Preclusion, Not Rooker‑Feldman, Governs Post‑Foreclosure Bankruptcy Litigation: Third Circuit’s Two‑Part Clarification for When Rooker‑Feldman Applies in Bankruptcy

Preclusion, Not Rooker‑Feldman, Governs Post‑Foreclosure Bankruptcy Litigation: Third Circuit’s Two‑Part Clarification for When Rooker‑Feldman Applies in Bankruptcy

Introduction

In a precedential decision, the United States Court of Appeals for the Third Circuit in In re: Eileen T. Adams (No. 24‑1212, Sept. 3, 2025) offers a clear and practical recalibration of the boundary between the Rooker‑Feldman doctrine and preclusion in the bankruptcy context. The case arises from a long‑running New Jersey mortgage foreclosure involving Eileen Adams, who—after losing in state court—resisted a creditor’s motion for relief from the automatic stay in bankruptcy by reasserting the same challenges to the foreclosure judgment.

The District Court affirmed the Bankruptcy Court’s order lifting the automatic stay but dismissed the appeal for lack of subject‑matter jurisdiction under Rooker‑Feldman. The Third Circuit agreed that Adams ultimately loses, yet rejected the jurisdictional rationale. It held that federal jurisdiction existed, but Adams’s arguments were barred by preclusion under New Jersey law. Importantly, the Court used this occasion to clarify when Rooker‑Feldman does—and does not—apply in bankruptcy proceedings, and to emphasize that preclusion, not jurisdictional dismissal, is typically the proper tool for dealing with repeat litigation of state‑court matters.

Summary of the Judgment

  • The Third Circuit affirmed the Bankruptcy Court’s order granting Nationstar Mortgage relief from the automatic stay, but on alternative grounds.
  • Jurisdiction existed in the federal courts; the District Court erred by invoking Rooker‑Feldman to dismiss the appeal.
  • Adams’s arguments attacking the New Jersey foreclosure judgment are barred by preclusion (res judicata) under New Jersey law.
  • Guidance for bankruptcy courts: Rooker‑Feldman is “narrow” and applies only where a federal plaintiff invites lower federal courts to review and reject a state‑court judgment. In bankruptcy, the doctrine fits only when:
    • The challenge is asserted via an adversary proceeding (a complaint under Federal Rule of Bankruptcy Procedure 7003), and
    • The claim is not “independent” of the state‑court judgment (i.e., it does not arise from a distinct bankruptcy law source of rights such as avoidance or discharge).
  • Because Adams opposed a creditor’s lift‑stay motion (a contested matter) and sought to relitigate issues already decided in state court, Rooker‑Feldman did not bar jurisdiction—but preclusion did bar her arguments on the merits.

Background and Procedural History

The essential facts were undisputed. In 2008, Eileen Adams and her husband transferred their New Jersey home to Adams’s father; in 2009, he borrowed $360,000 from AmTrust Bank, securing the loan with a mortgage recorded in favor of Mortgage Electronic Registration Systems (MERS), as nominee. After the father’s death, the property returned to Adams, subject to the mortgage. AmTrust failed and went into FDIC receivership; New York Community Bank (NYCB) acquired substantially all assets and liabilities, but the record was unclear whether this particular mortgage was included.

In 2013, MERS assigned the mortgage to EverBank; Adams defaulted in August 2013; EverBank filed foreclosure in August 2014. Adams answered pro se but did not oppose summary judgment, which the state trial court granted in October 2015. EverBank later assigned the mortgage to Nationstar Mortgage and, without formal substitution, continued litigating the foreclosure; final judgment entered in March 2017.

Adams and her husband then engaged in serial bankruptcy filings (Chapter 7 in 2017; a Chapter 13 in 2018 that allowed a state‑court challenge; later Chapter 13 cases in 2021 and 2022). In the state courts, Adams moved for reconsideration of the foreclosure judgment, arguing EverBank lacked standing based on chain‑of‑title defects; she lost. The Appellate Division affirmed in 2020, and the Supreme Court of New Jersey denied review. The Appellate Division held that New Jersey standing to foreclose is satisfied by either possession of the note or a pre‑complaint assignment of the mortgage, and borrowers generally lack standing to challenge assignments along the chain.

In the 2022 bankruptcy, Nationstar moved for in rem relief from the automatic stay to proceed with foreclosure; the Bankruptcy Court granted relief. Adams appealed. The District Court affirmed the lift‑stay order but dismissed the appeal under Rooker‑Feldman, reasoning that Adams sought to undo a state‑court judgment. Adams appealed to the Third Circuit. While the appeal was pending, Adams and her husband paid over $400,000 at the sheriff’s sale to buy back the property; the Court nonetheless proceeded to resolve the legal issues and affirmed the stay relief order on preclusion grounds.

