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Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 

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In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 14-1959

MIR S. IQBAL,

Plaintiff-Appellant,

v.

TEJASKUMAR M. PATEL, WARREN JOHNSON, and S-MART 

PETROLEUM, INC.,

Defendants-Appellees.

____________________

Appeal from the United States District Court for the

Northern District of Indiana, Hammond Division.

No. 2:12 CV 56 — James T. Moody, Judge.

____________________

ARGUED FEBRUARY 24, 2015 — DECIDED MARCH 2, 2015

____________________

Before EASTERBROOK, ROVNER, and SYKES, Circuit Judges.

EASTERBROOK, Circuit Judge. Through a closely held corporation, Mir Iqbal bought a gasoline service station. (He also guaranteed its debts, so we need not mention the corporation again.) Iqbal contracted with S-Mart Petroleum for gasoline. Iqbal then hired Tejaskumar Patel to conduct the business, ceding operational control to him. He chose Patel on 

the recommendation of Warren Johnson, S-Mart’s president. 

Case: 14-1959 Document: 47 Filed: 03/02/2015 Pages: 5
2 No. 14-1959

Patel ran the business but did not pay for the gasoline, leading S-Mart to sue on the contract in an Indiana court. The 

court entered a judgment of more than $65,000 against Iqbal 

as guarantor. He did not pay, and a settlement was reached. 

Iqbal gave S-Mart a note, secured by a mortgage on the 

business premises. When he still did not pay, a state court 

entered a second judgment against him, and the property 

was sold in a foreclosure auction.

Iqbal alleges in this federal suit that Patel and Johnson 

acted in cahoots to defraud him out of his business. The 

complaint accuses the defendants of racketeering and seeks 

treble damages under 18 U.S.C. §1964, part of the Racketeer 

Influenced and Corrupt Organizations Act (RICO). The district court dismissed the complaint for want of jurisdiction, 

however, ruling that it is barred by the Rooker-Feldman doctrine because it challenges the state court’s judgments. 2014 

U.S. Dist. LEXIS 45385 (N.D. Ind. Mar. 27, 2014).

Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 

(1983), after which the doctrine is named, hold that the Supreme Court of the United States is the sole federal tribunal 

authorized to review the judgments of state courts in civil 

litigation. See also, e.g., Exxon Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280 (2005); Lance v. Dennis, 546 U.S. 

459 (2006). Iqbal invited trouble by asking the district court 

to undo the foreclosure.

When the judge directed the parties to address whether 

that would be possible, consistent with the Rooker-Feldman

doctrine, Iqbal contended that it does not apply to fraud (either fraud out of court or fraud during litigation). As the district court rightly replied, Kelley v. Med-1 Solutions, LLC, 548 

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No. 14-1959 3

F.3d 600 (7th Cir. 2008), and other decisions in this circuit 

foreclose such an argument. The Rooker-Feldman doctrine is 

concerned not with why a state court’s judgment might be 

mistaken (fraud is one such reason; there are many others) 

but with which federal court is authorized to intervene. See 

Harold v. Steel, 773 F.3d 884, 886 (7th Cir. 2014). The reason a 

litigant gives for contesting the state court’s decision cannot 

endow a federal district court with authority; that’s what it 

means to say that the Rooker-Feldman doctrine is jurisdictional. So although we recognize that other circuits disagree on 

this issue, or at least that language in their precedential decisions is in tension—compare Reusser v. Wachovia Bank, N.A., 

525 F.3d 855, 859 (9th Cir. 2008), with Fielder v. Credit Acceptance Corp., 188 F.3d 1031 (8th Cir. 1999)—we shall stick 

with Kelley.

Iqbal maintains, however, that we abandoned Kelley in

Johnson v. Pushpin Holdings, LLC, 748 F.3d 769 (7th Cir. 2014), 

without so much as citing it. That’s not how precedent 

works. In this circuit it takes a circulation to the full court 

under Circuit Rule 40(e) for one panel to overrule another. 

