Fontana Empire Center, LLC v. City of Fontana, 02-55030.

• Decision Date: 03 October 2002
• Docket Number: No. 02-55030.,02-55030.
• Citation: 307 F.3d 987
• Court: U.S. Court of Appeals — Ninth Circuit
• Parties: FONTANA EMPIRE CENTER, LLC, a Delaware limited liability company; Fontana Empire Center II, LLC, a Delaware limited liability company, Plaintiffs-Appellants, v. CITY OF FONTANA, a municipal corporation; Kenneth R. Hunt, an individual; Raymond Bragg, an individual; Frank Schuma, an individual; Stone & Youngberg, LLC, a California limited liability company, Defendants-Appellees.

307 F.3d 987

FONTANA EMPIRE CENTER, LLC, a Delaware limited liability company; Fontana Empire Center II, LLC, a Delaware limited liability company, Plaintiffs-Appellants, v. CITY OF FONTANA, a municipal corporation; Kenneth R. Hunt, an individual; Raymond Bragg, an individual; Frank Schuma, an individual; Stone & Youngberg, LLC, a California limited liability company, Defendants-Appellees.

No. 02-55030.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 6, 2002.

Filed October 3, 2002.

COPYRIGHT MATERIAL OMITTED

Betty M. Shumener and Henry H. Oh, Robert O. Barton, Dewey Ballantine, Los Angeles, CA, for the plaintiffs-appellants.

Kendall H. MacVey, Best Best & Krieger, Riverside, CA; Edward P. Sangster, Dylan Carp, Kirkpatrick & Lockhart, San Francisco, CA, for the defendants-appellees.

Appeal from the United States District Court for the Central District of California; A. Howard Matz, District Judge, Presiding; D.C. No. CV-01-04491-AHM.

Before LAY,^* CANBY, JR. and PAEZ, Circuit Judges.

OPINION

LAY, Circuit Judge.

FACTS

Fontana Empire Center and Fontana Empire Center II (collectively FEC) filed a civil rights action in federal district court. In its complaint, FEC alleged, inter alia, that it acquired title to 218 contiguous acres of unimproved real property located in Fontana, California in June of 1998. The City of Fontana (City) had obtained a foreclosure judgment in 1996, prior to FEC's purchase of the property. The City conducted a foreclosure sale on March 9, 2001. The City purchased the property at the foreclosure sale by credit bid.

In their second amended complaint, Plaintiffs alleged (1) copyright infringement, (2) deprivation of procedural due process rights under color of state law (42 U.S.C. § 1983), (3) unlawful seizure of property under color of state law (42 U.S.C. § 1983), (4) unlawful taking of property under color of state law (42 U.S.C. § 1983), (5) deprivation of equal protection rights under color of state law (42 U.S.C. § 1983), (6) set aside foreclosure sale, (7) fraud and fraudulent concealment, (8) promissory estoppel, (9) quantum meruit, and (10) cancellation of deed or instrument. Defendants filed a motion to dismiss arguing that the district court lacked subject matter jurisdiction over FEC's claims under the Rooker-Feldman doctrine and, alternatively, that some of the claims asserted failed to state a claim for relief. Under the Rooker-Feldman rule, federal courts are precluded from reviewing state court decisions.

The district court entered an order denying in part and granting in part the motion to dismiss, ruling that FEC stated a valid claim for copyright infringement, quantum meruit, and fraud. The district court dismissed the remaining claims on the grounds that it lacked subject matter jurisdiction over those claims pursuant to the Rooker-Feldman doctrine.

FEC appealed, alleging that the district court improperly found the claims barred by the Rooker-Feldman doctrine. Defendants filed a motion to dismiss on the ground that this court lacked jurisdiction. A motions panel entered an order denying Defendants' motion to dismiss ruling that this court had jurisdiction under the collateral order rule.¹ See Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949).

JURISDICTION

Before passing on the question as to whether the Rooker-Feldman doctrine applies, it is necessary for us to determine whether this court has jurisdiction to review this issue. As previously indicated, the district court ruled that FEC had stated a valid claim for copyright infringement, quantum meruit, and fraud. The district court found as to the seven remaining claims that it lacked subject matter jurisdiction under the Rooker-Feldman doctrine. However, it is obvious that the appeal from the district court's ruling is an appeal from an interlocutory order. The parties were ordered by the district court to continue discovery and pursue other preparation for trial on the three remaining issues. None of the parties sought to obtain a certificate from the district court under Federal Rule of Civil Procedure Rule 54(b). The Plaintiffs assert, however, that this court has jurisdiction under the collateral order rule which grants this court jurisdiction of appeals from the final decision of the district court pursuant to 28 U.S.C. § 1291. This small category of cases provides an exception from the final decision of the district court, i.e. although the decision does not end the litigation, it must still be considered a final judgment. As the Supreme Court stated in Coopers & Lybrand v. Livesay, 437 U.S. 463, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978): "To come within the `small class' of decisions excepted from the final judgment rule by Cohen, the order must conclusively determine the disputed question, resolve an important issue completely separate from the merits of the action, and be effectively unreviewable on appeal from a final judgment." 437 U.S. at 468, 98 S.Ct. 2454.

