute the proceeds. Goodman
and his law firm, the adverse claimant-appellant in this case,
represented the defendants and removed the case to federal
4                                                     No. 13-3837

court. 1 The defendants fired Goodman soon after, but not
before racking up a $28,205.36 bill for legal services.
   On November 1, 2010, the district judge appointed
James E. Sullivan as receiver for Central Sleep. Along with
other creditors, Goodman received notice of the receiver-
ship. Several months later, in March 2011, Goodman sued
the defendants in Cook County Circuit Court for his unpaid
legal fees. Kevin B. Duff, the appellee in this case, succeeded
Sullivan as receiver.
    On June 16, 2011, the district judge entered an order stay-
ing nunc pro tunc from October 18, 2010, “[a]ll civil legal
proceedings of any nature, including, but not limited to …
actions of any nature involving … (c) any of the
[d]efendants.” Soon thereafter the judge entered summary
judgment for the plaintiffs and awarded $2.5 million in
damages.
    The defendants did not appear in Goodman’s state-court
suit for unpaid legal fees, so on August 22, 2011, Goodman
moved for default judgment. He then sought limited relief
from the district court’s stay order, claiming that he had
been unaware of it until after he filed the default-judgment
motion when he was contacted by the receiver’s attorney.
Goodman’s motion stated that he intended “to obtain judg-
ment and begin garnishment proceedings” because
“[p]resumably, some or all of the six individual defendants
are gainfully employed.” The receiver and the plaintiffs’
attorney both opposed the motion. On September 6, 2011,

1 Goodman Law Offices LLC is now known as Goodman Tovrov
Hardy & Johnson LLC. For simplicity, we refer to Goodman personally
throughout this opinion.
No. 13-3837                                                 5

the judge entered an order granting limited relief from the
stay: “Motion for limited relief from [the stay order] granted
without prejudice to objections, if any, that may be asserted
should movant succeed in recovering money from
Mr. Dachman and his co-[d]efendants.”
   On September 11, 2011, Goodman obtained a default
judgment against Central Sleep Diagnostics for $28,205.36,
along with an assessment of $394 in costs. On March 14,
2012, he obtained default judgments against the individual
defendants for $28,205.36 plus $1,282.14 in costs (with an
additional $2,100 against Katherine Dachman).
    In September 2012 Goodman filed a claim with the re-
ceiver for these amounts plus postjudgment interest, along
with a claim-verification form. The form, signed by Good-
man, stated in part:
      Claimant/creditor acknowledges and agrees
      that by submitting this claim verification form,
      claimant/creditor subjects his/her/its claim to
      the jurisdiction of the U.S. District Court for
      the Northern District of Illinois, Eastern Divi-
      sion, which is administering the Receivership
      Estate (“Receivership Court”). Claimant/
      creditor further agrees that his/her/its claim
      shall be adjudicated, determined and paid as
      ordered by the Receivership Court. Claimant/
      creditor further consents to, and understands
      that the Receivership Court will determine:
      (i) his/her/its right to any money from the Re-
      ceivership Estate, if any is available; (ii) the
      priority of his/her/its claim; (iii) the scheduling
      and allocation of any assets to be distributed;
6                                                           No. 13-3837

        and (iv) all objections and disputes regarding
        the allowance of his/her/its claim by the Re-
        ceiver, which shall be submitted to and subject
        to review by the Receivership Court for a final
        ruling without a jury.
    Around the same time, Goodman learned that the
Dachmans had filed a medical-malpractice lawsuit in Cook
County Circuit Court against a physician and his medical
practice. That suit—captioned Dachman v. Buyer, 2012 L
004568—was filed by a different law firm with no connection
to Goodman (as far as we can tell). The receiver and the
district judge were completely unaware that the Dachmans
had filed this action, which was a flagrant violation of the
stay order. Goodman didn’t tell them either.
    Instead, on November 5, 2012, Goodman filed a lien in
the Buyer case against the Dachmans’ interest in any judg-
ment proceeds. This too violated the district court’s stay
order. After securing the lien, Goodman sought to improve
his odds of recovery by asking another state judge to declare
the judgment lien “spread of record.” 2 That order issued on
December 4, 2012.
    On July 22, 2013, the Buyer case settled for $305,000. The
receiver learned of the suit and settlement about a week
later, before any money was distributed to Goodman or the

