Mills v. Harmon Law Offices, P.C.

          United States Court of Appeals
                     For the First Circuit


No. 03-1091

                 DEBORAH MILLS AND PETER MILLS,

                     Plaintiffs, Appellants,

                               v.

    HARMON LAW OFFICES, P.C., SALEM FIVE CENTS SAVINGS BANK,
         DAVID A MARSOCCI, ESQ., DAVID M. ROSEN, ESQ.,
                      AND DANIEL J. FLYNN,

                     Defendants, Appellees.


          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. Reginald C. Lindsay, U.S. District Judge]
      [Hon. Joyce London Alexander, U.S. Magistrate Judge]


                             Before

                       Boudin, Chief Judge,
                Lipez and Howard, Circuit Judges.



     Daniel A. Laufer, for appellants.
     Melissa E. Darigan, Lisa M. Martinelli, and Partridge Snow &
Hahn LLP for appellees.



                       September 12, 2003
           LIPEZ, Circuit Judge.       This appeal presents a narrow

procedural question -- whether a case properly removed to federal

court pursuant to 28 U.S.C. § 1446 can be dismissed with prejudice

if the district court subsequently concludes that it lacks subject

matter jurisdiction over the dispute.

           On January 9, 1987, appellants Deborah and Peter Mills

refinanced the mortgage on their home with defendant Salem Five

Cents Savings Bank ("Salem Bank"), which in turn assigned the

mortgage to the Federal Home Loan Mortgage Corporation ("Freddie

Mac").    The Mills were delinquent in their loan payments on

numerous occasions, prompting Salem Bank to initiate foreclosure

proceedings in May 1987.    Appellants sought to enjoin foreclosure

in   Rockingham   County   Superior    Court   in   New   Hampshire,   and

thereafter filed for Chapter 7 bankruptcy protection in September

1987.    On January 9, 1998, the bankruptcy court granted Salem

Bank's motion for relief from the automatic stay of foreclosure

proceedings, and the bank foreclosed on August 12, 1998.          Freddie

Mac purchased the property at the foreclosure sale and commenced

eviction proceedings against appellants in Plaistow District Court

in New Hampshire. After a year of litigation, Freddie Mac obtained

a writ of possession on August 10, 1999.       The Mills unsuccessfully

petitioned the Supreme Court of New Hampshire to quash the writ,

and subsequently returned to the bankruptcy court seeking to

invalidate the foreclosure by moving to vacate the bank's relief


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from the automatic stay.   The bankruptcy court denied the motion,

and the Mills appealed the decision first to the United States

District Court in New Hampshire and then to this court, both times

unsuccessfully.

          In July 2001, as that appeal was pending, the Mills filed

the underlying complaint in this matter in the Middlesex County

Superior Court in Massachusetts. Appellants alleged that (1) Salem

Bank was not the true owner of their mortgage, (2) Salem Bank's

attorneys fraudulently obscured the identity of the true mortgage

owner from the New Hampshire state courts, and (3) consequently,

the 1998 foreclosure was null and void.    Because the plaintiffs

inter alia sought relief under the federal civil RICO statute, the

defendants successfully petitioned to remove the case to the United

States District Court in Massachusetts, citing the court's federal

question jurisdiction.

          The district court assigned the case to a Magistrate

Judge, who sua sponte recommended dismissal pursuant to the Rooker-

Feldman doctrine.   The Rooker-Feldman doctrine precludes courts

from exercising subject matter jurisdiction1 where the issues

presented in the case are "inextricably intertwined" with questions


     1
      Our prior jurisprudence establishes that the Rooker-Feldman
doctrine implicates the court's subject matter jurisdiction. As we
observed in In re Middlesex Power Equip. & Marine, Inc., 292 F.3d
61 (1st Cir. 2002): "The Rooker-Feldman doctrine is jurisdictional
in nature; if a case is dismissed because the Rooker-Feldman
doctrine applies, it means the court has no subject matter
jurisdiction to hear the case." Id. at 66 n.1.

