Crestview Village v. HUD ( 2004 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-3060
CRESTVIEW VILLAGE APARTMENTS,
Plaintiff-Appellant,
v.
UNITED STATES DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT, et al.,
Defendants-Appellees.
____________
Appeal from the United States District Court for
the Northern District of Illinois, Eastern Division.
No. 01 C 6913—William J. Hibbler, Judge.
____________
ARGUED MARCH 31, 2004—DECIDED SEPTEMBER 2, 2004
____________
Before BAUER, POSNER, and WILLIAMS, Circuit Judges.
WILLIAMS, Circuit Judge. Crestview Village Apartments
Limited Partnership (“Crestview”) appeals from the district
court’s dismissal of its claim for lack of subject matter
jurisdiction. The district court reasoned that the Rooker-
Feldman doctrine, which generally prohibits federal court
review of state court judgments, precluded it from exercising
jurisdiction over Crestview’s claims. We agree and, therefore,
affirm the district court’s dismissal for lack of jurisdiction.
2 No. 03-3060
I. Background
Crestview owns and manages Crestview Village
Apartments, an apartment complex in Kankakee, Illinois
bought with financing insured by the United States Depart-
ment of Housing and Urban Development (“HUD”). Accord-
ing to Crestview, its tenants are primarily African American
and most receive federal housing assistance. Crestview
alleges that it has been targeted by local and federal
government officials due to the racial composition of its
tenants.
Crestview’s problems with regulators began in November
1998, when HUD cited it for failure to file required financial
statements for the years 1995 through 1997. In March 2000,
HUD filed an administrative complaint seeking civil penal-
ties based on Crestview’s continued failure to submit the
financial statements. In February 2001, after Crestview ne-
glected to respond to the complaint, the administrative law
judge entered a default judgment against Crestview for
$80,000.
Meanwhile, Crestview also encountered difficulties with
the City of Kankakee (the “City”). In October 1999, the City
filed a building code enforcement action against Crestview
in state court. The City later amended its complaint to in-
clude a demolition claim and a claim for unpaid sewer and
public service fees. In November 2000, when HUD learned
about the local building code violations, as charged in the
City’s complaint, it notified Crestview that, given the building’s
disrepair, it intended to initiate foreclosure proceedings
against Crestview. In March 2001, Crestview and the City
settled the state action, agreeing that Crestview would re-
pair 378 building code violations and the City would withdraw
its demolition claims and its claim for unpaid fees. The state
court then entered an order approving the settlement.
In September 2001, Crestview filed a complaint in federal
court, naming the following parties as defendants: HUD;
No. 03-3060 3
HUD employees Margarita Maisonet, Gregory Gustin, and
Edward Hinsberger;1 the City; Mayor Donald Green; Terry
Lewis, director of the City’s Code Enforcement; and Tony
Perry, owner of the property adjoining Crestview. Count I of
the complaint sought damages for discriminatory housing
practices pursuant to the Fair Housing Act, 42 U.S.C.
§ 3613, (“FHA”). Counts II through V alleged that the defen-
dants conspired to violate Crestview’s civil rights pursuant to
the federal civil rights statutes, 42 U.S.C. §§ 1981, 1982,
1983, and 1985.
The district court dismissed Crestview’s complaint, finding
that the Rooker-Feldman doctrine precluded the court from
exercising jurisdiction over Crestview’s claims. With respect
to the federal defendants, the district court also found that
subject matter jurisdiction was lacking, reasoning that (1)
the FHA does not provide for a right of action against the
federal defendants and (2) Crestview’s complaint alleged that
the federal defendants were doing their jobs, but §§ 1981,
1982, 1983, and 1985 do not provide a jurisdictional basis for
suits against HUD or its employees acting under the color of
federal law. The district court also alternatively noted that
even if jurisdiction existed, the claims should be dismissed
for failure to state a claim under Federal Rule of Civil
Procedure 12(b)(6).
On appeal, Crestview asserts that the district court’s finding
that the Rooker-Feldman doctrine precluded the court from
exercising jurisdiction was erroneous. Crestview does not,
however, challenge the district court’s separate rationale for
declining to exercise subject matter jurisdiction over the fed-
eral defendants and accordingly, Crestview has waived its
challenge regarding the dismissal of the federal defendants.
See Duncan v. City of Wis. Dep’t of Health and Family Servs.,
1
HUD and its employees are referred to throughout as the
“federal defendants.”
4 No. 03-3060
166 F.3d 930, 934 (7th Cir. 1999) (stating that “a party must
develop any arguments it wishes this court to consider in its
appellate brief, or they will be deemed waived or aban-
doned”). On appeal, Crestview also asserts that, after
finding itself without jurisdiction, the district court should
not have proceeded to decide the merits of the case by
alternatively dismissing the complaint for failure to state a
claim. Finally, Crestview argues that the district court
abused its discretion by declining to grant Crestview leave
to file an amended complaint, which Crestview contends
might have cured any jurisdictional deficiencies.
II. Analysis
A. Subject Matter Jurisdiction
We first consider whether the Rooker-Feldman doctrine
bars the district court, and indeed this court, from exercising
subject matter jurisdiction over this matter. The doctrine,
which emerged from two Supreme Court cases, Rooker v.
