F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
APR 12 2004
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
MERRILL LYNCH BUSINESS
FINANCIAL SERVICES, INC.,
Plaintiff - Appellant,
v. No. 03-1163
ARNOLD NUDELL,
Defendant - Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D. Ct. No. 02-N-942 (BNB))
Peter A. Jaffe, Law Offices of Peter A. Jaffe, LLC, McCoy, Colorado, appearing
for Plaintiff-Appellant.
Burton H. Levin, Levin & Levin, LLP, Edwards, Colorado, appearing for
Defendant-Appellee.
Before TACHA, Chief Circuit Judge, BRORBY, Senior Circuit Judge, and
KELLY, Circuit Judge.
TACHA, Chief Circuit Judge.
Plaintiff-Appellant Merrill Lynch Financial Business Services, Inc.
(“Merrill Lynch”) brought a diversity action to collect on a debt that Defendant-
Appellee Arnold Nudell guaranteed. Mr. Nudell, in response, filed a motion to
dismiss based upon the Rooker-Feldman doctrine, which the district court
granted. We take jurisdiction pursuant to 28 U.S.C. § 1291, REVERSE, and
REMAND.
I. BACKGROUND
This case comes to us from a motion to dismiss. We present the facts,
therefore, as stated in the Complaint. On August 15, 1995, Genesis Technologies,
Inc. (“GTI”) executed two Notes, Loans, and Security Agreements in favor of
Merrill Lynch in the amount of $300,000.00. On this same day, Mr. Nudell,
President of GTI, executed an unconditional guaranty of each note in which he
agreed, among other things, that Merrill Lynch “shall not be required at any time,
as a condition of the undersigned’s obligation hereunder, to resort to payment
from [GTI.]”
GTI failed to repay the loans to Merrill Lynch, and, in May 2001, Mr.
Nudell and Merrill Lynch entered into a forbearance agreement delaying
repayment of the loans until July 31, 2001. Mr. Nudell failed to repay the loans
by that date, which, given the accumulation of interest and a line of credit
increase, amounted to $591,185.15 plus late fees.
Merrill Lynch then launched a collection action in Colorado state court
against both GTI and Mr. Nudell. Unbeknownst to Merrill Lynch, GTI had filed
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for bankruptcy on the previous day in the Bankruptcy Court for the District of
Colorado. In December 2001, Mr. Nudell filed in Colorado state court a motion
to dismiss or, in the alternative, to stay pending the bankruptcy proceeding.
The state court granted the motion to dismiss on May 1, 2002, stating in
full:
THE COURT , having considered Defendant Nudell’s Motion to
Dismiss and otherwise being fully advised in the premises, GRANTS
the Motion. Now, therefore, IT IS ORDERED that the action is
dismissed without prejudice.
GTI’s bankruptcy case was closed on May 6, 2002. One week later, Merrill
Lynch commenced the present diversity action in the United States District Court
for the District of Colorado only against Mr. Nudell, seeking to enforce his
guaranty of the GTI loans.
Mr. Nudell then moved to dismiss for, inter alia, lack of subject matter
jurisdiction. He argued that, because the state court dismissed Merrill Lynch’s
collection action without prejudice, the Rooker-Feldman doctrine barred a federal
court from taking subject matter jurisdiction over Merrill Lynch’s claim. The
district court granted Mr. Nudell’s motion and dismissed the complaint. Merrill
Lynch filed a timely notice of appeal.
II. STANDARD OF REVIEW
Mr. Nudell raised this issue in a motion to dismiss for lack of jurisdiction
pursuant to Federal Rule of Civil Procedure 12(b)(1). “Rule 12(b)(1) motions
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generally take one of two forms. The moving party may (1) facially attack the
complaint’s allegations as to the existence of subject matter jurisdiction, or (2) go
beyond allegations contained in the complaint by presenting evidence to challenge
the factual basis upon which subject matter jurisdiction rests.” Maestas v. Lujan ,
351 F.3d 1001, 1013 (10th Cir. 2003) (internal citation and quotations omitted).
We review de novo the district court’s dismissal for lack of subject matter
jurisdiction and review for clear error any jurisdictional findings of fact. Id.
