Freehand H.J., Inc. v. Board of Supervisors of East Goshen Township

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In : Chapter 11
FREEHAND H.J., INC., :
Debtor. : Case No. 07-12172 (JKF)
________________________________
FREEHAND H.J., INC., :
Plaintiff, :
v. :
Board of Supervisors of :
East Goshen Township,
Defendant. : Adversary No. 07-0157
________________________________
MEMORANDUM OPINION
BY: JEAN K. FITZSIMON
United States Bankruptcy Judge
This matter is before the Court on the Board of Supervisors of East Goshen
Township’s Motion to Abstain and to Remand State Court Action Pursuant to 28
U.S.C. § 1334(c), 28 U.S.C. § 1452(b) and Federal Rule of Bankruptcy Procedure
9027. Because this Court lacks subject matter jurisdiction pursuant to the
Rooker-Feldman doctrine, the adversary proceeding will be remanded to the
state court.
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BACKGROUND
Freehand H.J., Inc., filed for Chapter 11 protection in this Court on April 15,
2007. Five days later it removed this adversary proceeding from state court to
this Court pursuant to 28 U.S.C. § 1452 and Fed. R. Bankr. P. 9027. The Defendant
filed the Motion to Remand and Abstain on May 17, 2007. In addition to the Debtor, the
Official Committee of Unsecured Creditors filed an opposition to the Motion.
The dispute pending in the state court concerns a land development project
that the Debtor contends failed due, in part, to East Goshen Township’s (the
“Township”) denial of a final land development plan approval. The Debtor filed a
land development plan with the Township on February 23, 2005 with regard to
property located at 1325 W est Chester Pike in East Goshen Township,
Pennsylvania. Because Freehand sought both to keep a historic resource on the
property and to build townhouses, it needed to and did file both a “Conditional
Use Application” and a “Land Development Application” with the Township. The
Debtor filed both of these applications, each with the same plan, at the same
time.
On September 6, 2005, Freehand was granted only conditional use
approval of the land, containing 30 conditions that the Debtor contends are
unreasonable and an abuse of the Township’s discretion. One of the conditions
was that the “final land development approval by the Board of Supervisors shall
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be granted contingent upon the submission of a fully engineered plan in
conformance with the conditions of this decision.” (See Decision and Order of the
Board of Supervisors of East Goshen Township at p.23, attached as “Exhibit A” to
the Township’s Answer to the state court Complaint). The Debtor appealed the
conditional use approval by the Township to the Court of Common Pleas of
Chester County. Freehand never submitted a revised land development plan.
The state court affirmed the decision of the Township in a written opinion issued
on January 19, 2007 (the “State Court Decision”). The State Court Decision
notes that the Township found Freehand’s plan to have violated various spacing
ordinances and also that the development plan would be detrimental to the
historical resource on the property (Opinion at 5, attached as Exhibit C to the
Motion). The Debtor has appealed the State Court Decision to the
Commonwealth Court of Pennsylvania.
On November 15, 2005, the Township denied Freehand’s “preliminary land
development plans,” (which both sides agree are one in the same as the final
development plans) in part because “the Preliminary Plans [did] not comply with
the terms and conditions in the Conditional Use Order.” (See Decision of
Township regarding Preliminary Land Development Application of H.J. Freehand
at p.3, attached to Defendant’s state court answer as “Exhibit C.”). Freehand did
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not appeal this decision. Rather, on December 21, 2005, the Debtor filed the
underlying state court Complaint in Chester County, alleging that the Township’s
delay and lack of justification in issuing final land development approval
contributed to the failure of the Debtor’s project. The Complaint seeks specific
performance, or mandamus, ordering the Defendant to issue stamped and
certified approvals to construct the proposed development, as well as damages in
excess of $50,000. The Township answered the Complaint, attaching its
conditional use grant of the property, as well as the Planning Commission
minutes. The Defendant raised a new matter in the state court, to which the
Plaintiff has replied.
A hearing was held in this Court on June 20, 2007, regarding the
Defendant’s Motion to Abstain and Remand. At that time the Court raised the
question of whether it has jurisdiction to hear this dispute pursuant to the Rooker-
Feldman doctrine. See Vanderwiele v. Murphy, 2005 W L 2396973, at *1 (E.D.
