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Great Western Mining & Mineral Co. v. Fox Rothschild LLP

August 5, 2010

GREAT WESTERN MINING & MINERAL COMPANY, ASSIGNEE OF HRC/NJ, INC., ASSIGNEE OF ACTIVE ENTERTAINMENT INC., APPELLANT
v.
FOX ROTHSCHILD LLP; THOMAS D. PARADISE, ESQ., PARTNER, FOX ROTHSCHILD LLP; ROBERT S. TINTNER, ESQ., PARTNER, FOX ROTHSCHILD LLP; ADR OPTIONS, INC.; THOMAS B. RUTTER, ESQ., CEO, ADR OPTIONS



On Appeal from the District Court for the District of New Jersey, (No. 08-cv-1093), District Judge: Honorable William H. Walls.

The opinion of the court was delivered by: Fuentes, Circuit Judge

PRECEDENTIAL

Argued March 25, 2010

Before: McKEE, Chief Judge, and FUENTES and CHAGARES, Circuit Judges

OPINION OF THE COURT

Having lost in state court, Great Western Mining & Mineral Company ("Great Western") brought a civil rights action in federal court under 42 U.S.C. § 1983. Great Western alleges that its state-court losses were the result of a "corrupt conspiracy" between the named defendants and certain members of the Pennsylvania state judiciary to exchange favorable rulings for future employment as arbitrators with ADR Options, Inc. ("ADR Options"), an alternative dispute resolution entity. The District Court dismissed Great Western's complaint for failure to state a claim and denied its motion for reconsideration and motions for leave to amend its complaint.

As a threshold matter, we address Defendants' contention that the Rooker-Feldman doctrine precludes the exercise of subject matter jurisdiction over this action. We disagree, as Great Western is not "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). Rather, Great Western asserts an independent constitutional claim that the alleged conspiracy violated its right to be heard in an impartial forum. Turning to the merits, we conclude that granting Great Western leave to amend would have proved futile as even the final version of its complaint failed to plead facts plausibly suggesting a conspiratorial agreement. Accordingly, we will affirm.

I.

This case originates out of a dispute involving a miniature golf course in which Active Entertainment, Inc. ("Active") was the losing party.*fn1 Active retained Brownstein & Vitale, P.C. ("B&V") to represent it in litigation against an entity that Active had hired to build a miniature golf course. Dissatisfied with the damages awarded in that litigation, Active brought a malpractice suit against its counsel, Gary Brownstein, Marc D. Vitale, and B&V. All parties agreed to binding arbitration before Thomas Rutter and Rutter's company, ADR Options. James F. Wiley, III, represented Active; Thomas Paradise, a partner at Fox Rothschild LLP ("Fox Rothschild"), represented Vitale.

According to the Complaint, ADR Options is the largest provider of alternative dispute resolution ("ADR") services in Pennsylvania, New Jersey, and Delaware. Rutter is the founding shareholder and Chief Executive Officer of ADR Options. Many of ADR Options's arbitrators are former federal and state judges.

Before beginning arbitration proceedings, the parties entered into a binding ADR Options Arbitration Agreement, which provided that:

Each party and participating attorney has disclosed any past or present relationship with the arbitrator, direct or indirect, whether financial, professional, social or any other kind. The arbitrator has also disclosed any past or present relationship with any party or attorney. It is understood that any doubt has been resolved in favor of disclosure.

(J.A. at 114 [Proposed Am. Compl. 3, ¶ 14].) The result of the arbitration proceedings was an award for defendants Brownstein, Vitale, and B&V. Thereafter, Great Western became the assignee of Active's interest.

Great Western filed a petition in Pennsylvania state court to vacate the arbitration award on the ground of improper failure to disclose potential conflicts. In particular, Great Western alleged that the managing partner at Fox Rothschild, Louis Fryman, was concurrently employed at ADR Options as an arbitrator and that Paradise maintained a professional relationship with Rutter.*fn2 The Philadelphia Court of Common Pleas and the Superior Court of Pennsylvania ruled against Great Western and confirmed the arbitration award. The Supreme Court of Pennsylvania denied Great Western's petition for allowance of appeal.

While its appeal was pending before the Superior Court of Pennsylvania, Great Western filed a separate civil action in the Philadelphia Court of Common Pleas against Rutter, ADR Options, Fox Rothschild, and Paradise, raising contract and tort claims and alleging a failure to disclose the purportedly improper relationships. Robert Tintner, a partner at Fox Rothschild, represented all of the defendants. The Court of Common Pleas dismissed the action as collaterally estopped, and Great Western appealed. According to Great Western's counsel, Wiley, shortly thereafter Tintner called Wiley and informed him that "[t]here [was] no way that a Philadelphia court [was] ever going to find against Thomas Rutter given his relationship with the Philadelphia court system." (J.A. at 118 [Proposed Am. Compl. 3, ¶ 43].) The Superior Court of Pennsylvania affirmed the decision of the Court of Common Pleas dismissing the action, and the Supreme Court of Pennsylvania denied Great Western's petition for allowance of appeal.