2 In Illinois this procedure allows a judgment-lien creditor to perfect a
lien against a judgment. Having a judgment lien “spread of record” can
obligate defendants to pay the judgment creditor directly for amounts
the plaintiff owes the creditor, ahead of any payments to the plaintiffs
under a judgment or settlement. See Podvinec v. Popov, 658 N.E.2d 433 (Ill.
1995).
No. 13-3837                                                  7

Dachmans. He filed an emergency request with the district
court to freeze the settlement funds and impose a judicial
lien. On July 30 the judge ordered a temporary freeze of the
settlement proceeds. Two weeks later she granted the re-
ceiver’s request to impose a lien and directed the Dachmans’
medical-malpractice firm to place the $305,000 settlement
proceeds in the receiver’s trust account. The firm complied,
though it later received a portion of the settlement as legal
fees.
    On September 6, 2013, the receiver filed a plan of distri-
bution proposing a pro rata payout of the receivership
estate, after legal and accounting fees. The plan included the
Buyer settlement proceeds in the receivership estate; indeed,
the settlement was the largest asset in the estate. As relevant
to this appeal, the plan also excluded interest, court costs,
and collection-related attorney’s fees from the claim calcula-
tions. The claimants were identified by number in the public
record to protect their privacy; the receiver submitted their
names to the court in camera.
    Goodman opposed the receiver’s plan of distribution, ar-
guing that his lien entitled him to recover his entire claim
amount, plus court costs and interest, directly from the Buyer
settlement, ahead of all other claimants. He also objected to
keeping the identity of the other claimants confidential. The
judge rejected these arguments, and on October 24, 2013,
denied Goodman’s motion to hold back funds from the
distribution pending an appeal. She set a supersedeas bond
of $250,000 “[s]hould Mr. Goodman file an appeal.”
  Goodman never posted the $250,000 supersedeas bond.
On November 19, 2013, the judge approved the receiver’s
amended distribution plan, which listed a total receivership
8                                                 No. 13-3837

estate of $403,882.68. The judge explicitly found that the
Buyer proceeds were properly part of the receivership estate
and that Goodman had no greater right of recovery than any
other creditor. In the weeks that followed, the estate was
fully distributed. Goodman received his pro rata share:
$1,733.50. In the meantime, he filed a notice of appeal. The
receivership was formally terminated on December 31, 2013.

                        II. Discussion
    Goodman argues that the district court erred (1) by dis-
regarding his “perfected lien” against the Buyer settlement
proceeds, and (2) by approving a distribution plan that
“crammed down” his claim (that is, excluded postjudgment
interest and costs) and omitted the names of the other claim-
ants from the public record. The receiver responds that the
distribution of the entirety of the receivership estate moots
Goodman’s appeal and that, in any case, the appeal is frivo-
lous. By separate motion he asks for sanctions against
Goodman under Rule 38 of the Federal Rules of Appellate
Procedure.

A. Mootness
   The receiver argues that the distribution of all the receiv-
ership assets moots Goodman’s appeal. The appeal is not
moot in the constitutional sense. Goodman asks us to reverse
the district court’s order approving the plan and to reopen
the receivership. If we were to agree, Goodman might ask
the district court to exercise “equitable powers to recover
erroneous distributions.” In re Vlasek, 325 F.3d 955, 962 (7th
Cir. 2003). The district court also would have the power
No. 13-3837                                                   9

