Augustyn Kasprzyk v. Gregory Funding LLC ( 2020 )

NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted June 30, 2020 *
Decided July 2, 2020
Before
JOEL M. FLAUM, Circuit Judge
MICHAEL S. KANNE, Circuit Judge
AMY C. BARRETT, Circuit Judge
No. 19-2402
AUGUSTYN KASPRZYK, Appeal from the United States District
Plaintiff-Appellant, Court for the Northern District of Illinois,
Eastern Division.
v. No. 17-cv-8523
AXIOM FINANCIAL LLC, et al., Charles R. Norgle,
Defendants-Appellees. Judge.
ORDER
Augustyn Kasprzyk lost his home in an Illinois foreclosure action. In this
federal suit, he asserts that over twenty lending institutions conspired to defraud him
by foreclosing on his home, in violation of federal and state laws. The district court
dismissed his case for lack of subject-matter jurisdiction, ruling that the Rooker-Feldman
doctrine barred all of his claims. See District of Columbia Court of Appeals v. Feldman,
*
We have agreed to decide the 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).
No. 19-2402 Page 2
460 U.S. 462 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923). On appeal Kasprzyk
insists that the doctrine does not apply to his claims because he is seeking monetary
damages for out-of-court actions by the defendants. But he alleges no injury distinct
from the foreclosure judgment, so we affirm.
In 2006 Kasprzyk obtained a mortgage loan for his home in Chicago. He
defaulted shortly afterward but managed to stave off the first round of foreclosure
proceedings against him. Further proceedings, however, were initiated by the
mortgage’s assignees, who refused Kasprzyk’s offer to repurchase his home at a lower
price. Judgment was entered against him in the state trial court in 2017, and his home
was later sold in a foreclosure sale.
Kasprzyk then filed this wide-ranging suit for damages against twenty-two
lending institutions. He said that he had uncovered new evidence of fraud that was
unavailable to him at the time of the state court’s proceedings—specifically, new reports
about rampant fraud in the mortgage securitization industry that helped trigger the
2008 financial collapse. In his view, these reports show that the defendants conspired to
foreclose on his home by issuing him a loan using fraudulent documents and
misrepresenting the status of his mortgage assignments. His complaint alleged
violations of several federal statutes: the Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. § 1961–1968; the Real Estate Settlement Procedures Act,
12 U.S.C. §§ 2601–2617; and the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692–
1962p. He also brought claims under the Illinois Consumer and Deceptive Business
Practices Act, 810 ILCS 505/1–505/12, and state tort law for intentional infliction of
emotional distress, trespass, and civil conspiracy.
The district court dismissed the case for lack of subject matter jurisdiction under
the Rooker-Feldman doctrine. It explained that Kasprzyk’s claims—which involved
events connected to the foreclosure action (e.g., allegedly fraudulent acts related to the
issuance of his mortgage loan and later attempts to collect on it)—were “inextricably
intertwined” with the state-court judgment and therefore barred.
On appeal Kasprzyk contends that the Rooker-Feldman doctrine does not apply to
his claims because he seeks to challenge the defendants’ conspiracy to defraud him of
his home, not the state-court foreclosure judgment. He relies on our decision in Johnson
v. Pushpin Holdings, LLC, 748 F.3d 769, 773 (7th Cir. 2014), in which we held that the
Rooker-Feldman doctrine did not bar a suit seeking damages for fraud that led to a state
court’s judgment adverse to the plaintiff. Johnson, 748 F.3d at 773.
No. 19-2402 Page 3
The Rooker-Feldman doctrine prevents lower federal courts from hearing “cases
brought by state-court losers complaining of injuries caused by state-court judgments.”
Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005). 1 That doctrine also
extends to federal claims that do not on their face require review of a state court’s
decision if those claims are closely enough related to a state court’s judgment. Mains v.
Citibank, N.A., 852 F.3d 669, 675 (7th Cir. 2017). If, however, the claim asserts an injury
independent of the state court’s judgment that the state court did not remedy, Rooker-
Feldman does not apply.
Based on these principles, Kasprzyk’s claims are barred by Rooker-Feldman. His
complaint seeks to recover on a theory that the defendants made false statements
during state litigation, but “[t]hat is precisely what Rooker-Feldman prohibits.” Id. at 676;
see also Harold v. Steel, 773 F.3d 884, 885 (7th Cir. 2014). His claim that the defendants
conspired under RICO to mislead the state court about the validity of his loan and the
status of his mortgage assignments is barred because “’[n]o injury occurred until the
state court ruled against [him].’” Mains, 852 F.3d at 677 (quoting Harold, 773 F.3d at 885).
As in Mains, a state court already had established that those documents and
assignments were valid, “and a lower federal court is not empowered to second-guess
that decision.” Id. at 677. For the same reason, we cannot reach his additional claim that
the defendants violated the FDCPA by attempting to collect on his loan, or that they
violated RESPA by refusing to accept his offer to repurchase his home at a lower price
while the foreclosure proceedings were pending. Id. at 678. For him to prevail on any of
his federal claims, a district court would need to declare that the foreclosure judgment
was invalid or, contrary to that judgment, find that the documents on which it relied
were fraudulent. See id.
Further, Kasprzyk’s reliance on Johnson is misplaced. In that case we held that
Rooker-Feldman does not bar a federal class-action suit alleging fraud that caused a state
court’s adverse judgment, but that suit concerned independently unlawful conduct (a
debt-collecting agency’s out-of-court misrepresentations about its licensing status) that
went unrectified in the state court. The plaintiffs’ suit sought not to disturb the state
1
We note that the proper standard under the Rooker-Feldman doctrine is not
whether the plaintiff’s claims are somehow “inextricably intertwined” with the state
court’s judgment, but whether the plaintiff, having lost in state court, is seeking review
of a state court’s judgment that injured him. See Exxon Mobil Corp. v. Saudi Basic
Industries Corp., 544 U.S. 280, 284 (2006); Milchstein v. Chisholm, 880 F.3d 895, 898
(7th Cir. 2018); Richardson v. Koch Law Firm, P.C., 768 F.3d 732, 734 (7th Cir. 2014).
No. 19-2402 Page 4
court’s judgment, but to obtain damages for the defendant’s fraudulent
misrepresentations that occurred outside the court’s proceedings. Johnson, 748 F.3d at
773. As we elaborated in Iqbal v. Patel, 780 F.3d 728, 730 (7th Cir. 2015), “[I]f a plaintiff
contends that out-of-court events have caused the injury that the state judiciary failed to
detect and repair, then a district court has jurisdiction—but only to the extent of dealing
with that injury.” Kasprzyk’s federal complaint, by contrast, seeks relief for statements
relied upon by the state court that he believes were fraudulent. Kasprzyk’s federal
claims were therefore properly dismissed.
Because the district court properly dismissed Kasprzyk’s federal law claims, it
lacked supplemental jurisdiction to address his state law claims. Mains, 679 F.3d at 679.
Finally, Kasprzyk asserts that the district court erred by dismissing his claims
with prejudice. But he misapprehends the court’s ruling. The court here dismissed his
claims for lack of subject-matter jurisdiction, which is a dismissal without prejudice.
See FED. R. CIV. P. 12(b)(1); Lewert v. P.F. Chang’s China Bistro, Inc., 819 F.3d 963, 970
(7th Cir. 2016).
AFFIRMED