Mazzella v. Comm PA Dept Ins

Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
4-17-2007
Mazzella v. Comm PA Dept Ins
Precedential or Non-Precedential: Non-Precedential
Docket No. 06-2325
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 06-2325
____________
LOUIS V. MAZZELLA, SR.,
Appellant
v.
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF INSURANCE;
M. DIANE KOKEN, Individually and as the
Insurance Commissioner of the Commonwealth of Pennsylvania;
WILLIAM TAYLOR, Individually and as the
Deputy Insurance Commissioner for Liquidations, Rehabilitation
and Special Funds of the Commonwealth of Pennsylvania;
JOSEPH DIMEMMO, Individually and as the
Director of Bureau of Liquidations and Rehabilitation Administration
of the Pennsylvania Insurance Department;
BUREAU OF LIQUIDATIONS AND REHABILITATIONS
____________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. No. 05-cv-01059)
District Judge: Honorable Yvette Kane
____________
Submitted Under Third Circuit LAR 34.1(a)
March 26, 2007
Before: FISHER, JORDAN and ROTH, Circuit Judges.
(Filed April 17, 2007)
____________
OPINION OF THE COURT
____________
FISHER, Circuit Judge.
This appeal arises out of the liquidation of an insolvent insurer, Colonial
Assurance Company (“Colonial”). Louis Mazzella, Sr., a Colonial shareholder who
consented to the liquidation, litigated for years in the Pennsylvania state courts to fight
the liquidation plan proposed by the Commonwealth. After his objections were dismissed
in that forum, he filed an action before the United States District Court for the Middle
District of Pennsylvania, which dismissed his Complaint under the Rooker-Feldman
doctrine, alternatively noting that his claims would be barred by the doctrine of res
judicata. For the reasons that follow, we will affirm the decision of the District Court
under its alternative reasoning.
I.
As we write only for the parties, we will forgo a lengthy recitation of the factual
and legal background to this case. In March 1984, Colonial was placed into liquidation
proceedings with the consent of Mazzella. During these proceedings, Mazzella filed
numerous pleadings challenging the Pennsylvania Insurance Commissioner’s handling of
the Colonial estate in its capacity as Statutory Liquidator.
In July 2004, the Pennsylvania Department of Insurance filed its Final Amended
Petition for Distribution in relation to the Colonial estate. Mazzella filed a series of
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objections in response to this Petition. He also filed a Motion for Surcharge, seeking
monetary relief. In November 2004, the Pennsylvania Commonwealth Court held a
four-day hearing to resolve all outstanding matters related to the liquidation. Mazzella
participated in this hearing.
On April 29, 2005, the Commonwealth Court entered an order granting the
Department of Insurance’s Final Petition and denying Mazzella’s objections and Motion
for Surcharge. Koken v. Colonial Assurance Co., 885 A.2d 1078 (Pa. Commw. Ct. 2005).
Mazzella filed a post-trial motion with the Commonwealth Court seeking a new trial, a
directed verdict, or judgment notwithstanding the verdict. He also sought injunctive relief
regarding several aspects of the court’s April 29 order. These requests were denied by the
Commonwealth Court on June 3, 2005. Mazzella then appealed the April 29 order to the
Pennsylvania Supreme Court, which affirmed the Commonwealth Court’s decision.
Koken v. Colonial Assurance Co., 893 A.2d 98 (Pa. 2006).
Following this disposition, Mazzella commenced a suit in the District Court
against the Pennsylvania Department of Insurance, its Bureau of Liquidations and
Rehabilitations, the Pennsylvania Insurance Commissioner, and Pennsylvania employees
William Taylor and Joseph DiMemmo, alleging that the Defendants violated his civil
rights, engaged in a civil conspiracy, and breached their fiduciary duties in relation to the
Colonial liquidation. On March 16, 2006, the District Court granted the Defendants’
Motion to Dismiss on the ground that it lacked subject matter jurisdiction pursuant to the
Rooker-Feldman doctrine. Alternatively, it noted that even if dismissal under the Rooker-
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Feldman doctrine were not appropriate, Mazzella’s claims would be barred by issue
preclusion. This appeal followed.1
II.
On appeal, Mazzella argues that the District Court erred by applying the Rooker-
Feldman doctrine in this case. The doctrine “prevents ‘inferior’ federal courts from
sitting as appellate courts for state court judgments.” In re Knapper, 407 F.3d 573, 580
(3d Cir. 2005). Recently, the Supreme Court narrowed the doctrine, emphasizing that it
“is confined to cases of the kind from which the doctrine acquired its name: cases brought
by state-court losers complaining of injuries caused by state-court judgments rendered
before the district court proceedings commenced and inviting district court review and
rejection of those judgments.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S.
280, 284 (2005). Following the Supreme Court’s holding in Exxon Mobil, we explained
that Rooker-Feldman was not applicable when a party complains of an injury “not caused
by the state-court judgment but instead attributable to defendants’ alleged . . . violations
that preceded the state-court judgment.” Turner v. Crawford Square Apartments III, L.P.,
449 F.3d 542, 547 (3d Cir. 2006) (emphasis in original). Because Mazzella’s federal
Complaint is directed at conduct that preceded the state-court judgment, we agree that this
is not an appropriate case for the application of the Rooker-Feldman doctrine.
1
We exercise jurisdiction pursuant to 28 U.S.C. § 1291.