Fidelity Trust Co., 263 U.S. 413 (1923) and District of
Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983),
prohibits the inferior federal courts from reviewing state
court decisions. Zurich American Ins. Co. v. Superior Court
for the State of California, 326 F.3d 816, 821 (7th Cir. 2003). It
is a jurisdictional doctrine premised upon the fact that,
because federal district courts are courts of original juris-
diction, lower federal courts are not authorized to review ap-
peals from state court judgments except, of course, where
Congress has explicitly authorized such collateral review.
Garry v. Geils, 82 F.3d 1362, 1365 (7th Cir. 1996). Instead,
“only the Supreme Court has appellate jurisdiction over the
civil judgments of state courts.” Id. We review de novo a
district court’s application of the Rooker-Feldman doctrine.
Zurich, 326 F.3d at 821.
To assess whether the Rooker-Feldman doctrine is applic-
able, “the fundamental and appropriate question to ask is
No. 03-3060 5
whether the injury alleged by the federal plaintiff resulted
from the state court judgment itself or is distinct from that
judgment. If the injury alleged resulted from the state court
judgment itself, Rooker-Feldman directs that the lower
federal courts lack jurisdiction.” Garry, 82 F.3d at 1365; see
also Kamilewicz v. Bank of Boston Corp., 92 F.3d 506, 510
(7th Cir. 1996) (The Rooker-Feldman doctrine asks “whether
the federal plaintiff seeks to set aside a state court judgment
or whether he is, in fact, presenting an independent claim.”).
Likewise, if the federal injury is “inextricably intertwined”
with the state court judgment, Rooker-Feldman bars the fed-
eral action. Ritter v. Ross, 992 F.2d 750, 753 (7th Cir. 1993).
But, as the “inextricably intertwined” inquiry is a difficult
one, “the crucial point is whether ‘the district court is in es-
sence being called upon to review the state-court deci-
sion.’ ” Id. at 754 (quoting Feldman, 460 U.S. at 483-84 n.16).
For Rooker-Feldman purposes, a “state court approved
settlement agreement is a judgment or decision. . . .” 4901
Corp. v. Town of Cicero, 220 F.3d 522, 528 n.5 (7th Cir. 2000).
Each count of Crestview’s federal complaint alleges that,
as a result of a conspiracy involving defendants, it was in-
jured in that it was “forced to defend unsubstantiated law-
suits, and excessively harsh administrative actions. . . .”
(emphasis added). Thus, in essence, Crestview is challenging
as baseless the state court order requiring Crestview to cure
the building code violations. After all, Crestview’s alleged
injury—having to defend unsubstantiated lawsuits— was only
complete after the state court entered the order and thereby
made an implicit finding that the suit was not unsubstanti-
ated. See Garry, 82 F.3d at 1368 (finding plaintiffs’ claim that
defendants brought a state condemnation action against
them due to political retaliation barred by Rooker-Feldman,
as “the injury alleged was only complete when the state
court actually condemned the property”).
A finding by the district court that defendants did, as
Crestview alleges, conspire to bring unsubstantiated law-
6 No. 03-3060
suits would undermine the state court’s implicit holding that
the state action was justified. See Shooting Point v.
Cumming, 368 F.3d 379, 384 (4th Cir. 2004) (finding that
Rooker-Feldman precluded jurisdiction over plaintiff’s claim
that state transportation regulations were selectively enforced
against plaintiff, as a “district court finding of selective
enforcement . . . would clearly contravene the state court’s
[implicit] judgment” that plaintiff was “properly subject to
the [ ] regulations”). As this court has consistently made
clear, the Rooker-Feldman doctrine prohibits federal courts
from entertaining such attempts to undo state court deci-
sions. See, e.g., Wright v. Tackett, 39 F.3d 155, 157 (7th Cir.
1994) (finding Rooker-Feldman prohibited §§ 1983, 1985,
and 1986 action alleging conspiracy to violate plaintiff’s civil
rights by initiating a foreclosure proceeding, as plaintiff
essentially sought review of “state court’s denial of his re-
quests to intervene in the foreclosure actions”). That this
suit was cast as a civil rights action is of no consequence.
See Ritter, 992 F.2d at 754 (citation omitted) (“It is settled
that ‘a plaintiff may not seek a reversal of a state court judg-
ment simply by casting his complaint in the form of a civil
rights action.’ ”). Accordingly, we agree with the district court’s
determination that the Rooker-Feldman doctrine operates as
a jurisdictional bar to Crestview’s suit in federal court.
Having found that we, and the district court, lack juris-
diction to entertain the merits of this appeal, we decline to
consider the propriety of the district court’s alternative
conclusion that Crestview failed to state a claim under Rule
12(b)(6). See State of Illinois v. City of Chicago, 137 F.3d
474, 478 (7th Cir. 1998) (“Subject-matter jurisdiction is the
first question in every case, and if the court concludes that
it lacks jurisdiction it must proceed no further.”).
