Dorce v. City of New York
2 F.4th 82
| 2d Cir. | 2021Background
- New York City’s Third Party Transfer (TPT) Program permits in rem tax foreclosure on delinquent properties and conveys title to third‑party partners; after transfer original owners lose property and cannot recover excess value above tax lien.
- Plaintiffs (former owners/shareholders in HDFC coops) allege TPT was used to seize non‑distressed, valuable properties in communities of color, without adequate notice, and without just compensation — raising takings, due process, and equal‑protection claims.
- Foreclosures at issue occurred in state court (judgments entered 2011 and 2017); deeds transferring title to third parties followed; plaintiffs sued in federal court in 2019 seeking damages ($66M estimate) and declaratory/injunctive relief and class certification.
- District court dismissed for lack of subject‑matter jurisdiction, holding Rooker‑Feldman barred some claims, plaintiffs lacked standing for prospective relief, and the Tax Injunction Act (TIA) and comity barred adjudication.
- Second Circuit: affirmed that plaintiffs lack standing for injunctive/declaratory relief; reversed district court’s comity/TIA dismissal; held Rooker‑Feldman bars some claims (those effectively seeking to undo state foreclosure or to challenge compliance with the administrative code) but does not bar damages claims limited to excess value above tax liens; remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing for prospective injunctive/declaratory relief | TPT is official City policy, plaintiffs live in targeted neighborhoods and continue to suffer/have ongoing risk | Plaintiffs have no likelihood of future injury; past injury alone cannot support prospective relief | Plaintiffs lack Article III standing to seek injunctive or declaratory relief (no certainly impending/substantial risk of future harm) |
| Applicability of TIA and doctrine of comity | Claims do not challenge tax assessment/amount and thus are not barred; plaintiffs seek excess (non‑tax) value | TIA/comity bar federal adjudication because case concerns tax‑based foreclosures and state tax administration | TIA not directly applicable (it bars injunctive/declaratory relief); comity does not bar plaintiffs’ damages claims here because adjudication won’t disrupt tax administration |
| Rooker‑Feldman jurisdictional bar | Claims are independent constitutional challenges, not appeals of state judgments | Federal suit seeks to overturn or review state foreclosure judgments and is therefore barred | Rooker‑Feldman bars claims that would void or require review of the state foreclosure judgment or that challenge compliance with the TPT administrative code; it does not bar claims for damages limited to excess value above tax liens |
| Scope of remedies for takings/due process/equal protection claims | Plaintiffs seek compensation for lost property value (excess over liens) and injunctive relief | Defendants argue damages or relief would improperly undo state judgments or interfere with state tax processes | Plaintiffs may pursue compensatory damages (at minimum nominal damages) equal to the excess value above taxes for takings, due‑process (lack of adequate notice), and equal‑protection claims; requests to void foreclosures or recover full property value are barred by Rooker‑Feldman |
Key Cases Cited
- Rooker v. Fidelity Trust Co., 263 U.S. 413 (establishes that lower federal courts cannot review final state court judgments)
- District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (applies Rooker principle to prevent federal review of state court decisions)
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (limits Rooker‑Feldman to cases brought by state‑court losers seeking review of state judgments)
- Levin v. Commerce Energy, Inc., 560 U.S. 413 (explains comity and when federal courts should abstain to avoid disrupting state tax administration)
- Hibbs v. Winn, 542 U.S. 88 (identifies circumstances where comity/TIA do not bar federal adjudication)
- Fair Assessment in Real Estate Ass'n, Inc. v. McNary, 454 U.S. 100 (discusses TIA’s bar on injunctive/declaratory relief in tax cases and relation to comity)
- Knick v. Township of Scott, 139 S. Ct. 2162 (removes state‑court exhaustion rule for takings claims; relevant to federal access for takings plaintiffs)
- Luessenhop v. Clinton Cty., 466 F.3d 259 (2d Cir. case holding notice‑based challenges to foreclosure need not be barred by TIA)