Harpin v. Oakley Custom Homes ( 2000 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
OCT 17 2000
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
VERNON JACKSON HARPIN,
Plaintiff-Appellant,
v. No. 99-1553
(D.C. No. 98-N-2448)
OAKLEY CUSTOM HOMES, INC. (D. Colo.)
and COASTAL HOLDINGS, INC.,
Defendants-Appellees.
ROBERT A. KELLEY,
Plaintiff-Appellant,
v. No. 99-1596
(D.C. No. 99-N-944)
OAKLEY CUSTOM HOMES, INC.; (D. Colo.)
COASTAL HOLDINGS, INC.,
Defendants-Appellees.
ORDER AND JUDGMENT *
Before BALDOCK , KELLY , and HENRY , Circuit Judges.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Vernon Harpin and Robert Kelley each appeals the district court’s dismissal
of his declaratory judgment action. Harpin filed his action in November 1998
seeking to have a March 1994 bankruptcy judgment in favor of Oakley Custom
Homes declared void on the grounds that the bankruptcy court had no personal
jurisdiction over him and that it failed to give him adequate notice and an
opportunity to respond before entering judgment against him. Harpin also sought
a return of all money he had paid on the judgment. In May 1999, Kelley filed his
declaratory judgment action seeking to invalidate the same bankruptcy judgment
on similar jurisdictional and due process grounds. Kelley also sought a return of
all money he had paid on the judgment, as well as a restoration of all rights,
property, and claims he had relinquished in two global settlement agreements that
included the bankruptcy judgment. The district court consolidated the two actions
and, after reviewing summary judgment materials and other pleadings of record,
determined that exercising jurisdiction over the consolidated action would not
further the purposes of the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202.
The court, therefore, dismissed the action and these appeals followed. We
exercise jurisdiction pursuant to 28 U.S.C. § 1292, and we affirm. 1
1
After examining the briefs and appellate record, this panel has determined
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The Declaratory Judgment Act provides, in pertinent part, that “[i]n a case
of actual controversy within its jurisdiction, . . . any court of the United States,
upon the filing of an appropriate pleading, may declare the rights and other legal
relations of any interested party seeking such declaration, whether or not further
relief is or could be sought.” 28 U.S.C. § 2201. The Supreme Court has
“repeatedly characterized the Declaratory Judgment Act as an enabling Act, which
confers a discretion on the courts rather than an absolute right upon the litigant.”
Wilton v. Seven Falls Co. , 515 U.S. 277, 287 (1995) (quotation omitted). “Since
its inception, the Declaratory Judgment Act has been understood to confer on
federal courts unique and substantial discretion in deciding whether to declare the
rights of litigants.” Id. at 286. “[D]istrict courts possess discretion in
determining whether and when to entertain an action under the Declaratory
Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional
prerequisites.” Id. at 282. “In the declaratory judgment context, the normal
principle that federal courts should adjudicate claims within their jurisdiction
yields to considerations of practicality and wise judicial administration.” Id. at
288.
1
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unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The cases are
therefore ordered submitted without oral argument.
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To guide district courts within this circuit in exercising their discretion
whether to hear declaratory judgment actions, this court has set forth a variety of
factors the district courts should consider. See State Farm Fire & Cas. Co. v.
Mhoon , 31 F.3d 979, 983 (10th Cir. 1994) (setting forth five factors originally
articulated by the Sixth Circuit in Allstate Ins. Co. v. Green , 825 F.2d 1061, 1063
(6th Cir. 1987)). Although we require a district court to consider these factors
when deciding whether to exercise its discretion to hear a declaratory judgment
action, “on appeal [we] will not engage in a de novo review of all the various
fact-intensive and highly discretionary factors involved. Instead, [we] will only
ask whether the trial court’s assessment of them was so unsatisfactory as to
amount to an abuse of discretion.” Id.
The district court here explicitly considered each of the Mhoon factors in
exercising its discretion not to hear the action. At the time the district court made
its decision, Kelley had filed an amended complaint, to which Oakley Custom
Homes and Coastal Holdings (referred to jointly as “Oakley”) had filed an answer
and counterclaim, and Harpin and Oakley had filed and fully briefed
cross-motions for summary judgment. The district court evaluated all the
information contained in the parties’ pleadings and made its own assessment of
the Mhoon factors without soliciting further input from the parties. Harpin and
Kelley contend that the district court abused its discretion by not giving the
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parties notice and an opportunity to address the Mhoon factors before dismissing
the action. They also contend that the district court abused its discretion in
evaluating the Mhoon factors.
