Iqbal v. Patel, No. 14-1959 (7th Cir. Mar. 2, 2015).
Mir Iqbal hired Tejaskumar Patel to run his gas station. Iqbal also guaranteed Patel’s debts to S-Mart Petroleum, which supplied the gas station with gas. When Patel defaulted on his contract with S-Mart, S-Mart foreclosed on the gas station’s property, and the property was sold under an Indiana state court’s judgment.
Iqbal then sued Patel and S-Mart in federal district court under RICO, alleging that they’d conspired to defraud him out of his business. The district court dismissed the complaint for lack of subject matter jurisdiction under the Rooker-Feldman doctrine. That doctrine, named after two Supreme Court cases, holds that a civil litigant who loses in state court can appeal that loss to only one federal court: the Supreme Court. If the litigant files suit in a federal district court and asserts the same claims he’d lost on in state court, the suit’s treated as a forbidden de facto appeal over which the lower federal courts can’t exercise jurisdiction.
Rooker-Feldman, though, doesn’t apply when the disappointed litigant files suit in federal district court, seeking recompense for “extrajudicial” injury caused by his loss in state court. “In other words,” the Seventh Circuit explains here, “if a plaintiff contends that out-of-court events have caused injury that the state judiciary failed to detect and repair, then [the federal] district court has jurisdiction—but only to the extent of dealing with that injury.” That’s the kind of injury that Patel is alleging here, so his suit isn’t barred by Rooker-Feldman.
It remains to be seen, however, whether the suit is barred by claim preclusion—a doctrine that’s sometimes confused with Rooker-Feldman, but that isn’t a jurisdictional matter. The Seventh Circuit remands for the district court to consider that question.