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previously adjudicated by a state court, such that the federal

district court would be in the unseemly position of reviewing a

state court decision for error.           See Hill v. Town of Conway, 193

F.3d 33, 39 (1st Cir. 1999) (noting that a federal claim is

"inextricably intertwined" with a state-court claim "if the federal

claim succeeds only to the extent that the state court wrongly

decided the issues before it."); see generally D.C. Ct. App. v.

Feldman, 460 U.S. 462 (1983); Rooker v. Fid. Trust Co., 263 U.S.

413 (1923); Wilson v. Shumway, 264 F.3d 120 (1st Cir. 2001).

            Applying the Rooker-Feldman doctrine to the case at bar,

the Magistrate Judge concluded that

            the substantive legal issues underlying the
            plaintiffs' common law and state statutory
            claims appear to derive from the same nuclei
            of facts and legal issues presented to, and
            decided by, the various New Hampshire state
            courts . . . . In order to adjudicate the
            allegations of the complaint en toto, the
            district court would have to exhume the
            averments presented to the New Hampshire
            courts and dissect them again.

Alternatively, the Magistrate Judge found in a footnote "that the

plaintiffs    have     not   properly    plead   the    RICO      count   in   their

complaint . . . . Accordingly, in the event that the district court

is   not   persuaded    of   the   applicability       of   the    Rooker-Feldman

doctrine, the complaint should be dismissed due to its deficiencies

in pleading the RICO claim."

            The district court adopted the Magistrate Judge's Report

and Recommendation in its totality, agreeing that the Rooker-

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Feldman doctrine divested the court of subject matter jurisdiction,

and further concluding "that the report and recommendation was

correct    in   its   ancillary   determination   that   no   pattern   of

racketeering activity as defined in the RICO statute has been

pleaded and that plaintiffs have therefore not stated a claim on

which relief may be granted pursuant to the statute." Accordingly,

the district court dismissed the Mills' complaint with prejudice on

all counts.

            On appeal, the Mills do not contest the district court's

application of the Rooker-Feldman doctrine, but claim that the

district court abused its discretion by dismissing the complaint

with prejudice after determining that it lacked subject matter

jurisdiction.     We agree.

            Under the relevant provision of the federal removal

statute,

            [a] motion to remand the case on the basis of
            any defect other than lack of subject matter
            jurisdiction must be made within 30 days after
            the filing of the notice of removal under
            section 1446(a). If at any time before final
            judgment it appears that the district court
            lacks subject matter jurisdiction, the case
            shall be remanded.    An order remanding the
            case may require payment of just costs and any
            actual expenses, including attorney fees,
            incurred as a result of the removal.         A
            certified copy of the order of remand shall be
            mailed by the clerk to the clerk of the State
            court. The State court may thereupon proceed
            with such case.




                                    -5-
28 U.S.C. § 1447(c) (emphasis added).                   The language of this

provision unambiguously precludes federal courts from reaching the

merits of a removed case when it lacks subject matter jurisdiction

over the dispute.         We have historically construed this passage

strictly:

             We think . . . that the district court erred
             in departing from the literal words of §
             1447(c), which, on their face, give it no
             discretion to dismiss rather than remand an
             action.   And, we are unwilling to read such
             discretion into the statute here, because we
             cannot say with absolute certainty that remand
             would prove futile.

Me. Ass'n of Interdependent Neighborhoods v. Comm'r, Me. Dep't of

Human Serv., 876 F.2d 1051, 1054 (1st Cir. 1989); see Smith v. Wis.

Dep't of Agric., Trade, and Consumer Prot., 23 F.3d 1134, 1139 n.

10 (7th Cir. 1994) ("[T]he point of section 1447(c) is that a

federal court does not have the authority to dismiss a claim over

which it never had jurisdiction in the first instance.                 The merits

of     the   .   .   .    claim    are    therefore      irrelevant     to       this

determination."); see also Christopher v. Stanley Bostitch, Inc.,

240 F.3d 95, 100 (1st Cir. 2001) ("When a federal court concludes

that it lacks subject matter jurisdiction over a case, it is

precluded    from    rendering    any    judgments      on   the   merits   of   the

case.").