Oakley argues that we should not even reach the question whether the
district court abused its discretion in dismissing the declaratory judgment actions,
because the district court lacked jurisdiction under the Rooker-Feldman doctrine 2
to provide any of the relief requested. The Rooker-Feldman doctrine bars “a
party losing in state court . . . from seeking what in substance would be appellate
review of the state judgment in a United States district court.” Johnson v.
De Grandy , 512 U.S. 997, 1005-06 (1994). “Generally, a federal district court
cannot review matters actually decided by a state court, nor can it issue any
declaratory relief that is inextricably intertwined with the state court judgment.”
Kiowa Indian Tribe of Okla. v. Hoover , 150 F.3d 1163, 1169 (10th Cir. 1998)
(quotations and citation omitted).
Oakley contends that the validity of the bankruptcy judgment is inextricably
intertwined with a state court judgment because the state court approved two
global settlement agreements by Kelley, Harpin, and Oakley, each of which stated
that the bankruptcy judgment was currently enforceable in federal court and
2
See Rooker v. Fidelity Trust Co. , 263 U.S. 413 (1923); District of Columbia
Ct. of Appeals v. Feldman , 460 U.S. 462 (1983).
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provided that the money paid by Harpin and Kelley under the settlement
agreement would be treated as payment on the bankruptcy judgment. Oakley
argues that because the state court approved the first settlement agreement and
made its terms an order of the court enforceable as such, and because it approved
a stipulated dismissal of the state court action based on the second settlement
agreement, then any federal court declaration about the validity of the bankruptcy
judgment would be inextricably intertwined with the state court’s orders.
“A claim is inextricably intertwined if the federal claim succeeds only to
the extent that the state court wrongly decided the issues before it.” Charchenko
v. City of Stillwater , 47 F.3d 981, 983 (8th Cir. 1995). Assuming that the
state-court-approved settlement agreement constituted a state court judgment for
purposes of the Rooker-Feldman doctrine, see 4901 Corp. v. Town of Cicero , 220
F.3d 522, 528 n.5 (7th Cir. 2000), the Rooker-Feldman doctrine would not
preclude the district court from declaring the bankruptcy court judgment invalid,
because that simple declaration would not require the district court to determine
the validity and/or correctness of the state-court-approved settlement agreements.
The Rooker-Feldman doctrine may, however, preclude the district court from
granting some of the other relief sought by Harpin and Kelley to the extent it
directly implicates the validity and/or correctness of the state-court-approved
settlement agreements. Because the Rooker-Feldman doctrine would not deprive
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the district court of jurisdiction over the entire declaratory judgment action, we
must proceed to consider whether the district court abused its discretion in
dismissing the action.
Although Harpin and Kelley contend that the district court abused its
discretion by not giving them notice before it decided not to proceed with the
action, neither of them cites any authority for this contention in his appellate
brief, nor sheds much light on what additional evidence or argument he would
have presented if given the opportunity. “It is appropriate . . . for a district court
to examine whether hearing the declaratory judgment action would serve the
objectives for which the Declaratory Judgment Act was created.” EMC Corp. v.
Norand Corp. , 89 F.3d 807, 814 (Fed. Cir. 1996). The district court may make
this determination at various stages of the proceedings. If a district court
determines after the complaint is filed that issuing a declaratory judgment would
not serve the purposes of the Act, it has no obligation to adjudicate the merits
before staying or dismissing the action. See Wilton , 515 U.S. at 288. “Consistent
with the nonobligatory nature of the remedy, a district court is authorized, in the
sound exercise of its discretion, to stay or to dismiss an action seeking a
declaratory judgment before trial or after all arguments have drawn to a close.”
Id. The district court here did not abuse its discretion in pausing before reaching
the merits of the summary judgment motions to assess whether proceeding with
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the declaratory judgment action would be appropriate. Nor did the court abuse its
discretion in relying on undisputed facts advanced by the parties in connection
with the Harpin-Oakley summary judgment motions to evaluate the propriety of
proceeding with either appellant’s declaratory judgment action.
As Harpin and Kelley concede, the district court explicitly considered all
the Mhoon factors in deciding whether to proceed further with the consolidated
declaratory judgment action. Harpin and Kelley each take issue with the court’s
assessment of those factors, but their arguments are ultimately unpersuasive.
Keeping in mind the district court’s “unique breadth of . . . discretion to decline
to enter a declaratory judgment,” id. at 287, we cannot say the court’s assessment
of the pertinent factors “was so unsatisfactory as to amount to an abuse of
discretion,” Mhoon , 31 F.3d at 983.
The judgment of the United States District Court for the District of
Colorado is AFFIRMED.
Entered for the Court
Paul J. Kelly, Jr.
Circuit Judge
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