Donald Bauer v. Kimberly Koester

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 19-1786
DONALD W. BAUER, et al.,
Plaintiffs-Appellants,
v.
KIMBERLY G. KOESTER, et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court
for the Southern District of Illinois.
No. 18-cv-1215-MJR-RJD — Michael J. Reagan, Judge.
____________________
SUBMITTED FEBRUARY 10, 2020 * — DECIDED MARCH 4, 2020
____________________
Before KANNE, SYKES, and ST. EVE, Circuit Judges.
PER CURIAM. This appeal arises out of Illinois foreclosure
proceedings on real estate owned by Donald and Lauretta
Bauer. Even though they were able to redeem their property,
*We agreed to decide this case without oral argument because the briefs
and record adequately present the facts and legal arguments, and oral
argument would not significantly aid the court. FED. R. APP.
P. 34(a)(2)(C).
2 No. 19-1786
the Bauers and two of their children, Karla and David
(collectively, “the Bauers”), believe they were harmed by the
proceedings and now seek damages under 42 U.S.C. § 1983.
The Bauers named as defendants many of the people and
entities involved in the foreclosure: Donald and Lauretta’s
attorneys, the attorneys for the foreclosing plaintiffs, the
bank that maintained an escrow account at issue and its
employees, the state-court clerk and deputy clerks, and the
judge who presided over the foreclosure proceedings. The
district court dismissed the Bauers’ suit as barred by the
Rooker-Feldman doctrine. See D.C. Court of Appeals v. Feldman,
460 U.S. 462 (1983); Rooker v. Fid. Tr. Co., 263 U.S. 413 (1923).
Because the district court properly applied that doctrine, we
affirm.
This case has an extensive history. In 1973 Donald and
Lauretta purchased seven tracts of land from Donald’s
parents and executed two promissory notes and a mortgage
for the property. Upon the deaths of Donald’s parents in the
late 1980s, his parents’ interest in the promissory notes
transferred to their remaining children, excluding Donald. In
2002 six of the eight interest holders (Donald’s siblings) filed
for foreclosure seeking a deficiency judgment against
Donald and Lauretta and a judgment that Donald and
Lauretta’s six children (including Karla and David, two of
the plaintiffs here) took no legal or equitable interest in the
property at issue.
In late 2013 the state court held a bench trial and found
that Donald and Lauretta had defaulted on the promissory
notes and mortgage. The judge entered a judgment for
foreclosure and judicial sale and a monetary judgment
against Donald and Lauretta for nearly $250,000. No judicial
No. 19-1786 3
sale took place, however, and in March 2015 the Bauers tried
to redeem the property by tendering a check satisfying the
judgment. The foreclosure plaintiffs then issued citations to
discover assets and moved for, among other things, addi-
tional interest incurred since the judgment.
In December 2015 the state court found that Donald and
Lauretta owed an additional $33,782.96 in interest. The judge
set a deadline to pay the interest and ordered a judicial sale
to occur if Donald and Lauretta did not pay by that date.
Donald and Lauretta met the deadline, and at the end of
2015, the plaintiffs filed a satisfaction of judgment and
cancellation of notice of lis pendens with the state court.
Three months later the Bauers filed a complaint in the
Eastern District of Missouri (seemingly basing venue on the
residency of some, but not all, of the defendants) against
many of the same defendants as this case. The judge dis-
missed the complaint for lack of subject-matter jurisdiction.
Bauer v. Lauth, No. 4:16-CV-410 CAS, 2016 WL 6679846 (E.D.
Mo. Nov. 14, 2016) (nonprecedential disposition).
