CECILIA M. ALTONAGA, District Judge.
On September 5, 2006, Timothy J. Brown ("Brown") took out a $231,200 loan from Loan America, Inc. in order to purchase a home (the "Property"). On the same day, he also executed a mortgage note naming Mortgage Electronic Registration System
A little over two years later, on February 12, 2009, IndyMac Federal Bank FSB ("IndyMac"), through its retained counsel—Defendant Law Offices of David J. Stern, P.A. (the "Firm"), sued Figueroa and Brown in Florida circuit court to foreclose on the Property. (3d Am. Compl. 15-16
IndyMac moved for summary judgment on September 14, 2009. (See Mot. Ex. A, 21-23
Four months after IndyMac filed its motion, on January 14, 2010, Brown filed a motion to dismiss for lack of subject matter jurisdiction. (See id. 18-20).
Despite Brown's motion, the Florida court granted IndyMac summary judgment on February 1, 2010. (See id. 13-17). The state-court order was concise, simply stating it was based on the motion and affidavits. (See id. 13).
After the Florida court entered summary judgment, Brown and Figueroa filed a pro se emergency motion to vacate the judgment and to stop the impending foreclosure sale. (See id. 7-12). They made several arguments, including that IndyMac had committed fraud by engaging, with others, in a pattern of deception to foreclose on residential properties even after having been paid in full. (See id. 7). The motion also resurrected Brown's earlier argument that IndyMac was not the proper party to bring the foreclosure suit. (See id. 7-12). Figueroa and Brown further urged that documents attached to the foreclosure complaint conflicted with allegations and material facts in the complaint. (See id. 8). After explaining why they believed IndyMac was not the proper party to foreclose, they stated that if the judgment was vacated, they intended "to file affirmative defenses for set off violations to the Truth in Lending Act, and a counterclaim for damages for RICO, TILA violations, usury, fraud in the inducement and fraud in the execution, damages for appraisal fraud, quiet title, and malicious abuse of process among other causes of action." (Id. 10). This motion was denied on February 25, 2010. (See id. 1).
After filing the emergency motion, Brown and Figueroa secured counsel who filed a subsequent motion to vacate the foreclosure judgment on February 22, 2010. (See id. 2-6). That motion argued summary judgment was inappropriate because there were material issues of fact. (See id. 2-6). The supposed issues included whether IndyMac owned the note and mortgage, and whether IndyMac had committed fraud in the foreclosure process. (See id. 2-3). Additionally, the motion
Roughly three months after losing the Property, Figueroa filed this federal suit, a purported class action. (See [ECF No. 1]).
Figueroa alleges the underlying scheme arose out of new mortgage products first introduced in the late 1990s, including non-documentation loans and adjustable-rate mortgages. (See id. 7). At the same time, lenders allegedly relaxed their lending standards, allowing lower-income persons to receive loans. (See id.). According to the Plaintiff, MERS was then "created to facilitate the illegal and fraudulent foreclosure of properties that are otherwise immune from repossession." (Mot. 9 (citing 3d Am. Compl. 2, 11, 18-19, 24-27, 35-36)).
Either prior to executing the mortgages or soon thereafter, Plaintiff alleges that the "true lenders," unnamed in the loan documents, sold the loans in "secretive transactions" without the borrowers' knowledge. (3d Am. Compl. 11). The only notice borrowers received was that their servicers had changed. (See id.). Figueroa contends that by constantly changing servicers, bankers obscured the truth as to who held the right to the loans' proceeds and who held the right to foreclose. (See id.). And, according to Plaintiff, because loans were pooled, sold, and continually resold, this "atomized" the true beneficial interests
Figueroa maintains that in drafting the mortgage documents and engaging in these additional transactions, Defendants began to use words in new ways—"inconsistent with their traditional meanings"— and created novel terms to blur the lines between parties and their interests. (Id. 11). This aspect of the alleged scheme was supposedly part of a "smokescreen" to prevent consumers and lawyers from ever discovering who was actually receiving the mortgage payments' benefits. (Id. 12). And the result, according to Figueroa, is that important terms devolved into a "state of meaninglessness." (Id.). He claims that mortgages and their related documents mean whatever the alleged schemers want them to mean. (See id.).
