20-1809-cv
Dorce v. City of New York
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2020
Argued: January 27, 2021 Decided: June 23, 2021
Docket No. 20-1809-cv
MCCONNELL DORCE, individually and on behalf of all others similarly situated,
CECILIA JONES, individually and on behalf of all others similarly situated,
SHERLIVIA THOMAS-MURCHISON, individually and on behalf of all others
similarly situated,
Plaintiffs-Appellants,
— v. —
CITY OF NEW YORK, NEIGHBORHOOD RESTORE HOUSING DEVELOPMENT FUND
CO. INC., BSDC KINGS COVENANT HOUSING DEVELOPMENT FUND COMPANY,
INC., MARIA TORRES-SPRINGER, COMMISSIONER OF THE NEW YORK CITY
DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT,
Defendants-Appellees.*
*
The Clerk of the Court is respectfully directed to amend the caption as set forth
above.
B e f o r e:
LIVINGSTON, Chief Judge, CABRANES AND LYNCH, Circuit Judges.
Plaintiffs-Appellants McConnell Dorce, Cecilia Jones and Sherlivia
Thomas-Murchison brought this putative class action challenging New York
City’s Third Party Transfer (“TPT”) Program, through which the City initiates in
rem foreclosure proceedings against tax-delinquent properties and, following a
foreclosure judgment, transfers ownership of the properties to third party
partners who develop and manage the properties. Plaintiffs, whose properties
were transferred through the program, allege federal constitutional and state law
claims against Defendants-Appellees the City, the Commissioner of the
Department of Housing and Preservation Development, and certain partners of
the TPT Program. The District Court for the Southern District of New York (John
G. Koeltl, J.) dismissed the complaint for lack of subject matter jurisdiction,
concluding that a number of claims were barred by the Rooker-Feldman doctrine,
that Plaintiffs lacked standing to seek declaratory and injunctive relief, and that
all of the claims were barred by the Tax Injunction Act (“TIA”) and the doctrine
of comity.
On appeal, Plaintiffs argue that the district court erred in dismissing their
claims. We agree in part, concluding that the district court has jurisdiction to
entertain some, but not all, of their claims. We affirm the district court’s
conclusion that Plaintiffs lack standing to seek injunctive and declaratory relief.
Because Plaintiffs cannot seek such relief, the TIA has no direct application to this
case. We further conclude that the district court exceeded its discretion in holding
that comity bars Plaintiffs’ claims. Finally, we conclude that the Rooker-Feldman
doctrine bars some, but not all, of Plaintiffs’ claims. Accordingly, the judgment of
the district court is REVERSED in part and AFFIRMED in part, and the case is
REMANDED for further proceedings consistent with this opinion.
2
DOUGLAS HALLWARD-DRIEMEIER, Ropes & Gray LLP,
Washington, DC (Keith H. Wofford, Gregg L. Weiner,
Alexander B. Simkin, New York, NY, on the brief),for
Plaintiffs-Appellants McConnell Dorce and Sherlivia
Thomas-Murchison.
Robert J. Valli, Jr., Matthew Berman, Valli Kane & Vagnini,
Garden City, NY, for Plaintiffs-Appellants McConnell
Dorce, Cecilia Jones, and Sherlivia Thomas-Murchison.
MELANIE T. WEST, Assistant Corporation Counsel (Richard
Dearing, Kate Fletcher, Kevin Osowski, Of Counsel, on
the brief), for James E. Johnson, Corporation Counsel of
New York, NY, for Defendants-Appellees City of New York
and Maria Torres-Springer, Commissioner of the New York
City Department of Housing Preservation and Development.
BRIAN J. MARKOWITZ, Goldstein Hall PLLC, New York, NY, for
Defendants-Appellees Neighborhood Restore Housing
Development Fund Co. Inc. and BSDC Kings Covenant
Housing Development Fund Company, Inc.
MAHOGANE D. REED, NAACP Legal Defense and Educational
Fund, Inc., Washington, DC (Coty Montag, Washington,
DC, Samuel Spital, Rachel M. Kleinman, Kristen A.
Johnson, New York, NY, on the brief), for Amicus Curiae
NAACP Legal Defense and Educational Fund, Inc.
Christina M. Martin, Kathryn D. Valois, Pacific Legal
Foundation, Palm Beach Gardens, FL, for Amicus Curiae
Pacific Legal Foundation.
3
GERARD E. LYNCH, Circuit Judge:
New York City’s Third Party Transfer (“TPT”) Program authorizes the City
to foreclose on properties with overdue taxes and transfer ownership of those
properties free of charge to designated partners, who develop and manage the
properties. The property rights of the original owners are extinguished, and there
is no mechanism for them to receive compensation for any value of their property
in excess of their tax liability once the transfer is complete.
Plaintiffs-Appellants McConnell Dorce, Cecilia Jones and Sherlivia
Thomas-Murchison, former property-owners whose properties were transferred
via the program, allege that under current practices the TPT Program operates to
transfer properties to chosen partners to advance housing policy goals and to
reward political allies, even when the properties are not distressed and owe
relatively little in taxes compared to the value of the property. They further allege
that the program violates their Fifth and Fourteenth Amendment rights because
the program effects an unconstitutional taking without just compensation; the
properties selected for the program are located primarily in communities of
4
color,1 denying property owners in those communities equal protection; and
properties transferred through the program are foreclosed on without affording
the owners notice and due process. They assert claims against Defendants-
Appellees New York City and Maria Torres-Springer, Commissioner of the
Department of Housing Preservation and Development (“HPD”) (collectively,
the “City Defendants”), who operate the program, and the third-party partners
who received title to their properties through the program, Neighborhood
Restore Housing Development Fund Co. Inc. (“Neighborhood Restore”) and
BSDC Kings Covenant Housing Development Fund Company (“Bridge Street”)
(collectively, “the Transferee Defendants,” and collectively with the City
Defendants, “Defendants”). The District Court for the Southern District of New
York (John G. Koeltl, J.) dismissed the complaint for lack of subject matter
jurisdiction, concluding that a number of claims were barred by the Rooker-
Feldman doctrine, that Plaintiffs lacked standing to seek prospective injunctive
and declaratory relief, and that all of the claims were barred by the Tax Injunction
Act (“TIA”), 28 U.S.C. § 1341, and the doctrine of comity.
1
Plaintiffs define a community of color as “a community predominantly
populated by African Americans, Caribbean Americans, Hispanic Americans and
Middle Eastern Americans.” J.A. 38.
5
This appeal requires us to decide whether the district court has subject
matter jurisdiction over any of Plaintiffs’ claims. We conclude that, as to some of
their claims, it does. While we affirm the district court’s conclusion that Plaintiffs
lack standing to seek prospective injunctive and declaratory relief, we reverse its
conclusion that the TIA and comity bar their claims for monetary compensation.
We further conclude that only some of Plaintiffs’ claims are barred by the Rooker-
Feldman doctrine. As explained in detail below, we remand the case so that the
surviving claims may proceed.
BACKGROUND2
I. The City’s Third Party Transfer Program
The TPT Program was enacted in 1996 by Local Law 37 and is based on
state law granting the City in rem foreclosure authority over tax-delinquent
properties. Under state law, unpaid property taxes become tax liens, on which
tax districts – such as New York City – may collect via in rem foreclosure. See
N.Y. Real Prop. Tax Law § 1120. New York City has exercised that authority by
enacting in rem foreclosure provisions allowing the City to collect tax liens. Prior
2
Except as noted, these facts are drawn from the complaint, the factual
allegations of which we accept as true for purposes of the motion to dismiss.
Merritt v. Shuttle, Inc., 245 F.3d 182, 186 (2d Cir. 2001).
6
to the passage of Local Law 37, the City often managed foreclosed buildings
directly.3 However, a rise in the number of distressed buildings in the 1970s and
1980s rendered direct management prohibitively expensive. The City developed
the TPT Program to shift the costs and challenges of management and
rehabilitation of the buildings to private parties. The intent of Local Law 37,
according to testimony given by the then-Commissioner of HPD before the New
York City Council at the time the law was passed, was to “improve tax collection
and to more effectively address the risk of abandonment of New York City’s
housing stock.” J.A. 21 (internal quotation marks and emphasis omitted).
Local Law 37 was implemented through the City’s Administrative Code.
Today, the City includes in the program both properties that meet the statutory
definition of “distressed” – a property with a lien to value ratio of fifteen percent
or more, and either an average of five serious housing violations per dwelling
unit or $1000 or more in emergency repair liens4 – and properties that are located
3
The City contends that some period of direct management and rehabilitation of
the properties was necessary because properties sold by public auction soon after
foreclosure typically deteriorated quickly and soon became re-eligible for
foreclosure. City Appellees’ Br. 6.
