Nicholson v. Shafe, No. 08-11426.

• Decision Date: 18 February 2009
• Docket Number: No. 08-11426.,No. 08-13058.
• Citation: 558 F.3d 1266
• Parties: Jeanette C. NICHOLSON, Ph.D., an individual, Career Assessment Atlanta, Inc., a Georgia Corporation, Plaintiffs-Appellants, v. James C. SHAFE, an individual, Career Training Concepts, Inc., a Georgia Corporation, Sales and Management Training Institute of Atlanta, a previous Georgia Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

558 F.3d 1266

Jeanette C. NICHOLSON, Ph.D., an individual, Career Assessment Atlanta, Inc., a Georgia Corporation, Plaintiffs-Appellants, v. James C. SHAFE, an individual, Career Training Concepts, Inc., a Georgia Corporation, Sales and Management Training Institute of Atlanta, a previous Georgia Corporation, Defendants-Appellees.

No. 08-11426.

No. 08-13058.

United States Court of Appeals, Eleventh Circuit.

February 18, 2009.

Robert M. Ward, Ashish D. Patel, Myers & Kaplan Intellectual Property Law, LLC, Atlanta, GA, for Plaintiffs-Appellants.

Roger Scott Sumrall, Sean Lamar Gill, Hall, Booth, Smith & Slover, P.C., Atlanta, GA, for Defendants-Appellees.

Appeals from the United States District Court for the Northern District of Georgia.

Before WILSON and COX, Circuit Judges, and FAWSETT,^* District Judge.

WILSON, Circuit Judge:

This appeal calls upon us to address the scope of the Rooker-Feldman¹ doctrine, which provides that "lower federal courts are precluded from exercising appellate jurisdiction over final state-court judgments." Lance v. Dennis, 546 U.S. 459, 463, 126 S.Ct. 1198, 163 L.Ed.2d 1059 (2006). The Supreme Court has only applied the Rooker-Feldman doctrine as a bar to jurisdiction on two occasions, the first instance being Rooker and the second instance being Feldman. Recently, in Exxon Mobil Corporation v. Saudi Basic Industries Corporation, 544 U.S. 280, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005), the Supreme Court addressed the scope of the Rooker-Feldman doctrine, holding 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." Id. at 284, 125 S.Ct. 1517.

This case stems from a prior lawsuit in state court. In September of 2005, Appellants Jeannette C. Nicholson, Ph.D., and Career Assessment Atlanta, Inc. ("Appellants") filed a lawsuit against Appellees James C. Shafe, Career Training Concepts, Inc., and Sales and Management Training Institute of Atlanta ("Appellees") in Georgia state court, seeking an accounting of profits relating to a copyright claim under state law. Appellants lost at trial. While an appeal to the Georgia appellate court remained pending, Appellants filed this declaratory judgment action, requesting, inter alia, an accounting under federal law. The district court dismissed the action sua sponte based on lack of jurisdiction, applying the Rooker-Feldman doctrine, and ordered sanctions against the Appellants. This appeal followed.

Because we find that the district court's dismissal for lack of jurisdiction exceeded the scope of the Rooker-Feldman doctrine as clarified in Exxon Mobil, we reverse and remand for further proceedings.

BACKGROUND

As is typical in cases implicating the Rooker-Feldman doctrine, a state court action preceded the instant federal declaratory judgment action. On September 12, 2005, the Appellants filed a "Verified Complaint and Demand for Jury Trial" against the Appellees in the Superior Court of Gwinett County, Georgia, asserting claims for, inter alia, an accounting for copyright profits under state law.² Construing the federal district court's ruling as establishing that the subject work constituted a joint work as a matter of law, the Appellants argued that they were entitled to 50% of the profits that arose from the joint work.³

The Appellants moved for summary judgment. The state court denied the motion, concluding that the district court's ruling in the underlying federal action, that the subject work constituted a joint work, was dicta. The state court also found that the accounting claim sounded in Georgia joint tenancy-in-common law, not federal copyright law. The case proceeded to trial and, on October 5, 2007, the jury returned a verdict in favor of the Appellees. On November 1, 2007, the Appellants filed an appeal.⁴

On November 1, 2007, the same day that they appealed the jury's verdict in the state court action, the Appellants filed a "Complaint for Declaratory Judgment" against the Appellees in United States District Court for the Northern District of Georgia, alleging two causes of action: (1) declaratory judgment to establish that the Appellants and the Appellees were "equal co-owners of the subject work" and that the Appellants were entitled to an accounting; and (2) declaratory judgment to determine the applicability of federal preemption of copyright accounting matters.