Through the described fraudulent activity, Defendants were then allegedly able to obtain final foreclose judgments against Plaintiff and other potential class members. (See id.). As a result of these judgments, Figueroa claims he and the class members were "robbed" of their properties. (Id.). Plaintiff asserts Merscorp and the Firm were complicit in this theft through their involvement in fraudulent assignments. (See id. 14). The Firm's employees signed legal documents as if they had actual authority to act for Merscorp, and as if Merscorp and MERS had a real interest in the properties. (See id. 14-15). Plaintiff, however, claims Merscorp and MERS had neither the authorization nor the interest. (See id. 14-15). Specifically, Plaintiff contends Merscorp lacked any "beneficial" interest in the properties, and as such, could not effectuate assignments. (Id. 15). Moreover, even if Merscorp had an interest, according to Plaintiff, the foreclosures would still be improper because the persons executing the assignments lacked personal knowledge and could not attest to their truth, or "bestow sufficient trustworthiness on the documents to qualify them as legally competent evidence of standing to foreclose." (Id.). Figueroa concludes that as a result, assignees received no actual interest. (See id.). And therefore all of the final foreclosure judgments entered in favor of the Firm's or MERS's "strawmen plaintiffs" were fraudulently and illegally obtained, and were "proximately caused" by the scheme and the RICO predicate acts. (Id.).
Figueroa alleges the mails and wires were used in furtherance of the scheme to defraud him in his foreclosure case and constitute "predicate acts" as defined by RICO. He contends the mails were used by the Firm to mail letters, notes, and assignments to the clerk of court for the Florida Seventeenth Judicial Circuit concerning his case. (Id. 17-18). These actions were allegedly in furtherance of the RICO enterprise because they were "directed toward obtaining a final judgment of foreclosure to which the plaintiff, represented by [the Firm] was not entitled." (Id.).
As a result of the alleged RICO scheme, Plaintiff claims he was injured by losing his one-half interest in the Property. (See id. 18). His injury was proximately caused by the alleged fraudulent scheme in which the mails were used. (See id.). Had the Firm not used the mails, he asserts, the foreclosure would not have ended in an adverse final judgment. (See id.). And finally, because there was no real party in interest that could legitimately bring the foreclosure or legitimately assign rights to the Property, Plaintiff claims damages. (See id.).
Figueroa asserts three claims, all violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962.
Figueroa maintains that the Firm and Stern were employed by and associated with MERS—which constitutes the alleged RICO enterprise.
With reference to Figueroa's own foreclosure, he alleges certain RICO predicate acts of mail and wire fraud, maintaining the mails were used in filing mortgage notes and mortgage assignments, and the wires were used in communications between Stern, the Firm, MERS, and Merscorp. (See id. 25-26). Figueroa asserts these actions were in furtherance of the RICO enterprise and conspiracy in that they were directed toward obtaining a final foreclosure judgment when IndyMac as plaintiff, represented by Stern and the Firm, was not entitled to one. (See id.).
In addition to the foregoing, Figueroa contends the Firm and Stern engaged in other overt acts in furtherance of the conspiracy. (See id. 27). These acts included: concealing the foreclosure-plaintiffs' lack of standing; "[p]roviding misleading authorship information" and omitting foreclosure complaints' dates; using misleading language and "artificially friendly mannerisms" prior to summary judgment hearings to convince pro se defendants to agree to sale dates far in the future and then obtaining summary judgments without opposition; participating in fraudulent assignments; altering hardware and software to remove mailing dates from the postmarks on legal documents and then delaying mailings until after defendants had waived their rights; and mailing motions and court documents in a manner "designed to facilitate the illegal thefts of properties." (Id. 28).
According to Figueroa, these predicate acts satisfy the RICO continuity requirement as they extend from 1999 through the present, and continue "unabated." (Id. 29). Even if MERS and Merscorp are no longer working with Stern and the Firm, they worked together from at least 2004 to 2009.
As a result, Figueroa claims damages because he and purported class members have lost their homes. (See id.). He maintains the mortgages were not truly able to be foreclosed upon. (See id. 30). Figueroa seeks on the behalf of the class the fair market value of the lost properties as the measure of damages, tripled under RICO, for total damages of $7.5 billion. (See id.).
Figueroa alleges that when Merscorp was created in 1998 the objective was to devise the fraudulent scheme and RICO enterprise outlined in the Complaint. (See id.). At the outset, Merscorp was MERS. (See id.). Later, after a "replica MERS" was created, the second (of three) MERS was transformed into Merscorp. (Id.). While Merscorp now asserts that MERS is its wholly-owned subsidiary, the MERS website lists multiple shareholders, all of which are Defendants in this action. (See id. 30-32).
Currently, Merscorp generates all of MERS's corporate resolutions. (See id. 30). These resolutions authorize employees of foreclosure mills to sign sworn documents despite allegedly lacking personal knowledge. (See id.). According to the Plaintiff, this is done to facilitate foreclosures. (See id.).
Figueroa asserts that in forming MERS, the conspirators commenced a plan devised to defraud. (See id. 31). The plan prevented borrowers, investors, and governments from identifying the actual beneficial owners of any collateralized loan. (See id.). The true beneficial owners, through MERS, became "private information" that was unavailable to anyone. (Id.). MERS then became a "sham beneficiary" with the unlawful intent of preventing Figueroa and other "victims" from identifying and holding accountable those behind the "industry-wide predatory practices and policies." (Id.).