4
See N.Y.C. Admin. Code § 11-401(4). This definition was in effect when the
proceedings in this case occurred. A modified definition took effect May 1,
2019. Id.
7
near distressed properties and are tax-delinquent but not distressed. The City
contends that the Administrative Code requires it to identify a list of all tax-
delinquent properties in a geographic area when commencing an in rem
foreclosure proceeding pursuant to the TPT Program whether or not those
properties meet the statutory definition of distressed, and therefore that some
properties subject to the program are tax-delinquent but not distressed. City
Appellees’ Br. 9, citing N.Y.C. Admin Code § 11-405(a).5 Accordingly, the City
contends that it has the authority to foreclose on all (1) non-cooperative and
non-condominium residential properties with a tax lien outstanding for at least
one year, and (2) cooperative and condominium properties with a tax lien
outstanding for at least three years, regardless of whether those properties are
distressed. Id., citing N.Y.C. Admin. Code § 11-404. According to Plaintiffs’ brief,
more than half of the properties selected in the most recent round of TPT
Program foreclosures were not distressed and had an average tax lien to value
ratio of only three percent (as opposed to fifteen percent or more for distressed
properties).
5
However, the Administrative Code also permits some properties to be omitted
from the list for foreclosure, at the Commissioner of Finance’s discretion, if they
meet certain requirements. N.Y.C. Admin. Code § 11-405(c).
8
Plaintiffs argue that the City’s practice of commencing in rem foreclosure
proceedings against properties that do not meet the statutory definition of
distressed is contrary to the requirements of the Administrative Code and
exceeds the City’s authority under state law. They argue that a property must
meet the statutory definition of distressed, and that the City must follow the
“[p]rocedures for distressed property” in § 11-404.1, before it can initiate a
foreclosure action under § 11-404. Appellants’ Br. 11-12; J.A. 27-28, citing N.Y.C.
Admin. Code §§ 11-401(4), 11-401.1, and 11-404(a).
Once a list of properties has been identified for foreclosure, the
Administrative Code requires that the City provide notice of the pending
foreclosure to interested parties by: (1) publishing a notice of foreclosure in the
City Record and two newspapers; (2) mailing notice to those owners and other
interested parties who have requested notice and specified an address, or to the
name and address, if any, listed on the latest annual record of assessed
valuations; and (3) posting a notice at the Commissioner of Finance’s office and
in other locations. N.Y.C. Admin. Code § 11-406. Owners and interested parties
then have an opportunity to redeem the property by paying delinquent taxes or
establishing a payment plan, up until preparation of the judgment of foreclosure
has commenced. Id. § 11-407(a)-(c).
9
Once the proceeding has commenced, the Administrative Code provides
that an interested party can assert defenses to foreclosure, or assert that it has
substantial equity in the property over the value of the lien and demand that the
property be sold with any surplus value paid to the interested party. Id. § 11-
409(a)-(b), (d). If the property is not redeemed and no answer is asserted, the
court must enter a final judgment of foreclosure. Id. § 11-412. After judgment has
been entered, a four-month period commences in which an interested party may
redeem the property by paying the taxes owed or entering an installment plan.
Id. § 11-412.1(d). After the four months have passed, and within eight months of
entry of judgment, “the commissioner of finance [may] prepare[] and execute[] a
deed conveying . . . to a third party full and complete title to such parcel. Upon
the execution of such deed, . . . the third party shall be seized of an estate in fee
simple absolute in such land.” Id. § 11-412.1(b)-(c).6 A third-party partner who
takes title under this procedure is not required to satisfy the tax lien that
rendered the property eligible for foreclosure. Once the transfer to a third party is
6
The Commissioner of Finance is also permitted to transfer title of the property
to the City instead of to a third-party partner. Id. § 11-412.1(c). If title is
transferred to the City, interested persons have at least a further sixteen months
to attempt to redeem the property. Id. § 11-412.1(e)-(f).
10
complete, there is no process by which the original owner may regain title to the
property or obtain compensation for the excess value of the property over the
amount of the tax lien. According to the City, “[c]urrent residents do not lose
their homes upon transfer, but become rent-stabilized tenants in a properly
maintained building.” J.A. 70.
According to Plaintiffs, the TPT Program is currently being used not to
collect taxes but to “advance the City’s (and its current Mayor’s) affordable
housing agenda.” J.A. 30. Moreover, they contend that “Mayor DeBlasio has
made it clear in public statements that he intends to expand the application and
reach of the Third Party Transfer Program” to further this agenda. J.A. 31. They
allege that the City “routinely and knowingly target[s] valuable properties within
communities of color for seizure with little (or no) tax debt relative to their
property value” in order to advance this agenda and to “reward political allies”
(the third-party partners) who “receive these valuable properties for free.”
Appellants’ Br. 8, 10.
II. The Properties
Plaintiffs in this appeal each allege that he or she had an ownership interest
in a property foreclosed on in rem and transferred to a third party via the TPT
11
Program. The properties were part of two foreclosure proceedings brought by the
City in 2007 and 2015.
A. The 2007 Proceeding
Plaintiff Thomas-Murchison owned shares in a housing development fund
corporation (“HDFC”) cooperative7 that owned property located at 248 Madison
Street, Brooklyn.8 According to Thomas-Murchison, her extended family lived in
the apartment associated with her shares, and she lived in another apartment in
the same HDFC cooperative associated with shares previously owned by her
deceased parents. Thomas-Murchison alleges that the HDFC cooperative owned
7
HDFC cooperatives are non-profit corporations organized under New York
state law “exclusively to develop a housing project for persons of low income,” in
which “persons or families who are entitled to occupancy in such [a] housing
project” own “shares in [the] corporation.” N.Y. Priv. Hous. Fin. Law § 573(3)(a),
(4). According to the complaint, HDFC cooperatives, like the TPT Program, have
been used by the City as a response to distressed and abandoned apartment
buildings.“[T]itle to the distressed buildings [was] transferred to not-for-profit or
charitable corporations organized . . . for the overall purpose of housing
improvement and homeownership, and primarily to keep the apartment units
owned thereby affordable over time to the working families residing therein.”
J.A. 19. “[T]enants became owners of their particular apartment units by virtue of
their pro-rata share ownership in the cooperative corporation [and] . . . have an
equity interest in the . . . HDFC-owned building and its related tangible and
intangible assets.” Id.
8
The Transferee Defendants contest Thomas-Murchison’s ownership of these
shares.
12
substantial equity in the property. She further alleges that 248 Madison Street is
located in a community of color.
In 2007 the City commenced a foreclosure proceeding against several
properties in Brooklyn, including the building at 248 Madison Street. According
to the City, arrears of $110,352.44 were owed on the property. No interested party
filed an answer or attempted to redeem the property during the foreclosure. In
October 2011, the Kings County Supreme Court entered a judgment of
foreclosure, which noted that “all of the procedures and proceedings required by
the provisions of Title 11, of Chapter 4 of the Administrative Code have been
duly performed.” In Rem Tax Foreclosure No. 51, Borough of Brooklyn, Index No.
8700/2007 (Sup. Ct. Oct. 26, 2011). Following entry of judgment, according to the
Transferee Defendants, the property was transferred to Neighborhood Restore,
which later conveyed title to Bridge Street.
In April 2016, Thomas-Murchison learned that the property at 248 Madison
Street had been transferred to Bridge Street. In May 2016, Thomas-Murchison
was informed that she was being converted to a renter, and her maintenance
payments, which the HDFC cooperative had previously used to pay property
taxes and water and sewer charges, would be converted to rent payments.
13
Thomas-Murchison alleges that she did not receive notice of the foreclosure
proceeding, and that the property did not meet the statutory definition of
distressed when the City commenced the proceeding.
B. The 2015 Proceeding
Plaintiffs Dorce and Jones both allege that they owned properties
transferred via the TPT Program through the 2015 foreclosure proceeding.9 Dorce
became the owner of 373 Rockaway Boulevard, Brooklyn in 1977 and paid off the
mortgage in 2012. Sometime after 2012, Dorce accrued unpaid water and sewer
charges. Dorce alleges that he entered into an agreement with New York City’s
Department of Environmental Protection to pay the water and sewer charges on
an installment plan. Jones owned shares in an HDFC cooperative that owned
property located at 1197 Dean Street, Brooklyn and lived in an apartment
associated with her shares. Jones alleges that the cooperative owned substantial
9
Plaintiffs allege that Jones’s property at 1197 Dean Street was also foreclosed on
in the 2007 proceeding, but because the City did not file a deed transferring the
property to a third party partner within eight months of judgment as required by
the Administrative Code, Jones and her fellow HDFC cooperative share owners
retained title until the 2015 proceeding. Jones’s claims are based on the 2015
proceeding, not the 2007 proceeding.
14
equity in the property. Both Jones and Dorce further allege that their respective
buildings were located in communities of color.
In 2015 the City commenced a foreclosure proceeding against several
properties in Brooklyn, including the properties at 373 Rockaway Boulevard and
1197 Dean Street. According to the City, municipal arrears of $45,132.73 were
owed on the property at 373 Rockaway Boulevard, and arrears of $160,760.20
were owed on the property at 1197 Dean Street. During the proceeding, no
interested party filed an answer or redeemed either of the properties. In
November 2017, the Kings County Supreme Court entered a judgment of
foreclosure, which again noted affidavits submitted by the City attesting to “the
performance of the acts required by the provisions of Title 11, Chapter 4 of the
Admin. Code.” See In Rem Tax Foreclosure Action No. 53, Borough of Brooklyn, Index
No. 8700/2015 (Sup. Ct. Nov. 27, 2017). Following entry of the foreclosure
judgment, according to the Transferee Defendants, the properties were
transferred to Neighborhood Restore.
