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WBK Industry News - Litigation Developments

1st Circuit Applies Rooker-Feldman Doctrine in Affirming Dismissal of Claims Against Mortgage Loan Servicer

The U.S. Court of Appeals for the First Circuit recently applied the Rooker-Feldman doctrine (the “Doctrine”), which limits federal-court jurisdiction, in affirming the dismissal of claims brought against a mortgage loan servicer in federal court.

The matter arose from foreclosure proceedings that were initiated by the servicer in the Massachusetts Land Court.  The Land Court entered a final judgment of foreclosure and the servicer purchased the debtor’s property at the foreclosure sale.  The servicer then commenced a summary process action in the Worcester Housing Court and the debtor filed a counterclaim challenging the validity of the mortgage assignment.  After lengthy motion practice, the Housing Court entered a final judgment and awarded possession of the property to the servicer.  The debtor appealed, but the debtor’s appeal was dismissed for failure to post the required bond.

Roughly five months after the conclusion of the summary process action, the debtor, invoking diversity jurisdiction, filed a civil action against the servicer in the U.S. District Court for the District of Massachusetts.  The debtor alleged state law claims of wrongful foreclosure, violation of the Massachusetts consumer protection statute, breach of the covenant of good faith and fair dealing, and negligent infliction of emotional distress.  The servicer moved to dismiss and the district court granted the servicer’s motion, concluding, inter alia, that the Doctrine deprived federal district courts of subject matter jurisdiction.

On appeal, the First Circuit agreed with the district court stating that the Doctrine preserves the U.S. Supreme Court’s exclusive jurisdiction over appeals from final state court judgments by divesting lower federal courts of jurisdiction to hear certain cases brought by parties who have lost in state court.  The appellate court explained that the Doctrine precludes a party who lost in state court from challenging the state court judgment in federal district court.

In the case at hand, the First Circuit stated that the debtor was the losing party in both the Land Court and the Housing Court, and that the debtor’s federal action pertains to injuries allegedly caused by those state court judgments.  Although the debtor argued that the federal claims were based on legal theories not presented in the state courts, the First Circuit, in affirming the dismissal of the claims, explained that because the debtor’s federal suit sought to invalidate the antecedent state courts’ judgments, the Doctrine deprived the district court of subject-matter jurisdiction to consider the debtor’s federal claims.

The full opinion can be found here.