Mortgage Servicing and Loan Modifications: 11.7.3 The Anti-Injunction Act
The Anti-Injunction Act is another potential impediment to federal court relief when there is an ongoing state court proceeding.
The Anti-Injunction Act is another potential impediment to federal court relief when there is an ongoing state court proceeding.
An additional abstention doctrine, enunciated by the Supreme Court in Colorado River Water Conservation District v. United States,493 sometimes arises in federal challenges to foreclosures.
The interplay between the federal courts’ removal jurisdiction and the Rooker-Feldman doctrine presents two special issues. First is whether the doctrine prevents a federal court from reviewing or modifying orders or judgments that were entered by a state court in the same case, before removal. The answer is clearly no.
The Supreme Court has made it clear that the Rooker-Feldman doctrine does not apply if the federal plaintiff was not a party to the state case.538 Even if the federal plaintiff is in privity with a party to the state case for preclusion purposes, the doctrine does not apply.539 Thus, a prior state court judgment against one of two
Some courts have suggested that if the federal defendants were not parties to the state court proceedings, this may be a reason not to apply the Rooker-Feldman doctrine even though the federal plaintiff was a party.546 The Tenth Circuit has held that merely adding defendants beyond those involved in the state court case does not avoid th
According to the Supreme Court’s formulation, the doctrine applies only to federal cases “brought by” state court losers.552 Occasionally, though, the homeowner will be the defendant rather than the plaintiff in the federal suit. For example, if the homeowner attempts to rescind the loan under the Truth in Lending Act after the state foreclosure judgment is entered, the creditor may bring an action in federal court seeking a declaratory judgment that the rescission is invalid.
There is some limited authority that the Rooker-Feldman doctrine does not apply if the federal plaintiff was also the plaintiff in the state court proceeding. For example, before filing in federal court the homeowner may have brought suit in state court to try to stop a non-judicial foreclosure.
The Rooker-Feldman doctrine does not apply to claims that the homeowner could not have possibly raised in the state court proceeding.556 Simply, a federal suit cannot be characterized as an “appeal” of a decision that the state court not only did not make, but could not even consider.
Many courts have held that the Rooker-Feldman doctrine is inapplicable to certain types of actions in bankruptcy court.562 These courts rely on the fact that federal bankruptcy courts have original jurisdiction that explicitly allows them to avoid, modify, and discharge state judgments in certain circumstances.
The Rooker-Feldman doctrine does not apply if a federal plaintiff presents an independent claim.573 A claim can be considered independent even if it denies a legal conclusion that a state court reached in a case to which the federal plaintiff was a party,574 and even if the “same or a related question” was litigated in the state court.575 The case or claim might be
In an unpublished decision, the Seventh Circuit held that the Rooker-Feldman doctrine would not bar a TILA rescission claim, as that injury occurred when the creditor provided unclear rescission deadline disclosures during the loan closing.
A challenge to the constitutionality of a statute on which an earlier state court decision was based is not a challenge to that decision itself, so is not barred.615 In Feldman, the Supreme Court did not bar plaintiff’s claim attacking the constitutionality of a rule that the state court had enforced.616 Likewise, in
Several courts have held that the doctrine does not bar claims based on acts that preceded the state court suit, even if those acts ultimately led to the state court suit.624 For example, claims of fraud, deceptive practices, professional malpractice, and violations of TILA, the Equal Credit Opportunity Act, and the Fair Housing Act, all of which related to the origination of the mortgage, were independent of a state foreclosure judgment, so were not barred by the doctrine.
A number of courts have held that a claim that a party procured a state court judgment by misconduct or fraud is an independent claim.626 For example, the Sixth Circuit held that a claim against a collection attorney for filing a false affidavit to initiate a state court garnishment action was an independent claim.627 The Ninth Circuit has gone so far as to develop an “extrinsic fraud” exception to the
A Fair Debt Collection Practices Act claim that a lender falsely represented the amount due after a foreclosure sale was not barred by the Rooker-Feldman doctrine because the FDCPA claim did not challenge the validity of the consumers’ obligations under the state court judgment and because their injury was not caused by that judgment.632 Likewise, FDCPA claims related to a servicer attorney’s misquote of a payo
Younger abstention, the Anti-Injunction Act, Colorado River abstention, and the Rooker-Feldman doctrine all apply only in federal court (although state courts may have similar doctrines). But even if an action gets beyond those obstacles, or is filed in state court, the plaintiff may still have to contend with res judicata or collateral estoppel if there is a prior state foreclosure or post-foreclosure eviction judgment.
A consumer facing the loss of a home through foreclosure or execution on a judgment lien may be able to secure temporary or permanent relief in the bankruptcy court. A complete discussion of the bankruptcy process can be found in NCLC’s Consumer Bankruptcy Law and Practice treatise,1 and we recommend that treatise for those considering using bankruptcy to assist their clients.
If an eviction or foreclosure case or some other type of collection action is pending against the homeowner, the consumer should consider bankruptcy court as a forum. In most cases, as soon as a bankruptcy case is filed, all such actions are automatically stayed without the need to consider the impediments to relief discussed above. Using bankruptcy to prevent foreclosure is discussed in detail in NCLC’s Home Foreclosures.645
Because of a federal law prohibiting mandatory arbitration in mortgage loans, arbitration requirements are rarely found in mortgage transactions today. This section provides an overview of this federal requirement, and then briefly summarizes other approaches where a defendant seeks to enforce an arbitration requirement. Far more detail on these other approaches is found in NCLC’s Consumer Arbitration Agreements treatise.646
Courts determine the enforceability of an arbitration clause unless there is a clear and unmistakable delegation to the arbitrator of the determination of arbitrability. Then it is for the court to decide whether the delegation clause is enforceable, but if it is, then the arbitrator determines arbitrability.666
[Editor’s note: This subsection has been deleted.]
An arbitration requirement is grounded upon an agreement between parties that delineated disputes must be resolved by an arbitration procedure specified in the agreement.
A preliminary matter in any challenge to the enforceability of an arbitration clause is whether the enforceability determination is to be made by a court or by the arbitrator. In Rent-A-Center, West, Inc. v. Jackson,689 the Supreme Court held that, “ordinarily,” issues about whether parties have agreed to a valid arbitration clause are for a court—not an arbitrator—to decide.
The Credit Repair Organizations Act (CROA) provides potential claims in foreclosure rescue scams and loan modification scams.694 The CROA contains provisions that appeared to some courts as inconsistent with an arbitration requirement, but the Supreme Court has resolved that question by finding that CROA claims can be forced into binding arbitration.695