WBK Industry News - Litigation Developments

10th Circuit Finds Rooker-Feldman Inapplicable to Colorado Non-Judicial Foreclosure Procedure

The U.S. Court of Appeals for the Tenth Circuit recently determined that the Rooker-Feldman doctrine, which limits federal-court jurisdiction, does not apply to a Colorado procedure for non-judicial foreclosure of mortgages.

The matter arose from foreclosure proceedings in Colorado state court pursuant to Colorado Rule of Civil Procedure 120 (“Rule 120”).  Generally, a Rule 120 proceeding allows for creditors to foreclose on a debtor’s property in an efficient and cost-effective manner; however, the Tenth Circuit found that non-judicial proceedings are not the proper forum for determining complex issues of foreclosure.  Rather, in a Rule 120 proceeding the court determines only whether there is a “reasonable probability” of the existence of the alleged circumstances which necessitate the sale of a home.

Here, before the sale had commenced, the borrower filed suit in the U.S. District Court for the District of Colorado.  The borrower alleged, among other things, that the defendants violated RESPA.  The borrower requested damages and a declaration that the defendants had no interest in the home.  The district court dismissed the borrower’s RESPA claim for failure to state a claim, and dismissed the additional claims on the ground that the claims asked the court to unwind the holdings of the Rule 120 proceedings, contrary to the jurisdictional bar of the Rooker-Feldman doctrine.

The Rooker-Feldman doctrine (“the doctrine”) forbids any federal court, besides the Supreme Court, from reviewing state-court civil judgments.  The doctrine generally creates a jurisdictional bar that arises if claims in federal court allege that a state court wrongfully entered judgment.

Ultimately, the Tenth Circuit ruled that the federal suit in this case was not barred by the doctrine because none of the plaintiff’s claims challenged the Rule 120 proceedings or sought to set aside the ruling from the Rule 120 rulings.  The Court remanded to the district court the question of the effect of the Rule 120 ruling on the case under Colorado state-law doctrines of claim and issue preclusion.