23-421-cv
Powell v. Ocwen Loan Servicing, LLC
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR
AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A
SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the
Second Circuit, held at the Thurgood Marshall United States Courthouse, 40
Foley Square, in the City of New York, on the 26th day of February, two thousand
twenty-four.
PRESENT:
DEBRA ANN LIVINGSTON,
Chief Judge,
GERARD E. LYNCH,
BETH ROBINSON,
Circuit Judges.
_____________________________________
Gary Powell, Gail Powell,
Plaintiffs-Appellants,
v. 23-421
Ocwen Loan Servicing, LLC, as Servicer
for Deutsche Bank National Trust
Company, PHH Mortgage, DBA
1
Newrez, Hinshaw & Culbertson, LLP,
Does, 1-50, 1
Defendants-Appellees.
_____________________________________
FOR PLAINTIFFS-APPELLANTS: Gary Powell, Gail Powell, pro
se, Wallingford, CT.
FOR DEFENDANTS-APPELLEES: Marissa I. Delinks, Aaron A.
Fredericks, Hinshaw &
Culbertson LLP, Boston, MA.
Appeal from a judgment of the United States District Court for the District
of Connecticut (Kari A. Dooley, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is
AFFIRMED IN PART and VACATED and REMANDED IN PART.
Because we write primarily for the parties, who are familiar with the history
of this case, we recite only what is necessary to explain our decision. In 2018, a
Connecticut state court entered a judgment of foreclosure on the Wallingford
home of plaintiffs Gary and Gail Powell. In the years since, the Powells have
brought a variety of state and federal challenges seeking to stave off the sale of
1 The Clerk of Court is respectfully directed to amend the official caption as set forth above.
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their home—at least in part successfully, as the sale does not appear to have taken
place yet.
In 2020, during the pendency of a prior federal lawsuit filed after the initial
state judgment of foreclosure, the Powells claim they entered into a settlement
agreement with their loan servicer, which was intended to end the state and
federal litigation. Although the copy of the agreement provided by the Powells is
heavily redacted, the agreement appears to be aimed at giving the Powells an
opportunity to pay off their outstanding debt on more favorable terms.
The Powells filed this lawsuit in December 2021, alleging that the
defendants—primarily, servicer PHH Mortgage, DBA Newrez (“PHH
Mortgage”) 2 and its law firm, Hinshaw & Culbertson LLP (“Hinshaw”)—failed to
perform under the settlement agreement. The Powells bring various state law
claims, with their main count raising a breach-of-contract claim, and they seek
enforcement of the agreement, declaratory relief, and awards of attorney’s fees and
damages.
The defendants moved to dismiss the complaint, primarily on the ground
that the action was barred by the Rooker-Feldman doctrine. The district court
2We do not address the claims against defendant Ocwen Loan Servicing (“Ocwen”) because PHH
Mortgage is Ocwen’s successor by merger.
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agreed, first dismissing the claims against Hinshaw because it is not a party to the
settlement agreement (and concluding that it was otherwise protected by litigation
privilege) and then the remainder of the complaint for lack of jurisdiction under
the Rooker-Feldman doctrine. See Powell v. Ocwen Loan Servicing, LLC, No. 3:21-cv-
01605 (KAD), 2023 WL 2538127 (D. Conn. Mar. 16, 2023).
This appeal followed. We conduct de novo review of an order dismissing a
complaint under Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction and
12(b)(6) for failure to state a claim. Jaghory v. N.Y. Sate Dep’t of Educ., 131 F.3d 326,
329 (2d Cir. 1997). Because the Powells have been pro se throughout this federal
litigation, we construe their submissions liberally and interpret them to raise the
strongest arguments they suggest. Hunter v. McMahon, 75 F.4th 62, 67 (2d Cir.
2023).
Given that the Powells do not challenge the district court’s dismissal of
Hinshaw from this case, we affirm that portion of the district court’s judgment and
deem the Powells’ claims against Hinshaw abandoned. See Debique v. Garland, 58
F.4th 676, 684 (2d Cir. 2023) (“We consider abandoned any claims not adequately
presented in an appellant’s brief, and an appellant’s failure to make legal or factual
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arguments constitutes abandonment.” (internal quotation marks and citation
omitted)).
