460 F.Supp.3d 327
S.D.N.Y.2020Background
- Plaintiffs (Dorce, Jones, Thomas‑Murchison) owned or held shares in NYC properties that were subject to in rem tax foreclosure judgments and later transferred to Third Party Transfer (TPT) partners (Neighborhood Restore, Bridge Street).
- Plaintiffs allege they received no actual or constructive notice of the in rem proceedings, were converted from owners/shareholders to tenants, received no compensation for alleged equity, and that many buildings transferred for nominal consideration.
- Plaintiffs brought federal constitutional claims (procedural due process, takings, equal protection) and state‑law claims, seeking damages and prospective declaratory/injunctive relief to enjoin the TPT program and portions of NYC Administrative Code.
- Defendants moved to dismiss under Fed. R. Civ. P. 12(b)(1) and 12(b)(6); the City argued federal court lacked jurisdiction under Rooker–Feldman, the Tax Injunction Act (TIA), and comity.
- The Court held (May 16, 2020) that Rooker–Feldman bars claims that necessarily ask the federal court to review or reject state foreclosure judgments; nominal procedural‑due‑process claims and certain takings claims survive Rooker–Feldman analysis, but TIA and comity bar federal adjudication of the tax/foreclosure‑related claims and plaintiffs lack standing for the sought prospective relief. The case was dismissed without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rooker–Feldman bars claims that attack state in rem foreclosure judgments | Plaintiffs seek constitutional relief for City's conduct in initiating foreclosures and transferring title | Plaintiffs lost in state court; federal court would have to review/reject state judgments | Rooker–Feldman bars claims seeking relief that would effectively invalidate the state foreclosure judgments (e.g., damages tied to lost property value) |
| Procedural due process (notice) — are claims barred? | Plaintiffs: lack of notice deprived them of property and due process; seek damages | Defendants: damages for lost property value flow from state judgments and are barred | Procedural‑due‑process claims seeking only nominal damages for denial of process are not barred; compensatory damages tied to foreclosure outcomes are barred |
| Takings (just compensation) — are claims barred? | Plaintiffs: foreclosure and transfers extinguished redemption/surplus rights and deprived them of compensation | Defendants: Takings claims would require undoing or invalidating foreclosure judgments | Takings claims premised on denial of compensation may proceed (do not necessarily require rejecting state judgments); claims that attack the propriety of initiating foreclosures are barred by Rooker–Feldman |
| Tax Injunction Act / comity and standing for prospective relief | Plaintiffs seek injunction/declaratory relief to stop TPT program expansion | Defendants: TIA and comity bar federal interference with state tax administration; plaintiffs lack imminent injury for prospective relief | TIA and comity bar federal adjudication of the tax/foreclosure matters; plaintiffs lack standing for prospective injunctive/declaratory relief; state claims dismissed for lack of supplemental jurisdiction |
Key Cases Cited
- Hoblock v. Albany Cty. Bd. of Elections, 422 F.3d 77 (2d Cir. 2005) (articulates Rooker–Feldman requirements and analysis)
- Vossbrinck v. Accredited Home Lenders, Inc., 773 F.3d 423 (2d Cir. 2014) (applies Rooker–Feldman factors)
- Carey v. Piphus, 435 U.S. 247 (1978) (denial of procedural due process actionable for nominal damages)
- Knick v. Township of Scott, Pa., 139 S. Ct. 2162 (2019) (takings claim accrues when government takes property without compensation; exhaustion context)
- Levin v. Commerce Energy, Inc., 560 U.S. 413 (2010) (Tax Injunction Act and comity in federal‑state tax disputes)
- Long Island Lighting Co. v. Town of Brookhaven, 889 F.2d 428 (2d Cir. 1989) (comity bars §1983 damages where state remedy is adequate)
- Bernard v. Village of Spring Valley, 30 F.3d 294 (2d Cir. 1994) (TIA rooted in federalism; federal courts should not interfere with local tax matters)
- Haywood v. Drown, 556 U.S. 729 (2009) (state courts have concurrent jurisdiction to adjudicate §1983 claims)
- Twombly v. Bell Atlantic Corp., 550 U.S. 544 (2007) (complaint must state a plausible claim to survive 12(b)(6))