In September 2018, Dorce learned that 373 Rockaway Boulevard had been
transferred. According to Dorce, he did not receive notice of the proceeding and
his property did not meet the statutory definition of distressed at the time of the
15
proceeding. According to Dorce, following the proceeding, he continued making
payments to the City in accordance with his agreement with the Department of
Environmental Protection, because he was not aware that he was no longer the
owner.10
At some point in either 2017 or 2018, Jones learned that ownership of 1197
Dean Street had been transferred to defendant Bridge Street, and in October 2018,
Bridge Street’s managing agent informed her that she had been converted into a
renter, and her maintenance payments, which the HDFC cooperative had used to
pay property taxes and water and sewer fees, would now be put toward rent
payments.11 According to Jones, she did not receive any notice of the foreclosure
10
The City concedes that it accepted payments made by Dorce after it had
already foreclosed on the property, but contends that those payments were
eventually refunded to Dorce.
11
It is unclear when Jones was first informed of the transfer. The complaint states
that “on or about October 2017, Ms. Jones learned that ownership of the subject
property had been transferred . . . to Bridge Street” and that “[o]n or about
October, 2018, Bridge Street’s managing agent informed Ms. Jones that she was
being converted into a renter, and her maintenance payments converted into
rental payments.” J.A. 41. The reference to October 2017 may be a typographical
error, as the judgment of foreclosure was not entered until November 2017. See In
Rem Tax Foreclosure Action No. 53, Borough of Brooklyn, Index No. 8700/2015 (Sup.
Ct. Nov. 27, 2017). It is also unclear whether Neighborhood Restore, which the
Transferee Defendants allege took ownership of the property from the City,
eventually conveyed the property to Bridge Street, which Plaintiffs allege is now
the owner of the property.
16
proceeding and the property did not meet the statutory definition of distressed at
the time of the proceeding.
III. Procedural Background
On March 11, 2019, Plaintiffs filed a putative class action against the City
Defendants and the Transferee Defendants in the United States District Court for
the Southern District of New York, seeking to represent a class of former
property owners whose properties were transferred to a third party via the TPT
Program.12 They alleged that the City’s TPT Program violated their rights under
the United States and New York Constitutions, and specifically: (1) that they
were not provided with constitutionally adequate notice of the in rem foreclosure
proceedings in violation of their due process rights; (2) that the program effected
an unconstitutional taking, both because the City proceeded against properties in
violation of the Administrative Code and because their property was transferred
to a third party without giving them the opportunity to redeem the excess value
of the property less the taxes owed; and (3) that the program violates equal
protection, by disproportionately targeting properties in communities of color for
12
The complaint also originally named as defendants Jacques Jiha, Commissioner
of the New York City Department of Finance, John Does #1-#10, and Jane Does
#1-#10. Jiha was never served, and the Jane and John Does were never identified.
17
foreclosure. They also brought claims under New York State law.13 They sought
$66 million in damages, as well as declaratory and injunctive relief.
On May 15, 2019, both sets of defendants moved to dismiss the complaint
for lack of subject matter jurisdiction and failure to state a claim. They argued
that the court lacked subject matter jurisdiction (1) under Rooker-Feldman, (2)
under the TIA and the related doctrine of comity, and (3) because Plaintiffs
lacked standing to seek prospective equitable relief.
On May 17, 2020, the district court granted Defendants’ motion to dismiss.
Dorce v. City of New York, 460 F. Supp. 3d 327 (S.D.N.Y. 2020). The court first
addressed Rooker-Feldman, and concluded that the earlier state court in rem
foreclosure proceedings barred some, but not all, of Plaintiffs’ claims. Specifically
the court concluded that Rooker-Feldman barred Plaintiffs’ due process claims for
“relief in the form of damages equal to their property values.” Id. at 338.
However, the court ruled that Rooker-Feldman did not bar Plaintiffs from seeking
“nominal damages” based on the claim that they were “depriv[ed] of process to
13
Specifically, they alleged that the City’s use of in rem foreclosure proceedings
constitutes ultra vires activity in violation of Article II, Section 10-11 of the New
York State Municipal Home Rule Law and that Defendants engaged in deceptive
practices in violation of New York General Business Law Section 349.
18
which they were entitled” during the in rem proceedings. Id. at 339. Regarding
Plaintiffs’ takings claims, the court concluded that Rooker-Feldman barred the
claim that “the City proceeded against properties that were not distressed and
against properties in parcels smaller than a ‘block’ in violation of the
Administrative Code.” Id. at 340. However, the court concluded that “to the
extent that the plaintiffs claim constitutional violations based on not receiving
compensation for their property that was allegedly taken for public use, the
plaintiffs’ claims would not be barred by Rooker-Feldman.” Id. Finally, the court
concluded that Rooker-Feldman did not bar Plaintiffs’ equal protection claim.
Turning to Defendants’ second argument, the court concluded that
Plaintiffs lacked standing to seek prospective equitable relief, because they could
not show that they owned property that was likely to be transferred in the future
under the TPT Program. The court further concluded that the TIA and the
doctrine of comity barred all of Plaintiffs’ claims, including those not otherwise
barred by Rooker-Feldman, because adjudicating those claims would interfere with
state tax administration.
Finally, the court declined to exercise supplemental jurisdiction over
Plaintiffs’ state law claims to the extent that those claims were not barred.
19
Because the court concluded that it lacked jurisdiction, it declined to reach
Defendants’ argument that the complaint failed to state a claim upon which relief
could be granted. This appeal followed.
DISCUSSION
On appeal, Plaintiffs argue that the district court erred in dismissing their
claims. They contend that their claims are not barred by Rooker-Feldman, the TIA,
or the doctrine of comity, and that they have standing to seek prospective
equitable relief. Defendants contest all of these points and argue that the district
court properly dismissed Plaintiffs’ claims.
We review a district court’s dismissal of a complaint for lack of subject
matter jurisdiction pursuant to Rule 12(b)(1) de novo. APWU v. Potter, 343 F.3d
619, 623-24 (2d Cir. 2003).14 Where “a district court dismisses the action based on
comity, we review the decision for abuse of discretion.” Joseph v. Hyman, 659 F.3d
215, 218 n.1 (2d Cir. 2011).15 However, when we review a court’s decision to
14
Although the City Defendants cited only Rule 12(b)(6) in their motion to
dismiss, the district court correctly observed that their arguments that the district
court lacked subject matter jurisdiction are properly addressed under Rule
12(b)(1).
15
Because “[t]he comity doctrine counsels lower federal courts to resist
engagement in certain cases falling within their jurisdiction,” Levin v. Com. Energy,
20
abstain from exercising jurisdiction, the abuse of discretion standard of review is
“more rigorous than that which is generally employed” such that there is “little
practical distinction” from de novo review. In re Picard, 917 F.3d 85, 101-02 (2d Cir.
2019) (internal quotation marks omitted).
We conclude that the district court correctly dismissed some of Plaintiffs’
claims, but erred in dismissing others. Specifically, we affirm the district court’s
holding that Plaintiffs lack standing to seek injunctive and declaratory relief.
However, we disagree with the district court’s decision to dismiss Plaintiffs’
claims based on the TIA and the doctrine of comity. We conclude that the TIA is
not directly implicated here because Plaintiffs cannot seek injunctive and
declaratory relief, the only remedies to which the TIA applies. Moreover, we
conclude that the district court exceeded its discretion in concluding that the
doctrine of comity bars Plaintiffs’ claims, because those claims do not risk
disrupting the City’s tax administration.
Inc., 560 U.S. 413, 421 (2010) (emphasis added), the argument that Plaintiffs’
claims are barred by comity does not strictly speaking challenge the court’s
subject-matter jurisdiction under Rule 12(b)(1). Nevertheless, because the request
to abstain from exercising its jurisdiction on grounds of comity is closely linked
to jurisdictional concerns, the district court properly considered the issue along
with Defendants’ jurisdictional challenges, separately from their arguments that
the complaint failed to state a claim, as do we.
21
With respect to the difficult question of the application of Rooker-Feldman to
this case, we conclude that some, but not all, of Plaintiffs’ claims may proceed,
and therefore affirm the district court’s judgment in part and reverse it in part
insofar as it rests on that doctrine. As to Plaintiffs’ takings claims, we agree with
the district court that Rooker-Feldman bars the claim that Plaintiffs’ properties
were transferred in violation of the administrative regulations governing the TPT
Program but does not bar their claim to just compensation. We further conclude
that Rooker-Feldman does not bar Plaintiffs’ claim for damages for the excess value
of the transferred properties above the amount owed in taxes. Because Plaintiffs
at oral argument expressly limited their claims for compensation to that remedy,
we need not decide whether that doctrine would bar claims for other forms of
compensation. As to their equal protection claim, we agree with the district
court’s conclusion that Rooker-Feldman does not bar that claim, and conclude that
Plaintiffs may seek damages equal to the excess value of their transferred
properties. Finally, as to their due process claims based on lack of notice, we
conclude that Rooker-Feldman does not bar those claims and that Plaintiffs may
seek nominal damages, or, if they can show that their alleged injury was caused
22
by the lack of notice, damages equal to the excess value of their transferred
property.
Finally, we vacate and remand the district court’s decision not to exercise
supplemental jurisdiction over Plaintiffs’ state law claims, for the court to
reconsider in light of the survival of some of their federal claims.