We find that this court has jurisdiction under the collateral order rule to review the district court's dismissal of the claims under the Rooker-Feldman doctrine. In applying the Rooker-Feldman doctrine, the district court simply recognized that federal courts may not review prior rulings of the state court. Although we have found no authority addressing the question whether a Rooker-Feldman dismissal is a collateral order, the Supreme Court decided in Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996), that a dismissal based on Burford abstention was an appealable collateral order because it effectively deprived the litigant of an opportunity to litigate in federal court.

We conclude that the attributes that the Supreme Court identified as making a Burford abstention appealable as a collateral order are also present in a Rooker-Feldman dismissal. In Quackenbush, the Supreme Court observed:

We determined that a stay order based on the Colorado River doctrine "presents an important issue separate from the merits" because it "amounts to a refusal to adjudicate" the case in federal court; that such orders could not be reviewed on appeal from a final judgment in the federal action because the district court would be bound, as a matter of res judicata, to honor the state court's judgment; and that unlike other stay orders, which might readily be reconsidered by the district court, abstention-based stay orders of this ilk are "conclusive" because they are the practical equivalent of an order dismissing the case.

Quackenbush, 517 U.S. at 713, 116 S.Ct. 1712 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 12, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)).

The same things may be said about the case before us. In dismissing the case as an attempt to review a state court judgment, the district court denied FEC the opportunity to adjudicate the dismissed claims in federal court. If an appeal of the district court's dismissal must await final judgment, it may well be too late to remedy the dismissal. As a result of the dismissal, FEC filed a separate lawsuit in state court to obtain an adjudication of the dismissed claims. The state court's judgment in that case would bind the district court in any further proceedings, thus permanently denying FEC the right to adjudicate its claims in federal court. Thus, in the absence of a collateral-order interlocutory appeal, the district court's Rooker-Feldman dismissal would be "the practical equivalent of an order dismissing the case." Quackenbush, 517 U.S. at 713, 116 S.Ct. 1712. We conclude, therefore, that a Rooker-Feldman dismissal qualifies as a collateral order to the same extent as a Burford abstention order.

The Rooker-Feldman dismissal also meets the two requirements of Cohen, 337 U.S. at 546, 69 S.Ct. 1221. In the present case, the district court conclusively determined the applicability of the Rooker-Feldman doctrine, thereby satisfying the first of the Cohen elements. The second Cohen requirement is whether the issue brought to the district court was separate from the merits of the action. It is obvious that the district court refused to adjudicate the merits of the dispute and barred the claims under the Rooker-Feldman doctrine. See Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949).

Along with fulfillment of these two requirements, the district court's ruling effectively becomes unreviewable on appeal from its final judgment because the district court would be required to give res judicata effect to the state court's determination. On the basis of our analysis, we find the requirements of Cohen have been satisfied and that the appeal under the collateral order rule is properly before this court.

ANALYSIS

I. Rooker-Feldman Doctrine

The Rooker-Feldman doctrine recognizes that federal district courts generally lack subject matter jurisdiction to review state court judgments. Dist. of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 476, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983); Rooker v. Fid. Trust Co., 263 U.S. 413, 415, 44 S.Ct. 149, 68 L.Ed. 362 (1923); see also Branson v. Nott, 62 F.3d 287, 291 (9th Cir.1995) ("As courts of original jurisdiction, federal district courts have no authority to review the final determinations of a state court in judicial proceedings."). The doctrine also precludes a federal district court from exercising jurisdiction over general constitutional challenges that are "inextricably intertwined" with claims asserted in state court. Feldman, 460 U.S. at 483 n. 16, 103 S.Ct. 1303; see also Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 25, 107 S.Ct. 1519, 95 L.Ed.2d 1 (1987) (Marshall, J., concurring); Doe & Assocs. Law Offices v. Napolitano, 252 F.3d 1026, 1029 (9th Cir.2001). A claim is inextricably intertwined with a state court judgment if "the federal claim succeeds only to the extent that the state court...