Saturday, November 3, 2018

FYI: 1st Cir Confirms Rooker-Feldman Barred Borrower's State and Federal Law Claims

The U.S. Court of Appeals for the First Circuit ("First Circuit") recently affirmed dismissal of a borrower's state and federal law claims, concluding that the trial court lacked jurisdiction under the Rooker-Feldman Doctrine, because the borrower's federal suit sought to invalidate the state courts' judgments.

 

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

 

After a borrower ("Borrower") defaulted on her mortgage loan, the assignee to the Borrower's mortgage ("Mortgagee") filed a petition in the Massachusetts Land Court ("land court") to foreclose the mortgaged property (the "foreclosure action").  Final judgment was entered in the Mortgagee's favor, and the property was sold to the Mortgagee at a foreclosure sale.

 

The Mortgagee then turned to the state's county Housing Court ("housing court") and filed a summary process action to evict the Borrower, who in turn filed a counterclaim.  After lengthy motion practice, and challenges to the validity of the mortgage assignment, the Mortgagee was eventually awarded possession of the property.  The Borrower's appeal of the final judgment in the eviction action was dismissed for failure to post bond.

 

Five months later, the Borrower field suit against the Mortgagee in the U.S. District for the District of Massachusetts, among other things alleging claims for wrongful foreclosure, violation of the Massachusetts consumer protection statute, Mass. Gen. Laws ch. 93A, § 9(1), breach of the covenant of good faith and fair dealing, and negligent infliction of emotional distress.

 

The Mortgagee filed a motion to dismiss, which was granted by the federal trial court, which held that it lacked subject-matter jurisdiction over Borrower's claims under the Rooker-Feldman Doctrine.  The instant appeal followed.

 

As you may recall, the Rooker-Feldman doctrine preserves the Supreme Court's exclusive jurisdiction over "appeals from final state court judgments," Lance v. Dennis, 546 U.S. 459, 463 (2006) (per curiam), by divesting lower federal courts of jurisdiction to hear certain cases brought by parties who have lost in state court, see Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 291- 93 (2005); Coggeshall v. Mass. Bd. of Regist. of Psychologists, 604 F.3d 658, 663 (1st Cir. 2010). Specifically, the doctrine - 6 - applies to "cases brought by state-court losers complaining of injuries caused by state-court judgments [that were] rendered before the district court proceedings commenced and invit[e] district court review and rejection of those judgments." Exxon Mobil, 544 U.S. at 284.

 

Here, the First Circuit noted that the Borrower's federal suit seeks to challenge the validity of both the foreclosure and mortgage assignment, which both fell within the compass of the state court judgments of foreclosure and rejecting Borrower's challenge to the mortgage assignment in the eviction action.

 

The Court concluded that Borrower's claims were all premised upon her claims that Mortgagee acquired the mortgage through a pattern of fraudulent activity—the very issue raised in her counterclaim to the eviction action, and denied by the housing court — and nothing more than artfully pleaded attempts to evade the reach of the Rooker-Feldman Doctrine.  See Davison v. Gov't of P.R. - P.R. Firefighters Corps., 471 F.3d 220, 223 (1st Cir. 2007) (applying Rooker-Feldman doctrine when "the only real injury to Plaintiffs is ultimately still caused by a state court judgment").

 

Similarly, her wrongful foreclosure claim was necessarily decided in the land court, and both the foreclosure and eviction actions were sufficiently final to trigger the Rooker-Feldman doctrine, as final judgment of foreclosure was entered five years prior to the initiation of the federal suit, and Borrower forfeited her opportunity to appeal the housing court's eviction judgment by failing to post bond.  See Davison v. Gov't of P.R. - P.R. Firefighters Corps., 471 F.3d 220, 223 (1st Cir. 2007) (applying Rooker-Feldman doctrine when "the only real injury to Plaintiffs is ultimately still caused by a state court judgment").

 

Lastly, First Circuit considered whether the plaintiff, in bringing her federal suit, impermissibly invited the federal trial court to review and reject one or more final state-court judgments. 

 

In order to grant the Borrower's requested relief to vacate the final judgment of foreclosure and enter an injunction prohibiting post-foreclosure proceedings, the district court would be compelled to review, reject and reverse the state courts' rulings — an invitation that could not be accepted under the Rooker-Feldman doctrine.  See Davison, 471 F.3d at 223. 

 

The Court also rejected the Borrower's fallback position that her federal claims were based on legal theories not presented in the state courts, and should be allowed to proceed.

 

In so ruling, the First Circuit held that even the federal claims still could not escape the Rooker-Feldman bar, which is not contingent upon identity of issues actually litigated in prior state-court proceedings, but whether those claims proffered in the subsequent federal suit are, in effect, an end-run around a final state-court judgment.  See Maymó-Meléndez v. Álvarez-Ramírez, 364 F.3d 27, 33 (1st Cir. 2004); Federación de Maestros de P.R., 410 F.3d at 24 (stating that "a federal suit seeking an opposite result [from a final state court judgment] is an impermissible attempt to appeal the state judgment to the lower federal courts").

 

Accordingly, because the Borrower's federal suit sought to invalidate the state courts' judgments, the First Circuit held that the federal trial court lacked jurisdiction to consider the Borrower's claims, and the federal trial court's dismissal order was affirmed.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog

 

and

 

Webinars

 

and

 

California Finance Law Developments