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Olathe/Santa Fe Partnership, et al v. John K. Doull

April 19, 2013


The opinion of the court was delivered by: Carlos Murguia United States District Judge


This matter is before the court on two motions to dismiss (Docs. 6 and 16). For the reasons discussed below, the court grants the motions as to plaintiffs' cause of action under the Racketeer Influenced and Corrupt Organization Act ("RICO") and declines to exercise supplemental jurisdiction over the remaining state law claims.*fn1


Defendant Cornerstone Bank ("the Bank") is a banking organization in Kansas that provides loans. The remaining defendants are officers or directors of the Bank. In 2004 and 2006 the Bank executed loans with plaintiff Olathe/Santa Fe Partnership ("OSFP"). Each loan was secured by a mortgage on real property.

The parties operated under the terms of the loans for several years without objection. The relationship soured in 2010 when the Bank filed a petition in state court to foreclose on the 2006 mortgage and recover on the loan.*fn3 The Bank filed a similar petition in state court in 2012 to foreclose on the 2004 mortgage.*fn4 In response to both petitions, plaintiffs alleged counterclaims and affirmative defenses based on fraud and breach of contract. In both state court cases, the court entered judgment in favor of the Bank and against plaintiffs on all claims and counterclaims.

Plaintiffs filed this lawsuit in 2012 and allege that defendants made fraudulent statements and misrepresentations during the negotiation, modification, and performance of the loans. Plaintiffs bring claims under RICO as well as claims for fraud, fraudulent nondisclosure, negligent misrepresentation, breach of fiduciary duty, publication of injurious falsehood, negligent/reckless failure to supervise, and civil conspiracy. Defendants now seek dismissal of plaintiffs' claims based on lack of subject-matter jurisdiction, failure to state a claim (e.g., preclusion), and Colorado River doctrine abstention.*fn5

II.Subject-Matter Jurisdiction

Defendants argue that this court lacks subject-matter jurisdiction based on the Rooker-Feldman doctrine.*fn6 This doctrine draws its name from two Supreme Court opinions: Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983). And it precludes "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." Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005).

The Supreme Court has cautioned that this is a narrow doctrine and that "Rooker-Feldman does not otherwise override or supplant preclusion doctrine . . . ." Exxon, 544 U.S. at 284. Therefore, "[i]f 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, then there is jurisdiction and state law determines whether the defendant prevails under principles of preclusion." Id. at 293 (quotation and brackets omitted).

The court concludes that the Rooker-Feldman doctrine does not apply for two reasons. First, this lawsuit was filed before the state-court proceedings concluded. See Erlandson v. Northglenn Mun. Court, 528 F.3d 785, 788 n.3 (10th Cir. 2008) (explaining that the doctrine is confined to cases brought after the state-court proceedings are final). Plaintiffs filed the instant complaint while the 2010 state court action was on appeal and while summary judgments motions were pending in the 2012 action. See Guttman v. Khalsa, 446 F.3d 1027, 1029 (10th Cir. 2006) (explaining that the district court had jurisdiction because case was filed before the end of the state courts' appeal process).

Second, the injuries that plaintiffs complain about in this case were not caused by the state-court judgments. Plaintiffs' present claims, narrowly construed, do not reject the state-court judgments. These claims may deny the state courts' legal conclusions that the Bank did not engage in fraud. But this issue implicates preclusions doctrines, not the Rooker-Feldman doctrine. The court retains subject-matter jurisdiction over plaintiffs' claims.

III.Failure To State A Claim

Defendants argue that plaintiffs failed to state a claim, asserting various theories. In considering these Rule 12(b)(6) challenges, all well-pleaded factual allegations-as distinguished from conclusory allegations-are accepted as true and viewed in the light most favorable to plaintiffs. To survive this motion, plaintiffs must provide "enough facts to state a claim to relief that is plausible on its face," Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), which requires "more than an unadorned, the-defendant-unlawfully-harmed-me accusation," Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint is not sufficient if it offers "naked assertions[s] devoid of further factual enhancement." Id. (alteration in original) (internal citation and quotation omitted).

Defendants argue that plaintiffs' RICO claim should be dismissed because plaintiffs did not allege at least two acts of racketeering that form a pattern of racketeering activity. Specifically, defendants contend that plaintiffs (1) failed to allege two predicate acts with particularity, and (2) did not allege a continuing pattern. Because the court agrees with defendants on these issues, the court dismisses plaintiffs' RICO claims and declines to exercise supplemental jurisdiction ...

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