Named for Supreme Court decisions from 1923 and 1983, the Rooker-Feldman doctrine means that federal courts do not have subject matter jurisdiction to sit in appellate review of state court decisions. Bankruptcy Judge David T. Thuma of Albuquerque, N.M., held that Rooker-Feldman does not apply when a state court erroneously decides that the automatic stay does not apply.

In a September 20 opinion, Judge Thuma said,

Rooker-Feldman does not apply to a bankruptcy court’s determination that actions taken in state court violate the automatic stay. If the state court’s ruling conflicts with the bankruptcy court’s, the state court’s ruling must give way.

The facts were complicated but boil down to this: The secured lender filed a complaint and motion in state court for a writ of assistance. The individual debtor filed a chapter 7 petition and notified the lender’s counsel before the motion came on for hearing.

At the hearing, the state court adopted the lender’s theory that the equipment subject to the writ of assistance was not property of the debtor’s estate. The state court therefore decided that the automatic stay did not apply. The state court ordered the assembly of the equipment for pickup by the lender.

Quickly, the debtor filed a motion in bankruptcy court to enforce the automatic stay by declaring that the state court order was void. The debtor also removed the suit from state court to the bankruptcy court.

In opposition to the motion to enforce the automatic stay, the lender argued to Judge Thuma that enforcement of the stay would be in violation of Rooker-Feldman, because the state court had decided that the automatic stay did not apply.

“In general terms,” Judge Thuma said, Rooker-Feldman “holds that federal courts may not sit as courts of appeal for state court orders and judgments the losing party is unhappy with.” However, he said it is “universally acknowledged that Rooker-Feldman does not prevent a bankruptcy court from determining whether the automatic stay applies to pending state court litigation.”

For authorities holding that Rooker-Feldman does not apply to erroneous state court decisions about the automatic stay, Judge Thuma cited In re Gruntz, 202 F.3d 1074, 1083 (9th Cir. 2000), where the Ninth Circuit said that “federal courts have the final authority to determine the scope and applicability of the automatic stay.” The Ninth Circuit went on to say that a “bankruptcy court simply does not conduct an improper appellate review of a state court when it enforces an automatic stay that issues from its own federal statutory authority.”

Because Rooker-Feldman does not apply, Judge Thuma said that “the bankruptcy court is not bound by the error” when “the state court errs in finding that the automatic stay does not apply.” Although state and federal courts have concurrent jurisdiction to determine the applicability of the automatic stay, he quoted Bankruptcy Judge Mitchell L. Herren, who said recently, “If a state court erroneously determines that the automatic stay does not apply in a case, it is in effect an improper modification of the automatic stay and renders the action in the nonbankruptcy proceeding void ab initio.” In re Hall, 2024 WL 1023129, *4 (Bankr. D. Kan. March 6, 2024).

Judge Thuma went on to cite decisions from around the country to the effect that a state court decision about the applicability of the automatic stay is not the final word, in view of the Supremacy Clause of the U.S. Constitution.

Rejecting the lender’s other arguments and finding that the debtor or the estate was involved, Judge Thuma ruled that the state court order was void. “Here,” he said, “the § 362(a)(1) stay violations were obvious and should have been pointed out by [the lender’s] counsel to the state court judge.”