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Shipp v. Donaher

March 25, 2010

WILLIAM AND STACY SHIPP, PLAINTIFFS,
v.
DONNA DONAHER, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Pollak, J.

OPINION

Plaintiffs William and Stacy Shipp have sued (1) PNC Bank, N.A. ("PNC"), (2) Tucker Arensberg, PC ("Tucker"), (3) PNC's Chief Executive Officer, James Rohr,*fn1 (4) Donna Donaher, an attorney at Tucker, (5) Jason Fyk, (6) For Your Kids, Inc.,*fn2 a company owned by Fyk, (7) an association identified in the complaint as "the PNC/[Tucker] Clan," and (8) Doe defendants, alleging that defendants' actions in connection with two confessed judgments in the Pennsylvania state courts violated various laws and constitutional provisions. Plaintiffs' complaint includes seventy-six counts in all,*fn3 including (1) violations of the federal constitution and 42 U.S.C. § 1983, (2) violations of various federal statutes, including (a) the Sherman Antitrust Act ("Sherman Act"), 15 U.S.C. § 1 et seq., (b) the Bank Holding Company Act ("BHCA"), 12 U.S.C. § 1841 et seq., (c) the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., (d) the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and (e) numerous criminal provisions of Title 18 of the U.S. Code, (3) state constitutional violations, and (4) state tort claims. Defendants PNC and Rohr and, in a separate motion, Donaher and Tucker, now move to dismiss the complaint for failure to state a claim upon which relief may be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.*fn4

I.

Although the complaint in this case is lengthy and convoluted, the history of plaintiffs' dispute with the moving defendants*fn5 may be concisely stated. Plaintiff William Shipp and defendant Jason Fyk purchased a property on Coates Street in Coatesville, Pennsylvania in December 2003. Compl. ¶ 72. They took out a mortgage on that property from the National Bank of Malvern, at which Shipp is an employee. See id. ¶ 75. The title to the property and the mortgage were both listed "in Shipp's and Fyk's individual names." Id. ¶ 76. Fyk subsequently purchased another property in Coatesville, this one on Jane Street. Id. ¶ 84.

In April 2005, Fyk incorporated defendant For Your Kids, id. ¶ 88, and later that month, For Your Kids received Small Business Administration ("SBA") loans from defendant PNC, id. ¶ 89. Fyk "executed [a] personal surety agreement[] in favor of PNC on" those loans. Id. ¶ 90. The relationship between Fyk and Shipp subsequently soured, see id. ¶¶ 117-33, and, at some point, Fyk "defaulted against another creditor," id. ¶ 105, leading PNC to seek confessed judgments, apparently against the Coates Street and Jane Street properties, see id. ¶¶ 26, 213, 217. Donaher, on behalf of Tucker, represented PNC in those proceedings. See id. ¶ 26.

Shipp, who also brought a state-court contract action against Fyk, see id. ¶ 19, sought to intervene in the confessed judgment proceedings, see id. ¶ 20. PNC "moved to dismiss Shipp's intervention petition," and that motion was granted. Id. ¶ 21. Shipp appealed, but "the Superior Court quashed [the] appeal," id. ¶ 22, and the Pennsylvania Supreme Court "denied Shipp's allocatur petition as moot," id. ¶ 23, after PNC issued what plaintiffs call "partial and conditional release documents" on both properties, id. ¶¶ 213, 217. The Shipps then filed the complaint in this action on June 1, 2009. The complaint alleges that defendants' actions in seeking the confessed judgment, as well as their actions more generally with regard to Pennsylvania's confessed judgment procedures and SBA loans, deprived William Shipp of numerous constitutional and statutory rights.*fn6

II.

In order to survive a motion to dismiss for failure to state a claim, a complaint need only include "'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the... claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). While a complaint "requires more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action," "detailed factual allegations" are unnecessary. Twombly, 540 U.S. at 555. Rather, plaintiffs must simply include enough facts to "state a claim to relief that is plausible on its face." Id. at 570.

In reviewing a 12(b)(6) motion, "the facts alleged [in the complaint] must be taken as true and a complaint may not be dismissed merely because it appears unlikely that the plaintiff can prove those facts or will ultimately prevail on the merits." Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). "[R]easonable inferences" are also drawn in favor of the plaintiff, id., but this court need not "'accept as true a legal conclusion couched as a factual allegation,'" Twombly, 550 U.S. at 555.

III.

As a threshold matter, Tucker and Donaher argue that the Rooker-Feldman doctrine deprives this court of jurisdiction to hear plaintiffs' claims. See Tucker Mem. at 37-38. The Rooker-Feldman doctrine, under which federal district courts and courts of appeals "lack subject matter jurisdiction to review, directly or indirectly, state court adjudications," In re Diet Drugs, 282 F.3d 220, 240 (3d Cir. 2002), "'precludes a federal action if the relief requested in the federal action would effectively reverse the state decision or void its ruling,'" Whiteford v. Reed, 155 F.3d 671, 674 (3d Cir. 1998) (quoting FOCUS v. Allegheny Court of Common Pleas, 75 F.3d 834, 840 (3d Cir. 1996)). It thus "applies to 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.'" Stoss v. Singer Fin. Corp., No. 08-cv-5968, 2010 WL 678115, at *3 (E.D. Pa. Feb. 24, 2010) (quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005)).