(though certainly not the obligation) to allow Goodman to
sue the receiver personally for making an illegal distribution.
Cf. In re Linton, 136 F.3d 544, 545 (7th Cir. 1998) (upholding a
bankruptcy judge’s denial of leave to sue a bankruptcy
trustee, while recognizing that “[t]he trustee in bankruptcy
is a statutory successor to the equity receiver, and it ha[s]
long been established that a receiver could not be sued
without leave of the court that appointed him”). In short,
Goodman has a personal stake in the outcome and at least
some arguably available remedial options to maintain a
justiciable claim under Article III of the Constitution. See
Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523, 1528
(2013) (internal quotation marks omitted).
    The receiver also invokes another doctrine, sometimes
confused with constitutional mootness, known as “equitable
mootness.” This doctrine “essentially derives from the
principle that in formulating equitable relief[,] a court must
consider the effects of the relief on innocent third parties.”
SEC v. Wealth Mgmt. LLC, 628 F.3d 323, 331 (7th Cir. 2010)
(quotation marks omitted); accord United States v. Segal,
432 F.3d 767, 773–74 (7th Cir. 2005); SEC v. Wozniak, 33 F.3d
13, 15 (7th Cir. 1994), overruled on other grounds by SEC v.
Enter. Trust Co., 559 F.3d 649 (7th Cir. 2009). An appellate
court may properly refuse to decide the merits of a challenge
to a bankruptcy or receivership plan where unwinding the
plan (even if legally justifiable) would be difficult and
inequitable in light of the complexity of the transactions and
the reliance interests involved. This is not “real mootness”;
the court has jurisdiction to alter the outcome, but equitable
considerations make it unfair or impracticable to intervene.
See In re UNR Indus., 20 F.3d 766, 769 (7th Cir. 1994) (distin-
10                                                 No. 13-3837

guishing the concept of equitable mootness from “real
mootness”).
    In evaluating the receiver’s argument for equitable
mootness, the two key factors are “(1) the legitimate expecta-
tions engendered by the plan; and (2) the difficulty of revers-
ing the consummated transactions.” Wealth Mgmt., 628 F.3d
at 332. This fact-intensive inquiry weighs “the virtues of
finality, the passage of time, whether the plan has been
implemented and whether it has been substantially con-
summated, and whether there has been a comprehensive
change in circumstances.” Segal, 432 F.3d at 774 (citing cases)
(quotation marks omitted).
   The reliance interests of the other claimants in this case
seem quite significant. We cannot say with certainty how
significant because the extent of their reliance is partly a
function of their current personal circumstances, which the
record before us does not disclose. See, e.g., In re Envirodyne
Indus., 29 F.3d 301, 304 (7th Cir. 1994) (noting an insufficient
record on “whether modification of the plan … would bear
unduly on the innocent”). We know that some of the claim-
ants are elderly, and many were very badly harmed by
Dachman’s fraud. They received about six cents for every
dollar of their approved claims against Central Sleep. The
investor with the greatest loss, whose claim of $625,000 was
approved by the receiver, recovered only around $38,000
from the estate. A clawback for Goodman would cost the
others more than 10% of their already meager recovery.
    The other claimants also have a right to expect to keep
what they received. The plan has been not only “substantial-
ly consummated,” Segal, 432 F.3d at 774, but fully consum-
mated, and the receivership is now closed. The claimants
No. 13-3837                                                    11

