Kinzy et al v. Howard and Howard, PLLC et al

Filing 85

ORDER signed by the Honorable Virginia M. Kendall on 1/3/2019. The Court grants the Defendants' Motions to Dismiss 56 , 58 , and 61 . All claims alleged in the complaint are dismissed without prejudice. Civil case terminated. Mailed notice(lk, )

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
KYLE KINZY and JACKI KINZY,
Plaintiffs,
v.
HOWARD & HOWARD, PLLC, et al.,
Defendants.

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No. 16 C 8230
Judge Virginia M. Kendall

ORDER
First Tennessee Bank, National Association, foreclosed on its mortgage to Kyle
and Jacki Kinzy, which the Kinzys claim they did not sign, making it—at least in
their view—unenforceable. The parties litigated this alleged forgery in state court,
where Howard & Howard, PLLC, and the other named law firm defendants represented First Tennessee Bank. The Kinzys lost when the state court entered a judgment of foreclosure against them in July 2015. But that did not keep the Kinzys from
suing First Tennessee and its lawyers in federal court, basically realleging that the
defendants defrauded them.
Previously, in Kinzy v. Howard & Howard, PLLC, No. 16 C 8230, 2017 WL
168480, at *1 (N.D. Ill. Jan. 17, 2017), this Court stayed the federal case while the
parties appealed in state court. The Court assumes the parties are familiar with the
relevant facts because not many changed since that opinion went on the docket. Notably, on September 7, 2017, the Appellate Court of Illinois dismissed the Kinzys’
appeal and in the following months struck their initial petition for rehearing and
denied a motion the court construed as a successive petition. The appellate court
then issued its mandate on February 28, 2018. The Kinzys did not petition the Supreme Court of Illinois for leave to appeal nor did they petition the Supreme Court of
the United States for a writ of certiorari. Because the parties reported the state court
proceedings were complete, this Court lifted the stay on their federal case in April
2018. (Dkt. 55.)
Soon thereafter, the defendants moved to dismiss all claims alleged in the complaint arguing that this Court lacks subject matter jurisdiction to resolve the case
because, under the Rooker-Feldman doctrine, only the Supreme Court of the United
States has the power to review state-court decisions in civil litigation. See Rooker v.
Fidelity Trust Co., 263 U.S. 413 (1923); District of Columbia Court of Appeals v.
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Feldman, 460 U.S. 462 (1983). Heedful of limited jurisdiction and federalism, the
Court grants the defendants’ motions to dismiss (Dkts. 56, 58, 61) under Federal Rule
of Civil Procedure 12(b)(1).
In granting the earlier stay in this case, the Court summed up the relationship
between the state and federal cases, reasoning that:
The Foreclosure Action and this action also involve substantially the
same factual and legal issues. In the instant action, all of the Kinzys’
claims primarily relate to the authenticity of the 2007 Mortgage, its enforceability, and the actions that the Defendants took to foreclose on the
mortgage. (See Dkt. 1 ¶¶ 17–25.) The Foreclosure Action by its very
nature involves assessing whether the 2007 Mortgage is valid and enforceable and the Appellate Court is now assessing the propriety of the
foreclosure action. Second, as either counterclaims or defenses in the
Foreclosure Action, the Kinzys have repeatedly asserted and litigated
that the 2007 Mortgage was unenforceable because it included forgeries
and other defects and that First Tennessee had no legal right to foreclose
on the note. Those same claims are at the heart of their complaint before
this Court.
Furthermore, there is a substantial likelihood that a final judgment in
the Foreclosure Action will dispose of all claims presented in the Kinzys’
federal complaint, which is the critical question in considering whether
a state and federal case are parallel. See Huon, 658 F.3d at 646. If the
Illinois Appellate Court affirms the determination that the 2007 Mortgage was valid and enforceable, the Kinzys’ central claims – that the
2007 Mortgage was fraudulent and that First Tennessee does not have
a valid claim to the note – would be precluded.
Kinzy, 2017 WL 168480, at *4–5. The Kinzys argued against this in a late, attachment-overloaded, and hard-to-follow response to the defendants’ motions to dismiss,
essentially contending that Rooker-Feldman: (1) has a fraud exception; (2) cannot bar
any claims that accrued after the state court entered it; and (3) does not preclude
their permissive counterclaims.
First, there is no fraud exception to Rooker-Feldman. See Bond v. Perley, 705
F. App’x 464, 465 (7th Cir. 2017), reh’g denied (Jan. 22, 2018) (citing Iqbal v. Patel,
780 F.3d 728, 729 (7th Cir. 2015)); Podemski v. U.S. Bank Nat’l Ass’n, 714 F. App’x
580, 581–82 (7th Cir. 2017) (first citing Mains v. Citibank, N.A., 852 F.3d 669, 676
(7th Cir. 2017); then citing Kelley v. Med-1 Solutions, LLC, 548 F.3d 600, 605 (7th
Cir. 2008)). That doctrine is about federal judicial power, not “why a state court’s
judgment might be mistaken . . .” Podemski, 714 F. App’x at 582 (quoting Iqbal, 780