According to the Complaint, whenever MERS acts, Merscorp is the real actor.
Figueroa contends that Merscorp "commits numerous predicate acts of mail and wire fraud each and every business day." (Id. 32). These acts allegedly occur when Merscorp sends and receives documents through "MERS mail," which operates through the U.S. mail and over the wires. (Id.). Because Merscorp and MERS allegedly communicate over the wires about authorizing robosigners and other fraudulent transactions, these actions affect interstate commerce, constitute wire fraud and a pattern of racketeering activity, and Merscorp should be held liable. (See id. 33).
Figueroa also alleges Merscorp has engaged in other "overt activities in furtherance" of the alleged fraud and RICO violations. (Id. 34). These activities include:
The overarching conspiracy alleged in the third claim is that the Defendants conspired to commit fraud and used the U.S. mails to facilitate it, with the ultimate goal of stealing "real properties through illegal foreclosures. . . ." (Id. 36).
Figueroa alleges Stern has been a conspirator since 1999. (See id. 37). Stern's alleged participation included ordering Firm employees to act on behalf of MERS, and those employees received their purported authority from fraudulent documents transmitted through the mails and wires. (See id.). Plaintiff further insists these actions only occurred because of Stern's "awareness and assent to the goals of the RICO enterprise." (Id.).
Plaintiff states Merscorp and the other shareholders were also conspiracy members. Merscorp was allegedly involved in the conspiracy as "established inferentially by virtue of the fact that it claims MERS as its subsidiary, and by the fact that it takes actions in the name of MERS." (Id). Likewise, the other Defendants are alleged to have participated in the conspiracy by virtue of their status as shareholders, initial investors, and MERS members. (See id. 37-43). Through these relationships, Defendants supposedly "furthered and continue[ ] to further the goals of the conspiracy and therefore as a matter of law [their] complicity therein may be inferred." (Id. 43). But Figueroa concedes that due to "contradictory information" he cannot tell whether the Defendants are shareholders of Merscorp, MERS, or both. (Id.). Figueroa asserts, however, that it is not coincidental these Defendants are co-conspirators in the MERS scheme as the Firm represents many of them. (See id.).
Figueroa insists the Defendants have RICO liability because they supported an illegal enterprise. (See id.). As shareholders, they participated—directly or indirectly—in that enterprise. (See id.). This is emphasized by the Merscorp website, which states that "[s]hareholders played a critical role in the development of MERS. Through their capital support, MERS was able to fund expenses related to development and initial start-up." (Id.). Consequently, Figueroa maintains he should be able to pierce the MERS corporate veil and hold the shareholder-Defendants liable for the actions of MERS and other scheme participants. (See id.).
As a result of the conspiracy, Figueroa alleges he and the other putative class members were damaged though the "illegal divest[ment]" of their real properties. (Id. 44). The same damages are sought in this count as in the other two counts—$7.5 billion. (See id.).
A defendant may attack subject matter jurisdiction under Rule 12(b)(1) in two ways—a facial attack or a factual attack. A facial attack asserts that a plaintiff has failed to allege a basis for subject matter jurisdiction in the complaint. See Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir.1980). In a facial attack, the plaintiff's allegations are taken as true for the purposes of the motion, see id., and the plaintiff is afforded safeguards similar to those provided in challenging a Rule 12(b)(6) motion. See Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th Cir. 1990).
On the other hand, a factual attack "challenges the existence of subject matter jurisdiction in fact, irrespective of the pleadings, and matters outside the pleadings such as testimony and affidavits, are considered." Menchaca, 613 F.2d at 511. In a factual attack, courts are free to weigh the evidence to satisfy themselves they have the power to hear the case. See Lawrence, 919 F.2d at 1529. No presumption of truth attaches to the plaintiff's allegations, and the existence of disputed material facts does not prevent the trial court from evaluating for itself the merits of the jurisdictional claim. See id. Moreover, "[i]n the face of a factual challenge to subject matter jurisdiction, the burden is on the plaintiff to prove that jurisdiction exists." OSI, Inc. v. United States, 285 F.3d 947, 951 (11th Cir.2002) (citations omitted).
Defendants raise several arguments in their Consolidated Motion to Dismiss. (See Mot.). Because the Court agrees that it lacks subject matter jurisdiction under the Rooker-Feldman doctrine, it does not address the remaining arguments.
Under 28 U.S.C. § 1257(a),
The Rooker-Feldman doctrine "makes clear that federal district courts cannot review state-court final judgments because that task is reserved for state appellate courts or, as a last resort, the
The Eleventh Circuit has identified two "scenarios" where a federal claim is inextricably intertwined with a state-court judgment: "(1) where the success of the federal claim would `effectively nullify' the state-court judgment; and (2) where the federal claim `succeeds only to the extent that the state wrongly decided the issues.'" Springer v. Perryman, No. 10-12059, 401 Fed.Appx. 457, 458, 2010 WL 4230633, at *1 (11th Cir. Oct. 27, 2010) (per curiam) (quoting Casale, 558 F.3d at 1260).