Because the Powells focus their appeal only on the district court’s dismissal
based on the Rooker-Feldman doctrine, we proceed to consider that issue as to the
remaining defendants. “[U]nder what has come to be known as the Rooker-
Feldman doctrine, lower federal courts are precluded from exercising appellate
jurisdiction over final state-court judgments” because 28 U.S.C. § 1257(a) vests
federal appellate jurisdiction over state judgments exclusively in the United States
Supreme Court. Lance v. Dennis, 546 U.S. 459, 463 (2006) (per curiam). In this
Circuit, an action is barred under Rooker-Feldman only if “(1) the federal-court
plaintiff lost in state court; (2) the plaintiff complains of injuries caused by a state
court judgment; (3) the plaintiff invites review and rejection of that judgment; and
(4) the state judgment was rendered before the district court proceedings
commenced.” Hunter, 75 F.4th at 68 (internal quotation marks and citation
omitted).
We conclude that Rooker-Feldman does not prevent the exercise of federal
jurisdiction in this case. The Powells do not seek direct review and rejection of the
foreclosure judgment. See Vossbrinck v. Accredited Home Lenders, Inc., 773 F.3d 423,
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427 (2d Cir. 2014). Instead, they allege nonperformance under a settlement
agreement in which the defendants, having obtained a judgment, did not seek to
immediately collect on it, and instead offered the Powells terms for retaining
ownership of their home.
In effect, the Powells challenged the way in which the defendants chose to
enforce (or not enforce) the foreclosure judgment they obtained in state court. Cf.
Bell v. New Jersey, 461 U.S. 773, 779 (1983) (explaining that a judgment is generally
not self-executing, and a party who secures a money judgment “may have to
undertake further proceedings to collect the damages awarded”). The harm here
flows from allegedly wrongful conduct in breaching a settlement agreement, not
the foreclosure judgment itself. See Sung Cho v. City of New York, 910 F.3d 639, 647
(2d Cir. 2018) (“[T]he complaint attacks the conduct itself, and the claim does not
function as a de facto appeal.”) As we have explained, state-court losers may
challenge a party’s conduct in litigation that resulted in a foreclosure judgment if
it does not require the federal court to “consider[] independently . . . the merits of
that foreclosure judgment.” Hansen v. Miller, 52 F.4th 96, 100 (2d Cir. 2022). The
same is true of conduct in litigation that follows from a state court foreclosure
judgement.
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Our decision is narrow. We do not decide whether the Powells have a valid
or plausible breach claim, or even whether the defendants are bound by the
alleged settlement agreement. We express no opinion as to whether the Powells’
breach of contract claims or claims for relief are subject to issue preclusion on the
basis of state court rulings. We conclude only that jurisdiction to enforce this
alleged settlement agreement, whether by awarding damages or compelling
performance by PHH, is not barred by Rooker-Feldman simply because the
settlement agreement was ancillary to a state court judgment.
Although Rooker-Feldman is not a bar to jurisdiction in this case, the federal
courts may lack jurisdiction due to incomplete diversity. This Court has the
“independent obligation to consider the presence or absence of subject matter
jurisdiction sua sponte.” Joseph v. Leavitt, 465 F.3d 87, 89 (2d Cir. 2006). “[T]he party
seeking to invoke jurisdiction under 28 U.S.C. § 1332 bears the burden of
demonstrating that the grounds for diversity exist and that diversity is complete.”
Herrick Co. v. SCS Commc’ns, Inc., 251 F.3d 315, 322–23 (2d Cir. 2001) (internal
quotation marks and citation omitted).
The Powells did not satisfy this obligation. First, their complaint failed to
plead that the amount in controversy “exceeds the sum or value of $75,000.” 28
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U.S.C. § 1332(a). And, more crucially, the Powells did not set out a complete and
accurate accounting of the defendants’ citizenship. They identified Hinshaw as a
Massachusetts citizen, but a law partnership like Hinshaw’s “has the citizenship
of each of its partners” for the purposes of establishing diversity. Herrick, 251 F.3d
at 322. Although we affirm Hinshaw’s dismissal, the Powells have also not
properly alleged the citizenship of PHH Mortgage, a corporation. For the
purposes of diversity jurisdiction, a corporation is a citizen of both its state of
incorporation and its principal place of business. Carter v. HealthPort Techs., LLC,
822 F.3d 47, 60 (2d Cir. 2016). Here, the Powells have only alleged PHH Mortgage’s
principal place of business. Accordingly, if the defendant is a citizen of
Connecticut, the required complete diversity would be lacking because the
Powells allege that they are citizens of Connecticut. Because the factual record
does not definitively establish or defeat diversity jurisdiction, we leave this
question for the district court to decide.
We do not reach the remaining arguments in light of our disposition above.
Accordingly, we AFFIRM IN PART and VACATE and REMAND IN PART for
further proceedings consistent with this order.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
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