In recent decisions, various courts have relied upon the Rooker-Feldman Doctrine to bar a consumer’s federal claims regarding the validity of his or her mortgage after the lender obtained a state court foreclosure judgment. See, e.g., Mohorne v. Beal Bank, S.S.B., 419 B.R. 488, 496-97 (S.D. Fla. 2009) (Altonaga, J.); Figueroa v. Merscorp., Inc., et al., Case No. 10-61296 (S.D. Fla., Jan. 31, 2011). Under the Rooker-Feldman doctrine, a party is barred from seeking appellate review in a federal district court of a judgment of a state court where the federal claims were inextricably intertwined with those in the state action. On Tuesday, March 22, 2011, the Third Circuit Court of Appeals in Kliesh v. Select Portfolio Servicing, Inc., No. 10-3175 (3d Cir., March 22, 2011), 2011 WL 989855, declined to apply the Rooker-Feldman Doctrine, but rather held that the consumer’s claims were barred based on the principles of issue preclusion. 

Select Portfolio Servicing Inc. (“SPS”) filed and obtained a foreclosure judgment in the Pennsylvania Court of Common Pleas. In that action, the plaintiff filed counterclaims against SPS based upon its attempts to collect the past due mortgage payments from the plaintiff. After the conclusion of the state-court case, the plaintiff filed a complaint against SPS, and its parent corporation, Credit Suisse First Boston (USA), in federal court alleging that: (1) SPS filed a fraudulent foreclosure action; violated the Truth in Lending Act (“TILA”), 15 U.S.C. §§1601-67; (3) unjustly enriched itself; (4) violated the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692-1692p; (5) violated the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§1681-1681x; and (6) intentionally inflicted emotional distress upon him. 

The trial court dismissed the plaintiff’s complaint based upon the Rooker-Feldman Doctrine. The appellate court, however, agreed that the Doctrine did not apply to the plaintiff’s claims, because the plaintiff “alleged that he was injured by the defendants, not the state-court judgment.” 

Nonetheless, a closecousin to the Rooker-Feldman Doctrine is the principle of issue preclusion. Under the doctrine of issue preclusion, when an issue of fact or of law is actually litigated and determined by a valid final judgment, and determination of the issue was essential to judgment, the determination on that issue is conclusive in a subsequent action between the parties. Accordingly, because the plaintiff’s exact arguments were raised and rejected in the state proceedings, the state court’s ruling was conclusive and barred the plaintiff’s federal claims. Additionally, the court held that the plaintiff had abandoned his FCRA and unjust enrichment claims on appeal, and his TILA and FDCPA claims were barred by the applicable statute of limitations. The court therefore concluded that any further amendments to the pleadings would be futile, and upheld the trial court’s dismissal of the case with prejudice. 

The above case highlights some of the defenses that may be available to lenders in the rash of  cases challenging foreclosure judgments that are sure to continue for the next few years.