Court Opinion

ID: 3001903
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:22:18.514565+00
Date Added: 2024-06-11T09:52:43.162498
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

Nos. 06-2186 & 07-1433
HAL D. HICKS,
                                               Plaintiff-Appellant,
                                 v.

MIDWEST TRANSIT, INC., and
HARRIS INVESTOR SERVICES, LLC,
also known as CFSBdirect,
                                            Defendants-Appellees.
                          ____________
            Appeals from the United States District Court
                 for the Southern District of Illinois.
    No. 03 C 4004—J. Phil Gilbert, and G. Patrick Murphy, Judges.
                          ____________
        ARGUED APRIL 8, 2008—DECIDED JUNE 17, 2008
                          ____________

  Before KANNE, WILLIAMS, and TINDER, Circuit Judges.
  KANNE, Circuit Judge. This opinion marks the third
published decision of this court stemming from contro-
versies that arose after Hal Hicks was sued in Illinois
state court for allegedly defrauding his company, Mid-
west Transit, Inc. (“Midwest”), when he served as its
president and director. See Hicks v. Midwest Transit, Inc.,
500 F.3d 647 (7th Cir. 2007); Hicks v. Midwest Transit, Inc.,
479 F.3d 468 (7th Cir. 2007). This time, the issue is whether
Hicks may collect damages from Harris Investor Services,
2                                     Nos. 06-2186 & 07-1433

LLC (“Harris”) for its alleged negligence in freezing
Hicks’s online stock-trading account. Harris froze Hicks’s
account pursuant to an attachment order issued by an
Illinois state court. After an Illinois appellate court invali-
dated the attachment order, Hicks filed this suit against
Harris, alleging that Harris was negligent for following
the court order. Harris filed a motion for summary judg-
ment, which the district court granted. The district court
also denied Hicks’s subsequent motion for reconsideration.
Because Harris was not negligent when it complied with
the facially valid court order, and because the motion for
reconsideration raised no new facts or issues, we affirm
both decisions.

                         I. HISTORY
   Hicks was part-owner, president, and a director of
Midwest, a closely-held corporation that provided mail-
carrying trailers to the United States Postal Service. In
2000, Hicks’s co-owners commenced a shareholders’
derivative suit against Hicks in state court in Lawrence
County, Illinois, alleging numerous violations of fiduciary
duties by Hicks when he managed Midwest, including
siphoning corporate funds into his own personal accounts
for his personal use. In 2001, the Lawrence County Cir-
cuit Court appointed a receiver, Don Hoagland, who
filed pleadings seeking a prejudgment attachment under
Illinois law of over $10 million worth of Hicks’s property.
See 735 Ill. Comp. Stat. 5/4-101. Hoagland did not post a
surety bond with the state court along with his attach-
ment request, see 735 Ill. Comp. Stat. 5/4-107; instead, he
filed a motion to attach Hicks’s assets without posting a
surety bond, claiming that his status as a court-appointed
Nos. 06-2186 & 07-1433                                        3

receiver made him an officer of the State of Illinois and
exempted him from the statute’s bond requirement, see id.
   In July 2001, the Lawrence County Circuit Court ruled
that a court-appointed receiver is an officer of the State
of Illinois, and granted Hoagland’s motion to attach
Hicks’s assets without posting a surety bond. The circuit
court then entered an order attaching Hicks’s assets,
which included an online stock-brokerage account that
Hicks maintained with Harris’s predecessors—Internet
stock brokers DLJdirect and CFSBdirect—and later with
Harris.1 The order, entered on July 26, 2001, provided on
its face the case number and caption, the signature of the
judge, and an attestation of the court clerk. The attach-
ment order described the account to attach as follows:
    Online stock trading account with DLJ Direct, a subsid-
    iary of Donaldson, Lufkin and Generette, c/o Credit
    Suisse First Boston, AT&T Corporate Center, 227 West
    Monroe Street, Chicago, IL 60606-5016, or DLJ Direct,
    a subsidiary of Donaldson, Lufkin and Generette, c/o