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F.3d at 729) (emphasis in original); see Lennon v. City of Carmel, Indiana, 865 F.3d
503, 507 (7th Cir. 2017).
Second (and third), the critical question under Rooker-Feldman is “whether the
federal plaintiff seeks the alteration of a state court’s judgment.” Milchtein v.
Chisholm, 880 F.3d 895, 897–98 (7th Cir. 2018). It does not much matter when the
plaintiff came up with the reason for asking the federal court to modify the statecourt decision or in what vehicle the plaintiff chose to present it. Now, if the plaintiff
raises a claim that is separate and apart from the state case, then that is a different
story. For example, “a plaintiff [might] seek[ ] damages for fraud that occurred outside of state litigation and that independently caused injury.” Robin v. Bank of New
York Mellon, 706 F. App’x 880, 881 (7th Cir. 2017) (citing Iqbal, 780 F.3d at 730). Or
perhaps a plaintiff would “seek[ ] damages for emotional and physical harm that follow” the state-court proceeding. See Milsap v. Habitat Co. LLC, 708 F. App’x 884,
886 (7th Cir. 2018).
But cases like the Kinzys’ often ask the federal court to disregard or vacate the
state court’s foreclosure judgment and that is exactly what Rooker-Feldman forbids.
See Moore, 2018 WL 5816723, at *9; Mains, 852 F.3d at 677; Carpenter v. PNC Bank,
Nat. Ass’n, 633 F. App’x 346, 347–48 (7th Cir. 2016), cert. denied, 136 S. Ct. 2394
(2016), reh’g denied, 136 S. Ct. 2549 (2016); Riddle v. Deutsche Bank Nat. Tr. Co., 599
F. App’x 598, 600 (7th Cir. 2015); Calhoun v. CitiMortgage, Inc., 580 F. App’x 484,
486 (7th Cir. 2014); Nora v. Residential Funding Co., LLC, 543 F. App’x 601, 602 (7th
Cir. 2013); Crawford v. Countrywide Home Loans, Inc., 647 F.3d 642, 646–47 (7th
Cir. 2011). Here, the Kinzys’ claims basically ask this Court to rule that the state
courts were wrong and that, in fact, the mortgage was invalid and unenforceable because it was perpetrated by a fraud.
For instance, the Kinzys allege in Counts I–II that the defendants violated the
Fair Debt Collections Practices Act (FDCPA) because they foreclosed on the Kinzys’
home and stated that the 2007 mortgage was a true and correct copy of the mortgage
even though, as the Kinzys see it, that mortgage was fraudulent. (See Dkt. 1 ¶¶ 43–
48, 51, 56, 64.) The Kinzys argued forgery in state court but it did not persuade the
trial or appellate courts. See Nora, 543 F. App’x at 602 (explaining that the plaintiff
“had the opportunity to raise—and did raise—her fraud allegations in the state foreclosure proceeding, where the court rejected them.”). For the Kinzys to prevail on
their FDCPA claims, this Court would need to reassess the propriety of the foreclosure action and it has no warrant to do so. See Mains, 852 F.3d at 677–78 (stating
that Rooker-Feldman bars FDCPA claims based on false statements) (citing Harold
v. Steel, 773 F.3d 884, 886–87 (7th Cir. 2014)). Effectively, the Kinzys request a de
facto exercise of federal appellate authority over a state-court final judgment, which
only the Supreme Court has the statutory power to perform.

