## Facts

- Dexter and Gretchen Kamilewicz and Martha Preston were absent class members in an Alabama state-court class action challenging a mortgage servicer’s handling of escrow/reserve balances.
- The Alabama court approved a class settlement providing small interest/escrow benefits to class members and authorizing attorneys’ fees allocated across the class.
- For some class members, including the Kamilewiczes, the settlement’s fee allocation exceeded the benefits received, producing an out-of-pocket loss.
- The plaintiffs alleged the class notice was misleading because it did not adequately disclose that some class members could end up paying more in attorneys’ fees than they received in settlement benefits.
- The plaintiffs filed a new action in the U.S. District Court for the Northern District of Illinois against the bank entities and the lawyers/law firms who had served as class counsel in the Alabama case, asserting state-law theories (including fraud and breach of fiduciary duty) based on the settlement and fee structure.
- After the federal suit was filed, proceedings occurred in Alabama in which the settlement order was reaffirmed.
- The federal district court dismissed the Illinois action for lack of subject-matter jurisdiction under the Rooker–Feldman doctrine.
- The plaintiffs appealed to the Seventh Circuit.

## Issues

1. Whether the Rooker–Feldman doctrine deprived the federal district court of subject-matter jurisdiction because the plaintiffs’ claimed injuries were caused by, and could be remedied only by undermining, the Alabama state-court judgment approving the class settlement and attorneys’ fee award.
2. Whether the plaintiffs’ claims could be characterized as alleging independent misconduct by the bank and class counsel such that federal jurisdiction existed without reviewing or nullifying the state-court judgment.

## Decision

- The Seventh Circuit affirmed the dismissal for lack of subject-matter jurisdiction.
- The court held the plaintiffs’ alleged injury (fees assessed through the settlement exceeding the benefits received) flowed from the Alabama judgment approving the settlement and fee allocation.
- Because the requested federal relief would require determining that the Alabama court’s approval of the settlement, notice, and fee award was wrong or void, the federal suit functioned as an impermissible de facto appeal of a state-court judgment.
- A dissent would have treated the complaint as alleging independent fraud/malpractice-like misconduct not requiring review of the Alabama judgment, but the majority rejected that framing based on the practical effect of the relief sought.

## Legal Principles

- Under the Rooker–Feldman doctrine, lower federal courts lack subject-matter jurisdiction over claims seeking relief from injuries caused by a state-court judgment.
- Federal claims are barred when they are “inextricably intertwined” with a state-court judgment, meaning the plaintiff’s alleged injury results from the judgment itself and relief would effectively negate or overturn that judgment.
- Labeling a claim as fraud, breach of fiduciary duty, or other misconduct does not create federal jurisdiction if success depends on a determination that the state-court settlement approval, notice approval, or fee award was invalid.
- Challenges to state-court judgments must proceed through state-court review mechanisms and, if appropriate, review in the U.S. Supreme Court rather than in a federal district court.

## Conclusion

The Seventh Circuit held that absent class members’ federal damages claims attacking the fairness of an Alabama class settlement, the adequacy of class notice, and the attorneys’ fee allocation were barred by Rooker–Feldman because the alleged injury was caused by the state-court judgment and federal relief would amount to appellate review of that judgment.


Kamilewicz v. Bank of Bos. Corp., 92 F.3d 506 (7th Cir. 1996)