52 F.4th 96
2d Cir.2022Background
- In 2008 Hansen loaned $300,000 to Stillwell Road, Inc. (SRI) and took an unrecorded security agreement in a Laurel Hollow residence.
- Matthew Miller (SRI) later caused a recorded mortgage in his wife Rachel’s name (the Rachel Mortgage) in 2013, creating a senior recorded lien.
- Rachel sued in New York state court to foreclose the Rachel Mortgage; Rachel was represented by Lieberman, SRI by Balanoff. After a bench trial, the state court held the Rachel Mortgage valid and extinguished Hansen’s unrecorded interest. Hansen appealed the state judgment.
- In 2019 Hansen filed a federal suit against the Millers, SRI, and the Attorney Defendants alleging fraud in enforcing the Rachel Mortgage, fraud upon the court, collusion/deceit in violation of N.Y. Judiciary Law § 487, and negligence.
- The district court dismissed the federal complaint on Rooker–Feldman and claim-preclusion/collateral-estoppel grounds. Hansen appealed.
- The Second Circuit affirmed in part and vacated in part: Rooker–Feldman did not bar Hansen’s damages claims against the attorneys; res judicata did not bar claims against Balanoff; collateral estoppel barred Hansen’s fraud and negligence claims but did not bar her § 487 claims; the case was remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rooker–Feldman deprives federal courts of jurisdiction over Hansen’s claims for misconduct in the state proceeding | Hansen: Rooker–Feldman is inapplicable because she seeks damages for independent wrongdoing in the state proceeding | Defendants: Federal court would be an impermissible forum to attack a state-court judgment | Held: Rooker–Feldman does not bar damages claims against third parties for misconduct in state proceedings (independent claims) |
| Whether res judicata bars claims against Balanoff based on the state foreclosure judgment | Hansen: State judgment should not preclude claims against Balanoff because he is not in privity with SRI | Balanoff: Attorney-client relationship with SRI creates privity and thus claim preclusion | Held: Res judicata does not bar Hansen’s claims against Balanoff—he failed to show the requisite privity |
| Whether collateral estoppel precludes Hansen’s fraud and negligence claims | Hansen: Attorney Defendants are not in privity with state parties; issues can be relitigated | Defendants: State court necessarily decided the validity of the Rachel Mortgage, so those issues are precluded | Held: Collateral estoppel bars Hansen’s fraud and negligence claims because the state court necessarily decided the mortgage’s validity and Hansen is the same party against whom that issue was decided |
| Whether collateral estoppel bars Hansen’s claims under N.Y. Judiciary Law § 487 | Hansen: § 487 claims concern attorneys’ intent/coaching and do not depend wholly on the mortgage’s validity | Defendants: § 487 claims are duplicative of fraud claims and precluded by the state judgment | Held: § 487 claims are not precluded — § 487 focuses on the attorney’s intent to deceive, which was not decided by the state court and can be litigated separately |
Key Cases Cited
- Vossbrinck v. Accredited Home Lenders, Inc., 773 F.3d 423 (2d Cir. 2014) (Rooker–Feldman inapplicable to independent damages claims arising from state-court misconduct)
- D.C. Court of Appeals v. Feldman, 460 U.S. 462 (U.S. 1983) (establishing limits on federal review of state court judgments)
- Rooker v. Fidelity Trust Co., 263 U.S. 413 (U.S. 1923) (foundational Rooker principle)
- Hoblock v. Albany Cnty. Bd. of Elections, 422 F.3d 77 (2d Cir. 2005) (Rooker–Feldman bars suits complaining of injuries caused by state-court judgments)
- Sykes v. Mel S. Harris & Assocs. LLC, 780 F.3d 70 (2d Cir. 2015) (Rooker–Feldman does not apply where claims target fraud used to obtain judgments)
- Cho v. Blackberry Ltd., 991 F.3d 155 (2d Cir. 2021) (elements of res judicata under New York law)
- Schiro v. Farley, 510 U.S. 222 (U.S. 1994) (principle of collateral estoppel preventing relitigation of ultimate facts)
- Bill Birds, Inc. v. Stein Law Firm, P.C., 35 N.Y.3d 173 (N.Y. 2020) (§ 487 focuses on attorney intent to deceive rather than success of deceit)
- Amalfitano v. Rosenberg, 12 N.Y.3d 8 (N.Y. 2009) (§ 487 centers on intent to deceive)
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (U.S. 2005) (distinguishing independent claims from forbidden federal review of state judgments)