4
However, in Turner we explained that even if “we reject the district court’s stated
grounds for granting summary judgment in favor of defendants, we nonetheless may
affirm the district court’s order granting summary judgment on other grounds.” 449 F.3d
at 548 (affirming a district court’s summary judgment order on res judicata grounds after
rejecting the district court’s reliance on the Rooker-Feldman doctrine). In this case, the
District Court recognized that even if the Rooker-Feldman doctrine were not applicable,
the doctrine of issue preclusion would bar Mazzella’s claims because he is attempting to
relitigate issues previously determined by the Commonwealth Court.
The Pennsylvania Supreme Court has explained that “[u]nder the doctrine of res
judicata issue preclusion, when an issue of fact or of law is actually litigated and
determined by a valid final judgment, and determination of the issue was essential to
judgment, the determination on that issue is conclusive in a subsequent action between
the parties, whether on the same or a different claim.” McNeil v. Owens-Corning
Fiberglass Corp., 680 A.2d 1145, 1147-48 (Pa. 1996) (internal footnote omitted).2 The
doctrine “serves the twin purposes of protecting litigants from assuming the burden of
re-litigating the same issue with the same party, and promoting judicial economy through
preventing needless litigation.” Id. at 1148.
2
We have noted that “[i]n determining the applicability of principles of res
judicata, we must give the same preclusive effect to the judgment [of the state court] that
the courts in Pennsylvania, the state in which the judgment was entered, would give.”
Turner, 449 F.3d at 548.
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Here, there is a valid final order that was entered by the Commonwealth Court and
affirmed by the Pennsylvania Supreme Court, and the parties to the current action are the
same as those in the previous action.3 Thus, the question here is whether Mazzella’s
claims in this case implicate issues that were actually decided by and necessary to the
judgment of the Commonwealth Court. See Cohen v. W.C.A.B., 909 A.2d 1261, 1264
(Pa. 2006). Mazzella has brought three claims in the current case: he alleges that the
Defendants violated his civil rights, engaged in a civil conspiracy, and breached their
fiduciary duties. His civil rights claim under 42 U.S.C. § 1983 is premised on the
Defendants’ denying him access to certain financial information, depriving him of due
process through the handling of the Colonial liquidation, and depriving him of a surplus
by proposing payment of interest to claimants. However, the Commonwealth Court
considered, and rejected, all of these objections. It explained that because it had “allowed
extensive and repeated opportunities to Mazzella to engage in discovery; to obtain
financial information and data from the Liquidator, including Mazzella’s efforts to review
sealed court records . . . ; to meet with auditors of the estate; and ultimately to participate
fully in the evidentiary hearings in the case,” it rejected any “objection, assertion or
contention” that Mazzella had been improperly denied access to any information.
3
Although the “identical parties” analysis is slightly strained in this case because
the prior action was a statutory liquidation proceeding, it is clear that each of Mazzella’s
objections were directed at the same parties in that context as they are here, and every
party had a full and fair opportunity to litigate those objections in the prior forum. See
Koken v. Colonial Assurance Co., 885 A.2d 1078 (Pa. Commw. Ct. 2005).
6
Colonial, 885 A.2d at 1094. Furthermore, the Commonwealth Court determined that
“Mazzella’s arguments that the Liquidator abused her authority or discretion in evaluating
and allowing certain claims, or that she reopened the estate after closing it to drain any
potential surplus, simply cannot be sustained . . . .” Id. at 1103. Mazzella’s final civil
rights allegation was similarly considered and rejected by the Commonwealth Court: it
ordered the Defendants to “pay interest to all claimants,” settling his claim that certain
interest payments were improper. Id. at 1100 (emphasis in original). Thus, the issues
underlying Mazzella’s civil rights claim were actually litigated by the Commonwealth
Court, and they were necessary to its approval of the Commonwealth’s Final Plan, which
could only have been approved by rejecting Mazzella’s objections.
As to Mazzella’s civil conspiracy claim, he must prove that there was an
underlying tort in order to succeed. Boyanowski v. Capital Area Intermediate Unit, 215
F.3d 396, 405-06 (3d Cir. 2000). In other words, this claim rests on a finding that the
Defendants acted unlawfully in carrying out their duties. However, the Commonwealth
Court specifically found that
Mazzella provided no credible evidence at the hearing to prove any
impropriety by the Liquidator in the overall handling of the Colonial estate,
and, in particular, Mazzella failed to show any impropriety in the
Liquidator’s application of the court-ordered claims bar date, incurring
expenses to administer the estate, efforts to collect reinsurance, investment
of assets and/or sale of real estate; or the request to destroy Colonial’s
records no longer needed to be retained.
7
Colonial, 885 A.2d at 1091. Thus, as with his civil rights claim, the issues underlying
Mazzella’s civil conspiracy claim were actually litigated and necessary to the
Commonwealth Court’s conclusion that Mazzella’s objections should be dismissed.
Finally, Mazzella alleges that the Defendants breached their fiduciary duties by
failing to account for a number of documents concerning reinsurance and investment
income. However, as the Defendants note, his allegations under this claim are a mirror-
image of his Motion for Surcharge before the Commonwealth Court. Disposing of the
claim, the Commonwealth Court held that “[t]he Liquidator, acting within her broad
statutory powers and in the best interests of all policyholders, creditors and the public,
owes no actionable duty to third parties and individual policyholders or creditors in tort or
contract.” Id. at 1093. As with Mazzella’s other claims, the issues underlying his breach
of fiduciary duty action were actually litigated in the state court and were necessary to the
judgment. As such, this and all of Mazzella’s claims are barred by the doctrine of issue
preclusion and were properly dismissed by the District Court.
III.
For the foregoing reasons, we will affirm the holding the District Court.
8