Monday, April 18, 2016

FYI: 8th Cir Declines to Apply Rooker-Feldman to Preclude FDCPA Action Based on State Court Lawsuit

In a federal Fair Debt Collection Practices Act (FDCPA) lawsuit, the U.S. Court of Appeals for the Eighth Circuit recently held that the Rooker-Feldman doctrine does not apply where the complained of conduct was not the underlying judgment but rather events that occurred during the state court litigation.


A copy of the opinion is available at:  Link to Opinion


The original creditor assigned a debt to a collection agency which in turn hired an attorney to collect the debt from the debtor.  The attorney sent a letter, made a phone call and ultimately filed suit in the name of the creditor against the debtor in Missouri state court in November 2012. 


The debtor did not answer or otherwise appear, and the attorney obtained a default judgment in December 2012.  Thereafter, the attorney docketed the judgment in Illinois state court to initiate garnishment proceedings.  The debtor again did not answer or otherwise contest the garnishment proceedings, and a wage garnishment order was entered on December 4, 2013. 


Debtor filed an FDCPA complaint against the debt collector attorney on December 19, 2013 alleging that based on the assignment documents, the attorney did not have the authority to file suit in the name of the original creditor, and that the real party in interest was actually the collection agency and not the original creditor. 


The debtor further alleged that the Illinois garnishment action was filed in an improper venue, and that the amounts being sought under the garnishment were improper.


The trial court dismissed part of the complaint based on statute of limitations grounds, and held that the FDCPA's venue requirement does not apply to the post-judgment wage garnishment under the Rooker-Feldman doctrine as the complaint related to attempts to challenge the legitimacy of the Missouri judgment.


On appeal the Eighth Circuit addressed Rooker-Feldman, first explaining that the doctrine precludes lower federal courts from exercising jurisdiction over actions seeking review of, or relief from, state court judgments.  Citing prior Eighth Circuit opinions, the Court further explained that the "doctrine is limited in scope and does not bar jurisdiction over actions alleging independent claims arising from conduct in underlying state proceedings." 


Because the alleged violation was the ability to actually file the underlying state court complaint, the debt collector attorney argued that Rooker-Feldman necessarily had to apply here as the underlying issue was an issue in the state court litigation. 


However, relying on prior Eighth Circuit decisions, the Court rejected the argument holding instead that "prior litigation of an issue in state court may trigger traditional preclusion principles, but it does not necessarily strip the federal courts of jurisdiction."  Ultimately, because the debtor was alleging statutory violations based on the attorney's actions "in the process of obtaining the judgment and order," the Eighth Circuit held that the Rooker-Feldman doctrine would not apply.


After declining to apply Rooker-Feldman, the Court addressed the statute of limitations argument, and agreed with the lower court that all of the activities in Missouri including the filing of the complaint and default judgment were barred by the FDCPA's one year statute of limitations.  The Eighth Circuit also declined to apply equitable tolling based on its prior ruling holding that the FDCPA's statute of limitations is jurisdictional and not subject to equitable tolling.


The Eighth Circuit also affirmed the lower court's ruling that the FDCPA's venue restriction does not apply to the registration of a foreign judgment.


Finally, the Eighth Circuit remanded the case back to the lower court to address potential violations arising from the conduct in the Illinois wage garnishment proceedings that were neither barred by the statute of limitations or Rooker-Feldman but were not otherwise addressed in the lower court's opinion.




Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
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Chicago, Illinois 60602
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