III. DISCUSSION
On appeal, Mr. Nudell urges that the state court’s dismissal without
prejudice triggers application of the Rooker-Feldman doctrine. Mr. Nudell
concedes, as he must, that “[t]he state court’s order did not have preclusive
effect” because, under Colorado law, a dismissal without prejudice means a
dismissal not on the merits of the case. See, e.g., Wistrand v. Leach Realty Co.,
364 P.2d 396, 397 (Colo. 1961). Nevertheless, Mr. Nudell contends that the
Rooker-Feldman doctrine applies because it “is not limited to situations in which
the state court’s decision would be entitled to res judicata effect, for if so there
would be no need for the doctrine.” Although we agree with Mr. Nudell that the
Rooker-Feldman doctrine has a broader scope than res judicata, we find the
doctrine inapplicable in this instance.
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The Rooker-Feldman doctrine 1 establishes, as a matter of subject-matter
jurisdiction, that only the United States Supreme Court has appellate authority to
review a state-court decision. See 28 U.S.C. § 1257(a) (establishing Supreme
Court jurisdiction to review certain “[f]inal judgments or decrees rendered by the
highest court of a State in which a decision could be had”). Thus, in applying the
Rooker-Feldman doctrine, we focus on whether the lower federal court, if it
adjudicated plaintiff’s claims, would effectively act as an appellate court
reviewing the state court disposition. See Dist. of Columbia Court of Appeals v.
1
In Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), the plaintiff, after
losing in state court, brought a new action in federal court seeking a bill in equity
for relief from the state court judgment. The Supreme Court found the bill to be
“merely an attempt to get rid of the judgment for alleged errors of law committed
in the exercise of [full state-court] jurisdiction.” Id. at 416. The Court held that
“[u]nder the legislation of Congress, no court of the United States other than [the
Supreme] Court could entertain a proceeding to reverse or modify the [state court]
judgment for errors” of constitutional law. Id.
In District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983),
the plaintiff, following a “highly structured program of study in the office of a
practicing attorney[,]” passed the Virginia and Maryland bar examinations. Id. at
465. Mr. Feldman then petitioned the District of Columbia Court of Appeals to
make an exception to the local rule that limited bar admission to candidates who
had graduated from an ABA-approved law school, or who had graduated from a
non-approved school and completed twenty-four semester-hours of study at an
approved school, suggesting that denial of his application would violate various
constitutional requirements. Nonetheless, the court denied his application. Mr.
Feldman brought an action in federal district court challenging the denial on
constitutional grounds. The district court, relying on Rooker, dismissed for lack
of jurisdiction to review a state court order. The Supreme Court agreed,
concluding that the denial of the request to waive the admission requirements was
“judicial in nature.” Id. at 479.
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Feldman, 460 U.S. 462, 483 n.16 (1983) (Under the Rooker-Feldman doctrine,
“lower federal courts possess no power whatever to sit in direct review of state
court decisions.”); Kenmen Eng. v. City of Union, 314 F.3d 468, 476 (10th Cir.
2002) (“Rooker-Feldman protects state-court judgments from impermissible
appellate review by lower federal courts.”).
Given this focus, it is not surprising that the Rooker-Feldman doctrine
shares a close affinity to claim and issue preclusion. Indeed, in many circuits, the
Rooker-Feldman doctrine is coextensive with preclusion doctrine. See, e.g., In re
Lease Oil Antitrust Litig. (No. II), 200 F.3d 317, 319 n.1 (5th Cir. 2000); Moccio
v. New York State Office of Court Admin., 95 F.3d 195, 199-200 (2nd Cir. 1996);
Robinson v. Ariyoshi, 753 F.2d 1468, 1472 (9th Cir. 1985), vacated on other
grounds, 477 U.S. 902 (1986).