Pa. Sep. 27, 2005) (citing Liberty Mut. Ins. Co. v. W ard Trucking Corp., 48 F.3d
742, 750 (3d Cir. 1995) (“[f]ederal courts have an ever-present obligation to
satisfy themselves of their subject matter jurisdiction and to decide the issue sua
sponte”). The parties were given a chance to brief the Rooker-Feldman issue
and further oral argument was held on July 17, 2007. This matter is now ready
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In the alternative, the Court would abstain from this proceeding pursuant to the abstention
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doctrine outlined in Burford v. Sun Oil Co., 319 U.S. 315 (1943). The purpose of Burford abstention is to
“‘avoid federal intrusion into m atters of local concern and which are within the special com petence of local
courts.’” Hi Tech Trans, LLC v. New Jersey, 382 F.3d 295, 303-4 (3d Cir. 2004) (citation om itted).
“W here tim ely and adequate state-court review is available, a federal court sitting in equity m ust decline to
interfere with the proceedings or orders of state adm inistrative agencies: (1) when there are difficult
questions of state law bearing on policy problem s of substantial public im port . . . or (2) where the exercise
of federal review of the question in a case and in sim ilar cases would be disruptive of state efforts to
establish a coherent policy with respect to a m atter of substantial public concern.” Id. (citation and internal
quotations om itted). Burford abstention has been held particularly appropriate in cases such as this
involving land use disputes where the state has a “unified schem e for review of its adm inistrative orders.”
See, e.g., Hoffm an v. Fay’s Boat Yard, Inc., 2006 W L 827781, at *4 (D.N.H. Feb.3, 2006) (and cases cited
therein). Freehand’s dispute with the Township involves land zoning issues appropriate for state court
adjudication which can be tim ely and adequately reviewed in state court. Burford abstention is therefore
appropriate under the circum stances.
The Rooker-Feldman doctrine acquired its nam e from two Suprem e Court cases, Rooker v.
2
Fidelity Trust Co., 263 U.S. 413 (1923) and District of Colum bia Court of Appeals v. Feldm an, 460 U.S.
462 (1982).
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for adjudication and the Court determines, for reasons set forth below, that it
lacks jurisdiction due to the Rooker-Feldman doctrine.
DISCUSSION
THE Rooker-Feldman DOCTRINE
W hile the Township’s original Motion presented the issue of whether the
Court should abstain from adjudicating this proceeding, the merits of that
question will not be reached in light of the Court’s conclusion, discussed below,
that it lacks jurisdiction due to the Rooker-Feldman doctrine.1
The Rooker-Feldman doctrine “prevents ‘inferior’ federal courts from sitting
as appellate courts for state court judgments.” In re Knapper, 407 F.3d 573, 580
(3d Cir. 2005). A claim is barred from federal adjudication according to the2
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Rooker-Feldman doctrine if: (1) “the federal claim was actually litigated in state
court prior to the filing of the federal action” or (2) “if the federal claim is
inextricably intertwined with the state adjudication.” Id. See also Desi’s Pizza,
Inc. v. City of W ilkes-Barre, 321 F.3d 411, 419 (3d Cir. 2003). A federal claim is
“inextricably intertwined” with an issue adjudicated by a state court when “(1) the
federal court must determine that the state court judgment was erroneously
entered in order to grant the requested relief, or (2) the federal court must take an
action that would negate the state court's judgment.” Knapper, 407 F.3d at 581.
According to the Supreme Court, the Rooker-Feldman doctrine is confined 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.” Exxon Mobil Corp. v.
Saudi Basic Industries Corp., 544 U.S. 280, 284 (2005).
APPLICATION OF THE Rooker-Feldman DOCTRINE
TO THE FACTS OF THIS CASE
Applying the above law to this case, the Court concludes that, pursuant to
the Rooker-Feldman doctrine, it lacks jurisdiction to determine the merits of this
adversary proceeding. The removed state court action seeks mandamus relief -
or an order telling the Township that it must stamp and certify Freehand’s land
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Mandam us is defined as “a writ issued by a superior court to com pel a lower court or a
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governm ent officer to perform m andatory or purely m inisterial duties correctly.” Black’s Law Dictionary
980 (8th Ed. 1999).
See, e.g., State Court Decision, at p.1(referring to the appeal from the Township’s decision,
4
granting the Debtor’s application “subject to seventeen conditions”). See also Condition # 15 of the
Township’s decision which the State Court’s Decision upheld (“Final land developm ent approval by the
Board of Supervisors shall be granted contingent upon the subm ission of a fully engineered plan in
conform ance with the conditions of this decision.”).