The Rooker-Feldman doctrine arose out of two Supreme Court cases: Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983).
In Rooker, the plaintiffs sought to have a U.S. district court declare a state-court judgment "null and void." Rooker, 263 U.S. at 414, 44 S.Ct. 149. After losing in the Indiana state courts, the federal plaintiffs asked the federal court to proclaim the judgment violated the Constitution. See id. at 414-15, 44 S.Ct.149. After the district court determined it lacked jurisdiction to hear the case, the federal plaintiffs appealed directly to the Supreme Court. See id. at 415, 44 S.Ct. 149. The Court affirmed, holding that district courts possess only original jurisdiction and not appellate jurisdiction. See id. at 416, 44 S.Ct. 149. It then stated even if the state court erred, that "did not make the judgment void, but merely left it open to reversal or modification in an appropriate and timely appellate proceeding." Id. at 415, 44 S.Ct. 149. The Court has made it clear that "Congress had empowered only [the Supreme] Court to exercise appellate authority `to reverse or modify' a state-court judgment." Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005) (quoting Rooker, 263 U.S. at 416, 44 S.Ct. 149).
Sixty years later the Supreme Court decided Feldman. There, the federal plaintiffs—Feldman and Hickey—petitioned the District of Columbia high court for waivers of the rule requiring graduation from an ABA-accredited law school for admission to the District of Columbia Bar. See Feldman, 460 U.S. at 463-73, 103 S.Ct. 1303. Neither plaintiff graduated from an ABA-accredited law school, and the D.C. Court of Appeals denied both plaintiffs waivers and admission to the Bar. See id. Separately, the plaintiffs then filed suit in the district court challenging the state-court decisions. See id. at 468-69, 472-73, 103 S.Ct. 1303. The district court dismissed Feldman's case for lack of subject matter jurisdiction because Feldman was seeking review of "an order of a
The Supreme Court vacated and remanded the cases. The Court began its analysis by acknowledging district courts lack authority to review state-court judicial proceedings.
In addressing the plaintiffs' claims that the D.C. court had acted arbitrarily and capriciously in denying Feldman's and Hickey's waiver petitions, the Court held that the district court could not hear these claims because they were "inextricably intertwined" with the D.C. court's decisions to deny plaintiffs waivers. See id. at 486-87, 103 S.Ct. 1303.
Recently, the Supreme Court revisited the Rooker-Feldman doctrine in Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005). Reeling in lower courts, which had extended the doctrine "far beyond the contours of the Rooker and Feldman cases," the Court "confined" the doctrine to "cases of the kind from which the doctrine acquired its name: cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments." Id. at 284, 125 S.Ct. 1517. The Court went on to hold that "Rooker-Feldman does not otherwise override or supplant preclusion doctrine or augment the circumscribed doctrines that allow federal courts to stay or dismiss proceedings in deference to state-court actions." Id.
In Exxon Mobil, Saudi Basic Industries Corp. ("SABIC") sued two subsidiaries of Exxon and Mobil
Prior to the state-court trial, SABIC moved to dismiss in federal court. See id. at 289-90, 125 S.Ct. 1517. The district court denied the motion, and SABIC took an interlocutory appeal to the Third Circuit. See id. Of its own accord, the circuit court considered whether Rooker-Feldman stripped the federal courts of jurisdiction. See id. It held that jurisdiction existed at the beginning of the suit, but "terminated" when the state court entered its judgment. Id. at 290, 125 S.Ct. 1517 (citing Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 364 F.3d 102, 104-5 (3d Cir.2004)).
The Supreme Court disagreed with the Third Circuit, reversing and remanding the case. See id. at 294, 125 S.Ct. 1517. The Court stated Rooker-Feldman only applies to federal cases filed after the state-court proceedings have ended. See id. at 291, 125 S.Ct. 1517. When there are parallel state and federal cases, "Rooker-Feldman is not triggered simply by the entry of judgment in state court." Id. at 292, 125 S.Ct. 1517. "`[T]he pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction.'" Id. (quoting McClellan v. Carland, 217 U.S. 268, 282, 30 S.Ct. 501, 54 L.Ed. 762 (1910)). In that situation, comity or abstention doctrines may lead a "federal court to stay or dismiss the federal action in favor of the state-court litigation." Id. (citations omitted). But importantly, the federal court does not lack jurisdiction. Id. Rather, in the case of parallel state and federal actions, "[d]isposition of the federal action, once the state-court adjudication is complete, would be governed by preclusion law," which is not jurisdictional. Id. at 293, 125 S.Ct. 1517.
