Dismissing A Borrower’s Post-Foreclosure Federal Court Action For Fraud And Deception: Rooker-Feldman Strikes Again
August 24, 2016
Lesson. A defendant in state court foreclosure action doesn’t get another bite at the apple in federal court.
Case cite. Shaffer v. PNC, 2015 U.S. Dist. LEXIS 116831 (S.D. Ind. 2015) (.pdf).
Legal issue. Whether federal court had jurisdiction over the plaintiff borrower’s post-foreclosure case against the defendant lender and its law firm.
Vital facts. This federal court case followed a judgment rendered in a residential foreclosure suit in state court. In state court, the lender/mortgagee sued its borrower/mortgagor for a default under the subject promissory note and to foreclose the subject mortgage. The state court granted summary judgment for the lender, and the mortgaged property was sold at a sheriff’s sale. Efforts by the borrower to appeal failed. Subsequently, the borrower filed a complaint in federal court asserting claims for: “demand for chain of title; statutory violations; a Fourteenth Amendment violation; and a clarification as to the individual status of each party under the Fair Debt Collection Practices Act.” At its core, the borrower alleged fraud and deception on the part of the lender and its law firm.
Procedural history. The Shaffer opinion arose out of the defendants’ motion to dismiss for lack of subject matter jurisdiction. Judge William T. Lawrence of the U.S. District Court for the Southern District of Indiana issued the ruling that dismissed the plaintiff borrower’s complaint.
- The outcome hinged on the Rooker-Feldman doctrine, which bars two categories of federal claims: (1) where a plaintiff requests a federal court to overturn an adverse state court judgment or (2) where federal claims were not raised in state court but yet are “inextricably intertwined” with a state court judgment.
- In addition, “fraud (no matter how described) does not permit a federal district court to set aside a state court’s judgment in a civil suit.”
- Subject matter jurisdiction motions to dismiss are based upon Rule 12(b)(1).
Holding. The Court dismissed the case, stating “[borrower’s] claims are precisely the type of claims the Rooker-Feldman doctrine was designed to prevent the Court from reviewing.”
Policy/rationale. The purpose of the Rooker-Feldman doctrine is to preclude lower federal court jurisdiction over claims seeking review of state court judgments because “no matter how erroneous or unconstitutional the state court judgment may be, the Supreme Court of the United States is the only federal court that could have jurisdiction to review a state court judgment.” In Shaffer, the borrower sought review and reversal of the state court judgment. “The thrust of her complaint is that [the lender] cannot enforce its note and mortgage.” Moreover, while federal courts have jurisdiction to award damages “for fraud that imposes extrajudicial injury,” the borrower’s complaint in Shaffer made no such allegation. As such, no exception to the Rooker-Feldman doctrine applied.