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development approval “in accordance with the Debtor’s Final Land Development
Plan.” See Complaint, at p.3. Such relief would effectively overturn the State3
Court Decision because that ruling upheld a zoning decision by the Township
which precluded final land development approval without certain prior conditions
being met. In other words, if this Court were to grant the mandamus relief4
sought in this adversary, the Debtor would effectively circumvent one of the
conditions of the Township’s September 6, 2005 conditional use ruling. Thus,
this Court cannot order the Township to grant the final land development plan
because such approval is inextricably intertwined with the conditional use
approval and the State Court Decision upholding it. See Holland Transport, Inc.
v. Township of Upper Chichester, 2002 W L 31518836, at *19 (E.D. Pa. Oct. 24,
2002) (“[f]or Rooker-Feldman purposes, a federal claim and a state claim are
inextricably intertwined, where, if the federal claim succeeds, the state court
judgment would be effectively voided.”) (quoting Gulla v. North Strabane
Township, 146 F.3d 168, 171 (3d Cir. 1998)). Granting the Debtor a final land
development plan that is potentially inconsistent with the conditional use grant
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would void the State Court Decision. Rooker-Feldman prohibits this. Therefore,
the Court lacks jurisdiction over this adversary proceeding and the action must be
remanded to state court.
THE DEBTOR’S ARGUMENT
Freehand argues that the Rooker-Feldman doctrine does not apply in this
case because there was “never a final judgment from a state court.”
(Supplemental Brief, p.3). This is not so; the State Court Decision was a final
order that disposed of all claims of all parties in that proceeding. See Pa.R.A.P.,
Rule 341 (defining “final order”). Issuance of a mandamus order effectively would
overturn that decision.
First, contrary to the assertion of Freehand, the Third Circuit holds that the
Rooker-Feldman doctrine bars review of lower state courts’ interlocutory orders.
See Port Authority Police Benev. Ass’n Inc. v. Port Authority of New York, 973
F.2d 169, 178 (3d Cir 1992) (“the interlocutory nature of the New York state
court’s order does not preclude application of the Rooker-Feldman doctrine”);
see also In re Diet Drugs, 282 F.3d 220, 241 (3d Cir. 2002) (“In Port Authority . . .
we found the [Rooker-Feldman] doctrine precluded review of a preliminary
injunction issued by a state court”). This conclusion regarding interlocutory
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orders was not, as Freehand intimates, mere dicta in Port Authority. Rather, the
Third Circuit clearly pronounced “we hold that the Rooker-Feldman doctrine
precludes such review.” Port Authority, 973 F.2d at 178 (emphasis added).
But even if the Debtor were correct about the law regarding the application
of the Rooker-Feldman doctrine to interlocutory orders in the Third Circuit, it
would still be incorrect about the outcome of this proceeding. That is, Freehand
also errs when it contends that there was no final judgment by the state court
regarding the conditional use approval of the property at issue. To the contrary,
the State Court Decision issued by the Court of Common Pleas on January 19,
2007 fully disposed of the question of whether the Township had properly
exercised its discretion in issuing the conditional use approval to the Debtor and
was therefore not an interlocutory order. Freehand articulates no argument to the
contrary. In fact, the Debtor has appealed the State Court Decision to this
Commonwealth Court of Pennsylvania. In pointing out that the Township ruled
on a preliminary land development plan, Freehand confuses the subject matter of
the State Court Decision with the nature of that ruling. (Supplemental brief, p.5-
6). The mere fact that the State Court Decision involved a preliminary plan does
not render any order of the state court interlocutory.
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CONCLUSION
For the reasons discussed, the Court lacks subject matter jurisdiction over
this adversary proceeding pursuant to the Rooker-Feldman doctrine. For this
reason, the matter will be remanded to state court. The parties’ arguments
concerning abstention and the Township’s discussion of standing are moot in
light of this conclusion.
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In : Chapter 11
FREEHAND H.J., INC., :
Debtor. : Case No. 07-12172 (JKF)
________________________________
FREEHAND H.J., INC., :
Plaintiff, :
v. :
Board of Supervisors of :
East Goshen Township,
Defendant. : Adversary No. 07-0157
________________________________
ORDER
This 17th day of July, 2007, for reasons discussed in the accompanying
Memorandum Opinion, the Court concludes that it lacks jurisdiction over the
above captioned adversary proceeding pursuant to the Rooker-Feldman doctrine.
The adversary is therefore remanded to the state court.
______________________________
JEAN K. FITZSIMON
United States Bankruptcy Judge
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Copies to:
Albert A. Ciardi, III, Esquire
One Commerce Square
2005 Market Street, Suite 2020
Philadelphia, PA 19103
Jeffrey R. Sommer, Esquire
Buckley Brion McGuire Morris & Sommer LL
304 N. High Street
W est Chester, PA 19380
David Alexander Barnes, Esquire
Obermayer, Rebmann, Maxwell & Hipple LLD
1617 John F. Kennedy Boulevard, Suite 1900
Philadelphia, PA 19103-4210
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