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The Kinzys’ only other purported basis for federal-question jurisdiction fares
no better. In Count V, the Kinzys maintain that the defendants breached the Racketeer Influenced and Corrupt Organizations Act (RICO) by using a forgery to foreclose
on the Kinzys’ home. (See Dkt. 1 ¶¶ 104, 107–115, 119, 122.) Once again, to substantiate that cause of action would mean this Court finding that the defendants forged
the mortgage, a ruling that would directly contradict the state court’s judgment that
the mortgage was valid and enforceable. Because “it was the state-court judgment
that authorized the foreclosure and subsequent sale of” the Kinzys’ house, this federal
lawsuit turns into a later attack on that judgment. See Riddle, 599 F. App’x at 600.
Rooker-Feldman covers claims, like the Kinzys’, “that misstatements made to a state
court produced a harmful judgment.” Coley v. Abell, 682 F. App’x 476, 478 (7th Cir.
2017) (first citing Harold, 773 F.3d at 886–87; then citing Kelley, 548 F.3d at 605).
All remaining counts in the complaint are state-law claims that this Court has
the discretion to relinquish supplemental jurisdiction over. See Dietchweiler by Dietchweiler v. Lucas, 827 F.3d 622, 631 (7th Cir. 2016). This Court will exercise that
discretion according to the statutory presumption that if the federal claims drop out
before trial, so too should the state-law claims. See id. (citing 28 U.S.C. § 1367(c)(3)).
Even if the Court did not do that, however, Rooker-Feldman would still apply to those
claims.
By way of example, the Kinzys contend in Count III that the defendants contravened the Illinois Consumer Fraud and Deceptive Practices Act because they repeatedly misrepresented the 2007 mortgage as a true and correct document, and in
doing so, defrauded the county recorder of deeds and the state courts. (See Dkt. 1 ¶
91–92.) The state trial court rejected this assertion when it found that the 2007 mortgage was valid and enforceable. The state appellate court affirmed that judgment.
This Court is not the proper forum to review those decisions. In fact, “the proper
place to remedy any potential fraud in the state court’s judgment is the state court.”
Mains, 852 F.3d at 678. The identity theft (Count IV), intentional infliction of emotional distress (Count VI), quiet-title (Count VII), and slander of title (Count VIII)
claims all suffer from the same jurisdictional defects as the statutory fraud claim and
this Court is therefore without authority to adjudicate them.
Even assuming Rooker-Feldman did not prohibit this Court from exercising
jurisdiction over this lawsuit (meaning the claims are independent of the state-court
judgment), the doctrines of claim and issue preclusion would apply in one way or
another to block the Kinzys from asserting their causes of action because the state
courts already passed on them. See Mains, 852 F.3d at 675; Sykes v. Cook Cty. Circuit
Court Prob. Div., 837 F.3d 736, 742 (7th Cir. 2016), reh’g and suggestion for reh’g en
banc denied (Oct. 27, 2016).
In conclusion, this Court cannot “delve into the question whether fraud tainted
the state court’s judgment [because] the only relief [it] could give would be to vacate
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that judgment.” Mains, 852 F.3d at 676. The Kinzys’ remedies lie in the Illinois
courts or potentially the Supreme Court of the United States. Accordingly, the Court
grants the defendants’ motions to dismiss (Dkts. 56, 58, 61) all claims alleged in the
complaint without prejudice under Rule 12(b)(1). See Lennon v. City of Carmel, Indiana, 865 F.3d 503, 509 (7th Cir. 2017) (stating that a dismissal with prejudice is a
disposition on the merits that only a court with the power to hear a case may issue)
(citing Mains, 852 F.3d at 678).

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Virginia M. Kendall
United States District Judge
Date: January 3, 2019

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