In particular, the Rooker-Feldman doctrine bars review by this court of "'claims that have been previously adjudicated in state court or that are inextricably intertwined with a state adjudication.'" Whiteford, 155 F.3d at 674 (quoting Gulla v. N. Strabane Twp., 146 F.3d 168, 170 (3d Cir. 1998)). "The actually litigated prong is principally useful where the claims before the state and federal courts are in all respects identical." ITT Corp. v. Intelnet. Int'l, 366 F.3d 205, 211 (3d Cir. 2004). "State and federal claims are inextricably intertwined," meanwhile, "'(1) when in order to grant the federal plaintiff the relief sought, the federal court must determine that the state court judgment was erroneously entered [or] (2) when the federal court must... take action that would render [the state court's] judgment ineffectual.'" ITT Corp., 366 F.3d at 211 (quoting Desi's Pizza, Inc. v. City of Wilkes-Barre, 321 F.3d 411, 421 (3d Cir. 2003)) (internal quotation marks omitted).

The doctrine is thus "narrow [in] scope," Turner v. Crawford Square Apartments III, L.P., 449 F.3d 542, 547 (3d Cir. 2006): "[W]here a state action does not reach the merits of a plaintiff's claims,... Rooker-Feldman does not deprive the federal court of jurisdiction." Whiteford, 155 F.3d at 674; accord, e.g., ITT Corp., 366 F.3d at 211. More specifically, when a denial of intervention is not effectively a decision on the merits, the denial of intervention does not trigger the application of Rooker-Feldman. See FOCUS, 75 F.3d at 841.

Tucker and Donaher contend that plaintiffs' claims reduce to the proposition that "the trial court, the Superior Court and the Pennsylvania Supreme Court improperly denied [plaintiffs'] right to intervene in the" confessed judgment proceedings "based upon the alleged acts of the defendants." Tucker Mem. at 38. This argument, however, slightly misunderstands what I take to be the nub of plaintiffs' grievances. Although plaintiffs clearly disagree with the state courts' ruling, the complaint's primary focus is on the alleged actions of the various defendants in instantiating and carrying out the confessed judgment action -- which is to say that the complaint attempts to put before this court the merits of issues that the state courts declined to consider. This fact alone is a sufficient basis to conclude that the state courts did not "previously adjudicate" plaintiffs' claims.

The question of whether plaintiffs' claims are inextricably intertwined with the state courts' ruling is slightly more complex. The state courts' opinions denying intervention -- which have been provided by plaintiffs as exhibits to the complaint*fn7 -- go beyond merely "asserting that [the state courts] lacked jurisdiction" to entertain the intervention. FOCUS, 75 F.3d at 841. Rather, the Court of Common Pleas' October 1, 2007 order addresses two additional issues -- (1) whether or not a partnership of Shipp and Fyk owned the properties at issue, and (2) whether "PNC... made false averments to the Court and otherwise committed 'obstructionist malfeasance.'" Compl. Ex. 4, at 2-3. The Superior Court memorandum affirming the denial of intervention, while focused on jurisdictional issues, expresses the view that PNC did not have actual notice that the properties were owned by a partnership at the time it instituted the confessed judgment actions. See id. Ex. 8, at 9. This aspect of the Superior Court's decision was based on the conclusions that (1) "[t]he deed to the property does not indicate the property is owned by a partnership," id. at 8, and (2) "[u]nder the circumstances of the present case... the court would be limited to the four corners of the deed in determining whether the property was really partnership property," to the exclusion of parol evidence, id. at 9 (internal quotation marks omitted).

The claims in the complaint are, however, largely independent of the Pennsylvania courts' decisions that (1) a partnership did not own the properties, titled as they were in the individual names of Shipp and Fyk, (2) PNC's conduct in the Court of Common Pleas was unimpeachable, and (3) Shipp was not entitled to intervene. Count 1 of the complaint provides a convenient illustration. That count, pled as a violation of the Privileges and Immunities Clause of the Fourteenth Amendment, alleges variously that

(1) "[d]efendants seized [one of the properties]... without bringing charges against Shipp or the [alleged] Partnership," (2) "[d]efendants... forc[ed plaintiffs] to continue in a hostile and dangerous business relationship with Fyk", in part by "fr[eezing Shipp] out of the courts," (3) "[d]efendants knowingly took and retained Shipp's property by ex parte action," and (4) "[t]here can be no greater abridgement of rights and immunities than being told that your legal interests were subordinated to the one who illegally subordinated your interest in ex parte proceedings." Compl. ¶¶ 339-41, 344. Whatever the merits of this claim, it is not one that was ever decided by the state courts, and ruling on its merits would not entail a decision that the state courts were incorrect to deny intervention or that the expressed grounds for the denial were incorrect.*fn8 Moreover, insofar as plaintiffs' allegations do "den[y] a legal conclusion that a state court has reached," the result is simply that "there is jurisdiction and state law determines whether the defendant prevails under principles of preclusion." Exxon Mobil, 544 U.S. at 293.

Accordingly, I conclude that the Rooker-Feldman doctrine does not deprive this court of jurisdiction over plaintiffs' claims, and I turn to the question of whether the complaint states ...


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