PHILADELPHIA – The U.S. Court of Appeals for the Third Circuit agreed with a lower federal court that the Rooker-Feldman doctrine precluded the claims of plaintiffs who believed U.S. Bank breached its mortgage obligations and the Fair Debt Collections Practices Act (FDCPA).

On April 12, Third Circuit judges D. Michael Fisher, Cheryl Ann Krause and Morton I. Greenberg decided to affirm the judgment of the U.S. District Court for the Eastern District of Pennsylvania, and dismissed the case brought by plaintiffs David and Kelly Schraven and Kathleen Todd.

The Schravens and Todd defaulted on their mortgages, leading U.S. Bank National Association (the Trustee) to begin foreclosure actions against them. Each foreclosure complaint asked for “damages representing the principal balance of the loans, interest, attorney’s fees, expenses incurred in foreclosing, and late fees.”

“The plaintiffs did not defend from the foreclosures, so default judgments were entered against them. Trustee’s counsel sought to execute the judgments and the court scheduled sheriff’s sales. The sheriff’s sales were rescheduled multiple times. Upon motion by the trustee’s counsel, the court reissued the writs of execution to include accrued costs and interest through the new prospective dates of sale. The plaintiffs did not challenge the reissued writs of execution in state court,” Fisher stated.

The plaintiffs allege “the trustee breached its mortgage obligations and violated the FDCPA by charging post-judgment attorney’s fees, and by charging post-judgment interest before the interest accrued.”

The District Court dismissed the plaintiffs’ cases for lack of jurisdiction under the Rooker-Feldman doctrine.

The Rooker-Feldman doctrine precludes federal district courts from hearing “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.”

“Four requirements must be met for the Rooker-Feldman doctrine to apply: (1) The federal plaintiff lost in state court; (2) The plaintiff complains of injuries caused by the state-court judgment; (3) Those judgments were rendered before the federal lawsuit was filed; and (4) The plaintiff is inviting the district court to review and reject the state judgments,” Fisher said.

Fisher explained the first and third requirements were satisfied, as the plaintiffs lost in the state court action and the default judgments were entered before they filed their federal claims, naming the second and fourth requirements as central to the appeal.

“With respect to the second requirement, the court must ‘identify those federal suits that profess to complain of injury by a third party, but actually complain of injury produced by a state-court judgment and not simply ratified, acquiesced in, or left unpunished by it.’ With respect to the fourth element, the court must determine whether evaluating the plaintiff’s claims will require ‘prohibited appellate review consisting of a review of the proceedings already conducted by the ‘lower’ tribunal to determine whether it reached its result in accordance with the law,” Fisher said.

“The plaintiffs argue that their injuries are the result of post-judgment activities – namely, the inclusion of attorney’s fees and anticipated interest in the reissued writs of execution. But the default judgments provided for attorney’s fees and interest through the date of the sheriff’s sale, and a writ of execution is an enforcement mechanism for a default judgment in Pennsylvania. The injuries complained of were therefore produced by the default judgments, which were neither stricken nor opened at the state court level. The plaintiffs’ federal claims are in effect appeals to the underlying default judgments. This is exactly what the Rooker-Feldman doctrine seeks to preclude. Accordingly, the District Court correctly concluded that it did not have jurisdiction to hear the plaintiffs’ claims,” Fisher stated.

The plaintiffs are represented by James A. Francis, Michael P. Malakoff and David A. Searles of Francis & Mailman, in Philadelphia and Pittsburgh.

The defendants are represented by Daniel S. Bernheim III of Wilentz Goldman & Spitzer, Candidus K. Dougherty and Jeffrey B. McCarron of Swartz Campbell plus Henry F. Reichner and Nipun J. Patel of Reed Smith, all in Philadelphia.

U.S. Court of Appeals for the Third Circuit case 16-1255

U.S. District Court for the Eastern District of Pennsylvania case 2:15-cv-03397

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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