587 B.R. 891
Bankr. S.D. Tex.2018Background
- Gruppo Formstar (plaintiff) sued FM Forrest, Inc. (debtor) and its sole shareholder Fred F. Morgan in Texas state court on a promissory note and guaranty; plaintiff obtained final summary judgment and post-judgment enforcement orders (compel, receivership).
- Defendants' state-court counsel Jacqueline Houlette did not file substantive responses to several post‑judgment matters and did not appear at some hearings; later she stated she had mental-health issues but produced no medical testimony or records at evidentiary hearings.
- Defendants (new counsel) moved in state court to vacate the judgment; the state court held a July 14, 2017 evidentiary hearing and denied relief in September 2017. Defendants also filed a Bill of Review in state court.
- Morgan removed the state-court action to federal court on November 6, 2017; after venue transfer the bankruptcy court held an evidentiary hearing on Morgan’s Federal Rule of Civil Procedure 60(b) motion (filed Feb. 15, 2018) seeking to set aside the judgment and enforcement orders.
- The bankruptcy court concluded (1) Rooker–Feldman bars federal collateral review of the state-court judgments; (2) alternatively, law‑of‑the‑case and Rule 60 procedural and substantive standards (timeliness, burden to show extraordinary circumstances/voidness) independently require denial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal court has jurisdiction to set aside state-court judgment (Rooker–Feldman) | Rooker–Feldman precludes federal review of state-court judgments | Morgan argued Rooker–Feldman doesn't apply to removed cases or that elements not satisfied | Court: Rooker–Feldman applies to removed actions and bars jurisdiction because Morgan is a state‑court loser seeking federal review of prior state judgments |
| Whether law‑of‑the‑case bars relitigation of issues decided by state court | Plaintiff: state-court rulings (after evidentiary hearing) should be treated as prior decisions | Morgan: federal court may reconsider after removal | Court: law‑of‑the‑case applies; state‑court evidentiary ruling was the same issue and was not undermined by new evidence, so relief denied |
| Whether Rule 60(b) motion was timely | Plaintiff: motion untimely (filed 101 days after removal; grounds known at removal) | Morgan: removal tolled review; waited to pursue in federal forum | Court: motion not filed within a reasonable time; timeliness factor favors denial |
| Whether Morgan met Rule 60(b)(6)/(4)/(1) substantive standards (extraordinary circumstances, voidness, excusable neglect) | Morgan: Houlette’s alleged mental incapacity amounted to abandonment/extraordinary circumstances or voided the state judgments | Plaintiff: no competent medical proof; attorney’s failures imputed to client; state court afforded due process and later denied relief | Court: Morgan failed to produce medical/expert evidence; attorney mistakes imputed to Morgan; no due‑process voidness; Rule 60(b) relief denied |
Key Cases Cited
- Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) (federal courts may not set aside state‑court judgments)
- D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983) (reinforcing limits on federal review of state judicial determinations)
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (2005) (definitive statement of Rooker–Feldman elements)
- United States v. Cirami, 563 F.2d 26 (2d Cir. 1977) (attorney mental illness may justify extraordinary‑circumstances relief under Rule 60(b)(6) when supported by medical proof)
- Seven Elves, Inc. v. Eskenazi, 635 F.2d 396 (5th Cir. 1981) (factors for Rule 60(b) relief)
- Link v. Wabash R.R. Co., 370 U.S. 626 (1962) (clients bound by acts/omissions of chosen counsel)
- Maples v. Thomas, 565 U.S. 266 (2012) (agency/abandonment principles in attorney‑client context)