             Appellees gamely attempt to evade this inevitable result,

arguing that a district court is entitled to dismiss a removed case

with    prejudice    if   the     removal      itself   "is    procedurally      and

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substantively proper," and the jurisdictional defect is revealed

only after the removal is perfected. This novel theory contradicts

the plain directive in 1447(c) that "[i]f at any time before final

judgment it appears that the district court lacks subject matter

jurisdiction,   the   case   shall    be   remanded"   (emphasis   added).

Nothing in the language of this provision or the cases construing

it predicates the remand requirement on the nature of the defect in

the court's subject matter jurisdiction, or the timing of its

discovery. The existence of any subject matter jurisdiction defect

divests the court of authority to dismiss a removed case on its

merits,2 regardless of whether the jurisdictional flaw results from

an improper removal or arises from some other source, such as the

Rooker-Feldman doctrine.3      And whether or not section 1447(c)


     2
      While this rule precludes federal courts from considering the
merits of a case after identifying a defect in subject matter
jurisdiction, it in no way implies a "sequencing of jurisdictional
issues," see Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 584-85
(1999), that obliges courts to resolve subject matter jurisdiction
before investigating other possible bases for disclaiming
jurisdiction (e.g., personal jurisdiction, discretionary abstention
grounds). The Supreme Court has expressly declined to adopt any
wooden rule to the contrary.     See id., cited with approval in
Middlesex Power Equip., 292 F.3d at 66 n.1.
     3
      Appellees supplement their argument with a lengthy string
citation of cases in which the district court dismissed cases "with
prejudice" pursuant to the Rooker-Feldman doctrine. Our review of
those cases indicates that, without exception, they originated in
federal court and hence were not subject to the provisions of the
federal removal statute. Accordingly, those cases do not counsel
against the outcome we reach here.     Of course, lack of subject
matter jurisdiction precludes a disposition on the merits even in
a non-removed action.     However, a dismissal on Rooker-Feldman
grounds, although "with prejudice," is not intrinsically a

                                     -7-
contains an implicit exception for a case where a remand could be

said "with absolute certainty" to be futile, see Interdependent

Neighborhoods, 876 F.2d at 1054, we are unwilling to make such a

finding here, though we suspect that this case has little future.

           The appellees are understandably frustrated with the

Mills' litigiousness:

           The Mills have trampled through no less than
           six Courts in pursuit of relief as a result of
           a foreclosure that legally occurred due to
           their indisputable Mortgage default and have
           wasted   endless    judicial   resources    by
           continuing to pursue this frivolous and
           baseless claim.   Clearly, this is a case of
           litigants who have a demonstrated history of
           vexatious litigation that if left unchecked,
           will continue to spread across a new forum and
           state.

While we are obliged to order the district court to remand this

case back to the Massachusetts Superior Court, we note that the

Mills' foray through the courts may be approaching its terminus.

The same bedrock principles codified in the Rooker-Feldman doctrine

that preclude federal district courts from revisiting questions

previously adjudicated by state courts, see Hill, 193 F.3d at 39,

compel   state    courts    to    give   "full   faith   and   credit"   to   the

judgments issued by other state courts.              "In a practical sense,

full faith and credit establishes a rule of evidence requiring

recognition      of   a   prior   out-of-State    judgment,    giving    it   res

judicata effect and thus avoiding relitigation of issues in one


disposition on the merits.

                                         -8-
State which have already been decided in another." Luna v. Dobson,

763   N.E.2d   1146,   1150   (N.Y.   2001)   (internal   quotation   marks

omitted); see U.S. Const. art. IV, § 1; Bassett v. Blanchard, 546

N.E.2d 155, 157 (Mass. 1989); Wright Mach. Corp. v. Seaman-Andwall

Corp., 307 N.E.2d 826, 831-32 (Mass. 1974).         Accordingly, without

in any way presuming to direct the outcome in state court, we

anticipate that application of these principles is very likely to

lead the Massachusetts Superior Court to grant the dismissal with

prejudice that was unavailable to appellees in the federal forum.

           The judgment of the district court is vacated, and this

case is remanded to the district court with instructions to remand

the case to the Middlesex County Superior Court.

           So ordered.




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