B. The Amended Complaint
For the sake of completeness, we consider Crestview’s argu-
ment that the district court abused its discretion by declining
No. 03-3060 7
to allow Crestview leave to amend its complaint. Crestview
intimates that it could have overcome any potential juris-
dictional defects had the district court granted it leave to
amend. A brief overview of the procedural history regarding
the complaint is helpful. In early December 2001, shortly
after Crestview initiated this action, the federal and the City
defendants each filed motions to dismiss Crestview’s claim.
Defendant Tony Perry, however, did not file such a motion.
The district court gave Crestview until January 10, 2002 to
respond to the motions to dismiss. On January 10, Crestview
instead filed a motion for an extension of time to file either
a response or an amended complaint. The district court
granted Crestview’s motion, extending the deadline until
January 22, 2002. On January 22, Crestview once again filed
a motion for an extension of time to respond to the motion to
dismiss by filing an amended complaint. On February 5,
2002, the court granted both motions to dismiss. The following
day, the court denied Crestview’s January 22 request for an
extension of time to respond to the motion to dismiss.
Shortly thereafter, on February 15, 2002, Crestview filed
a motion pursuant to Federal Rule of Civil Procedure 59(e)
to alter or amend the judgment and seeking leave to file an
amended complaint. Crestview did not, however, attach its
proposed amended complaint or explain in its motion how it
proposed to alter the complaint. Instead, when the district
court considered Crestview’s motion at a February 28, 2002
hearing, Crestview attempted to submit its proposed
amended complaint as an exhibit to the motion to reconsider,
and the court denied its request. In an August 22, 2002
order, the district court also denied the motion to reconsider.
We review a district court’s denial of a request for leave to
amend for an abuse of discretion. Indiana Funeral Dirs. Ins.
Trust v. Trustmark Ins. Corp., 347 F.3d 652, 655 (7th Cir.
2003). Federal Rule of Civil Procedure 15(a) provides that a
party may amend its complaint once as a matter of course
before a responsive pleading is filed. Camp v. Gregory, 67
8 No. 03-3060
F.3d 1286, 1289 (7th Cir. 1995). “A motion to dismiss does
not constitute a responsive pleading for purposes of Rule
15(a); thus, an order dismissing the original complaint nor-
mally does not eliminate the plaintiff’s right to amend once as
a matter of right. . . . If final judgment is entered dismissing
the case, however, the plaintiff loses that right.” Id. After
final judgment has been entered, a plaintiff may amend with
leave of the court following a motion to set aside the judg-
ment under Rule 59(e) or Rule 60(b). Sparrow v. Heller, 116
F.3d 204, 205 (7th Cir. 1997).
Here, the defendants filed a motion to dismiss, but never
filed a responsive pleading. Moreover, although the district
court (encouraged by Crestview) was under the mistaken
impression that its February 5, 2002 order dismissing the
complaint was a final order, in fact, it was not. After all,
when the Rule 59(e) motion was filed, the district court had
not yet dismissed Crestview’s claim against defendant Tony
Perry.2 See Fed. R. Civ. P. 54(b). Given this procedural pos-
ture, Crestview’s general right to amend its complaint once
as a matter of course had not yet been extinguished when
Crestview requested leave to amend. But the right to amend
as a matter of course is not absolute. Perkins v. Silverstein,
939 F.2d 463, 471-72 (7th Cir. 1991). Rather, a “court may
deny leave to amend if the proposed amendment fails to cure
the deficiencies in the original pleading, or could not survive
a second motion to dismiss.” Id. at 472; see also Duda v. Bd.
of Educ. of Franklin Park Pub. Sch. Dist., 133 F.3d 1054, 1057
n.4 (7th Cir. 1998) (recognizing exception to right to amend
once as a matter of course). A contrary holding “would impose
upon the defendants and the courts the arduous task of
responding to an obviously futile gesture on the part of the
plaintiffs.” Perkins, 939 F.2d at 472.
2
The district court granted Perry’s motion to dismiss on July 7,
2003, citing Rooker-Feldman. Final judgment was entered in this
case the same day.
No. 03-3060 9
Because Crestview did not attach its proposed amended
complaint to its motion for reconsideration or take the neces-
sary steps to make its proposed amendment a part of the
record on appeal, we cannot meaningfully assess whether its
proposed amendment would have cured the deficiencies in
the original pleading. See Harris v. City of Auburn, 27 F.3d
1284, 1287 (7th Cir. 1994) (“[T]he failure to tender an
amended complaint with a motion to alter judgment may
indicate a lack of diligence or good faith.”). Accordingly, we
cannot say that the district court’s denial of Crestview’s
request for leave to amend constituted an abuse of discre-
tion. To hold otherwise would allow Crestview to benefit
both from inducing the district court into believing that its
order dismissing the complaint was a final judgment and
also from not making its proposed amended complaint part
of the record on appeal. See Hydrite Chem. Co. v. Calumet
Lubricants Co., 47 F.3d 887, 891 (7th Cir. 1995) (“Ordinarily a
party will not be heard to complain about an erroneous
ruling that he himself precipitated.”).
III. Conclusion
For the foregoing reasons, we AFFIRM the district court’s
order dismissing the case for lack of subject matter jurisdiction.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—9-2-04