Bergquist v. Mann Bracken, LLP, — F.3d —-, 2010 WL 273973 (7th Cir. (Ill.), Jan 26, 2010)(NO. 09-8046, 09-8047).

The Seventh Circuit reversed the district court’s remand order holding that although Rooker-Feldman doctrine that prevents federal adjudication of any claim that seeks to invalidate judgments entered by state courts applies to CAFA, it did not apply here as the plaintiff was no longer a state-court loser (at least procedurally; we can’t speak about in general).

The plaintiff, a credit card borrower, brought a class action in state court against the defendants, debt collector (a law firm) and issuing bank, seeking to set aside the state court judgment enforcing the arbitration award, on behalf of all persons whose disputes had been arbitrated by National Arbitration Forum, based on a belief that the Forum and debt collector were secretly under common control.  The state court then set aside the judgment enforcing the award against the plaintiff. 

Afterwards, the defendants removed the suit seeking relief on behalf of a class to the district court invoking diversity jurisdiction under CAFA.  Although the district court did not find fault with any of the jurisdictional allegations, it remanded the case to state court under the Rooker-Feldman doctrine.

Upon appeal, the Seventh Circuit noted that the Rooker-Feldman doctrine, which takes its name from Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983), held that only the US Supreme Court may set aside a state court’s decision in civil litigation. Thus, the federal district judges may not entertain collateral attacks on state judges’ decisions. 

The Rooker-Feldman doctrine also applies to proceedings under CAFA because nothing in CAFA hints at allowing federal district judges to review state-court decisions-other than the interlocutory steps taken in the same case before its removal, a power that the federal court enjoys no matter the source of authority for removal. 

The Seventh Circuit, however, found that the Rooker-Feldman doctrinedid not apply to the plaintiff’s claim because she was no longer a state-court loser because the state court itself vacated its decision enforcing the arbitration award against her. The Seventh Circuit maintained that the plaintiff’s injury arose from the award itself, and the Rooker-Feldman doctrine does not apply to arbitral awards.  The Seventh Circuit noted that although the district court recognized that the Rooker-Feldman doctrine did not apply to plaintiff’s claim, it remanded the suit because the plaintiff sought relief on behalf of persons who lost in state court when judges confirmed arbitral awards adverse to their interests.  In doing so, the district court thought that only a state court could resolve the whole dispute, so it remanded the whole case.