Wallis v. USA Baby, Inc., No. 11-2018 (7th Cir. 2012)
Annotate this CaseThe company, formed in 2003 to franchise stores, was forced into reorganization bankruptcy under Chapter 11. The bankruptcy judge granted a motion to convert to Chapter 7 liquidation, over objection by a five percent shareholder who had been the company’s president (Wallis). The judge rejected allegations of fraud and a request that the court compel franchisees to pay what Wallis claimed they owed. The district court and Seventh Circuit affirmed, first holding that it had jurisdiction although the bankruptcy case has not been closed. The court rejected an argument that, because creditors’ claims were based on contracts that were subject to arbitration, they were outside the jurisdiction of bankruptcy court. The court noted that Wallis has filed eight appeals to the district court and five to the Seventh Circuit, "all pro se and frivolous. Enough is enough. The next time he files a frivolous appeal he will be sanctioned."
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