A recent case from the Eastern District of New York, Swiatkowski v. Citibank, No. 10-CV114 (JFB)(WDW), 745 F.Supp.2d 150, 2010 WL 3951212 (E.D.N.Y. Oct. 7, 2010), is particularly instructive to the facts and claims presented here. In Swiatkowski, plaintiff, her husband, and a relative (collectively the "Swiatkowskis") defaulted under their note and mortgage. See id. at 155-56 at *1. The mortgage, originally financed by Citibank, N.A. ("Citi"), was then the subject of a foreclosure action filed by Citibank's successor-in-interest. See id. A judgment of foreclosure was obtained on April 20, 1999. See id. After several bankruptcy filings and delays in the sale of the property, CitiMortgage accepted payment from the Swiatkowskis without a written settlement agreement. See id. at 155-58, at *1-2.
On January 23, 2003, Citi brought another action for foreclosure. See id. at 156-58, at *2. This time, Citi was granted summary judgment. See id. The Swiatkowskis then sought an order to show cause, filed a notice of appeal, and filed a petition to remove the foreclosure action to federal court. See id. They also filed a separate federal suit against Citi and other defendants alleging various claims. See id. The district court remanded the foreclosure action and dismissed the other federal suit for lack of federal jurisdiction. See id. The Second Circuit affirmed. See id. at 158-59, at *3. A final foreclosure judgment was eventually served on plaintiff on December 22, 2006. The Swiatkowskis then filed successive bankruptcy petitions, all of which were dismissed. See id.
The defendants moved to dismiss, arguing, inter alia, that the Rooker-Feldman doctrine precluded plaintiff's suit, as plaintiff was actually seeking relief from the earlier foreclosure action. See id. at 162-63, at *7. The court understood plaintiff's complaint as alleging defendants had "engaged in a pattern of submitting fraudulent and perjurious documents related to the . . . Judgment of Foreclosure and Sale in other courts. . . ." Id. at 165, at *9. The court framed plaintiff's suit as "seeking to undo the 2005 state court judgment based upon what plaintiff argues was a pattern of allegedly fraudulent activity, and . . . injuries that occurred as a result of the judgment. . . ." Id. Although the plaintiff also complained about actions occurring in the various bankruptcy petitions, "many of plaintiff's allegations of fraud involve[d] allegedly fraudulent documents or acts that were associated with the state court foreclosure proceeding." Id. Plaintiff further argued the fraud cast doubt on the proceedings that culminated in the foreclosure judgment. See id. at 165, at *9.
The court, in reviewing plaintiff's complaint, found her complained-of injuries stemmed from the foreclosure judgment. See id. It determined that to grant plaintiff her requested relief, the court "would necessarily have to review that [foreclosure] judgment. . . ." Id. The court went on to find that plaintiff's factual allegations were "inextricably intertwined with the state court judgment and would require overturning the state court judgment. . . ." Id. The allegations were inextricably intertwined because plaintiff claimed the state-court judgment was the result of fraud, and if the court accepted plaintiff's arguments, it "`would effectively declare the state court judgment fraudulently procured and thus void.'" Id. at 166, at *10 (quoting Kropelnicki v. Siegel, 290 F.3d 118, 129 (2d Cir.2002)). Moreover, "[a]lthough plaintiff [ ] labeled the relief in the complaint as seeking monetary damages, it [wa]s abundantly clear that the whole purpose of th[at] action [wa]s to stop and undo the foreclosure judgment." Id. at 165, at *9. As a result, the court found "Rooker-Feldman clearly applie[d]." Id. The plaintiff had "`ample opportunity to raise th[e fraud] claim before the state court' in her answer or her motions for reconsideration[,]. . . [and] the proper venue to challenge that decision was by appeal in state court—not in federal court." Id. at 167, at *11 (internal quotation marks and citations omitted).
In addition to Swiatkowski, Defendants identify a recent Tenth Circuit case as "an almost identical attempt to challenge a state court final judgment through a subsequent RICO claim in federal court." (Mot. 16).
The Tal plaintiffs then filed a federal lawsuit alleging RICO and other claims. See id. The district court dismissed the complaint, and the Tenth Circuit affirmed. See id. at 1252, 1271.
Tal's RICO claim alleged that defendants violated the statute "by engaging in a conspiracy to condemn its property through fraud." Id. at 1255. The district court found this claim was barred by Rooker-Feldman, and the Tenth Circuit agreed. See id. at 1255-56. The court gave three reasons. First, the state courts had considered and rejected Tal's claims that the condemnation was procured by fraud. See id. Second, the court said that if there were new allegations of fraud, they may create grounds for appeal. See id. But, the panel reasoned, that appeal should have been brought in state court. See id. Third, the court stated the "addition of new defendants in federal court also does not change the nature of the underlying state court ruling which upheld the validity of the condemnation." Id. at 1257 (citing Lavasek v. White, 339 F.2d 861, 863 (10th Cir.1965)).
