The RF doctrine is generally thought to mean that anything that was litigated in state court cannot be brought up in Federal court and that the reverse is also true. One of my anonymous contributors has detected a case that makes the whole RF doctrine thing and res judicata doctrines COMPARED and found to be different.
Here is what he sent me from the decision
What Johnson adds—what the defendants in this suit have failed to appreciate—is that federal courts retain juris-‐‑ diction to award damages for fraud that imposes extra-‐‑ judicial injury. The Supreme Court drew that very line in Exxon Mobil:
Nor does [the doctrine] stop a district court from exercising sub-‐‑ ject-‐‑matter jurisdiction simply because a party attempts to liti-‐‑ gate in federal court a matter previously litigated in state court. If a federal plaintiff “present[s] some independent claim, albeit one that denies a legal conclusion that a state court has reached in a case to which he was a party … , then there is jurisdiction and state law determines whether the defendant prevails under principles of preclusion.” GASH Assocs. v. Rosemont, 995 F. 2d 726, 728 (7th Cir. 1993); accord Noel v. Hall, 341 F. 3d 1148, 1163– 1164 (9th Cir. 2003).
544 U.S. at 293. In other words, if a plaintiff contends that out-‐‑of-‐‑court events have caused injury that the state judici-‐‑ ary failed to detect and repair, then a district court has juris-‐‑ diction—but only to the extent of dealing with that injury. As we wrote in Johnson, the federal court cannot set aside the state court’s judgment.
Iqbal alleges that the defendants conducted a racketeer-‐‑ ing enterprise that predates the state court’s judgments. He cannot have those judgments annulled but can contend that he was injured, out of court, by being “set up” by Patel and Johnson so that they could take over his business and reap the profits he anticipated. The district court believed that any pre-‐‑litigation fraud is “intertwined” with the state court judgments and therefore forecloses federal litigation, but Exxon Mobil shows that the Rooker-‐‑Feldman doctrine asks No. 14-‐‑1959 5
what injury the plaintiff asks the federal court to redress, not whether the injury is “intertwined” with something else. See 544 U.S. at 291; see also Richardson v. Koch Law Firm, P.C., 768 F.3d 732, 734 (7th Cir. 2014) (deprecating any inquiry into what is intertwined with what).
Because Iqbal seeks damages for activity that (he alleges) predates the state litigation and caused injury independently of it, the Rooker-‐‑Feldman doctrine does not block this suit. It must be reinstated.
Logically the district court’s next inquiry is whether the doctrine of claim preclusion (res judicata) applies. (Exxon Mobil observes, 544 U.S. 293, that preclusion differs from the Rooker-‐‑Feldman doctrine and comes to the fore once the fed-‐‑ eral court concludes that it has subject-‐‑matter jurisdiction.) At least two decisions by intermediate appellate courts in Indiana hold that fraud causing nonpayment is a compulso-‐‑ ry counterclaim in a debt-‐‑collection suit. Ratcliff v. Citizens Bank, 768 N.E.2d 964, 967–69 (Ind. App. 2002); Broadhurst v. Moenning, 633 N.E.2d 326, 331–32 (Ind. App. 1994). Cf. Fox v. Maulding, 112 F.3d 453 (10th Cir. 1997) (similar conclusion under Oklahoma law). State law determines the rules of pre-‐‑ clusion, see 28 U.S.C. §1738, so the district court will need to decide whether the Supreme Court of Indiana is likely to agree with these decisions, and if so whether there is any ex-‐‑ ception to the rules of preclusion. The court also will need to consider whether Patel and Johnson receive the benefits of any compulsory-‐‑counterclaim requirement, given that S-‐‑ Mart Petroleum was the sole plaintiff in the state actions.
The judgment is reversed, and the case is remanded for further proceedings consistent with this opinion.
Filed under: foreclosure