know that Goodman never posted a supersedeas bond after
his arguments failed and his request for a holdback was
rejected by the district court. And as far as we can tell, the
other claimants (unlike Goodman) did not try to impede the
receivership. The “legitimate expectations engendered by
the plan” weigh against our consideration of Goodman’s
appeal. Wealth Mgmt., 628 F.3d at 332.
     The difficulty of undoing the transaction is a closer call.
In some respects this plan may be simpler to unwind than
others this court has seen. Most importantly, this plan
involved distribution of cash, which is easy to count and
value, unlike stock distributions or asset sales. Cf. Segal,
432 F.3d at 774 (sale of a former business, with consequences
for employees and competitors); In re Envirodyne Indus.,
29 F.3d at 304 (distributions of stock, some of which were
already sold); In re UNR Indus., 20 F.3d at 769 (stock sale).
Because there is nothing left of Central Sleep, there are no
investors in a reorganized business whose interests would
be negatively affected. So there is less risk that in future
receivership proceedings similarly placed investors will
underpay for receivership assets out of concern that further
litigation may reduce asset value. Cf. In re UNR Indus.,
20 F.3d at 770.
    In addition, the number of claimants, the sum of money
at stake, and the size of the distribution plan are all relatively
small. Goodman would seek to claw back from the 50 other
claimants approximately $30,000, minus the $1,700 he has
already recovered. The claimants received total distributions
that add up to about $243,000. Cf. Wealth Mgmt., 628 F.3d at
332 ($4.2 million was already distributed to 300 investor-
claimants); In re Envirodyne Indus., 29 F.3d at 303 ($141
12                                                  No. 13-3837

million in stock was already distributed to noteholders); In re
UNR Indus., 20 F.3d at 769 (15 million shares of stock traded
in public markets were already distributed). If he were
successful on appeal, Goodman could seek about $8,400 total
from the two claimants with the largest distributions; the
remaining $19,900 would have to come from everyone else—
an average of around $400 per claimant.
    But when we consider the difficulty of unwinding the
receivership distribution in an equitable sense, we are
mindful of the cumulative practical costs this choice would
impose on the participants in the plan. When recovery
amounts get this small—an average of $400 each from most
of the claimants—there is a real possibility that the net social
value of a partial do-over would be negative. A claimant
who prevails on appeal doesn’t internalize the costs that his
efforts to claw back distributions would impose on everyone
else, so we cannot simply rely on Goodman to stop collect-
ing when the total costs exceed the remaining potential
recovery. (This point is reinforced by Goodman’s litigation
behavior to date.) So while in some cases smaller sums of
money and fewer participants in a receivership plan could
lessen the reviewing court’s practical concerns, here the
difficulty of reversing this transaction—from equitable and
practical perspectives—tips in favor of preserving the status
quo.
   Because Goodman’s appeal is patently frivolous on the
merits, however, we need not come to a firm conclusion
about equitable mootness. See Wealth Mgmt., 628 F.3d at 332
(concluding that “we need not take the analysis any further”
because the district court’s decision was being affirmed on
the merits); Segal, 432 F.3d at 774 (deciding that the difficulty
No. 13-3837                                                  13

in “determin[ing] the precise effects” of trying to unwind the
settlement “prevents us from conclusively holding … that it
would be foolish for us to even consider reversing the deal”);
In re Envirodyne Indus., 29 F.3d at 304 (stating that if there
were doubts about the lack of merit to the appellant’s argu-
ment, the court would remand the case to the district court
to determine the effect of modifying the plan on the other
participants). We therefore proceed to the merits of Good-
man’s claims.

B. The Merits
   1. The “Perfected Lien” Claim
    Because the district court has “broad equitable power in
this area,” we review the court’s decision approving the
distribution plan deferentially, for abuse of discretion.
Wealth Mgmt., 628 F.3d at 332. Goodman argues that the
judge erred in rejecting his claim to preferential treatment
based on his “perfected lien” against the settlement proceeds
in the Dachmans’ medical-malpractice case. He boasts that
he “found the medical malpractice case about nine months
before Mr. Duff did, and perfected a security interest in it
long before Mr. Duff was even aware that the case existed.”
    As legal support for this argument, Goodman relies
largely on the Full Faith and Credit Act, which requires
federal courts to give the judicial acts of the states “the same
full faith and credit … as they have by law or usage in the
courts of such State, Territory or Possession from which they
are taken.” 28 U.S.C. § 1738. Goodman contends that the
district court violated the Act by failing to recognize and
accord priority to his state-court lien.
14                                                   No. 13-3837

