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Joseph Abbas, Individually, and Downers Motors, Inc v. Rbs Citizens National Association

May 29, 2012


The opinion of the court was delivered by: Judge Feinerman


Plaintiffs Joseph Abbas and Downers Motors, Inc. brought this action in the Circuit Court of Cook County, Illinois, against Defendant RBS Citizens National Association. RBS removed the suit on diversity grounds, and now moves to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). The motion is denied. However, because Plaintiffs' claims are an attack on and inextricably intertwined with a final state court judgment entered in a case involving all three parties here, and because Plaintiffs had a reasonable opportunity to present their claims in state court, the Rooker-Feldman doctrine divests this court of jurisdiction. The case therefore is remanded to state court.


A complaint's well-pleaded facts generally are assumed true on Rule 12(b)(1) and Rule 12(b)(6) motions, and all reasonable inferences are drawn in the plaintiff's favor. See Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 763 (7th Cir. 2010); Patel v. City of Chicago, 383 F.3d 569, 572 (7th Cir. 2004). In evaluating a motion to dismiss, the court must consider "the complaint itself, documents attached to the complaint, documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice." Geinosky v. City of Chicago, 675 F.3d 743, 745 n.1 (7th Cir. 2012). Orders entered and filings made in other courts are subject to judicial notice, as are "adjudicative facts capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." United States v. Stevens, 500 F.3d 625, 628 n.4 (7th Cir. 2007) (internal quotation marks omitted); see also Cancer Found., Inc. v. Cerberus Capital Mgmt., LP, 559 F.3d 671, 676 n.2 (7th Cir. 2009). The following facts are stated as favorably to Plaintiffs as permitted by the complaint and other materials that may be considered on a Rule 12(b) motion.

Downers was a car dealership and Abbas was its president. In October 2005, Downers (then known as Luxury Motors, Inc.) entered into a financing loan and security agreement with RBS's predecessor to finance the purchase of vehicles for Downers and another Abbas dealership. Abbas personally guaranteed the loan.

After Abbas and Downers defaulted on their obligations in February 2009, RBS retained Premier Performance Group ("PPG"), a collateral management company, to manage the dealerships' inventories. PPG had no experience in preserving assets or keeping car dealerships in business. In March 2009, with RBS's consent, Abbas entered into a management agreement with Import Acquisition Motors ("IAM"), which was interested in buying the dealerships. At RBS's behest, PPG took daily inventories at both dealerships and excluded from those inventories any vehicles traded in by Downers' customers.

RBS received daily reports regarding the dealerships' inventories and sales. According to Abbas and Downers, the reports should have alerted RBS to PPG's inadequate performance. Abbas and Downers charge that PPG's mismanagement caused the debt they owed to RBS to increase from approximately $2 million to over $9 million. They further allege that RBS approved the sale of at least six vehicles for less than their "inventory price," a term defined as the amount Downers paid for the vehicle, which is the amount Downers borrowed from RBS to purchase the vehicle. In one such instance, RBS approved the sale of a new Bentley Azure to an RBS employee for $64,400, even though Downers owed RBS $232,000 for the vehicle. RBS also approved the sale of a used Bentley Continental to a dealership owned by one of IAM's principals for $55,000, even though Downers owed RBS $115,000 for the vehicle.