The Tenth Circuit, in a footnote, discussed Tal's fraud allegations as a RICO predicate act. See id. at 1263 n. 19. In concluding that adjudicating these allegations was foreclosed by Rooker-Feldman, the court opined it could not
Id. The court agreed the district court lacked jurisdiction.
Similarly, the Eleventh Circuit and many district courts in this circuit have applied Rooker-Feldman to dismiss actions where plaintiffs were, in reality, challenging state-foreclosure judgments. See, e.g., Parker v. Potter, 368 Fed.Appx. 945, 947-48 (11th Cir.2010) (rejecting under Rooker-Feldman a federal claim under the Truth in Lending Act ("TILA") that sought rescission of a state foreclosure judgment); Velardo v. Fremont Inv. & Loan, 298 Fed.Appx. 890, 892-93 (11th Cir.2008) (holding that appellants' federal TILA claims were inextricably intertwined with a state-court foreclosure judgment and thus barred by Rooker-Feldman); Harper v. Chase Manhattan Bank, 138 Fed.Appx. 130, 132-33 (11th Cir.2005) (dismissing federal TILA, Fair Debt Collection Practices Act ("FDCPA"), and Equal Credit Opportunity Act ("ECOA") claims under Rooker-Feldman because they were inextricably intertwined with a state-court foreclosure proceeding); Aboyade-Cole Bey v. BankAtl., No. 6:09-cv-1572-Orl-31GJK, 2010 WL 3069102, at *2 (M.D.Fla. Aug. 2, 2010) (finding the court had no jurisdiction to hear plaintiff's case under Rooker-Feldman because the case was, "at its core," an attempt to revisit a state-court foreclosure judgment); Distant v. Bayview Loan Servicing, LLC, No. 09-61460-CIV, 2010 WL 1249129, at *3 (S.D.Fla. Mar. 25, 2010) ("Although plead as conspiracy claims . . ., Plaintiff is clearly asking this Court to invalidate the state court action by ruling that the state court foreclosure judgment is somehow void. Under the Rooker-Feldman doctrine, [defendant] is correct that this Court lacks subject matter jurisdiction, as Plaintiff seeks a de facto appeal of a previously litigated state court matter.").
Procedurally, Rooker-Feldman may apply here as this federal case was not filed until after the state-court proceedings concluded. The state-court foreclosure judgment was entered on February 1, 2010. (See 3d Am. Compl. 17). This case did not commence until July 26, 2010. Figueroa did not appeal the state-court foreclosure judgment and concedes "this action was not filed until after the conclusion of the state court litigation."
Defendants contend Figueroa is seeking "what amounts to appellate review of the final state court foreclosure judgment." (Mot. 15). They maintain that Figueroa's claims are inextricably intertwined
Plaintiff responds that Rooker-Feldman should not apply in this case.
Plaintiff begins his arguments with a faulty premise. He asserts first and foremost that Rooker-Feldman does not apply here "because this action was not filed until after the conclusion of the state court litigation...." (Mot. Opp. 7). Plaintiff sets the law wrong. As discussed, the Supreme Court in Exxon Mobil emphasized that Rooker-Feldman may only apply where the federal action is filed after there is a final state-court judgment. Exxon Mobil, 544 U.S. at 283, 125 S.Ct. 1517; see also Nicholson, 558 F.3d at 1273-74 (quoting Exxon Mobil, 544 U.S. at 283-94, 125 S.Ct. 1517). Plaintiff cites Nicholson for the "principle of law" that "in
In short, the applicability of Rooker-Feldman and preclusion law breaks down like this:
Here, even Plaintiff has conceded that the state-court proceedings had terminated prior to the filing of this federal action. (See Mot. Opp. 7). Thus Rooker-Feldman, as well as preclusion principles, may apply.
Beyond Plaintiff's erroneous formulation of Rooker-Feldman, he also contends that the doctrine does not apply because he is not "appealing" from the state-court judgment. (Mot. Opp. 8). As discussed, Plaintiff inaccurately maintains that "inextricably intertwined" is no longer the test to determine whether an issue is barred by Rooker-Feldman.
This suit is barred by Rooker-Feldman because Plaintiff's claims can only succeed if the Court implicitly or explicitly determines the Florida state court wrongly decided the foreclosure issue. Plaintiff's Complaint seeks damages arising out of the loss of his home. (See 3d Am. Compl. 29 ("As a result of the RICO enterprise of which these actions were part, the Class Members have suffered damages, in that they have lost their homes."); 35 (same); 44 ("The overt acts committed in furtherance of the conspiracy damaged the Class Members in Florida ... [in that they] were illegally divested of their Florida real properties.")). The only way Plaintiff (and putative class members) could have been "damaged" by the loss or "illegal divestment" of their homes is if those foreclosures were wrongful.
