Narrowly interpreting Rooker-Feldman in light of more recent authority, a district judge in Tampa, Fla., held that the doctrine did not apply to someone who was not a party to the suit in state court and was not a “state-court loser.”
To stop someone from relitigating an issue decided in state court, District Judge Charlene Edwards Honeywell said in her opinion on October 31 that other doctrines might apply, such as issue preclusion, formerly known as collateral estoppel.
The corporate debtor held a lease on a parking lot used in connection with an adjoining restaurant operated by a corporation having the same owners. The lease was not recorded, but the lender had been sent a copy of the lease.
The lender commenced foreclosure on the parking lot by giving notice to the corporate owner of the parking lot and to the two individuals who owned both the parking lot and the corporation that was the tenant at the parking lot. The corporate tenant at the parking lot was not named as a defendant in the foreclosure action.
The foreclosure complaint also named unknown tenants as defendants, but none were served. Before entry of the foreclosure judgment, the unknown defendants were dropped from an amended complaint.
The owner of the parking lot lost an appeal from the judgment of foreclosure. After the foreclosure sale, the tenant filed a motion to intervene in the foreclosure action and vacate the foreclosure sale. The state court allowed intervention but overruled the tenant’s objections. The tenant took no appeals.
Meanwhile, the purchaser at the foreclosure sale obtained a writ of possession and prevailed on a motion for enforcement in state court. The tenant then filed a chapter 11 petition and a lawsuit against the lender.
In the adversary proceeding, the debtor-tenant sought a declaration that the foreclosure was ineffectual and that the lease remained in effect. Invoking Rooker-Feldman, the bankruptcy court reasoned that the lawsuit was a direct attack on the state court foreclosure judgment. The bankruptcy court dismissed the adversary proceeding for lack of subject matter jurisdiction. The debtor-tenant appealed to Judge Honeywell.
Rooker-Feldman
Judge Honeywell quoted the Eleventh Circuit for saying that Rooker-Feldman “‘establishes that a party who loses a case in state court cannot appeal that loss in a federal district court.’ Behr v. Campbell, 8 F.4th 1206, 1208 (11th Cir. 2021).”
In the case on appeal, Judge Honeywell said that the debtor-tenant was relying on an “outdated” and “unduly broad” interpretation of Rooker-Feldman. She quoted the Supreme Court for holding in 2006 that the doctrine does not bar actions by a nonparty to the earlier state court suit. Lance v. Dennis, 546 U.S. 459, 460 (2006).
Following Lance, Judge Honeywell quoted the Eleventh Circuit for holding “that Rooker-Feldman did not apply because the parties in a state court foreclosure action and bankruptcy case were not the same, even though they were closely related — one party was a corporate entity owned by the husband of the other party.” In other words, “those who are not in a position to appeal a state court judgment are not affected by Rooker-Feldman,” she said.
In bankruptcy court, both sides had argued about whether the debtor-tenant suffered a loss from the foreclosure judgment. That’s not the question.
Judge Honeywell said the parties should have analyzed “the threshold question of whether [the debtor-tenant] was a ‘state court loser’ in the sense that it was a party to the action that led to the final judgment of foreclosure.” [Emphasis in original.]
Because the debtor-tenant was not a party in the foreclosure action, Judge Honeywell held that the adversary proceeding was not barred by Rooker-Feldman. For that reason, she reversed.
However, the ballgame wasn’t over. On remand, Judge Honeywell said that the bankruptcy court might consider other grounds for dismissal, such as issue preclusion or application of Rooker-Feldman to judgments entered after the debtor was a party.
Narrowly interpreting Rooker-Feldman in light of more recent authority, a district judge in Tampa, Fla., held that the doctrine did not apply to someone who was not a party to the suit in state court and was not a “state-court loser.”
To stop someone from relitigating an issue decided in state court, District Judge Charlene Edwards Honeywell said in her opinion on October 31 that other doctrines might apply, such as issue preclusion, formerly known as collateral estoppel.
The corporate debtor held a lease on a parking lot used in connection with an adjoining restaurant operated by a corporation having the same owners. The lease was not recorded, but the lender had been sent a copy of the lease.
The lender commenced foreclosure on the parking lot by giving notice to the corporate owner of the parking lot and to the two individuals who owned both the parking lot and the corporation that was the tenant at the parking lot. The corporate tenant at the parking lot was not named as a defendant in the foreclosure action.