Mir Iqbal v. Tejaskumar Patel
2015 U.S. App. LEXIS 3241
7th Cir.2015Background
- Iqbal (through a closely held corporation and as guarantor) bought a gas station and contracted with S‑Mart for gasoline supply. He delegated operations to Patel, recommended by S‑Mart president Johnson.
- Patel ran the business but failed to pay S‑Mart; S‑Mart obtained a state judgment against Iqbal as guarantor, then a settlement note secured by a mortgage, and ultimately a second judgment and foreclosure sale.
- Iqbal sued in federal court alleging Patel and Johnson conspired to defraud him and brought RICO claims seeking treble damages and other relief, including vacatur of the state-court judgments.
- The district court dismissed for lack of jurisdiction under the Rooker‑Feldman doctrine as the federal suit challenged state-court judgments.
- On appeal the Seventh Circuit held Rooker‑Feldman does not bar federal claims that seek damages for pre‑litigation, extra‑judicial injuries (e.g., an alleged scheme to set Iqbal up), though the federal court cannot set aside state judgments; the case was remanded for further proceedings, including consideration of claim‑preclusion under Indiana law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of Rooker‑Feldman when fraud is alleged | Rooker‑Feldman shouldn’t bar federal suit alleging fraud (either out‑of‑court or in‑court) | Rooker‑Feldman bars federal attempt to undo state judgments regardless of fraud allegations | Rooker‑Feldman is jurisdictional; fraud allegation does not by itself avoid it (Kelley governs) |
| Whether federal court may award damages for pre‑litigation fraud | Iqbal seeks damages for an alleged scheme that predated state suits and caused independent harm | Defendants say the claims are effectively attacks on state judgments and thus barred | Federal courts have jurisdiction to hear independent claims for extra‑judicial injuries caused by pre‑litigation fraud (Exxon line) |
| Whether federal court can vacate or set aside state court judgments | Iqbal also asks to vacate/default state judgments | Defendants assert vacatur is prohibited by Rooker‑Feldman | Vacatur or setting aside state judgments is barred; the federal court may nevertheless adjudicate separate damage claims for injuries outside the state judgments |
| Claim preclusion under state law (res judicata) | Iqbal contends fraud claims were not (and could not be) litigated in state collection actions | Defendants argue fraud counterclaims were compulsory in state suits and thus precluded now | Remanded to district court to determine under Indiana law whether fraud claims were compulsory and thus precluded (considering Ratcliff, Broadhurst) |
Key Cases Cited
- Rooker v. Fidelity Trust Co., 263 U.S. 413 (U.S. 1923) (establishes that only the U.S. Supreme Court may review final state‑court judgments)
- District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (U.S. 1983) (clarifies Rooker doctrine limits on federal court review of state decisions)
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (U.S. 2005) (distinguishes Rooker‑Feldman from ordinary preclusion and allows federal suits addressing independent, extra‑judicial injuries)
- Kelley v. Med‑1 Solutions, LLC, 548 F.3d 600 (7th Cir. 2008) (holds Rooker‑Feldman bars federal claims that seek to overturn state judgments even when fraud is alleged)
- Johnson v. Pushpin Holdings, LLC, 748 F.3d 769 (7th Cir. 2014) (permits federal damage claims for fraud causing extra‑judicial injury while reaffirming that federal courts cannot vacate state judgments)
- Richardson v. Koch Law Firm, P.C., 768 F.3d 732 (7th Cir. 2014) (criticizes inquiry into whether federal claims are "intertwined" with state judgments)
- Gash Assocs. v. Rosemont, 995 F.2d 726 (7th Cir. 1993) (explains that if a federal plaintiff presents an independent claim denying a state‑court legal conclusion, jurisdiction exists and preclusion principles govern)
- Noel v. Hall, 341 F.3d 1148 (9th Cir. 2003) (aligns with the distinction between Rooker‑Feldman and ordinary preclusion)
- Ratcliff v. Citizens Bank, 768 N.E.2d 964 (Ind. App. 2002) (Indiana appellate decision treating fraud causing nonpayment as a compulsory counterclaim in debt collection suits)
- Broadhurst v. Moenning, 633 N.E.2d 326 (Ind. App. 1994) (similar Indiana authority on compulsory fraud counterclaims)