    The first obvious problem with Goodman’s argument is
that the Full Faith and Credit Act does not apply when the
claim or issue before a federal court was never actually
decided in state court. Applying the Full Faith and Credit
Act requires “tak[ing] up the question: What matters did the
[state-court judgment] legitimately conclude?” Baker by
Thomas v. Gen. Motors Corp., 522 U.S. 222, 237 (1998). Here,
there is no state-court judgment addressing the relative
priority of Goodman’s claim to the Buyer settlement pro-
ceeds as against the receiver’s. The state court’s order
spreading the lien of record meant only that Goodman
should have priority over the plaintiffs in the case—that is,
the Dachmans. The state court never considered, much less
decided, whether Goodman or the receiver would have
priority. How could it? Goodman never informed the state
judge of the receivership, nor did he give the receiver notice
of the state proceedings.
    The district judge therefore had no need to address the
validity of Goodman’s lien when deciding that the Buyer
proceeds belonged to the receivership estate; it was suffi-
cient that the receiver had a superior claim. And the receiv-
er’s claim was properly prioritized over Goodman’s later
“perfected lien.” Receivers can displace even prior security
interests in receivership property in some circumstances. See,
e.g., Gaskill v. Gordon, 27 F.3d 248, 251 (7th Cir. 1994) (priori-
tizing a receiver’s lien for fees over a preexisting mortgage
where the mortgagee acquiesced in the receivership). A
receivership court can certainly use its equitable powers to
give the receiver’s judgment priority over a state-court lien
obtained by a claimant subsequent to that judgment.
No. 13-3837                                                    15

    In any event, because Goodman obtained the lien in vio-
lation of the district court’s order, the judge could simply
disregard the lien. This is the second glaring problem with
Goodman’s argument. In her September 2011 order, the
judge lifted the stay for a narrowly limited purpose. Good-
man was permitted to obtain a state-court judgment and
perhaps garnish the defendants’ wages, subject to objections
by the receiver. Because Goodman’s motion to lift the stay did
not request permission to pursue any collection actions
beyond this, the federal stay remained in effect with respect
to other potential sources of recovery, including the pro-
ceeds of the Buyer case. And the September 2011 order
partially lifting the stay was specifically conditioned on the
receiver’s right to object to Goodman’s efforts in state court;
under no reading of that order was Goodman authorized to
perfect a lien against the Buyer proceeds without giving the
receiver notice and an opportunity to object.
    The Full Faith and Credit Act directs courts to apply the
“law or usage in the courts” of the rendering state in analyz-
ing the preclusive effect of state-court judgments. 28 U.S.C.
§ 1738; see also Marrese v. Am. Acad. of Orthopaedic Surgeons,
470 U.S. 373, 380 (1985); Czarniecki v. City of Chicago, 633 F.3d
545, 548 n.3 (7th Cir. 2011). Illinois courts do not enforce
liens obtained in violation of a federal stay. See, e.g., Cohen v.
Salata, 709 N.E.2d 668, 672 (Ill. App. Ct. 1999) (vacating a
lower-court order after deciding that a bankruptcy automat-
ic stay order had deprived the state court of subject-matter
jurisdiction over the claim in the first place). Goodman does
not argue otherwise; instead he maintains that he never
violated the stay in obtaining or perfecting the lien. For the
reasons we’ve already explained, that claim cannot be taken
seriously.
16                                                No. 13-3837

   Goodman also altogether ignores the fact that the mal-
practice case itself was from beginning to end conducted by
the Dachmans in violation of the federal stay. We could
easily affirm on this basis too. A state-court action that
violates a federal stay order is voidable in federal court, if
not void ab initio. See Middle Tenn. News Co. v. Charnel of
Cincinnati, Inc., 250 F.3d 1077, 1082 n.6 (7th Cir. 2001) (ac-
knowledging debate between circuits over whether actions
taken in violation of a bankruptcy automatic stay order “are
void or merely voidable”); accord Kimbrell v. Brown, 651 F.3d
752, 755 (7th Cir. 2011). Irrespective of Goodman’s own
violation of the stay order, the Dachmans’ violation of the
stay brought the proceeds of that action properly within the
discretion of the receivership court.
   Because Goodman has given us no nonfrivolous argu-
ment to support his claim that the district court erred in
disregarding his “perfected lien,” we will not disturb the
court’s reasonable inclusion of the entire Buyer settlement in
the receivership estate without regard to the lien.