In the meantime, on March 11, 2009, RBS filed suit in the Circuit Court of the Eighteenth Judicial Circuit, DuPage County, Illinois, against Downers, Abbas, and three other defendants. The suit sought to recover over $18 million from Abbas and Downers on the defaulted loan and guaranty agreements. Doc. 20-5. Abbas and Downers filed affirmative defenses alleging that RBS, among other things: (a) "orchestrat[ed] a default" under the loan and guaranty agreements, Doc. 20-7 at ¶ 16; (b) did not give them "credit . [for] vehicles that were received as trade-ins . caus[ing them] to have to pay down the [loan] as if no trade-in had been received[,]" id. at ¶ 39; (c) "retained [PPG] to manage inventory that was subject to the lien of RBS[,]" id. at ¶ 46; (d) "took over the management and control of the dealerships[,]" id. at ¶ 57; (e) through its agent, PPG, "directed all dealership revenues into [a] new operating account at RBS and controlled payments out of th[e] account[,]" id. at ¶ 59; (f) through its agent, PPG, "took control of the titles to all [the dealerships'] vehicles[,]" id. at ¶ 60; (g) along with PPG, "mismanage[d]" the dealerships, id. at ¶ 88; and (h) seized their vehicles and wrongfully conveyed title for less than fair market value, id. at ¶¶ 90-91. The defenses sought to abrogate, in whole or in part, Abbas and Downers's alleged liability to RBS. Id. at ¶ 92.

On April 12, 2010, RBS moved to dismiss the affirmative defenses, arguing that Abbas and Downers waived in the loan and guaranty agreements their right to assert those defenses, that the defenses were not true affirmative defenses, and that the defenses were not sufficiently pled under Illinois law. Doc. 20-8. Rather than oppose the motion, Abbas and Downers withdrew their affirmative defenses on July 1, 2010. Doc. 20-13 at 2-3. RBS then moved for summary judgment, seeking $12,021,098.90 plus interest, costs, and expenses. Doc. 20-14. On March 14, 2011, the state court entered judgment in favor of RBS and against Abbas and Downers for $12,357,098.90. Doc. 20-1.

Abbas and Downers filed this suit five months later. As relief, they seek several million dollars in damages to offset the debt they owe to RBS. Doc. 13 at p. 8.


RBS moves to dismiss this suit under Rule 12(b)(1), arguing that the Rooker-Feldman doctrine deprives the court of subject matter jurisdiction, and under Rule 12(b)(6), arguing that the suit is barred by res judicata. Subject matter jurisdiction will be addressed first. See Crawford v. Countrywide Home Loans, Inc., 647 F.3d 642, 645 (7th Cir. 2011) ("We will take up the[] jurisdictional issue first to demonstrate that this case is properly before us."). Only if the court has jurisdiction will it address res judicata, a merits issue. See Taylor v. Fed. Nat'l Mortg. Ass'n, 374 F.3d 529, 535 (7th Cir. 2004).

The Rooker-Feldman doctrine "precludes lower federal court jurisdiction over claims seeking review of state court judgments or over claims 'inextricably intertwined' with state court determinations." Remer v. Burlington Area Sch. Dist., 205 F.3d 990, 996 (7th Cir. 2000). Rooker-Feldman is a "narrow doctrine, 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." Kelley v. Med-1 Solutions, LLC, 548 F.3d 600, 603 (7th Cir. 2008) (quoting Lance v. Dennis, 546 U.S. 459, 464 (2006)) (internal quotation marks omitted). "The doctrine does not prevent state-court losers from presenting independent claims to a federal district court, even if the new claims involve questions related to those in the original state court proceedings." Crawford, 647 F.3d at 645. The "pivotal inquiry in applying the doctrine is whether the federal plaintiff seeks to set aside a state court judgment or whether he is, in fact, presenting an independent claim." Brokaw v. Weaver, 305 F.3d 660, 665 (7th Cir. 2002).

Abbas and Downers (who henceforth will be referred to together as "Downers") do not dispute that their claims here are inextricably intertwined with the claims resolved in the state court case brought by RBS. Instead, Downers invokes an exception to Rooker-Feldman that "allows plaintiffs to litigate in the federal system if they were not afforded a 'reasonable opportunity' to raise their claims in state court." Gilbert v. Ill. State Bd. of Educ., 591 F.3d 896, 901-02 (7th Cir. 2010). The "reasonable opportunity" exception applies where "some factor independent of the actions of the opposing party [here, RBS] ... precluded the litigants [here, ...

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