The United States Court of Appeals for the Eleventh Circuit recently held that the district court lacked subject matter jurisdiction over a Truth In Lending Act (“TILA”) rescission claim under the Rooker-Feldman doctrine, where a state court granted final judgment of foreclosure prior to the commencement of the federal claim. A copy of the unpublished opinion is attached.
The plaintiff borrower (“Borrower”) refinanced her
In February 2006, Borrower sought a restraining order in federal court to prevent the third-party sale. The District Court dismissed with prejudice, but the Appellate Court vacated and remanded to allow Borrower the opportunity to amend the complaint and proceed with an action for rescission under TILA, which Borrower did in July 2007. On this, the District Court granted summary judgment in favor of Borrower, holding that Borrower could rescind the mortgage based on disclosure violations under TILA.
Borrower filed a motion for clarification seeking $725,000 from Defendant for an alleged unjust enrichment obtained through the sale of the property. Construing the motion as a request to alter or amend the judgment, the District Court denied the motion and concluded that Borrower had given up the right to damages under TILA by not specifically requesting them in her amended complaint or motion for summary judgment.
Borrower appealed the District Court’s denial of equitable relief and Defendant appealed the mortgage rescission. The Eleventh Circuit vacated and remanded the District Court’s decision with instructions to dismiss Borrower’s rescission claim, holding that, under the Rooker-Feldman doctrine, the District Court did not have jurisdiction to hear Borrower’s rescission claim.
The Rooker-Feldman doctrine provides that “federal courts – other than the Supreme Court – do not have subject matter jurisdiction over cases brought by state-court losers complaining of injuries caused by state court judgments rendered before the federal district court proceedings commenced and inviting district court review and rejection of those judgments.” Specifically, the doctrine applies when “(1) the party in federal court is the same as the party in state court; (2) the prior state court ruling was a final or conclusive judgment on the merits; (3) the party seeking relief in federal court had a reasonable opportunity to raise its federal claims in the state court proceeding; and (4) the issue before the federal court was either adjudicated by a state court or was inextricably intertwined with the state court’s judgment.” In the Eleventh Circuit, the doctrine bars federal courts from reviewing, reversing, or invalidating final state court decisions.
Addressing each prong, the Eleventh Circuit first reasoned that the “same parties in this action participated in the subject state proceeding, and a
Borrower attempted to distinguish the state and federal claims on the basis that the former dealt with payments under the note, while the latter dealt with disclosure compliance under TILA. The Eleventh Circuit rejected this argument, stating that “the effect of the District Court’s judgment unquestioningly invalidated the state court’s final judgment granting foreclosure,” and “therefore offended the Rooker-Feldman doctrine.” Accordingly, the Court vacated and remanded the District Court’s decision with directions to dismiss Borrower’s claim for rescission under TILA.
Ralph T. Wutscher
Kahrl Wutscher LLP
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