1
  Hicks initially opened an online trading account with
DLJdirect over the Internet in 1998. In February 2001, DLJdirect
became CFSBdirect, which became Harris in February 2002. At
the time of the July 2001 attachment order, Hicks’s account
was held by CFSBdirect. The online brokerage account allowed
Hicks to execute self-directed stock purchases and sales of
securities, which were held in “street name”—meaning they
were registered to a nominee or depositary for the ownership of
customers rather than registered to individual customers
themselves (i.e., the securities are “held electronically in the
account of the stock broker, similar to a bank account.”). See
Wikipedia, Street name securities, http://en.wikipedia.org/
wiki/Street_name_securities (last visited June 12, 2008).
4                                   Nos. 06-2186 & 07-1433

    Credit Suisse First Boston, 200 West Madison Street,
    Chicago, IL 60606.
The next day, the attachment order was served by hand at
the offices of Credit Suisse First Boston, at 227 West
Monroe Street in Chicago. The order was then faxed to
CFSBdirect’s compliance offices in New York and New
Jersey, where it was reviewed by a compliance manager.
The compliance manager considered the order to be
regular on its face, and CFSBdirect took action as di-
rected by the order—it suspended stock transactions in
Hicks’s account and preserved the stock positions held
in the account at the time of the attachment order.
   Ten days later, Hicks filed a motion with the Lawrence
County Circuit Court to vacate its order of attachment
because Hoagland had not posted bond, and when that
motion was denied, Hicks appealed the circuit court’s
decision. Over a year later, in September 2002, the
Illinois Court of Appeals for the Fifth District vacated the
circuit court’s attachment order. The Illinois Court of
Appeals held that the circuit court had erred by deeming
Hoagland, a court-appointed receiver, to be an officer of
the State of Illinois, and found that Hoagland’s failure
to post a surety bond made the order void as a matter of
law. The Illinois Court of Appeals remanded the case to
the Lawrence County Circuit Court to require Hoagland
to post a surety bond. At that point, Harris removed the
hold on Hicks’s online brokerage account.
   Hicks first filed this diversity-jurisdiction lawsuit in
the United States District Court for the Southern District of
Illinois in January 2003, seeking to recover damages
from Midwest and Hoagland for wrongfully attaching
Hicks’s assets, and from Harris for its alleged negligence
Nos. 06-2186 & 07-1433                                      5

in complying with the invalid attachment order. After
several years of litigation, only the negligence claim against
Harris remained. In this count of the complaint, Hicks
alleged that Harris had duties “to investigate the allega-
tions set forth in the Attachment Orders, to challenge
the improper process served upon it . . . and to other-
wise take steps [to] safeguard and protect the Hicks’
Account.” The complaint claimed that Harris was negli-
gent for breaching these duties.
  The case proceeded before Judge J. Phil Gilbert, and in
August 2005, Harris moved for summary judgment on
the negligence claim. Hicks filed a response to the
motion, which repeated many of the allegations in his
complaint and also alleged that Credit Suisse First
Boston—the entity that was served the attachment
order—was a separate and distinct legal entity from
CFSBdirect—the entity that held Hicks’s account.
  In March 2006, Judge Gilbert issued an opinion, which
held that as a matter of law, Harris’s (and its predecessors’)
duty to Hicks was limited to reasonably determining
whether the court-issued attachment order was facially
valid before complying with its terms and freezing
Hicks’s brokerage account. Judge Gilbert noted that “the
parties [had] not cited to any Illinois or Seventh Circuit
cases that have discussed the duties of a garnishee under
similar circumstances and Hicks does not dispute this
formulation,” and he explained that the Illinois stat-
utes governing attachment procedures comported with
limiting Harris’s duty in this fashion. Judge Gilbert also
concluded that “the bond requirement issue goes to the
substantive merit of the attachment order and not to
whether the order was regular on its face.” Because the
attachment order’s invalidity stemmed from Hoagland’s
6                                   Nos. 06-2186 & 07-1433

