Charles v. Levitt
16-2902-cv
2d Cir.Nov 16, 2017Background
- Plaintiff Wayne Charles, Sr. sued multiple defendants (lawyers, his ex-wife Glenda, a state employee, a bank, and a court-appointed receiver) alleging civil RICO, fraud, due-process violations, and seeking money damages and equitable relief related to a receivership over his Manhattan property at 80 W. 120th St.
- A New York state court entered judgment against Charles and appointed a receiver for the Property before he filed the federal suit.
- The District Court dismissed Charles’s amended complaint, holding his claims were barred by the Rooker–Feldman doctrine and, alternatively, that the complaint failed to state a claim; the court also imposed $1,000 in sanctions on Charles’s counsel for including irrelevant and scurrilous allegations.
- Charles appealed, arguing the Rooker–Feldman dismissal was improper (he said he did not seek to vacate the state judgment), that his complaint stated claims, and that sanctions were unwarranted.
- The Second Circuit affirmed dismissal on Rooker–Feldman grounds and the sanctions order, but remanded with instructions to amend the District Court’s judgment to dismiss without prejudice because lack of subject-matter jurisdiction precludes dismissal with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rooker–Feldman bars the federal suit | Charles: suit seeks damages, not to vacate the state judgment; thus federal jurisdiction is proper | Defendants: suit complains of injuries caused by the state-court receivership and asks relief that would require review/rejection of the state judgment | Court: Rooker–Feldman applies because plaintiff’s injuries flow from the state-court judgment and relief would require impermissible review; dismissal affirmed but must be without prejudice |
| Whether the amended complaint states viable claims (RICO, fraud, due process) | Charles: complaint alleges fraud/RICO/perjury/bribery tied to defendants’ conduct | Defendants: alternative grounds—claims fail on merits and pleadings | Court: did not decide merits (agreeing Rooker–Feldman bars suit); expressed no view on alternative merits ruling |
| Whether the District Court properly imposed sanctions on plaintiff’s counsel | Charles: sanctions unjustified; complaint raised serious issues; some challenged supporting material cited by Charles | Defendants: complaint contained irrelevant, absurd, and scurrilous statements warranting sanctions | Court: sanction affirmed as within discretion; District Court cited specific offending portions of the complaint |
| Whether dismissal may be with prejudice when jurisdiction is lacking | Charles: (argued for relief) | Defendants: District Court had dismissed with prejudice | Court: dismissal for lack of subject-matter jurisdiction must be without prejudice; remand to amend judgment accordingly |
Key Cases Cited
- Hoblock v. Albany Cty. Bd. of Elections, 422 F.3d 77 (2d Cir. 2005) (articulates four-part test for Rooker–Feldman application)
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (U.S. 2005) (limits Rooker–Feldman to cases seeking review of state-court judgments)
- Vossbrinck v. Accredited Home Lenders, Inc., 773 F.3d 423 (2d Cir. 2014) (explains when claims tied to state judgments remain barred despite being framed as statutory torts)
- Sykes v. Mel S. Harris & Assocs. LLC, 780 F.3d 70 (2d Cir. 2015) (distinguishes claims that attack state judgments from those alleging independent fraudulent conduct)
- Hernandez v. Conriv Realty Assocs., 182 F.3d 121 (2d Cir. 1999) (holds courts lacking subject-matter jurisdiction cannot dismiss with prejudice)
- Katz v. Donna Karan Co., L.L.C., 872 F.3d 114 (2d Cir. 2017) (directs amendment to dismissals when jurisdictional defects require without-prejudice dismissal)
- Carter v. HealthPort Techs., LLC, 822 F.3d 47 (2d Cir. 2016) (same principle regarding prejudice and jurisdiction)
- Wolters Kluwer Fin. Servs., Inc. v. Scivantage, 564 F.3d 110 (2d Cir. 2009) (standard of review for sanctions appeals)
- Perpetual Sec., Inc. v. Tang, 290 F.3d 132 (2d Cir. 2002) (court may decide collateral matters like sanctions despite lacking jurisdiction over merits)