     2. Other Challenges to the Plan of Distribution
    Goodman raises two additional challenges to the judge’s
approval of the receiver’s distribution plan. First, he argues
that the judge erred in approving a plan that “crammed
down” his claim by excluding postjudgment interest and
court costs. Second, he argues that the decision to keep the
claimants’ identities out of the public record was improper.
These claims are equally flimsy.
   Goodman asserts that because his state-court default
judgment against Central Sleep awarded court costs and
No. 13-3837                                                  17

Illinois law allows postjudgment interest, 735 ILL. COMP.
STAT. 5/2-1303, those amounts must be recognized as part of
his claim in the receivership proceedings. Again he relies on
the Full Faith and Credit Act, but he makes a number of
obvious errors in his analysis. For starters, the district judge
never questioned either the validity of the state-court judg-
ment or its amount. And Goodman continues to overlook
the fact that his ability to execute on his state-court judgment
was strictly limited by the terms of the district judge’s
September 2011 order granting relief from the stay and his
consent to the equitable jurisdiction of the receivership
court. To repeat: the judge’s order granted Goodman limited
relief from the stay subject to objections by the receiver. The
receiver’s proposed plan of distribution disallowed, as a
matter of equity, Goodman’s claim of entitlement to court
costs and postjudgment interest, something other claimants
could not receive. The judge was entitled to agree.
    Goodman hasn’t explained how the judge otherwise
abused her discretion. His inability to do so is no surprise;
the judge’s approval of the plan was clearly correct. The
exclusion of this small portion of Goodman’s claim was
entirely appropriate because many claimants were prevent-
ed by the district court’s stay order from filing state-court
actions. Other claimants had filed the receivership action in
the first place and also could not separately pursue their
claims in state court. To treat the claimants equally across
the board, the final distribution plan reasonably excluded
claim amounts attributable to penalties, interest, and attor-
ney’s fees.
   Goodman’s argument with respect to the confidentiality
of claimants’ identities fares no better. A district court’s
18                                                No. 13-3837

decision to keep a litigant’s name confidential is reviewed for
abuse of discretion. Doe v. Elmbrook Sch. Dist., 658 F.3d 710,
721–24 (7th Cir. 2011), reversed on other grounds en banc,
687 F.3d 840, 842–43 (7th Cir. 2012) (adopting the panel’s
analysis on anonymity). We are at least as deferential to a
decision to keep other aspects of the record under seal.
Goodman mounts only a feeble challenge to the judge’s
decision, citing a single case, Mueller v. Raemisch, 740 F.3d
1128 (7th Cir. 2014), and relying on generalized references to
bankruptcy-court practice. Neither Mueller nor general
bankruptcy practice helps him here.
    While secrecy in judicial proceedings is generally disfa-
vored (as we made clear in Mueller, see 740 F.3d at 1135–36),
Goodman makes no effort to explain why the limited confi-
dentiality allowed here is not appropriate in the context of
this receivership. Indeed, the litigants’ names are public.
Goodman insists that the names of all the other claimants—
the victims of Dachman’s fraud—be made public. To the
extent that this argument relies on Mueller, that case is not
even remotely analogous. In Mueller we criticized a decision
to allow sex-offender plaintiffs to litigate anonymously in a
constitutional challenge to a state sex-offender registration
law. Our criticism was largely premised on the fact that their
status as sex offenders was already a matter of public record;
we also noted they were perpetrators, not victims. See id. It
should be self-evident that this reasoning does not apply
here.
   Goodman also seeks support from general bankruptcy
practice, but the Bankruptcy Code specifically provides that
“a paper filed in a case under this title … [is a] public rec-
ord” subject to limited exceptions. 11 U.S.C. § 107(a). A
No. 13-3837                                                    19

federal receivership is not governed by the Bankruptcy
Code. Goodman has not explained why a receivership
court’s broad discretion does not include the discretion to
treat as confidential the names of the claimants. Nor has he
given us any reason to think that the judge abused her
discretion here.