I. Plaintiffs Lack Standing to Seek Injunctive and Declaratory Relief.
“To establish Article III standing, a plaintiff must show (1) an injury in fact,
(2) a sufficient causal connection between the injury and the conduct complained
of, and (3) a likelihood that the injury will be redressed by a favorable decision.”
Susan B. Anthony List v. Driehaus, 573 U.S. 149, 157-58 (2014) (internal quotation
marks and alterations omitted). Where, as here, plaintiffs seek injunctive or
declaratory relief, they “cannot rely on past injury to satisfy the injury
requirement but must show a likelihood that [they] will be injured in the future.”
Deshawn E. by Charlotte E. v. Safir, 156 F.3d 340, 344 (2d Cir. 1998), citing City of
Los Angeles v. Lyons, 461 U.S. 95, 111 (1983). Such an allegation of future injury
will be sufficient only if “the threatened injury is certainly impending, or there is
a substantial risk that the harm will occur.” Susan B. Anthony List, 573 U.S. at 158
(internal quotation marks omitted).
23
Plaintiffs seek, among other things, a declaratory judgment that the TPT
Program is unconstitutional and an injunction barring the City from continuing
to foreclose on and transfer property under the program. Defendants argue that
Plaintiffs lack standing to seek such relief, because they have not demonstrated
that they will be subject to future harm caused by the program. We agree.
On appeal, Plaintiffs argue that they are likely to suffer future harm
because (1) the TPT Program is an official policy of the City; (2) Plaintiffs are
residents of neighborhoods targeted by the program; and (3) the City intends to
expand the program. But as the district court correctly observed, none of these
allegations show that Plaintiffs themselves – who do not allege any facts to show
that they own, plan to purchase, or have been deterred from purchasing any
additional property that is likely to be subject to the program – will be harmed in
the future. Plaintiffs argue on appeal that “[t]he City has already implemented
this policy in a manner that has harmed [them,]” Appellants’ Br. 53-54, but that
cannot support their standing to seek future-oriented equitable relief, because
“plaintiff[s] cannot rely solely on past injuries” to have standing to pursue such
remedies, but “must establish how [they] will be injured prospectively.”
Marcavage v. City of New York, 689 F.3d 98, 103 (2d Cir. 2012). Plaintiffs also
24
attempt to rely on the fact that the TPT Program is an “officially endorsed City
policy.” Appellants’ Br. 53. But it is clear that “the existence of an official policy,
on its own, is [not] sufficient to confer standing to sue [for injunctive and
declaratory relief] on any individual who had previously been subjected to that
policy,” unless the individual can also show a sufficient likelihood of future
harm. Shain v. Ellison, 356 F.3d 211, 216 (2d Cir. 2004).
Perhaps recognizing that flaw in their argument, Plaintiffs also assert that
they are subject to ongoing harm, because they continue to be deprived of the
property that was transferred through the TPT Program.16 Although we
appreciate that losing ownership of one’s home can inflict a lingering trauma,
that argument merely recasts a past harm as a continuing one. “[P]ast wrongs do
not in themselves amount to that real and immediate threat of injury necessary to
make out a case or controversy” with respect to potential future similar wrongs.
16
Plaintiffs also contend that they suffer an ongoing harm because they “continue
to face the risk that any property they own or plan to acquire in their
neighborhoods might be taken without notice.” Appellants’ Br. 55. As with
Plaintiffs’ allegations of future harm, that claim cannot support standing because
the complaint fails to allege any factual support, such as that Plaintiffs own or
intended to purchase property in a targeted neighborhood that would likely be
subject to the TPT Program.
25
Lyons, 461 U.S. at 103. That a past harm was severe or inflicts continuing damage
does not change that rule: the remedy for continuing pain and suffering from a
defendant’s past damage is compensatory damages, as an injunction against
future actions by a defendant does not remedy the harm done by that
defendant’s past acts.
Moreover, the cases Plaintiffs rely on to support their assertion of ongoing
harm are easily distinguishable, because in those cases the plaintiffs adequately
alleged a risk of future harm. See Deshawn E., 156 F.3d at 344 (“Unlike Lyons, the
plaintiffs in this case allege that they, as a certified class, are likely to suffer future
interrogations by the Squad.”); Knight First Amend. Inst. at Columbia Univ. v.
Trump, 302 F. Supp. 3d 541, 558 (S.D.N.Y. 2018) (“[Plaintiffs’] future harms are . . .
virtually certain because the individual plaintiffs continue to be blocked.”), aff’d,
928 F.3d 226 (2d Cir. 2019), vacated on other grounds sub nom., Biden v. Knight First
Amend. Inst. at Columbia Univ., 141 S. Ct. 1220 (2021). As described above,
Plaintiffs have failed to demonstrate a similar risk of future harm here. “The
equitable remedy is unavailable . . .where there is no showing of any real or
immediate threat that the plaintiff will be wronged again.” Lyons, 461 U.S. at 111.
26
Finally, we note that Plaintiffs assert that any defect in their allegations
related to standing to seek prospective relief could be cured on remand by
amending the complaint to include additional plaintiffs. We leave it to the district
court to decide in the first instance whether Plaintiffs should be permitted to
amend their complaint to join additional plaintiffs, and whether any proposed
added plaintiffs allege sufficient risk of future harm to confer standing. See Cruz
v. TD Bank, N.A., 742 F.3d 520, 523 (2d Cir. 2013).
II. The Tax Injunction Act and the Doctrine of Comity Do Not Bar
Plaintiffs’ Claims.
“Federal courts generally abstain from cases that challenge state taxation
schemes,” Joseph, 659 F.3d at 218, due to “‘a proper reluctance to interfere by
prevention with the fiscal operations of the state governments,’” Levin v. Com.
Energy, Inc., 560 U.S. 413, 422 (2010), quoting Boise Artesian Hot & Cold Water Co.
v. Boise City, 213 U.S. 276, 282 (1909). In 1937, Congress partially codified that
long-standing judicial principle in the TIA, which explicitly prohibits district
courts from “enjoin[ing], suspend[ing] or restrain[ing] the assessment, levy or
collection of any tax under State law where a plain, speedy and efficient remedy
may be had in the courts of such State.” 28 U.S.C. § 1341. However, the TIA “may
27
be best understood as but a partial codification of the federal reluctance to
interfere with state taxation.” Nat’l Priv. Truck Council, Inc. v. Okla. Tax Comm’n,
515 U.S. 582, 590 (1995). The “more embracive” doctrine of comity, which
“restrains federal courts from entertaining claims for relief that risk disrupting
state tax administration,” has “continuing sway . . . independent of the [TIA]”
and bars some cases not barred by the TIA. Levin, 560 U.S. at 417, 423-24.
Here, the district court concluded that the TIA and comity bar all of
Plaintiffs’ claims. On appeal, Plaintiffs argue that none of their claims are barred
by the TIA or the doctrine of comity, because they “do not challenge the validity
or amount of any tax” and would not “interfere with state tax administration.”
Appellants’ Br. 19-20. We conclude that the TIA is not directly applicable here,
and we agree with Plaintiffs that comity does not bar their claims, reversing the
conclusion of the district court.17
17
Plaintiffs also argue that the Supreme Court’s decision in Knick v. Township of
Scott, 139 S. Ct. 2162 (2019), “guarantees a takings plaintiff access to federal court
notwithstanding potential state court remedies,” and therefore, that their claims
cannot be barred by the TIA or comity. Appellants’ Br. 20. We are wholly
unpersuaded by that argument. In Knick, the Supreme Court abolished the
requirement, previously established in Williamson County Regional Planning
Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985), that plaintiffs must
exhaust state court remedies before seeking federal relief for an unconstitutional
taking. Although Knick removed one obstacle to federal court litigation, it does
28
We begin with the TIA. On its face, the TIA bars district courts only from
“enjoin[ing], suspend[ing] or restrain[ing] the assessment, levy or collection” of
state taxes. 28 U.S.C. § 1341. The Supreme Court has concluded that the TIA
“bar[s] federal courts from granting injunctive and declaratory relief in state tax
cases,” but has declined to explicitly address whether it also “bars federal courts
from granting damages relief in such cases,” because where damages are sought,
comity often bars such a suit. See Fair Assessment in Real Est. Ass'n, Inc. v. McNary,
454 U.S. 100, 107 (1981) (“Because . . . the principle of comity bars federal courts
from granting damages relief in such cases, we do not decide whether [the TIA],
standing alone, would require such a result.”).
Our court has interpreted those precedents to indicate a division between
claims for injunctive and declaratory relief and those for damages, concluding
that the TIA “prevents federal courts from giving injunctive relief, [whereas] . . .
it is the principle of comity that prevents a taxpayer from seeking damages.” Long
Island Lighting Co. v. Town of Brookhaven, 889 F.2d 428, 431 (2d Cir. 1989); see also
not “guarantee” a federal forum, and, as the district court correctly observed, it
“is not directly relevant in this case because . . . [i]t did not address the issues of
Rooker-Feldman, the Tax Injunction Act, or comity.” Dorce, 460 F. Supp. 3d at 341
n.11.