failure to post a surety bond and not from any facial
defect, Judge Gilbert held that Hicks had not raised a
genuine issue of material fact on the “reasonableness of
Harris’s conclusion that the attachment order was
facially valid as a result of the bond issue.” As for
Hicks’s improper-service-of-process argument, Judge
Gilbert noted that service upon Harris was proper as a
matter of Illinois statutory law and under the Uniform
Commercial Code as codified in Illinois. Judge Gilbert
then granted Harris’s motion for summary judgment
without hearing argument on the matter. Hicks timely
filed a notice of appeal from this ruling in April 2006.
  In August 2006, Hicks filed a motion for reconsidera-
tion with the district court, pursuant to Federal Rule of
Civil Procedure 60(b). This motion was based upon “critical
documents” that were not part of the summary-judgment
record. Hicks alleged that these documents proved that
service of the attachment order was improper: Hicks
claimed that Harris had misrepresented the corporate
structure of Credit Suisse First Boston because the later-
produced documents proved that CFSBdirect was a
separate entity from Credit Suisse First Boston, which,
Hicks argued, meant that the attachment order was never
properly served on CFSBdirect. In September 2006, Judge
Gilbert recused himself, and the case was reassigned to
then Chief Judge, G. Patrick Murphy. After reviewing the
entire record, Judge Murphy concluded in February 2007
that “nothing justifies relief from the judgment” because
“the late discovery responses only verify and corroborate
facts that were already before the Court.” Judge Murphy
then denied Hicks’s motion for reconsideration. Hicks filed
a notice of appeal from that ruling as well, and we consoli-
dated the appeals.
Nos. 06-2186 & 07-1433                                    7

                       II. ANALYSIS
   On appeal, Hicks reiterates the argument raised in his
complaint that the attachment order was invalid because
Hoagland failed to post a surety bond, and that conse-
quently, Harris was negligent for complying with the
invalid order. Hicks claims that the district court erred
when it granted summary judgment to Harris because
CFSBdirect was never personally served with the Lawrence
County Circuit Court’s attachment order. Hicks also
maintains that the attachment order was “illegal and void”
because “[the order] improperly attempted to attach
and/or levy monies that were outside of Lawrence County,
Illinois.” Lastly, Hicks contends that the district court
should have granted his motion to reconsider because
the summary-judgment order was predicated on
“false, incorrect, and/or misleading” facts submitted by
Harris.

A. The district court’s grant of summary judgment to Harris
   We review the district court’s grant of summary judg-
ment de novo, viewing all facts in the light most favorable
to Hicks. See Kannapien v. Quaker Oats Co., 507 F.3d 629,
635 (7th Cir. 2007). Summary judgment is appropriate
where “the pleadings, the discovery and disclosure mate-
rials on file, and any affidavits show that there is no
genuine issue as to any material fact and that the movant
is entitled to judgment as a matter of law.” Fed R. Civ. P.
56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986). “ ‘We may affirm summary judgment on any
basis we find in the record.’ ” Garg v. Potter, 521 F.3d
731, 736 (7th Cir. 2008) (quoting Winters v. Fru-Con Inc.,
498 F.3d 734, 743 (7th Cir. 2007)).
8                                     Nos. 06-2186 & 07-1433

  Hicks has never challenged the district court’s formula-
tion of Harris’s duty under Illinois law—that Harris had
no duty to look beyond the face of the attachment order to
ascertain its validity. Hicks has therefore waived any
argument on that point. See Garg, 521 F.3d at 736. And
Hicks’s waiver is the death knell to his appeal because
all of Hicks’s arguments allege deficiencies in the attach-
ment order that would not be evident from its face.
   “[T]he phrase ‘regular on its face,’ means nothing more
than what it says: legal process whose validity, facially
judged, appears to evidence a legitimate exercise of
jurisdiction on the part of the issuing authority.” Millard
v. United States, 16 Cl. Ct. 485, 489 (1989). Certain deficien-
cies, such as lack of personal jurisdiction, require a tri-
bunal to engage in a fact-bound analysis of the defend-
ant’s contacts with the forum and its governing law,
and cannot be determined solely from the face of a docu-
ment. Cf. United States v. Morton, 467 U.S. 822, 829-30
(1984) (holding that federal statute required United States
to honor wage garnishment orders irrespective of their
deficiency for lack of personal jurisdiction on grounds
that personal jurisdiction cannot be determined from
face of order). But other procedural defects may be
obvious from a quick review of the document itself. Cf. id.
at 829 n.10 (“ ‘The inquiry into whether an order is valid
on its face is an examination of the procedural aspects of
the legal process involved, not the substantive issues.
Whether a process conforms or is regular ‘on its face’
means just that. Facial validity of a writ need not be
determined ‘upon the basis of scrutiny by a trained legal
mind,’ nor is facial validity to be judged in light of facts
outside the writ’s provisions which the person executing
the writ may know.’ ” (quoting In re Mathews, 61 Comp.
Gen. 229, 230-31 (1982))).
Nos. 06-2186 & 07-1433                                         9

