Pieper v. American Arbitration Ass'n, Inc.

• Decision Date: 11 July 2003
• Docket Number: No. 01-4043.,01-4043.
• Citation: 336 F.3d 458
• Parties: Richard PIEPER, Plaintiff-Appellant, v. AMERICAN ARBITRATION ASSOCIATION, INC.; R. Jeffrey Pollock; Gerald Hambly, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

336 F.3d 458

Richard PIEPER, Plaintiff-Appellant, v. AMERICAN ARBITRATION ASSOCIATION, INC.; R. Jeffrey Pollock; Gerald Hambly, Defendants-Appellees.

No. 01-4043.

United States Court of Appeals, Sixth Circuit.

Argued: November 14, 2002.

Decided and Filed: July 11, 2003.

George R. Royer (argued and briefed), Toledo, Ohio, for Appellant.

John P. Gustafson (argued and briefed), Toledo, Ohio, for Appellees.

Before: MOORE and COLE, Circuit Judges; SARGUS, District Judge.^*

OPINION

MOORE, Circuit Judge.

Plaintiff-Appellant Richard Pieper ("Pieper") was ordered by an Ohio state court to arbitrate the disputes that arose between him and one of the defendants-appellees, Gerald Hambly. Before arbitration began, however, Pieper brought a lawsuit in the U.S. District Court for the Northern District of Ohio, claiming that the dispute was not properly subject to arbitration and seeking injunctive relief that would bar the defendant-appellee American Arbitration Association from proceeding with arbitration hearings.

The district judge granted the defendants' motion to dismiss, holding that the district court was without jurisdiction to grant the plaintiff relief under the Rooker-Feldman doctrine, which generally prohibits federal courts from reviewing state-court judgments. For the reasons that follow, we AFFIRM that judgment.

I. BACKGROUND

On December 14, 1999, Pieper brought an action against Gerald Hambly and several other individuals in Ohio state court. Pieper, Hambly, and others had agreed to form a home-construction business. Pieper was supposed to have a one-third interest in the corporation, All Points Investment, Inc. However, according to the state-court complaint, the defendants improperly assumed control of the corporation in violation of Ohio law. The complaint also alleged that the defendants withdrew funds and assets from the corporation without approval of the board of directors and for their personal use, fraudulently purchased real estate, trespassed on the plaintiffs property, and eventually sold the corporation without a vote of the board of directors. The complaint did not raise any federal issue.

Hambly filed a motion to stay the state-court proceedings pending arbitration and to compel arbitration in January of 2000. The state trial court granted Hambly's motion on February 16, 2000. Pieper objected, and the state court again directed arbitration over Pieper's protest. At no point did Pieper appeal this determination to an Ohio appellate court, even though such an order is appealable under OHIO REV. CODE ANN. § 2711.02.

Hambly filed a complaint in arbitration, accusing Pieper of embezzlement, accounting negligence, fraud, and malpractice, among other claims. The arbitration hearing was originally scheduled for March of 2001, but was pushed back to April 19, 2001, by request of Pieper's counsel. The day before the arbitration was to begin, on April 18, 2001, Pieper filed this lawsuit in federal court, which sought a declaration that the disputes between Pieper and Hambly were not properly subject to arbitration. Hambly was not initially a defendant in the federal lawsuit; Pieper sued the American Arbitration Association and the arbitrator scheduled for the case. Hambly moved to intervene, and the motion was granted. Hambly then filed a motion to dismiss, alleging that the Rooker-Feldman doctrine prohibited federal-court jurisdiction, and he also moved for sanctions. The district court granted the motion to dismiss but denied the motion for sanctions.

Pieper has appealed to this court. Hambly has filed a motion for sanctions under Federal Rule of Appellate Procedure 38(a), alleging that Pieper has filed a frivolous appeal.

II. ANALYSIS

A. The Rooker-Feldman Question

The principal issue in this case is whether the district court properly dismissed the case because of a lack of subject-matter jurisdiction. This court reviews de novo a district court's grant of a motion to dismiss on the basis of subject-matter jurisdiction. Tropf v. Fidelity Nat'l Title Ins. Co., 289 F.3d 929, 936 (6th Cir.2002), cert. denied, 537 U.S. 1118, 123 S.Ct. 887, 154 L.Ed.2d 797 (2003).