29
Bernard v. Vill. of Spring Valley, 30 F.3d 294, 297 (2d Cir. 1994) (“As to damages,
the principle of comity dictates a similar result to that suggested by the Tax
Injunction Act.”).18 Accordingly, we conclude that the TIA has no direct
application to Plaintiffs’ remaining claims, because we have already concluded
that they lack standing to seek injunctive and declaratory relief.19 Instead, we
focus primarily on comity, which can bar claims for damages, the only claims
that Plaintiffs have standing to pursue.20 Nevertheless, we consider precedents
addressing the TIA to the extent that they can assist us in determining the scope
of the related comity doctrine.
18
However, the doctrine of comity is not limited to claims for damages. It is
“more embracive” than the TIA and can bar claims for injunctive relief arguably
not prohibited by the TIA. See, e.g., Levin, 560 U.S. at 424, 432 (“Because we
conclude that the comity doctrine justifies dismissal of respondents' federal-court
action [seeking injunctive and declaratory relief], we need not decide whether the
TIA would itself block the suit.”).
19
If Plaintiffs amend their complaint to include additional plaintiffs with
standing to pursue injunctive relief, see supra p. 27, we leave it to the district court
to determine the application of the TIA to their claims in the first instance,
consistent with this opinion.
20
At least one other circuit has concluded that the TIA does apply to at least some
claims for damages. See A Bonding Co. v. Sunnuck, 629 F.2d 1127, 1132-33 (5th Cir.
1980) (“Without deciding whether section 1341 precludes all suits for damages
against administrators of state and local taxes, we find that the statute does
deprive the district court of jurisdiction in this case.”).
30
We conclude that the district court exceeded its discretion in holding that
comity bars Plaintiffs’ claims. Comity bars claims that “‘risk disrupting state tax
administration’” if “an adequate, speedy, and efficient remedy exists in state
court.” Joseph, 659 F.3d at 219-20, quoting Levin, 560 U.S. at 417. The doctrine
“instructs federal courts to refrain from granting relief” only “in suits that contest
taxpayer liability in a manner that interferes with a state’s administration of its
tax system.” Abuzaid v. Mattox, 726 F.3d 311, 315 (2d Cir. 2013). Comity does not
bar Plaintiffs’ claims here because their claims do not challenge their tax liability,
and do not challenge or disrupt any aspect of the City’s administration,
calculation, or collection of any tax.21
21
Plaintiffs also make several other arguments as to why the TIA and comity do
not bar their claims. First, they argue that the TIA and comity are inapplicable
because some of the debts owed by Plaintiffs were for water and sewer charges,
not unpaid taxes. Second, they argue that the purpose of the TPT Program is to
advance the City’s affordable housing agenda, not to collect tax revenue, and that
therefore claims related to the program cannot be barred by the TIA or comity.
Finally, relying on Wells v. Malloy, 510 F.2d 74, 77 (2d Cir. 1975), Plaintiffs argue
that the TPT Program is not subject to the TIA or comity, because it does not
generate tax revenue except “indirectly through a more general use of coercive
power.” The City disputes all three points. We need not address those arguments
because we conclude that Plaintiffs’ claims are not barred by comity in any event.
31
We acknowledge that, as the district court correctly observed, Plaintiffs’
claims challenge various aspects of the City’s Administrative Code § 11-401 et
seq., which is in the section of the Code labeled “Taxation and Finance.”
However, that alone is clearly not sufficient to demonstrate that adjudication of
Plaintiffs’ claims would disrupt the City’s tax administration. See, e.g., Mobil Oil
Corp. v. Tully, 639 F.2d 912, 918 (2d Cir. 1981) (“The mere fact that [a challenged
provision] is contained in a tax law of the State should not lead to automatic
sanctuary under [the TIA].”).
Our conclusion turns instead on our analysis of the substance of Plaintiffs’
claims. Contrary to the City’s argument, we understand Plaintiffs not to challenge
the use of in rem foreclosure based on tax liens as a general matter. Rather, they
challenge individual aspects of the TPT Program, which applies unique
procedures to in rem foreclosures, and uses those foreclosures for specific ends
beyond the collection of taxes. Plaintiffs’ equal protection claim challenges the
manner in which properties are selected for the TPT Program, not the ability of
the City to foreclose on those properties. Since that claim, if successful, would not
prevent the City from foreclosing on tax-delinquent properties in the future, it is
32
difficult to see how it would disrupt the City’s tax administration.22
Similarly, Plaintiffs’ due process claims challenge the manner in which
notice of an in rem foreclosure proceeding pursuant to the TPT Program is given
to property owners, but Plaintiffs do not challenge the legitimacy of in rem
foreclosure to collect taxes where sufficient notice is given. Our court has
previously concluded that a “taxpayer’s challenge that the notice of foreclosure
provided by the taxing authority of a state [wa]s constitutionally inadequate”
was not barred by the TIA because the claim did not “contest the government’s
authority to collect property taxes [or] . . . dispute the assessments or amounts
owed.” Luessenhop v. Clinton Cty., 466 F.3d 259, 261, 268 (2d Cir. 2006).23
22
The Supreme Court has explicitly left open “whether . . . comity . . . would also
bar a claim under § 1983” – like this one – “which requires no scrutiny whatever
of state tax assessment practices, such as a facial attack on tax laws colorably
claimed to be discriminatory as to race.” Fair Assessment, 454 U.S. at 107 n.4.
23
The City argues that Luessenhop is no longer good law following the Supreme
Court’s decision in Direct Marketing Ass’n v. Brohl, 575 U.S. 1 (2015). That is
incorrect. The City’s brief cites dictum in Direct Marketing explaining the tax
collection process at the time the TIA was passed, which began with the tax
collector “giving notice to each person liable to pay any taxes.” City Br. 52,
quoting Direct Marketing, 575 U.S. at 10. But that statement tells us nothing at all
about whether taxpayers can bring a claim alleging that they were denied
constitutionally adequate notice in the foreclosure process. More fundamentally,
Direct Marketing reaffirmed that the crux of suits barred by the TIA are those that
challenge the “assessment, levy, and collection” of a tax. Direct Marketing, 575
33
Finally, Plaintiffs’ takings claims challenge the City’s authority to transfer
foreclosed-on property, including any value in that property in excess of the
amount owed and secured by the tax lien, to a third party without affording the
homeowner a mechanism for seeking compensation for the excess value of the
property. Such excess value, as Plaintiffs argue, “cannot, by definition, be a tax.”
Appellants’ Br. 20. Although our court has yet to consider the question, other
courts have determined that such a claim – limited to the excess value of the
property – would not be barred by comity because it would not risk disruption of
local tax administration. See Freed v. Thomas, 976 F.3d 729, 735-37 (6th Cir. 2020)
(holding that TIA and comity did not bar taxpayers’ suit challenging, as
unconstitutional taking, the state’s failure to reimburse him for excess proceeds
from sale of his property); Harrison v. Montgomery Cty., No. 20-4051, 2021 WL
U.S. at 12. That is consistent with Luessenhop, in which we concluded that the
plaintiffs’ claims that they had received insufficient notice were not barred by the
TIA because the “taxpayers do not contest the government’s authority to collect
property taxes, nor do they dispute the assessments or amounts owed.” 466 F.3d
at 268. Cf. CIC Services, LLC v. Internal Revenue Service, 141 S. Ct. 1582, 1589 n.1,
1590 (2021) (concluding that the Anti-Injunction Act, on which the TIA is
“modeled,”did not bar a suit seeking to set aside a reporting requirement backed
by civil tax penalties, because the suit “br[ought] no legal claim against the
separate statutory tax” and “did not ask[] for injunctive relief from . . . any
impending or eventual tax obligation.”).
34
1881382 at *6 (6th Cir. May 11, 2021) (same); Coleman v. District of Columbia, 70 F.
Supp. 3d 58, 64-67 (D.D.C. 2014) (same). We are persuaded by that reasoning.
Our conclusion that the comity doctrine does not control here is further
bolstered by our consideration of three factors identified by the Supreme Court in
a pair of seminal cases, which distinguish between cases where comity controls
and those that may proceed in federal court. In the first, Hibbs v. Winn, the Court
held that neither the TIA nor comity barred Arizona taxpayers from seeking to
enjoin on Establishment Clause grounds an Arizona law authorizing income-tax
credits for payments to organizations that award educational scholarships and
tuition grants to children attending private schools, including religious schools.
542 U.S. 88, 92-93 (2004). In the second, Levin v. Commerce Energy, Inc., in contrast,
the Court held that comity barred a suit by Ohio natural gas sellers challenging
the constitutionality of a state tax credit for public utilities that also sell natural
gas. 560 U.S. at 417.
In comparing Levin and Hibbs, the Court identified three key distinctions.
First, Hibbs raised an Establishment Clause claim while Levin presented an issue
of economic discrimination that did not involve “classifications subject to
heightened scrutiny or . . . fundamental rights.” Id. at 426. Second, in Levin and
35
similar cases that challenge some inequality in the rate or amount of taxation, the
court must decide whether the inequality should be fixed by “leveling up” –
extending the benefit to all – or “leveling down” – withdrawing the benefit from
all. See id. at 426-27; see also Comptroller of Maryland v. Wynne, 575 U.S. 542, 569
(2015). Federal courts cannot resolve that remedial question for states, and lower
federal courts cannot remand the issue to the state court as the Supreme Court
can. By contrast, in Hibbs, the only possible remedy was to declare the challenged
tax credit unconstitutional, a task for which federal and state courts were equally
well suited. Levin, 560 U.S. at 431. Third, while the Levin plaintiffs sought to alter
an allegedly discriminatory tax scheme, “[t]he plaintiffs in Hibbs were outsiders
to the tax expenditure, ‘third parties’ whose own tax liability was not a relevant
factor.” Id. at 430. Our court has identified the three factors present in Hibbs but
not present in Levin as “counsel[ing] in favor of federal court adjudication despite
the general rule of comity.” Joseph, 659 F.3d at 219.