   Certainly Harris could not have had notice of the attach-
ment order’s invalidity based on Hoagland’s failure to
post a surety bond from the face of the order. Illinois
law allows an attachment order to be entered without
bond if requested by a state officer. See 735 Ill. Comp. Stat.
5/4-107 (“Nothing herein contained shall be construed to
require the State of Illinois, or any Department of Govern-
ment thereof, or any State officer, to file a bond . . . .”). The
Lawrence County Circuit Court stated in the order that
it had granted Hoagland’s motion to waive bond, and
that decision did not lose its effect until it was vacated by
the Illinois Court of Appeals after a thorough, substan-
tive analysis of the issue. Thus, the fact that Hoagland
never posted a surety bond—the basis for liability pled
in the complaint—could not be discerned from a review
of the face of the attachment order, and does not raise a
genuine issue of material fact.
  Similarly, Hicks’s argument that CFSBdirect was
never personally served with the attachment order is not
evident from the face of the order. The order delineates
that the property attached will be served care of (“c/o”)
Credit Suisse First Boston, and lists the 227 West Monroe
Street address. The order was hand-delivered to that
address, and faxed to CFSBdirect’s officer in New Jersey.
CFSBdirect’s compliance manager did not have to engage
in the scrutiny of notice or service of process that a “trained
legal mind” might undergo before deciding whether to
comply with the order. See Morton, 467 U.S. at 829 n.10.
And it is not clear (even to a trained legal mind) that
service of process on a company in the same corporate
family as an intermediary holding securities in “street
name” is insufficient under Illinois law to confer juris-
diction over the account. See 810 Ill. Comp. Stat. 5/8-112(c)
10                                  Nos. 06-2186 & 07-1433

(allowing service “upon the securities intermediary
with whom the debtor’s securities account is maintained”
to reach “the interest of a debtor in a security entitle-
ment”). Service of process is the means by which a
court acquires personal jurisdiction, see Coyne v. OSF
Healthcare Sys., 773 N.E.2d 732, 734 (Ill. App. Ct. 2002);
Whitley v. Lutheran Hosp., 392 N.E.2d 729, 732 (Ill. App. Ct.
1979), and questions of personal jurisdiction cannot
ordinarily be determined solely by examining the face of
an order, cf. Morton, 467 U.S. at 829-30.
  Hicks’s claim that the attachment order was invalid
because it attached assets outside of Lawrence County,
the situs of the circuit court, also fails to raise a problem
that would have been evident from the face of the attach-
ment order. We recognize that it is clear from the
order’s face that a Lawrence County court is attaching
assets located in Cook County, but it is entirely unclear
that this action would be inappropriate under Illinois
law—in fact, it appears perfectly acceptable. See 735 Ill.
Comp. Stat. 5/4-118 (allowing for certified copies of
attachment orders to be issued and levied in any other
county where debtor may have property liable to be
attached).
  The attachment order listed the names of the parties,
the court, the case and caption number, and it bore the
signature of the issuing judge and the clerk’s attestation.
The order contained all the trappings of valid legal pro-
cess. It would create perverse incentives to force a gar-
nishee to look beyond these facets and conduct an inde-
pendent legal inquiry before deciding whether to comply
with such an order. Indeed, allowing a negligence action
to be maintained against a garnishee who complies with
a facially legitimate order would place the garnishee be-
Nos. 06-2186 & 07-1433                                     11