For Figueroa's federal RICO claims to succeed, the Court must find that wire and mail fraud occurred in Defendants' prosecution of foreclosures. If the Court concludes that mail and wire fraud occurred in obtaining the foreclosures, and that the fraud damaged Plaintiff and class members, the Court would be saying the foreclosures were wrongfully granted and the resulting judgments are void. See, e.g., Swiatkowski, 745 F.Supp.2d at 166, 2010 WL 3951212, at *10 (plaintiff claimed that the state court judgment was the result of fraud, and if the court accepted plaintiff's arguments, it "`would effectively declare the state court judgment fraudulently procured and thus void.'" (quoting Kropelnicki, 290 F.3d at 129)). Figueroa's federal claims can only succeed to the extent the Florida court erred, and the Court cannot grant Figueroa his requested relief without disturbing the Florida foreclosure judgment. Cf. Sophocleus v. Ala. Dep't of Transp., 605 F.Supp.2d 1209, 1218 (M.D.Ala.2009). It is for the state appeals courts and the U.S. Supreme Court to tell the state court it was wrong. This Court has no such role. Finally, to the extent Plaintiff seeks money damages and not an explicit overturning of the state-court judgment, this does not change the Court's conclusion, as damages would only be available where there was a wrongful foreclosure. See, e.g., Rene, 32 F.Supp.2d at 543. Because the federal claims can only succeed if the state court wrongly granted the foreclosure, the federal and state claims are inextricably intertwined.
This conclusion is further buttressed by Plaintiff's state-court filings, including the two motions he and Brown filed seeking to vacate the foreclosure judgment and the motion to dismiss for lack of subject matter jurisdiction. (See Mot. Ex. A, at 2-12). In the emergency motion to vacate the state-court judgment, Figueroa asserted IndyMac and other banks committed fraud and engaged in a pattern of fraud and deception while attempting to foreclose residential properties. (See id. at 7). Figueroa further argued in the emergency motion that IndyMac did not have standing to foreclose on his property. (See id. at 9). Likewise, in the motion to dismiss, Brown asserted that IndyMac did not have standing to foreclose because it was not the owner of the note and mortgage. (See id. at 18).
Moreover, although not actually raised, Figueroa explained in the emergency motion that he "intended" to raise affirmative defenses to the foreclosure and intended to file several counterclaims, including RICO claims. (See id. at 10). Figueroa's emergency motion was filed to overturn the state-court foreclosure judgment, and he resurrects the same arguments in this RICO action. This repetition and repackaging of earlier arguments demonstrates Figueroa's true purpose here is to attack the state-court judgment.
Plaintiff asks the Court to follow Sykes v. Mel Harris & Assocs., LLC, No. 09 Civ. 8486(DC), 757 F.Supp.2d 413, 2010 WL 5395712 (S.D.N.Y. Dec. 29, 2010), where the court declined to dismiss the case under the Rooker-Feldman doctrine. See id. at 428-29, at *10. Plaintiffs there were served via "sewer service"—where process servers would not actually serve defendants but would still report service as completed. Id. at 419, at *2. After the faulty service, creditors would then obtain default judgments and attack defendants' assets. Id. at 419-21, at *2-3.
The court in Sykes found that Rooker-Feldman did not apply because the plaintiffs' claims were independent of state-court judgments and did not seek to overturn them. See id. at 428-29, at *10. Notably, however, the state-court judgments there had already been "vacated or discontinued" in the state court, and plaintiffs' declaratory and injunctive relief claims were distinct from the vacated judgments. Id. Since the state-court judgments had previously been overturned, the district court could issue orders that would not nullify the state-court judgments; there were no state judgments at all. With no valid state-court decisions, the plaintiff could succeed without the state court having wrongly decided the issues. See id. Further, without adverse judgments against them, the plaintiffs in Sykes could not properly be called "state-court losers," a status that is required for Rooker-Feldman to apply. Here, on the other hand, the Court cannot grant Plaintiff, a state-court loser, his sought-after relief without fundamentally undermining the state-court judgment. To the extent the Court could grant Plaintiff damages, it would have to find the foreclosure was improper, a finding at odds with that of the Florida court. This case is clearly distinguishable from Sykes.
Finally, Plaintiff had a full and fair opportunity to litigate in state court. The foreclosure action was filed in Florida circuit court, a court of general jurisdiction. (See Mot. Ex. A); FLA. CONST. art. V, § 5; FLA. STAT. § 26.012. Federal RICO claims may be raised in Florida circuit courts. See, e.g., Winters v. Mulholland, 33 So.3d 54, 56 (Fla. 2d DCA 2010) (discussing a Florida state-court case containing a federal RICO claim that went to trial in a Florida circuit court).