Here, those factors cut decidedly in favor of allowing Plaintiffs’ claims to
proceed in federal court. First, Plaintiffs allege that the City took their property
for a public purpose without just compensation; that the TPT Program is
selectively enforced and targets buildings in neighborhoods which are
36
predominantly communities of color, in violation of equal protection; and that
the City denied them due process in taking their property. All of these claims
implicate fundamental constitutional rights more similar to the Establishment
Clause claim in Hibbs than the economic discrimination claim in Levin. See McCoy
v. Union Elevated R. Co., 247 U.S. 354, 364 (1918) (discussing property “owner’s
fundamental right to just compensation” for government taking); Yick Wo v.
Hopkins, 118 U.S. 356, 370, 373-74 (1886) (“fundamental rights” are injured where
a “law itself . . . fair on its face, and impartial in appearance . . . is applied and
administered by public authority with . . . an unequal hand”); United States v.
James Daniel Good Real Prop., 510 U.S. 43, 44, 53-54 (1993) (due process protects
“private interest of historic and continuing importance” in the “right to maintain
control over [one’s] home, and to be free from governmental interference”).
Second, unlike in Levin, Plaintiffs do not challenge an inequality in the tax
rate that can be fixed either by “leveling up” or by “leveling down,” a task to
which the state courts are better suited because the decision directly affects the
incidence of taxes on different taxpayers. Instead, as in Hibbs, Plaintiffs argue that
various aspects of the TPT Program itself are unconstitutional as applied to them,
and, as discussed earlier in this Opinion, Plaintiffs have standing to seek only
37
monetary damages. Therefore, “state courts would have no greater leeway than
federal courts to cure the alleged violation.” Levin, 560 U.S. at 431.
Third, although Plaintiffs here are not true “third parties,” Hibbs, 542 U.S.
at 108, like the Hibbs plaintiffs they “neither seek to avoid the payment of state
taxes nor dispute the amounts owed.” Appellants’ Br. 20. In other words, like
“the Hibbs plaintiffs, [Plaintiffs here] do [not] object to their own tax situation.”
Levin, 560 U.S. at 430.
Accordingly, because Plaintiffs’ claims do not “risk disrupting state tax
administration” and because all three Levin factors “counsel[] in favor of federal
court adjudication,” we conclude that the district court exceeded its discretion in
holding that comity bars federal adjudication of Plaintiffs’ claims. Joseph, 659 F.3d
at 219-20 (internal quotation marks omitted).
III. Rooker-Feldman Bars Some, But Not All, of Plaintiffs’ Claims.
The Rooker-Feldman doctrine bars federal district courts from hearing cases
that in effect are appeals from state court judgments, because the Supreme Court
is the only federal court with jurisdiction over such cases. 28 U.S.C. § 1257. The
doctrine was first articulated in the two cases, Rooker v. Fidelity Trust Co., 263 U.S.
413 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983),
38
from which it takes its name. In those cases, the Supreme Court held that federal
district courts could not exercise jurisdiction over claims seeking to void the
outcome of a state court judgment. Rooker, 263 U.S. at 414 (plaintiff sought to
have Indiana judgment “declared null and void”); Feldman, 460 U.S. at 463
(plaintiffs sought reversal of state court’s denial of requests for waivers of bar
admission rule).
In a more recent case, Exxon Mobil Corp. v. Saudi Basic Industries Corp., the
Supreme Court observed that circuit courts had gone beyond these precedents,
applying the doctrine too broadly. 544 U.S. 280, 283 (2005). Specifically, the Court
noted that some lower federal courts, including ours, had erroneously taken
Rooker-Feldman to “overrid[e] Congress’ conferral of federal-court jurisdiction
concurrent with jurisdiction exercised by state courts, and supersed[e] the
ordinary application of preclusion law under 28 U.S.C. § 1738.” Id. at 283. The
Court instructed that the doctrine “is confined to cases of the kind from which [it]
acquired its name: cases brought by state-court losers complaining of injuries
caused by state-court judgments rendered before the district court proceedings
commenced and inviting district court review and rejection of those judgments.”
Id. at 284.
39
Following Exxon Mobil’s edict to confine applications of Rooker-Feldman to
the types of cases from which it takes its name, our court has articulated four
requirements that must be met for Rooker-Feldman to apply: (1) “the federal-court
plaintiff must have lost in state court[;]” (2) “the plaintiff must complain of
injuries caused by a state-court judgment[;]” (3) “the plaintiff must invite district
court review and rejection of that judgment[;]” and (4) “the state-court judgment
must have been rendered before the district court proceedings commenced.”
Hoblock v. Albany Cty. Bd. of Elections, 422 F.3d 77, 85 (2d Cir. 2005) (internal
quotation marks and alterations omitted). “The first and fourth of these
requirements may be loosely termed procedural; the second and third may be
termed substantive.” Id. Although “all four requirements must be met in order
for Rooker-Feldman to act as a jurisdictional bar . . . the second requirement – that
the plaintiff complains of an injury caused by a state-court judgment – is the core
requirement from which the other Rooker-Feldman requirements derive.” Sung
Cho v. City of New York, 910 F.3d 639, 646 (2d Cir. 2018) (internal quotation marks
and alterations omitted).
As we analyze whether Plaintiffs’ claims satisfy Rooker-Feldman’s
requirements, we note that Plaintiffs clarified at oral argument that they seek
40
damages “only for the surplus value [of the properties] after the taxes have been
received by the City.” Oral Argument at 30:23-38 (emphasis added). Plaintiffs’
briefs on appeal were not clear on this point. Compare Appellants’ Br. 37 n.19
(“[T]he District Court erred if the Order is interpreted to hold that each of
Appellants’ claims met the substantive requirements of Rooker-Feldman to the
extent they seek damages equal to the value of the Subject Properties”) with id. at
20 (“Appellants’ claims neither seek to avoid the payment of state taxes nor
dispute the amounts owed. . . . Appellants’ challenge [is] to Municipal
Defendants’ seizure of the . . . excess value.”). However, to the extent that certain
statements in Plaintiffs’ briefs here or in the district court are to the contrary,
Plaintiffs are nevertheless bound by concessions made by their counsel at oral
argument. See U.S. Trust Co. of N.Y. v. Shapiro, 835 F.2d 1007, 1009 (2d Cir. 1987)
(holding plaintiff bound by concessions made by counsel at oral argument); ICN
Pharms., Inc. v. Khan, 2 F.3d 484, 492 (2d Cir. 1993) (analyzing claim for injunctive
relief as limited in scope by counsel’s concession at oral argument). Accordingly,
we consider Plaintiffs’ claims, and the remedies they seek, as limited by their
counsel’s statements at oral argument that they seek compensation only for the
excess value, and not the full value, of their transferred properties.
41
A. Procedural Requirements
Turning first to Rooker-Feldman’s procedural requirements, we conclude, as
did the district court, that both are met here as to all of Plaintiffs’ claims. It is
clear that the fourth requirement is met because the state court foreclosure
judgments were rendered in 2011 and 2017, before this proceeding was
commenced in 2019. Though it is a closer question, we conclude that the first
requirement is also met here because Plaintiffs lost in state court.
Plaintiffs argue that the first requirement is not met because they were not
named parties to the earlier in rem foreclosure proceedings. Although that
argument has some logical force, we disagree. Someone who loses an ownership
interest in property through a state in rem foreclosure proceeding against the
property has lost in state court. The mere fact that Plaintiffs were not named
parties to the state action against the property does not abrogate the operation of
Rooker-Feldman. Were we to conclude otherwise, state courts would be unable to
exercise in rem jurisdiction without the risk of federal courts undoing their work,
because parties with an interest in property who lost in state court could always
proceed to federal court for a do-over. Under that approach, state court decisions
based on in rem jurisdiction would have inferior force to state court decisions
42
based on other types of jurisdiction, which could be reviewed only by the
Supreme Court. We are unpersuaded that the Rooker-Feldman doctrine as clarified
in Exxon Mobil dictates that result, which is antithetical to the original purpose of
the doctrine.24
We have reached a similar conclusion in two previous cases, albeit cases
disposed of by summary order. See Riley v. Comm’r of Fin. of N.Y.C., 618 F. App’x
16, 17 (2d Cir. 2015) (Rooker-Feldman barred federal action after state court in rem
proceeding); Wik v. City of Rochester, 632 F. App’x 661, 662-63 (2d Cir. 2015)
(same). Plaintiffs argue that these cases are distinguishable because in both, the
interested property owner actually participated in the underlying state court
proceedings, whereas Plaintiffs here did not. Although that is true, we are
unpersuaded that it is decisive. If the participation of the property owner were
critical, then property owners would be able to choose whether to contest the
proceeding in state court, or hang back in order to preserve their right to proceed
24
Plaintiffs argue that the Supreme Court’s decision in Lance v. Dennis, 546 U.S.