On November 21, 2007, the Appellees filed a motion to dismiss, asserting res judicata, collateral estoppel, and the statute of limitations. On January 8, 2007, the Appellees filed a motion for sanctions. The Appellants responded to both motions. On March 25, 2008, the district court granted both motions. Nicholson v. Shafe, Civil Action File No. 1:07-CV-2724-BBM, slip. op. at 27 (N.D.Ga. March 25, 2008) (Order Granting "Motion to Dismiss for Failure to State a Claim Upon Which Relief Can be Granted" and "Motion for Rule 11 Sanctions"). As to the motion to dismiss, the district court, recognizing its ongoing duty to inquire as to jurisdiction, sua sponte found that it lacked jurisdiction under the Rooker-Feldman doctrine. In light of its lack of jurisdiction, the district court declined to address "whether the state court's findings are barred by res judicata or collateral estoppel in this action because it lack[ed] jurisdiction to do so." Id. at 11 n. 5. As to the motion for sanctions, the district court found that Appellants' complaint warranted sanctions under Federal Rule of Civil Procedure 11 and 28 U.S.C. § 1927. As relief, the district court dismissed the Appellants' Complaint, issued an injunction against the filing of additional complaints in that court based on the same facts without first obtaining a court order, and ordered the Appellants to pay a $1,000 fine as well as attorney's fees. The Appellants appealed.

JURISDICTIONAL QUESTION

The district court's March 25, 2008 Order granted the following relief to the Appellees: (1) dismissal of the complaint; (2) an injunction against the Appellants, enjoining them from filing future lawsuits against the Appellees in that court based on the facts underlying the case without first obtaining a court order; (3) a fine in the amount of $1,000; and (4) an order of attorney's fees in an undetermined amount. On March 26, 2008, the Appellants appealed. In response, we presented the following Jurisdictional Question to the parties, addressing only the order of attorney's fees: "Whether the district court's March 25, 2008, order is final and appealable to the extent that it awarded sanctions but directed Defendants to submit proof of their reasonable attorney fees," and, "[i]f not, whether the notice of appeal is premature with respect to Plaintiffs' counsel." On May 1, 2008, the Appellants submitted their "Appellants' Statement Regarding Jurisdictional Questions," in which they assert that we retain jurisdiction over the entirety of the March 25, 2008 Order. The Appellees did not file a response.

Subsequent events to the issuance of the jurisdictional question and the Appellants' statement have rendered moot any question with respect to the jurisdictional question. On May 14, 2008, the district court quantified the amount of attorney fees and costs, ordering the Appellants to pay $9,717. In response to that order, the Appellants filed a second notice of appeal on May 28, 2008. On June 13, 2008, the Appellants filed Appellants' Motion to Consolidate Appeals, which this Court granted on August 20, 2008. Because the Appellants filed a second notice of appeal as to the May 14, 2008 Order and subsequently consolidated that appeal with the first appeal, the jurisdictional question as to the appealability of the March 25, 2008 Order as to the undetermined amount of attorney's fees and costs is now moot.

DISCUSSION

This appeal raises two separate yet related issues: (1) the dismissal of the Appellants' case for want of jurisdiction under the Rooker-Feldman doctrine; and (2) the entry of sanctions against the Appellants' counsel.

We review dismissals for lack of subject matter jurisdiction de novo. Barbour v. Haley, 471 F.3d 1222, 1225 (11th Cir.2006). We review a district court's imposition of sanctions under Rule 11 and under section 1927 for an abuse of discretion. Amlong & Amlong, P.A. v. Denny's, Inc., 457 F.3d 1180, 1188 (11th Cir.2006) (section 1927); Anderson v. Smithfield Foods, Inc., 353 F.3d 912, 915 (11th Cir. 2003) (Rule 11).

A. The Rooker-Feldman Doctrine

Generally speaking, the Rooker-Feldman doctrine bars federal district courts from reviewing state court decisions. The Supreme Court stated in Exxon Mobil that the Rooker-Feldman doctrine "has sometimes been construed to extend far beyond the contours of the Rooker and Feldman cases" and it should be "confined to cases of the kind from which the doctrine acquired its name." Exxon Mobil, 544 U.S. at 283, 284, 125 S.Ct. 1517. Thus, we begin our analysis with the Rooker and Feldman cases.

In Rooker, a plaintiff filed a bill of equity in federal district court seeking a declaration that an Indiana circuit court judgment, "which was affirmed by the Supreme Court of the state, [be] declared null and void." Rooker, 263 U.S. at 414 44 S.Ct. 149.⁵ The plaintiff argued that the circuit court judgment contravened certain provisions of the United States Constitution. The Supreme Court determined that the federal district courts lacked jurisdiction to "entertain a proceeding to reverse or modify" a state court judgment, even if said judgment was wrong. Id. at 416, 44 S.Ct. 149. The jurisdiction of federal district courts, the Supreme Court explained, is "strictly original" and such courts may not exercise "appellate jurisdiction" over purported erroneous state court judgments. Id. Rather, Congress empowered only...