In the Tenth Circuit, however, we apply the Rooker-Feldman doctrine in a
slightly broader fashion. “[T]he Rooker-Feldman doctrine—unlike res
judicata—does not distinguish between ‘temporary’ and ‘final’ orders.” Kenmen
Eng., 314 F.3d at 474; accord Charchenko v. City of Stillwater, 47 F.3d 981, 983
n.1 (8th Cir. 1995) (“We note that Rooker-Feldman is broader than claim and
issue preclusion because it does not depend on a final judgment on the merits.
Aside from this distinction the doctrines are extremely similar.”). Thus, under
our law, the Rooker-Feldman doctrine mirrors claim and issue preclusion, except
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that Rooker-Feldman applies to temporary and non-final orders. See Kenmen
Eng ., 314 F.3d at 474.
Pursuant to Supreme Court precedent, we apply the Rooker-Feldman
doctrine: (1) to those federal claims actually decided by a state court, and (2) to
those federal claims inextricably intertwined with a state court judgment. Id. at
475. When a state court does not pass on the merits of the claim the “actually
decided” test is not satisfied. Pittsburg County Rural Water Dist. No. 7 v. City of
McAlester, 358 F.3d 694, 707 (10th Cir. 2004) (“Plainly, the merits of
[plaintiff’s] claims for relief . . . were not actually decided by the Oklahoma
district court, which performed no merits analysis and dismissed [plaintiff’s]
appeal due to defective service of process.”).
To discern whether the “inextricably intertwined” standard applies, we ask
whether the injury alleged by the federal plaintiff resulted from the
state court judgment itself or is distinct from that judgment. Three
related concepts—injury, causation, and redressability—inform this
analysis. In other words, we approach the question by asking whether
the state-court judgment caused, actually and proximately, the injury
for which the federal-court plaintiff seeks redress. Kenmen Eng., 314
F.3d at 476 (internal citations and quotations omitted).
In applying these principles, our recent Pittsburg County opinion held that a
dismissal not on the merits does not trigger application of the inextricably
intertwined test. Pittsburg County, 358 F.3d at 707 (holding that because the
state court did not reach the plaintiff’s federal claims on the merits, the federal
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“claims do not result from the state court judgments dismissing [them]”). Thus,
the “inextricably intertwined” test is not satisfied when a federal plaintiff brings
claims that the state court did not review on the merits. See id. at 708 n.3.
Here, the state court, by dismissing without prejudice, did not pass on the
merits of the case. Although Mr. Nudell suggests numerous on-the-merits
grounds that he presented in his state court motion on which the state court could
have relied, given the dignity and respect due a state court decision, we take the
court at its word that it “dismissed without prejudice.” As the Colorado Supreme
Court held in Wistrand, dismissal without prejudice means not on the merits:
Here the order of dismissal expressly specifies that it is without
prejudice. To now urge that the dismissal prejudiced [plaintiff’s]
right to have his claim adjudicated does violence to the rule and the
court’s order. It is difficult to see how the court could have better
assured [plaintiff] that he could again go to court and have his claim
adjudicated on the merits. Wistrand, 364 P.2d at 397.
Because the state court, by dismissing without prejudice, did not reach the
merits of Merrill Lynch’s claim, neither the actually decided nor the inextricably
intertwined tests are satisfied. Hence, the Rooker-Feldman doctrine does not
apply. See Pittsburg County, 358 F.3d at 708 n.3 (citing Whiteford v. Reed, 155
F.3d 671, 674 (3d. Cir. 1998) (“This court has consistently held that where a state
action does not reach the merits of a plaintiff’s claims, then Rooker-Feldman does
not deprive the federal court of jurisdiction.”) & Charles Alan Wright & Arthur
R. Miller, Federal Practice and Procedure § 4469.1, at 130-31 (2d ed. 2002) (“A
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decision not on the merits also does not oust federal jurisdiction to decide on the
merits.”)).
IV. CONCLUSION
As the Rooker-Feldman doctrine is inapplicable here, we REVERSE the
district court’s dismissal and REMAND for further proceedings consistent with
this opinion.
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