The Rooker-Feldman doctrine is derived from two Supreme Court cases which establish that "lower federal courts lack subject matter jurisdiction to engage in appellate review of state court proceedings." Peterson Novelties, Inc. v. City of Berkley, 305 F.3d 386, 390 (6th Cir.2002); see also Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923); District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983). The Court has summarized the doctrine as being designed to prevent "`a party losing in state court ... from seeking what in substance would be appellate review of the state judgment [in the lower federal courts] based on the losing party's claim that the state judgment itself violates the loser's federal rights.'" Tropf, 289 F.3d at 936-37 (citing Johnson v. De Grandy, 512 U.S. 997, 1005-06, 114 S.Ct. 2647, 129 L.Ed.2d 775 (1994)).

The Rooker-Feldman doctrine bars relitigation of claims raised in state-court proceedings as well as claims that are "inextricably intertwined" with the claims asserted there. See Catz v. Chalker, 142 F.3d 279, 293 (6th Cir.1998). In practice this means that when granting relief on the federal claim would imply that the state-court judgment on the other issues was incorrect, federal courts do not have jurisdiction: "`Where federal relief can only be predicated upon a conviction that the state court was wrong, it is difficult to conceive the federal proceeding as, in substance, anything other than a prohibited appeal of the state-court judgment.'" Id. (citation omitted). The Rooker-Feldman doctrine, however, does not bar jurisdiction when the plaintiffs claim is merely "a general challenge to the constitutionality of the state law applied in the state action," rather than a challenge to the law's application in a particular state case. Tropf, 289 F.3d at 937 (quoting Catz, 142 F.3d at 293).

At first glance, it seems indisputable that the Rooker-Feldman doctrine applies here. Pieper has several federal claims; he alleges that the state court's order compelling arbitration violates his due process rights, his right to jury trial and his right to confront witnesses. All of these claims, however, are attacks on the state court's order compelling arbitration (though we note that none of them was actually raised in the state-court litigation). Since it would be impossible to grant Pieper relief on any of these claims without calling into question the state court's arbitration decision, Pieper's federal claims are inextricably intertwined within the meaning of Rooker-Feldman's bar.¹ Having reached this conclusion, we would normally dismiss Pieper's case immediately.

This case, however, has a twist. Pieper implicitly argues that Rooker-Feldman's bar should not apply here because the state-court order requiring arbitration was not reviewable by the Supreme Court under 28 U.S.C. § 1257, because it was not a final judgment or a decision by the highest court of a State. Such a claim has not been addressed by our circuit before. To understand this argument, one must start by looking at the text of 28 U.S.C. § 1257, which is the root of Rooker-Feldman doctrine and which reads, in part, as follows:

Final judgments or decrees rendered by the highest court of a State in which a decision could be had, may be reviewed by the Supreme Court by writ of certiorari [when they raise a federal question]....

On its face, this statute simply grants to the Supreme Court the ability to consider appeals from the highest court of each state. In the Rooker and Feldman cases, however, the Supreme Court drew an important negative inference from this statutory language. This negative inference is that because the Supreme Court was specifically given jurisdiction to hear appeals from final judgments of the highest state courts, lower federal courts do not have jurisdiction to review such judgments. See Feldman, 460 U.S. at 482, 103 S.Ct. 1303 (noting that "a United States District Court has no authority to review final judgments of a state court in judicial proceedings" because "[r]eview of such judgments may be had only in this Court").

A close reading of § 1257 reveals that the first sentence gives the Supreme Court power to review only a certain subset of state-court decisions, namely final judgments or decrees that are rendered by the highest court of a State in which a decision could be had. In essence, Pieper argues that Rooker-Feldman does not apply to the state-court order compelling arbitration because it was not a final judgment and also was not rendered by the highest state court.² The basic argument under this view is that the Rooker-Feldman doctrine is only necessary to effectuate the negative implication of 28 U.S.C. § 1257 — it is needed only to prevent lower federal courts from considering cases that the Supreme Court is permitted to hear under the statute. When the state-court judgment is not final or is not rendered by the highest state court, Supreme Court review under § 1257 is impossible. This, according to the argument, makes Rooker-Feldman inapplicable.³

We reject this argument and join with the majority of circuits that have concluded that the Rooker-Feldman doctrine does apply to interlocutory orders and to orders of lower state courts.

First, like other federal courts of appeals, we find it difficult to believe that lower federal courts are prohibited from reviewing final state-court judgments, but yet are somehow permitted to review interlocutory decisions. The D.C. Circuit put this point forcefully:

We cannot imagine how one could reconcile Feldman's reasoning, based as it is on allowing state courts to arrive at decisions free from collateral federal attack, with the idea that the district court would be free to review Richardson's...