Tuesday, March 29, 2011

Rooker-Feldman, Issue Preclusion & The Kiboshing Of Homeowners' Federal Lawsuits Challenging State Court Foreclosure Judgments

Lexology reports:

  • In recent decisions, various courts have relied upon the Rooker-Feldman Doctrine to bar a consumer’s federal claims regarding the validity of his or her mortgage after the lender obtained a state court foreclosure judgment. See, e.g., Mohorne v. Beal Bank, S.S.B., 419 B.R. 488, 496-97 (S.D. Fla. 2009) (Altonaga, J.); Figueroa v. Merscorp., Inc., et al., Case No. 10-61296 (S.D. Fla., Jan. 31, 2011).(1)

  • Under the Rooker-Feldman doctrine, a party is barred from seeking appellate review in a federal district court of a judgment of a state court where the federal claims were inextricably intertwined with those in the state action.
  • On Tuesday, March 22, 2011, the Third Circuit Court of Appeals in Kliesh v. Select Portfolio Servicing, Inc., No. 10-3175 (3d Cir., March 22, 2011), 2011 WL 989855, declined to apply the Rooker-Feldman Doctrine, but rather held that the consumer’s claims were barred based on the principles of issue preclusion.
  • Select Portfolio Servicing Inc. (“SPS”) filed and obtained a foreclosure judgment in the Pennsylvania Court of Common Pleas. In that action, the plaintiff filed counterclaims against SPS based upon its attempts to collect the past due mortgage payments from the plaintiff. After the conclusion of the state-court case, the plaintiff filed a complaint against SPS, and its parent corporation, Credit Suisse First Boston (USA), in federal court alleging that: (1) SPS filed a fraudulent foreclosure action; violated the Truth in Lending Act (“TILA”), 15 U.S.C. §§1601-67; (3) unjustly enriched itself; (4) violated the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692-1692p; (5) violated the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§1681-1681x; and (6) intentionally inflicted emotional distress upon him.

  • The trial court dismissed the plaintiff’s complaint based upon the Rooker-Feldman Doctrine. The appellate court, however, agreed that the Doctrine did not apply to the plaintiff’s claims, because the plaintiff “alleged that he was injured by the defendants, not the state-court judgment.”
  • Nonetheless, a close cousin to the Rooker-Feldman Doctrine is the principle of issue preclusion. Under the doctrine of issue preclusion, when an issue of fact or of law is actually litigated and determined by a valid final judgment, and determination of the issue was essential to judgment, the determination on that issue is conclusive in a subsequent action between the parties.

  • Accordingly, because the plaintiff’s exact arguments were raised and rejected in the state proceedings, the state court’s ruling was conclusive and barred the plaintiff’s federal claims. Additionally, the court held that the plaintiff had abandoned his FCRA and unjust enrichment claims on appeal, and his TILA and FDCPA claims were barred by the applicable statute of limitations.

  • The court therefore concluded that any further amendments to the pleadings would be futile, and upheld the trial court’s dismissal of the case with prejudice.

  • The above case highlights some of the defenses that may be available to lenders in the rash of cases challenging foreclosure judgments that are sure to continue for the next few years.

Source: The doctrine of issue preclusion barred claims based upon an alleged fraudulent mortgage. (requires subscription; if no subscription, GO HERE, or TRY HERE, then click appropriate link for the story).

(1) For a sampling of Federal Courts of Appeal Rooker-Feldman cases involving state court foreclosure judgments, see:

Go here for links to at least a few dozen more Rooker-Feldman foreclosure cases.

After reviewing these cases, I think that the moral of this story is that, if a homeowner is going to challenge a state court foreclosure action in a Federal court, it probably better be done before a judgment is entered in the state court.

1 comment:

John said...

The case of Kliesh V Select Portfolio Servicing has been re-filed and the former Judges are under review by the Chief judge and DOJ. Due to legal and ethical misconduct, since the Judges ALTERED counts, Disregarded Federal Rules, Disregarded Evidence.Example the count of Unjust Enrichment was Dismissed when they claimed it was not a legal claim, the count of CONTRACT FRAUD was altered to a TILA claim to claim the Statute of Limitations,They also disregarded that the Defendants failed to comply with all state laws in the foreclosure action.Now the Rooker-Feldman was claimed when they divided a count in to two parts to claim the content was barred. Which the Second Circuit Federal Appeal Court ruled this action to be deseptive act (HOBLOCK).
The Judges also permitted the defendants lawyers to file documents late and file documents on behalf of a defendant which they where not representing.
Therefore, the case has been re-filed. Which one of the Oppossing Lawyers hand delivered a letter to the new Judge demanding he recuse himself and turn the case over to a Judge who may already be Suspended Pending Investigation.