459 (2006), establishes that only named parties meet Rooker-Feldman’s first
requirement. Not so. The Court there explicitly stated that its decision did “not
address whether there are any circumstances . . . in which Rooker-Feldman may be
applied against a party not named in an earlier state proceeding.” Id. at 466 n.2
(emphasis omitted).
43
in federal court. As we have explained, that result is not consistent with the
doctrine of Rooker-Feldman as it has been applied by our court. Indeed, Plaintiffs’
argument is, at bottom, merely an argument that state court default judgments
cannot give rise to a Rooker-Feldman bar, a position our court has rejected. See
Ballyhighlands, Ltd. v. Bruns, 182 F.3d 898 (2d Cir. 1999) (unpublished table
decision) (“Rooker-Feldman applies to default judgments just as it does to other
types of judgments.”); In re Wilson, 410 F. App’x 409, 410 (2d Cir. 2011) (default
foreclosure judgment against the plaintiff satisfied the first prong of Rooker-
Feldman). Accordingly, we conclude that a property owner who loses his or her
interest in the property through an in rem foreclosure proceeding in state court
against the property has lost in state court for the purposes of Rooker-Feldman’s
first requirement.25
25
We note that two of the properties at issue here were owned by HDFC
cooperatives. It could be contended, therefore, that unlike a fee simple owner of
property, the “owner” of an apartment in a cooperative does not technically have
an ownership interest in the property, but is really a shareholder in a corporation
that owns the property. We have observed in other contexts, however, that under
New York law, “[t]he interest in a cooperative apartment ‘is represented by
shares of stock, which are personal property, yet in reality what is owned is not
an interest in an ongoing business enterprise, but instead a right to possess real
property.’” Alphonso v. Comm’r, 708 F.3d 344, 352 (2d Cir. 2013) (emphasis
omitted), quoting In re Estate of Carmer, 71 N.Y.2d 781, 784 (1988). Accordingly,
there is a strong argument that the same Rooker-Feldman analysis applies to a
44
B. Substantive Requirements
We turn now to Rooker-Feldman’s two substantive requirements: that the
plaintiff’s injuries be caused by the state court judgment and that the asserted
claims invite federal review and rejection of that judgment. We conclude that
those requirements are met as to only some of Plaintiffs’ claims. We begin by
identifying several principles established by our previous interpretations of
Rooker-Feldman’s second and third requirements, which aid our analysis.
First, it is clear that Plaintiffs cannot seek to void the state court foreclosure
decisions transferring their property. That is the type of claim that Rooker-Feldman
squarely forecloses, both because it addresses an injury caused by the state court
judgment, and because it would require the district court to review that
judgment. See Exxon Mobil, 544 U.S. at 293 (explaining that “the paradigm
situation in which Rooker-Feldman precludes a federal district court from
proceeding” is one in which the plaintiff asks the “federal court to undo the
[state] judgment”) (internal quotation marks omitted); Vossbrinck v. Accredited
party who lost his or her interest in a residential cooperative through an in rem
foreclosure proceeding against the property in state court as applies to the owner
of a house or condominium. We need not definitively resolve this question,
however, as Plaintiffs have not made, and therefore have forfeited, any argument
based on the structure of cooperative ownership.
45
Home Lenders, Inc., 773 F.3d 423, 427 (2d Cir. 2014) (“To the extent [the plaintiffs]
ask[] the federal court to grant [them] title to [their] property because the
foreclosure judgment was obtained fraudulently, Rooker-Feldman bars [their]
claim.”).
However, it is equally clear that federal courts do not lose jurisdiction
merely because “a federal plaintiff presents some independent claim, albeit one
that denies a legal conclusion that a state court has reached in a case to which he
was a party.” Exxon Mobil, 544 U.S. at 293 (internal quotation marks and
alterations omitted). In Feldman, for example, the Court concluded that although
the plaintiffs there could not seek federal court review of state court judgments
denying their requests for waiver of a rule prohibiting them from taking the bar
exam because they had not graduated from an accredited law school, they could
“mount[] a general challenge to the constitutionality of” the rule in federal court.
460 U.S. at 483.
Our court has further determined that Rooker-Feldman does not bar claims
based on an opponent’s misconduct that precedes the state court proceeding, if the
“plaintiffs’ alleged injuries were merely ratified by the state-court judgments
rather than caused by them.” Sung Cho, 910 F.3d at 641. In Sung Cho, the plaintiffs
46
claimed that their rights were violated when they were coerced by operation of a
city ordinance into signing settlement agreements waiving various constitutional
rights to avoid eviction. Id. at 643. We concluded that those claims were not
barred by Rooker-Feldman, even though the settlement agreements were ratified
by state court judges. Id. at 649; see also Hoblock, 422 F.3d at 88 (Rooker-Feldman
acts to bar a claim only when “[a] third party’s actions are produced by a
state-court judgment and not simply ratified, acquiesced in, or left unpunished
by it.”).
Finally, as to remedies, although plaintiffs may not seek to have a state
court judgment voided, our court has concluded that Rooker-Feldman does not bar
plaintiffs from seeking compensatory damages for misconduct “that defendants
pursued in obtaining” state court judgments. Sykes v. Mel S. Harris & Assocs., LLC,
780 F.3d 70, 95 (2d Cir. 2015); see also Vossbrinck, 773 F.3d at 427 (plaintiffs not
barred from “seek[ing] damages from [their opponent] for injuries [they] suffered
from their [opponent’s] alleged [misconduct]”). In other words, plaintiffs are
permitted to seek damages for injuries caused by a defendant’s misconduct in
procuring a state court judgment, but not for injuries directly caused by that
judgment.
47
Applying these principles, we conclude that Rooker-Feldman does not bar
Plaintiffs’ equal protection and due process claims, or their second takings claim
– that their property was taken for a public purpose without just compensation –
to the extent that for each of those claims, they seek only the value of their lost
property in excess of the amount owed in taxes.26
1. Takings Claims
Plaintiffs allege two separate takings claims. First, they allege that their
properties were taken in violation of the administrative regulations governing
the TPT program, including because their properties did not meet the statutory
definition of distressed. Second, they argue that their properties were taken for a
public purpose, and that they did not receive just compensation for the excess
value of their properties beyond the amount they owed in taxes.
As to the first claim, we conclude, as did the district court, that it is barred
by Rooker-Feldman. The second requirement, that the injury be caused by the state
court judgment, is met because the injury Plaintiffs complain of is the loss of their
property, which was caused by the state court judgments that divested them of
26
Plaintiffs also argue that the Supreme Court’s decision in Knick v. Township of
Scott, 139 S. Ct. 2162 (2019), guarantees them a federal forum, at least for their
takings claims, notwithstanding Rooker-Feldman. We disagree. See supra note 17.
48
that property. By effecting the divestiture of Plaintiffs’ interest in their property,
the state court judgments thus directly inflicted the injury complained of.
Moreover, the state court imposed that judgment after concluding that the City
had complied with the administrative regulations of the TPT program. To
conclude otherwise, the district court would be required to review that state
court’s decision and determine, impermissibly, whether the state court judgment
was valid. That satisfies the third Rooker-Feldman requirement, because in order to
prevail, Plaintiffs would need to persuade the district court that the state court
had erred. See Vossbrinck, 773 F.3d at 427 (Rooker-Feldman bars claim seeking to
undo foreclosure judgment on the basis that it was obtained fraudulently).
We conclude, however, as did the district court, that Plaintiffs’ second
takings claim – that their property was taken without just compensation because
they were not compensated for the excess value of the property – is not barred by
Rooker-Feldman. First, the City’s failure to provide just compensation was not
caused by the state court foreclosure judgment, but by the City’s decision to
include the properties in the TPT Program and transfer them to a third party, and
by the TPT Program’s allegedly inadequate mechanism for seeking compensation
for the excess value of the property following foreclosure. Moreover, Plaintiffs do
49
not seek to void that state court foreclosure judgment; rather, they seek
compensation only for the excess value of their property above the taxes and fees
that they owed, not the return of their property or the full value of their property.
See Oral Argument at 30:23-30:38; supra pp. 40-41. That injury was caused not by
the judgment of forfeiture, but by the City’s actions following upon the forfeiture,
by transferring the foreclosed-on property to the Transferee Defendants while
failing to provide a mechanism for limiting Plaintiffs’ losses to the amount owed
in taxes.
Finally, adjudicating that claim would not require the district court to
review the state court judgment, as that judgment did not address whether the
City’s actions constituted a taking, or whether Plaintiffs were justly compensated
(and indeed, compensation was not necessary prior to the transfer, which
occurred after the foreclosure judgment was entered). See Feldman, 460 U.S. at 483
(Rooker-Feldman would not bar “a general challenge to the constitutionality of”
the rule that was applied to plaintiffs). Accordingly, the third Rooker-Feldman
requirement is also unmet as to that claim.27
27
The parties also contest whether a taking occurred here. That is an issue
regarding the merits of Plaintiffs’ claims that is beyond the scope of this appeal,
and we express no view on it.