The Bauers then returned to state court, suing many of
the same defendants for tampering with evidence and
engaging in an abuse of process by seeking to extort money
through issuance of citations to discover assets. The judge
dismissed the complaint, and the state appellate court
upheld the dismissal. Bauer v. Niemerg, No. 5-18-0229,
2019 WL 1170883 (Ill. App. Ct. Mar. 11, 2019), appeal denied,
132 N.E.3d 325 (Ill. 2019).
While their appeal was pending in state court, the Bauers
filed this action in the Southern District of Illinois. They
generally invoked their right to due process, equal protec-
4 No. 19-1786
tion, and an unbiased tribunal. The Bauers alleged, first, that
the defendants, including the state-court judge, had con-
spired to introduce a forged version of the escrow account
into evidence during the foreclosure trial. Second, they
alleged that the state-court judge and the clerk’s office
allowed the foreclosure plaintiffs to issue baseless citations
to discover assets—a means to extort money without an
underlying judgment.
The district court granted the defendants’ motions to
dismiss the case under the Rooker-Feldman doctrine. That
doctrine precludes federal district-court jurisdiction “over
cases brought by state court losers challenging state court
judgments rendered before the district court proceedings
commenced.” Sykes v. Cook Cty. Circuit Court Prob. Div.,
837 F.3d 736, 741 (7th Cir. 2016) (citing Exxon Mobil Corp. v.
Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005)); see also
Harold v. Steel, 773 F.3d 884, 885 (7th Cir. 2014) (“The Rooker-
Feldman doctrine applies when the state court’s judgment is
the source of the injury of which plaintiffs complain in
federal court.”). The judge explained: “Simply put, [the
Bauers’] alleged injuries stem from the 2013 state court
foreclosure judgment … .”
On appeal the Bauers argue that Rooker-Feldman does not
apply because they do not seek to set aside the state court’s
order of foreclosure or the monetary judgment against them.
Instead, they mean to challenge the “collection practices” of
the defendants and their collusion to introduce forged
evidence.
This suit is barred by the Rooker-Feldman doctrine, how-
ever, because any finding in favor of the Bauers would
require us to contradict the state court’s orders. See Moore v.
No. 19-1786 5
Wells Fargo Bank, N.A., 908 F.3d 1050, 1062 (7th Cir. 2018).
The injuries for which the Bauers seek redress ($350,000 in
actual damages and $5 million in punitive damages) resulted
from the state court’s judgment of foreclosure and its order
awarding additional interest. See Mains v. Citibank, N.A.,
852 F.3d 669, 676–77 (7th Cir. 2017) (applying Rooker-Feldman
where the requested relief challenged the state-court deter-
mination of amounts due and an obligation to pay). Rooker-
Feldman bars review of claims that allege injury caused by a
state-court order. Swartz v. Heartland Equine Rescue, 940 F.3d
387, 391 (7th Cir. 2019). Here, were it not for the state court’s
foreclosure order and order awarding additional interest, no
injury would have resulted from the allegedly forged escrow
exhibit or the citations to discover assets. Indeed, the de-
fendants needed to prevail in the state court to effectuate
their alleged fraud, so the Bauers’ claims are barred by
Rooker-Feldman because they “ultimately require us to evalu-
ate the state court judgments.” Kelley v. Med-1 Sols., LLC,
548 F.3d 600, 605 (7th Cir. 2008).
Relying on Nesses v. Shepard, 68 F.3d 1003, 1005 (7th Cir.
1995), the Bauers also contend that Rooker-Feldman does not
bar federal review of a fraud-based claim like theirs in which
the defendants “so far succeeded in corrupting the state
judicial process as to obtain a favorable judgment.” In Nesses,
however, the plaintiff alleged in his breach-of-contract suit
that “a massive, tentacular conspiracy among the lawyers
and the judges” corrupted the entire state judicial process
such that his claims fell beyond Rooker-Feldman’s scope. Id. at
1004–05 (stating in dicta that Rooker-Feldman does not block
an independent claim based on the right to be judged by “a
tribunal … uncontaminated by politics”); see also Loubser v.
Thacker, 440 F.3d 439, 441 (7th Cir. 2006) (Rooker-Feldman
6 No. 19-1786
does not bar a sprawling conspiracy claim that included a
state-court judge, court reporters, and many others, to
manipulate the entirety of divorce proceedings). The Bauers’
case differs from Nesses and Loubser in that they do not allege
that a widespread conspiracy undermined the entirety of the
state-court proceedings; as the Bauers acknowledge, they
merely challenge the state court’s decisions regarding the
supposedly forged exhibit and the citations to discover
assets.
