Cawley v. Celeste (In Re Athens/Alpha Gas Corp.)
715 F.3d 230
| 8th Cir. | 2013Background
- Cawley lent to Athens/Alpha 1998–2002; bankruptcy filed 2002 with Cawley listed as creditor for $26,000 secured claim.
- Cawley claimed a 5% working interest in a well; did not record the interest or file a proof of claim before plan confirmation.
- Plan4 transferred assets to Missouri Breaks free and clear; court disallowed Cawley’s secured claim and allowed it unsecured; plan confirmed May 5, 2005.
- Post-confirmation, Cawley sought payment of administrative expense claim; ND state court quiet-title action held Cawley’s interest invalid; ND Supreme Court affirmed res judicata effect.
- Bankruptcy court reopened proceedings; denied motion to determine claims; BAP affirmed, citing Rooker–Feldman as bar; Cawley appeals.
- Sanctions motion against Cawley by Interest Holders pending.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rooker–Feldman bars the federal action | Cawley argues RF does not apply and preclusion should govern | Interest Holders contend RF bars the action as a challenge to a state court judgment | RF bars the federal action (broadly) as state-court judgment review is sought |
| Whether ND res judicata bars Cawley’s claims under §1738 | Res judicata should not bar claims because ND court lacked estate-property jurisdiction | ND judgment forecloses relitigation of same claims | Yes; ND judgment precludes under §1738 |
| Whether the ND judgment had proper subject-matter jurisdiction (Durfee standard) | State court lacked jurisdiction over bankruptcy-related matters | State and federal courts have concurrent jurisdiction in bankruptcy proceedings | ND court had jurisdiction; Durfee fully and fairly litigated and decided the issue |
Key Cases Cited
- Durfee v. Duke, 375 U.S. 106 (U.S. 1963) (full faith and credit for jurisdictional questions when fairly litigated in state court)
- Sanders Confectionery Prod., Inc. v. Heller Financial, Inc., 973 F.2d 474 (6th Cir. 1992) (four-element res judicata test applied by ND Supreme Court)
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (Sup. Ct. 2005) (Rooker–Feldman clarification; limits on federal review of state judgments)
- Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75 (U.S. 1984) (full faith and credit; preclusion under state judgments)
- Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 (U.S. 1998) (jurisdictional questions before merits in some contexts)