Thereafter, Great Western filed a federal action under 42 U.S.C. § 1983, claiming deprivations of procedural and substantive due process. As defendants, Great Western named Fox Rothschild, Paradise, Tintner, ADR Options, and Rutter (collectively, "Defendants"). Great Western alleged that the Pennsylvania state-court decisions were corrupted by the improper influence of Defendants, arising both from the Pennsylvania courts' reliance on Rutter's services and from Pennsylvania judges' prospect of future employment with ADR Options. Specifically, Great Western claimed that "Defendants had the power yet failed to take action to prevent violation of Great Western's constitutional rights to due process." (J.A. at 127 [Proposed Am. Compl. 3, ¶ 105]). The District Court granted Defendants' motion to dismiss for failure to state a claim, holding that Great Western had not sufficiently alleged that Defendants acted under color of state law. The District Court reasoned that the corruption alleged by Great Western "exists only to the extent that defendants conspired with the courts to ensure the outcome of the underlying case" and concluded that Great Western had failed to properly allege the existence of a conspiracy between Defendants and the Pennsylvania state court system. Great W. Mining & Mineral Co. v. Fox Rothschild LLP, No. 08-cv-1093, 2009 WL 704335, at *4 (D.N.J. Mar. 16, 2009).

Thereafter, Great Western filed a motion for reconsideration and for leave to amend its complaint pursuant to Federal Rules of Civil Procedure 59(e) and 15(a), attaching a draft amended complaint ("Proposed Amended Complaint 1"). While the reconsideration motion was pending, Great Western filed a second motion for leave to amend, seeking to substitute a new proposed draft amended complaint ("Proposed Amended Complaint 2"), which was attached. Several weeks later and without a ruling on the first two motions to amend, Great Western filed a third motion for leave to amend, seeking to substitute yet another proposed draft amended complaint ("Proposed Amended Complaint 3"), which was attached. In this motion, Great Western argued that it had newly discovered evidence, specifically Rutter's May 14, 2009 admission under oath in another lawsuit that some of the judges who had ruled against Great Western and for ADR Options had already approached Rutter regarding the prospect of employment upon leaving the bench.

On June 24, 2009, the District Court issued an unpublished Letter Order denying the motion for reconsideration on the merits and denying the three motions for leave to amend as moot. In ruling on the motion for reconsideration, the District Court considered Proposed Amended Complaint 2, but not Proposed Amended Complaint 3. In a footnote, the District Court explained that it declined to consider Proposed Amended Complaint 3 because "[t]o allow plaintiff to repeatedly submit drafts of its complaint while plaintiff's original motions are still pending would be prejudicial to defendants." (J.A. at 3.) The District Court denied the motion for reconsideration, holding that the allegations in Proposed Amended Complaint 2 did not support a conspiracy claim. On appeal, Great Western challenges the District Court's refusal to consider Proposed Amended Complaint 3 and argues that the motion for reconsideration was erroneously denied.

II.

Defendants contest our jurisdiction and that of the District Court, contending that this action is barred by the Rooker-Feldman doctrine. Although Defendants raised this argument in their motion to dismiss, the District Court declined to address it and, exercising jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1343, dismissed Great Western's Complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). We exercise de novo review over questions of subject matter jurisdiction.*fn3 PennMont Secs. v. Frucher, 586 F.3d 242, 245 (3d Cir. 2009). Moreover, all courts "have an independent obligation to determine whether subject-matter jurisdiction exists." Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006).

Our standard of review of a district court's dismissal under Federal Rule of Civil Procedure 12(b)(6) is plenary. PennMont Secs., 586 F.3d at 245. We review a district court decision refusing leave to amend under Federal Rule of Civil Procedure 15(a) for abuse of discretion. Bjorgung v. Whitetail Resort, LP, 550 F.3d 263, 266 (3d Cir. 2008). Likewise, the denial of a motion for reconsideration is reviewed for abuse of discretion. McDowell v. Phila. Hous. Auth., 423 F.3d 233, 238 (3d Cir. 2005).

III.

A. Rooker-Feldman Doctrine

In certain circumstances, where a federal suit follows a state suit, the Rooker-Feldman doctrine prohibits the district court from exercising jurisdiction. The doctrine takes its name from the only two cases in which the Supreme Court has applied it to defeat federal subject-matter jurisdiction: Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983). In a recent decision, the Supreme Court held that the Rooker-Feldman doctrine "is confined to cases of the kind from which the doctrine acquired its name: 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, 544 U.S. at 284. Thus, any discussion of the scope of the doctrine must begin with an examination of its namesake cases.

The Supreme Court characterized the lawsuit at issue in Rooker as an attempt "to have a judgment of a circuit court in Indiana, which was affirmed by the Supreme Court of the state, declared null and void, and to obtain other relief dependent on that outcome." 263 U.S. at 414. Rooker and others, who had lost in state court, sought relief in federal district court, arguing that the state-court judgment was "in contravention of" the United States Constitution. Id. at 415. The Supreme Court affirmed the dismissal by the district court for lack of jurisdiction. The Court reasoned that:

[u]nder the legislation of Congress, no court of the United States other than this court could entertain a proceeding to reverse or modify the judgment for errors of that character. To do so would be an exercise of appellate jurisdiction. The ...


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