Peterson v. Wells Fargo Tr., 16-3635-cv

Peterson was defendant in a 2009 Connecticut foreclosure action brought by Wells Fargo; the state court granted summary judgment on liability after Peterson did not oppose that motion.
The matter entered foreclosure mediation; the state court terminated mediation for Peterson’s alleged failure to provide documents and entered strict foreclosure judgment in August 2012.
Peterson moved to open the judgment alleging defendants submitted false affidavits and documents; after an evidentiary hearing the state court denied the motion and a subsequent reconsideration motion; her state appeals were dismissed as untimely.
In October 2014 Peterson filed this federal suit asserting negligent misrepresentation, fraud by non‑disclosure, wrongful foreclosure, and breach of good faith and fair dealing (and other claims she later abandoned on appeal), based on the same alleged fraudulent conduct during the foreclosure.
The district court dismissed the federal complaint as precluded by res judicata; it also denied leave to amend. Peterson appealed.
The Second Circuit affirmed, holding res judicata did not apply but that collateral estoppel barred relitigation of the fraud-related facts decided against Peterson in state court; amendment was properly denied as futile.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Preclusion by res judicata	Peterson: federal claims are distinct and were not fully litigable as counterclaims in the foreclosure action	Defendants: state foreclosure judgment and litigation preclude these claims	Court: Res judicata did not apply because the fraud claims arose during foreclosure and could not reasonably have been litigated as counterclaims before liability was decided
Preclusion by collateral estoppel	Peterson: factual allegations of fraud can be relitigated in federal court	Defendants: issues were already litigated and decided in state court	Court: Collateral estoppel bars relitigation — the fraud issue was actually, fully, and necessarily decided against Peterson in state court
Rooker–Feldman jurisdictional bar	Peterson: seeks money damages for fraud and not review of state judgment	Defendants: federal court lacks jurisdiction to undo state judgment	Court: Rooker–Feldman only bars federal review to the extent plaintiff seeks to vacate the state judgment; it does not bar a damages claim that leaves the judgment intact, but here collateral estoppel disposes of the case
Leave to amend complaint	Peterson: district court should have allowed amendment (she is pro se)	Defendants: amendment would be futile given preclusion	Court: Denial was not an abuse of discretion because amendment would be futile due to preclusion

Vossbrinck v. Accredited Home Lenders, Inc., 773 F.3d 423 (2d Cir. 2014) (Rooker–Feldman does not bar federal damages claims that do not require overturning state judgment)
Computer Assocs. Int’l, Inc. v. Altai, Inc., 126 F.3d 365 (2d Cir. 1997) (standard of review for preclusion issues)
O’Connor v. Pierson, 568 F.3d 64 (2d Cir. 2009) (state‑law preclusion rules govern federal courts’ treatment of state judgments)
CitiMortgage, Inc. v. Rey, 92 A.3d 278 (Conn. App. Ct. 2014) (counterclaims in foreclosure arise only from the transactions alleged in the plaintiff’s complaint)
Thyroff v. Nationwide Mut. Ins. Co., 460 F.3d 400 (2d Cir. 2006) (appellate court may affirm on any ground supported by the record)
Trikona Advisers Ltd. v. Chugh, 846 F.3d 22 (2d Cir. 2017) (elements of collateral estoppel under Connecticut law)
Cuoco v. Moritsugu, 222 F.3d 99 (2d Cir. 2000) (leave to amend need not be granted where amendment would be futile)
Wells Fargo Bank, N.A. v. Melahn, 85 A.3d 1 (Conn. App. Ct. 2014) (fraud may justify setting aside a strict-foreclosure judgment)
LaBow v. Rubin, 897 A.2d 136 (Conn. App. Ct. 2006) (pending appeal does not necessarily prevent application of res judicata or collateral estoppel)