50
2. Equal Protection Claim
Plaintiffs allege that they were denied equal protection because the City,
through the TPT Program, disproportionately targets properties in communities
of color for foreclosure. We conclude, consistent with the district court, that that
claim is not barred by Rooker-Feldman. As to the second Rooker-Feldman
requirement, Plaintiffs’ alleged injury was not caused by the state court
judgment, because it is the City that decides which properties to target for
inclusion in the TPT Program, prior to any state court proceeding. The state court
merely adjudicates the merits of the foreclosure action; the court was not
implicated in the allegedly wrongful discriminatory decision to target these
properties, rather than others, for foreclosure. The state court foreclosure
judgment thus at most “ ratified” the City’s pre-existing alleged misconduct.
Sung Cho, 910 F.3d at 641. Moreover, because Plaintiffs do not seek return of their
property, but only the value in excess of the taxes owed, they do not seek to void
or undo the state court foreclosure judgment, nor does their claim require the
district court to review that judgment. The state court did not consider whether
the City had violated equal protection in targeting specific properties for
foreclosure when it issued the foreclosure judgments.
51
3. Due Process Claims
Finally, we turn to Plaintiffs’ due process claims. Plaintiffs raise two
separate due process claims, both based on lack of notice of the in rem
foreclosure proceeding. First, they allege that the City “instituted its in rem
proceedings against property owners without issuing them notice reasonably
calculated to inform them of the proceeding,” and with “actual knowledge that it
was not providing [such] notice.” J.A. 47. Second, they allege that “the notice
provisions of the City’s Third Party Transfer Program fall short of those required
under the Due Process Clause of the 14th Amendment to the United States
Constitution.” Id.
We conclude that Rooker-Feldman does not bar the first claim. The second
requirement is not met because the complained of injury was produced by the
City’s alleged failure to provide adequate notice. Although the state court
judgment “ratified” the injury, Rooker-Feldman does “not bar jurisdiction where,
as here, plaintiffs’ alleged injuries were merely ratified by the state-court
judgments rather than caused by them.” Sung Cho, 910 F.3d at 643.
As to the third requirement, the first claim would require the district court
to, in some sense, review the state court judgment, because that judgment
52
concluded that notice was provided. See In Rem Tax Foreclosure No. 51, Borough of
Brooklyn, Index No. 8700/2007 (Sup. Ct. Oct. 26, 2011) (concluding that notice was
provided in compliance with the provisions of Title 11, Chapter 4 of the N.Y.C.
Administrative Code); In Rem Tax Foreclosure Action No. 53, Borough of Brooklyn,
Index No. 8700/2015 (Sup. Ct. Nov. 27, 2017) (same). But this is not the sort of
review Rooker-Feldman forbids. Rooker-Feldman, as a “construction” of 28 U.S.C.
§ 1257, ASARCO Inc. v. Kadish, 490 U.S. 605, 622-23 (1989), prohibits lower federal
courts only from taking appeals from state courts, Lance v. Dennis, 546 U.S. 459,
463 (2006). As such, they may not “overturn,” Exxon Mobil, 544 U.S. at 291-92,
“declare[] null and void,” Rooker, 263 U.S. at 413, or “reverse or modify,” id. at
416, state court decisions. It does not prevent them, as part of adjudicating an
“independent claim,” from “den[ying] a legal conclusion that a state court has
reached[.]” Exxon Mobil, 544 U.S. at 293. But that is all Plaintiffs ask of the district
court. If it rules in their favor, the foreclosure judgments will not lose their legal
force. Nor would an award of damages amount to a reversal in substance by
imposing an obligation on Defendants that is incompatible with the dictates of a
state court judgment. See Hoblock, 422 F.3d at 87. And even assuming arguendo
that compensatory damages in the amount of Plaintiffs’ loss would effectively
53
reverse the state court, we note that Plaintiffs are not seeking that amount. Infra
p. 56 & n.29.
The district court also drew a distinction between Plaintiffs’ claim seeking
nominal damages, which it concluded Rooker-Feldman permitted, and their claim
seeking compensatory damages, which it concluded was prohibited. We
conclude that neither claim, as limited by Plaintiffs’ statements at oral argument,
is barred by Rooker-Feldman. First, as the district court properly concluded,
Plaintiffs will be entitled to, at minimum, nominal damages, if they can show that
they were deprived of due process. Warren v. Pataki, 823 F.3d 125, 141 (2d Cir.
2016).
Second, to obtain compensatory damages, Plaintiffs will be required to
show that their alleged injuries were caused by the City’s failure to provide them
with adequate notice. Id. Defendants argue, and the district court agreed, that a
claim for compensatory damages would meet Rooker-Feldman’s second and third
requirements and should be barred, because (1) Plaintiffs’ injury, the loss of their
property, was caused by the state court judgment and (2) determining whether
compensatory damages are warranted would require the district court to
entertain the counterfactual of what would have occurred in the state court
54
proceeding if Plaintiffs had received adequate notice, which would be an
impermissible review of the state court judgment. We disagree on both points,
and conclude that compensatory damages are not barred.
As to the second requirement, causation, our court has concluded that
Rooker-Feldman does not bar a claim for compensatory damages where the injury
– here, the failure to provide for remission to Plaintiffs of the value of their
property in excess of what was owed in taxes – was caused by an opponent’s
alleged misconduct, rather than a state court judgment ratifying that conduct.
Sykes, 780 F.3d at 94-95.28
As to the third requirement, we have already explained that entertaining
the counterfactual of what would have occurred had notice been given merely
requires the district court to “den[y] a legal conclusion that a state court has
reached,” Exxon Mobil, 544 U.S. at 293, which Rooker-Feldman permits so long as
the district court does not engage in review and rejection of the state court
judgment. See also Great Western Mining & Mineral Co. v. Fox Rothschild LLP, 615
F.3d 159. 172-73 (3d Cir. 2010) (concluding Rooker-Feldman did not bar plaintiff’s
28
To the extent that Brodsky v. Carter, 673 F. App’x 42, 44 (2d Cir. 2016), is to the
contrary, we do not find the reasoning in that decision persuasive, and decline to
follow it. See 2d Cir. R. 32.1.1(a).
55
claim for compensatory damages for an alleged due process violation); Nesses v.
Shepard, 68 F.3d 1003, 1005 (7th Cir. 1995) (same). We conclude that Plaintiffs may
seek compensatory damages equal to the excess value of their lost property, over
and above the amount owed in taxes. That is an appropriate measure of
Plaintiffs’ damages because, even had they been given adequate notice, their
properties would still be tax-delinquent.29
29
Because Plaintiffs’ counsel limited their claim for damages at oral argument, we
need not address, as the district court was required to, whether Rooker-Feldman
would bar a claim for damages equal to the full value of Plaintiffs’ property on
the theory that such a claim would be, in essence, a request to “undo” the state
court judgment. We note that in a previous case, we have concluded that Rooker-
Feldman barred a plaintiff’s claim for compensatory damages based on a state
court foreclosure proceeding where the complaint estimated those damages to be
the full value of the foreclosed-on property, which was akin to asking the federal
court to “review and reject” the state court judgment. See Charles v. Levitt, 716 F.
App’x 18, 22 (2d Cir. 2017) (our conclusion that Rooker-Feldman barred the
plaintiff’s claims was “further buttressed by our observation that the damages
demanded in the amended complaint are tied to the alleged value of the
Property”). This case is different, however, because Plaintiffs made clear at oral
argument that they were not seeking compensation equal to the full value of their
lost property and were not seeking to undo the foreclosure judgment, and
because the complaint makes clear that the amount it seeks in damages is merely
an imprecise estimate of the putative class’s total damages. Compare J.A. 35 (“By
way of example, in 2017 alone, the City Defendants were awarded in rem title to
sixty-six (66) properties in Kings County believed to be worth, in the aggregate,
in excess of sixty million dollars ($60,000,000.00).”) with J.A. 48 (“Plaintiffs, and
those similarly situated, have accordingly been damaged in the minimal sum of
$66,000,000.00.”). For obvious reasons, it would be difficult at this stage for
Plaintiffs to precisely estimate damages equal to the excess value of the
56
We turn at last to Plaintiffs’ second due process claim, that the notice
provisions of the TPT Program are facially unconstitutional. As discussed earlier
in this Opinion, Plaintiffs lack standing to seek prospective injunctive relief for
that claim, and therefore, we need not consider whether such relief would be
barred by Rooker-Feldman. Supra pp. 23-27. To the extent that they seek monetary
relief for the past injury of being subjected to the allegedly unconstitutional
provisions, that claim overlaps with their first claim that they were not given
adequate notice, and the earlier Rooker-Feldman analysis applies.
CONCLUSION
For the forgoing reasons, we conclude: (1) that Plaintiffs lack standing to
seek injunctive and declaratory relief; (2) that the TIA is not directly applicable to
Plaintiffs’ claims and that the district court exceeded its discretion in concluding
that comity bars their claims; and (3) that the Rooker-Feldman doctrine does not
bar Plaintiffs’ equal protection and due process claims, or their second takings
claim – that their property was taken for a public purpose without just
properties owned by putative class members and taken through the TPT
Program.
57
compensation – to the extent that for each of those claims, they seek only the
value of their lost property in excess of the amount owed in taxes. Accordingly,
we AFFIRM in part and REVERSE in part the district court’s judgment, and
REMAND for further proceedings consistent with this opinion. We also
VACATE and REMAND the district court’s decision not to exercise supplemental
jurisdiction over Plaintiffs’ state law claims, so that the court may reconsider that
decision in light of this opinion.
58