But the panel in Johnson did not disagree with Kelley. It made 

a different point, which we now quote:

The [Rooker-Feldman doctrine] does not bar a federal suit that 

seeks damages for a fraud that resulted in a judgment adverse to 

the plaintiff. Such a suit does not seek to disturb the judgment of 

the state court, but to obtain damages for the unlawful conduct 

that misled the court into issuing the judgment. It’s true that the 

plaintiff is also asking that the default judgments be vacated, and 

that is relief that would violate the Rooker-Feldman rule; but that 

claim can be rejected without affecting the damages claim.

Johnson, 748 F.3d at 773 (citations omitted). Like the district 

judge in our case, Johnson concludes that fraud (no matter 

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how described) does not permit a federal district court to set 

aside a state court’s judgment in a civil suit.

What Johnson adds—what the defendants in this suit 

have failed to appreciate—is that federal courts retain jurisdiction to award damages for fraud that imposes extrajudicial injury. The Supreme Court drew that very line in

Exxon Mobil:

Nor does [the doctrine] stop a district court from exercising subject-matter jurisdiction simply because a party attempts to litigate in federal court a matter previously litigated in state court. 

If a federal plaintiff “present[s] some independent claim, albeit 

one that denies a legal conclusion that a state court has reached 

in a case to which he was a party ... , then there is jurisdiction 

and state law determines whether the defendant prevails under 

principles of preclusion.” GASH Assocs. v. Rosemont, 995 F. 2d 

726, 728 (7th Cir. 1993); accord Noel v. Hall, 341 F. 3d 1148, 1163–

1164 (9th Cir. 2003).

544 U.S. at 293. In other words, if a plaintiff contends that 

out-of-court events have caused injury that the state judiciary failed to detect and repair, then a district court has jurisdiction—but only to the extent of dealing with that injury. 

As we wrote in Johnson, the federal court cannot set aside the 

state court’s judgment.

Iqbal alleges that the defendants conducted a racketeering enterprise that predates the state court’s judgments. He 

cannot have those judgments annulled but can contend that 

he was injured, out of court, by being “set up” by Patel and 

Johnson so that they could take over his business and reap 

the profits he anticipated. The district court believed that 

any pre-litigation fraud is “intertwined” with the state court 

judgments and therefore forecloses federal litigation, but

Exxon Mobil shows that the Rooker-Feldman doctrine asks 

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No. 14-1959 5

what injury the plaintiff asks the federal court to redress, not 

whether the injury is “intertwined” with something else. See 

544 U.S. at 291; see also Richardson v. Koch Law Firm, P.C., 768 

F.3d 732, 734 (7th Cir. 2014) (deprecating any inquiry into 

what is intertwined with what).

Because Iqbal seeks damages for activity that (he alleges) 

predates the state litigation and caused injury independently 

of it, the Rooker-Feldman doctrine does not block this suit. It 

must be reinstated.

Logically the district court’s next inquiry is whether the 

doctrine of claim preclusion (res judicata) applies. (Exxon 

Mobil observes, 544 U.S. 293, that preclusion differs from the 

Rooker-Feldman doctrine and comes to the fore once the federal court concludes that it has subject-matter jurisdiction.) 

At least two decisions by intermediate appellate courts in 

Indiana hold that fraud causing nonpayment is a compulsory counterclaim in a debt-collection suit. Ratcliff v. Citizens 

Bank, 768 N.E.2d 964, 967–69 (Ind. App. 2002); Broadhurst v. 

Moenning, 633 N.E.2d 326, 331–32 (Ind. App. 1994). Cf. Fox v. 

Maulding, 112 F.3d 453 (10th Cir. 1997) (similar conclusion 

under Oklahoma law). State law determines the rules of preclusion, see 28 U.S.C. §1738, so the district court will need to

decide whether the Supreme Court of Indiana is likely to 

agree with these decisions, and if so whether there is any exception to the rules of preclusion. The court also will need to 

consider whether Patel and Johnson receive the benefits of 

any compulsory-counterclaim requirement, given that SMart Petroleum was the sole plaintiff in the state actions.

The judgment is reversed, and the case is remanded for 

further proceedings consistent with this opinion.

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