tween the Scylla of complying with the order and being
liable for negligence if the order is reversed on appeal,
and the Charybdis of violating the order and being held
in contempt or otherwise sanctioned. And sanctions for
violating a garnishment order seem all the more likely
because Illinois has supplemented the intrinsic coercive
force of attachment orders with a statute that mandates that
garnishees comply with attachment orders. See 735
Ill. Comp. Stat. 5/4-126.
   Given the complex nature of the legal issues sur-
rounding appropriate service of process and personal
jurisdiction, we do not believe it would be reasonable
to force the recipient of an attachment order—which bears
all indicia of legitimacy—to engage in an independent
investigation for potential underlying legal deficiencies.
Illinois would not require a garnishee to scour the
statute books, acquaint himself with the case law, and
come to a legal conclusion about the propriety of the
issuing court’s authority. But in order to resolve the
issues that Hicks raises, that is precisely the level of in-
quiry that would be required. As Judge Gilbert aptly
noted, “The scope of the inquiry the Court has undertaken
reinforces its hesitancy. To determine the validity of the
Attachment Order on the level that Hicks asserts would
force a garnishee in Harris’s position to conduct a
review similar to that this Court has undertaken here.”
  The party in the best position to promptly raise the legal
infirmities underlying the order was Hicks, and he did
so immediately—within ten days after the order was
issued, he challenged the order in the Illinois circuit court.
In fact, in his state-court challenge, Hicks pressed the
very concerns with the attachment order that he faults
Harris for failing to notice; and given that Hicks could
12                                     Nos. 06-2186 & 07-1433

easily protect his own rights, we do not believe that
Illinois law would impose a duty upon Harris to do so as
well. Hicks’s complaint therefore failed to raised any
potential problems with the attachment order that
would have been evident from its face, and Judge Gilbert
properly decided that Hicks failed to raise a genuine
issue of material fact with respect to his negligence claim.

B. The district court’s denial of Hicks’s motion for reconsidera-
   tion
  We review the district court’s decision to deny Hicks’s
motion for reconsideration under Federal Rule of Civil
Procedure 60(b) for an abuse of discretion. See Spurgin-
Dienst v. United States, 359 F.3d 451, 456-57 (7th Cir. 2004);
Bell v. Eastman Kodak Co., 214 F.3d 798, 800 (7th Cir. 2000).
Under Rule 60(b), a court may relieve a party from a final
judgment or order based on, among other reasons, “mis-
take, inadvertence, surprise, or excusable neglect”; “newly
discovered evidence that, with reasonable diligence,
could not have been discovered in time to move for a
new trial”; or “fraud (whether previously called intrinsic
or extrinsic), misrepresentation, or misconduct by an
opposing party.” Fed. R. Civ. P. 60(b). “ ‘Motions for
reconsideration serve a limited function; to correct manifest
errors of law or fact or to present newly discovered evi-
dence.’ ” Rothwell Cotton Co. v. Rosenthal & Co., 827 F.2d 246,
251 (7th Cir. 1987) (quoting Keene Corp. v. Int’l Fid. Ins. Co.,
561 F. Supp. 656, 665-66 (N.D. Ill. 1976)).
  In his Rule 60(b) motion, Hicks asserted that the district
court entered summary judgment against him before he
was allowed to supplement the record with additional
documents allegedly proving that Credit Suisse First
Nos. 06-2186 & 07-1433                                  13

Boston and CFSBdirect were separate corporate entities,
and Hicks also accused Harris of misrepresenting facts
to the court. Judge Murphy reviewed the record and
found that the newly submitted documents merely
verified and corroborated facts already before the court.
After conducting our own review of the record, we cer-
tainly agree with Judge Murphy. Nothing Hicks added
to the record established any new facts about the cor-
porate relationship between CFSBdirect and Credit Suisse
First Boston, which Harris always admitted were
separate, but related entities. And even had Hicks
proved that CFSBdirect and Credit Suisse First Boston
were separate entities, it would not change the end-result:
the district court still would have granted summary
judgment because the relationship between CFSBdirect
and Credit Suisse First Boston goes to the issue of the
propriety of service, which we have explained is not a
facial challenge to the attachment order. Judge Murphy
did not abuse his discretion when he denied Hicks’s
Rule 60(b) motion to reconsider.

                    III. CONCLUSION
  We AFFIRM the district court’s grant of summary judg-
ment to Harris, and we also AFFIRM the district court’s
denial of Hicks’s motion to reconsider.

                   USCA-02-C-0072—6-17--08