The Bauers next argue that Rooker-Feldman applies only
to final state-court judgments and thus does not apply to the
state court’s foreclosure judgment, which was not a final
appealable order under Illinois law. They base this argument
on language from Feldman stating that a federal district court
“has no authority to review final judgments of a state court
in judicial proceedings.” 460 U.S. at 482. They maintain that
without a final appealable order entered against them, they
cannot be considered state-court losers. See, e.g., Green v.
Mattingly, 585 F.3d 97, 102–03 (2d Cir. 2009) (concluding that
Rooker-Feldman did not apply because the plaintiff (a woman
whose child was temporarily removed from her custody)
did not “lose” in state court, and she complained only of
injuries caused by a state-court interlocutory order); see also
HSBC Bank USA, N.A. v. Townsend, 793 F.3d 771, 777 (7th Cir.
2015) (highlighting the conclusion of the Supreme Court of
Illinois that a foreclosure judgment is not a final judgment
“because it does not dispose of all issues between the parties
and it does not terminate the litigation”) (quotation marks
omitted).
We have stated that the Rooker-Feldman doctrine “does
not apply independently to interlocutory orders.” Kowalski v.
No. 19-1786 7
Boliker, 893 F.3d 987, 995 (7th Cir. 2018). But we have also
stated that “interlocutory orders entered prior to the final
disposition of state court lawsuits are not immune from the
jurisdiction-stripping powers of Rooker-Feldman.” Sykes,
837 F.3d at 742 (emphasis added). The Bauers’ argument
fails because the record shows that the foreclosure case
against them is effectively final. The Bauers paid all mone-
tary judgments against them, thus negating the need for a
judicial sale, and the foreclosure plaintiffs then filed a satis-
faction of judgment and cancellation of notice of lis pendens
with the state court. See 735 ILL. COMP. STAT. 5/15-1603(f)(3)
(requiring that upon receipt of all payment owed, the mort-
gagee shall furnish a release of the mortgage or a satisfaction
of the judgment and evidence of any indebtedness secured
by the mortgage shall be cancelled).
Because the satisfaction of judgment effectively ended
the state proceeding, there is a “judgment” under Rooker-
Feldman. Malhan v. Sec’y U.S. Dep’t of State, 938 F.3d 453, 459
(3d Cir. 2019) (agreeing with the holding of six other circuits
that there is a state-court “judgment” under Rooker-Feldman,
even in the absence of a final appealable order so long as the
state-court interlocutory order is “effectively final”). And
even if the Bauers were correct that there is no final judg-
ment for purposes of Rooker-Feldman, “[n]othing in the
Supreme Court’s decisions suggests that state-court deci-
sions too provisional to deserve review within the state’s
own system can be reviewed by federal district and appel-
late courts.” Harold, 773 F.3d at 886.
The Bauers relatedly argue that because the foreclosure
order was not final and appealable, Rooker-Feldman does not
bar their constitutional claims because they had no reasona-
8 No. 19-1786
ble opportunity to raise them in state court. See Jakupovic v.
Curran, 850 F.3d 898, 904 (7th Cir. 2017). But the “reasonable
opportunity” inquiry focuses on “difficulties caused by
factors independent of” opposing parties’ actions that pre-
clude a plaintiff from litigating federal claims in state court.
Id. (internal quotation marks and alteration omitted). The
Bauers do not identify any such difficulties. Indeed, the
record reflects that the Bauers pursued these arguments both
in the foreclosure case (through a filing notifying the state
court of defendants “tampering with the evidence”) and in
their later state suit (which raised substantially the same
allegations as those made here).
Finally, the Bauers contend that Rooker-Feldman should
not apply because none of the defendants were a party to the
state-court foreclosure action. But whether any defendant
was a party to the state-court action is a consideration under
the doctrine of claim preclusion, not Rooker-Feldman. See
Moore, 908 F.3d at 1062 n.8.
We have considered the Bauers’ remaining arguments,
and none has merit.
AFFIRMED