C. Rule 38 Sanctions
    Rule 38 of the Federal Rules of Appellate Procedure al-
lows us to “award just damages and single or double costs”
when an appeal is frivolous. Rule 38 sanctions compensate
the aggrieved party and deter future frivolous appeals.
McCoy v. Iberdrola Renewables, Inc., 769 F.3d 535, 536–37 (7th
Cir. 2014). An appeal is frivolous “when the result is obvious
or when the appellant’s argument is wholly without merit.”
Id. at 538. Sanctions may also be appropriate if an appeal is
filed for an inappropriate purpose, In re Hendrix, 986 F.2d
195, 201 (7th Cir. 1993), or if the arguments made are merely
cursory, Clark v. Runyon, 116 F.3d 275, 279 (7th Cir. 1997). We
do not impose Rule 38 sanctions lightly, however. Reasona-
ble lawyers often disagree, and “this court’s doors are open
to consider those disagreements brought to us in good
faith.” Harris N.A. v. Hershey, 711 F.3d 794, 801 (7th Cir. 2013).
    Rule 38 requires either notice from the court or a separate
motion by the appellee, and a reasonable opportunity to
respond. The receiver filed a separate Rule 38 motion and
Goodman has responded. In light of the record and Good-
man’s oral argument, we conclude that the appeal is both
frivolous and deserving of sanction.
20                                                   No. 13-3837

    As we’ve explained, much of Goodman’s briefing is
based on his obvious misunderstanding of the Full Faith and
Credit Act. We’re particularly troubled, however, by Good-
man’s inexplicable insistence that he owed no duty to keep
the district judge or the receiver informed of his activities in
state court. We emphasize again that the judge granted only
limited relief from the stay for Goodman to obtain a judg-
ment and garnish wages, and this limited relief was explicit-
ly conditioned on the receiver’s right to object. As an officer
of the court, Goodman surely understood his obligation to
respect this order. Instead he ignored it, and he advances an
argument that would have us treat its limitations as mean-
ingless.
    Goodman’s challenge to the confidentiality of the claim-
ants’ identities is just as problematic. He argued in his
principal brief that the receiver implemented a “secret
claims-handling process” in which even the district judge
herself was denied access to the claimants’ identities. That is
false. If he had simply read the receiver’s explanation of the
distribution plan, he would have known that the receiver
submitted the claimants’ identities to the district court in
camera. The receiver noted Goodman’s error in his response
brief. To his credit, in his reply brief Goodman retracted this
wild and unfounded argument. But that doesn’t make up for
his lack of care in the first place. And as we’ve noted, his
legal authority for this claim is woefully inadequate.
    These are indications that Goodman’s appeal was not on-
ly frivolous but egregiously so. There are compelling indica-
tions of lack of diligence or, just as likely, outright bad faith.
Goodman’s failure to post a supersedeas bond pursuant to
the district court’s order ensured that the receivership funds
No. 13-3837                                               21

were fully distributed by the time the case reached us.
Goodman’s insistence on pursuing this appeal thus put the
receiver to needless personal expense. Because the receiver-
ship estate no longer contains any assets, Duff’s counsel was
forced to defend the appeal pro bono.
    This discussion leaves little doubt that Goodman’s appeal
is frivolous and sanctionable under Rule 38. The receiver
may submit, within 28 days of the issuance of this opinion,
an affidavit and supporting papers specifying his damages
from this frivolous appeal. Goodman may file a response not
later than 28 days of the receiver’s submission.
                             AFFIRMED; SANCTIONS ORDERED.