Plaintiff's Complaint, in passing and without discussion, states that "a default was entered against Mr. Figueroa." (3d Am. Compl. 17). This is alleged to have occurred because although he and Brown were served with and were aware of the foreclosure complaint, they chose not to respond because of an erroneous belief that service was improper. (See id.).
Nevertheless, in the Complaint, Figueroa alleges that a default was entered against him on September 16, 2009. (See 3d Am. Compl. 17). IndyMac's summary judgment motion was filed two-days earlier, on September 14, 2009. (See Mot. Ex. A, at 21-23). In response to the summary judgment motion, Brown filed a motion to dismiss based on a lack of subject matter jurisdiction on January 13, 2010. (See id. at 18-20). Nowhere in that motion to dismiss is there any mention of improper service or a default. (See id.). And when summary judgment was granted on February 1, 2010, the Florida court made no mention of a previous default judgment. (See id. at 13-17).
Three days after summary judgment was granted, Figueroa and Brown filed their emergency motion to vacate the judgment and foreclosure sale. (See id. at 7-12). In that motion, they made numerous arguments—including RICO and fraud allegations. (See id.). Again, no references to improper service or a default judgment appear.
Figueroa and Brown, through retained counsel, filed a second motion to vacate the summary judgment on February 22, 2010. (See id. at 2-6). Their counsel also made no mention of improper service or a default judgment. (See id.). In fact, the only "default" mentioned in any of the state-court filings is Figueroa's and Brown's default on their mortgage. (See Mot. Ex. A, at 21).
The Court does not credit Plaintiff's allegation of a default. Beyond the sole sentence in the Complaint, there simply is no evidence that a default was ever entered against Figueroa. No state-court filing demonstrates one was entered. And if one was entered, Figueroa and Brown would have undoubtedly sought to vacate it, as they attempted to vacate the entry of summary judgment. Even if a default was entered in that case, it would not preclude a finding that Figueroa and Brown had a full and fair opportunity to litigate given that they were aware of the litigation and made a conscious decision to not respond. See, e.g., In re Harmon, 250 F.3d 1240, 1247 (9th Cir.2001) (finding that a default judgment is an estoppel as to all litigated issues if the defendant is served but fails to respond because he or she is presumed to admit all facts that were pleaded, but a default is not an estoppel to defendants who were unaware of the litigation). Figueroa and Brown were aware of the state action and had a full and fair opportunity to litigate, but chose not to do so until the summary judgment motion was filed.
In this action Plaintiff is seeking to attack a state foreclosure judgment, and the RICO claims are inextricably intertwined with that foreclosure judgment. The Court thus lacks jurisdiction to hear the claims under the Rooker-Feldman doctrine. Having chosen not to appeal in state court, Plaintiff may not, effectively, appeal his adverse judgment here.
It is therefore
MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 96, 828 N.Y.S.2d 266, 861 N.E.2d 81 (N.Y. 2006) (footnote call numbers omitted).
28 U.S.C. § 1257.
Prior to the Supreme Court's decision in Exxon Mobil, courts in the Eleventh Circuit used the Amos test when determining whether the Rooker-Feldman doctrine applied. See Nicholson, 558 F.3d at 1272. That four-part test considered whether:
Id. (quoting Amos v. Glynn Cnty. Bd. of Tax Assessors, 347 F.3d 1249, 1266 n. 11 (11th Cir.2003) (internal citations omitted)). In Nicholson the Eleventh Circuit eschewed that test in favor of the strict language of Exxon Mobil. See Nicholson, 558 F.3d at 1274 (citing Exxon Mobil, 544 U.S. at 284, 125 S.Ct. 1517).
While the Eleventh Circuit has abandoned the Amos test, it continues to acknowledge that "Rooker-Feldman's reach extends to federal claims raised by the state-court loser that are deemed to be `inextricably intertwined' with the state court judgment." Springer, 401 Fed.Appx. at 458, 2010 WL 4230633, at * 1 (citing Casale, 558 F.3d at 1260); Casale, 558 F.3d at 1260 (Rooker-Feldman "applies both to federal claims raised in the state court and to those `inextricably intertwined' with the state court's judgment." (citing Feldman, 460 U.S. at 482 n. 16, 103 S.Ct. 1303)). In fact, the Eleventh Circuit has stated post-Exxon Mobil and Nicholson: "[W]e must determine whether a plaintiff is a state-court loser who is complaining of injuries caused by state-court judgments. In doing so, our circuit has continued to apply the fourth factor of the Amos test, evaluating whether the plaintiff's claims are `inextricably intertwined' with the state court judgment." Cormier v. Horkan, No. 10-11089, 397 Fed.Appx. 550, 552, 2010 WL 3705973, at *2 (11th Cir. Sept. 23, 2010) (per curiam) (internal citations omitted).