Analysis

Precedents Cited and Their Influence

  • Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983):
    These cases anchor the Rooker‑Feldman doctrine, which bars federal district courts from acting as appellate tribunals to review and reverse state‑court judgments. Feldman introduced the confusing “inextricably intertwined” phrasing, later over‑applied by lower courts.
  • Exxon Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280 (2005):
    The Supreme Court reined in overexpansion, confining Rooker‑Feldman to cases “brought by state‑court losers” complaining of injuries caused by state judgments and inviting federal review and rejection. Exxon Mobil also reemphasized that preclusion—not jurisdictional dismissal—is the proper vehicle once state adjudication is complete.
  • Great Western Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159 (3d Cir. 2010):
    The Third Circuit refined Rooker‑Feldman, focusing on whether the federal claim is “independent” of the state judgment or instead asks the federal court to review and reject that judgment. This decision narrows prior Third Circuit formulations that relied heavily on “inextricably intertwined.”
  • In re Knapper, 407 F.3d 573 (3d Cir. 2005) and In re Madera, 586 F.3d 228 (3d Cir. 2009):
    Earlier Third Circuit applications of Rooker‑Feldman in the foreclosure/bankruptcy context. The Adams panel notes these were decided before Great Western Mining and endorses the post‑Exxon/Great Western “independent claim” test, thus limiting any broader readings of Knapper and Madera.
  • In re Philadelphia Entertainment & Development Partners, 879 F.3d 492 (3d Cir. 2018):
    Held that a trustee’s fraudulent transfer claim in bankruptcy was “independent” of a state‑court license revocation; the Bankruptcy Court’s adjudication did not invite review and rejection of the state judgment. Adams leans on this independence concept to separate bankruptcy powers from Rooker‑Feldman concerns.
  • Ritzen Group, Inc. v. Jackson Masonry, LLC, 589 U.S. 35 (2020) and Halper v. Halper, 164 F.3d 830 (3d Cir. 1999):
    Both recognize the distinctive structure of bankruptcy cases as collections of discrete controversies and the breadth of bankruptcy jurisdiction under 28 U.S.C. § 1334.
  • Taylor v. Sturgell, 553 U.S. 880 (2008) and New Hampshire v. Maine, 532 U.S. 742 (2001):
    Foundational precedents clarifying the contours of claim and issue preclusion in federal practice.
  • Parsons Steel, Inc. v. First Alabama Bank, 474 U.S. 518 (1986) and 28 U.S.C. § 1738:
    Federal courts must give state judgments the same preclusive effect they would receive in the courts of that state (full faith and credit).
  • Wall v. Kholi, 562 U.S. 545 (2011):
    Describes habeas as “collateral” rather than direct review, distinguishing it from what Rooker‑Feldman forbids.
  • Watkins v. Resorts Int’l Hotel & Casino, Inc., 591 A.2d 592 (N.J. 1991):
    New Jersey’s test for claim preclusion: a valid, final, merits judgment; identity or privity of parties; and a later claim arising from the same transaction or occurrence.
  • Additional authorities guiding standards and appellate practice: In re Gilbert, 120 F.4th 114 (3d Cir. 2024) (reviewing Bankruptcy Court decision directly), In re Myers, 491 F.3d 120 (3d Cir. 2007) (abuse‑of‑discretion review of stay relief), In re Heritage Highgate, Inc., 679 F.3d 132 (3d Cir. 2012) (de novo review of legal issues), and Laurel Gardens, LLC v. McKenna, 948 F.3d 105 (3d Cir. 2020) (court may affirm on any ground supported by the record).

Legal Reasoning

The Third Circuit proceeds in three steps: (1) clarifying the scope and purpose of Rooker‑Feldman, (2) reconciling bankruptcy practice with that doctrine, and (3) applying preclusion under New Jersey law to dispose of Adams’s arguments on the merits.

1) Rooker‑Feldman is jurisdictional and narrow. It enforces the limit that only the U.S. Supreme Court may exercise appellate review over final state‑court judgments. The doctrine applies exclusively when a federal plaintiff seeks what is, in substance, appellate review of a state judgment—i.e., asks a lower federal court to “review and reject” a state‑court result. It does not “supersede the ordinary application of preclusion law” (Exxon Mobil), which ordinarily governs when a litigant tries to relitigate matters already decided elsewhere.

2) In bankruptcy, the same rule applies—with important practical guidance. Bankruptcy courts, exercising federal jurisdiction under 28 U.S.C. § 1334, regularly apply Title 11 powers that can avoid, modify, or discharge state‑court judgments. That activity is not forbidden by Rooker‑Feldman because it does not involve appellate review of state judgments; rather, it deploys independent bankruptcy powers authorized by Congress. The Court crystallizes a workable standard:

  • First, Rooker‑Feldman in bankruptcy typically arises only when a party files an adversary proceeding (a complaint triggering Part VII, see Fed. R. Bankr. P. 7001 and 7003). Routine motion practice—such as a creditor’s lift‑stay motion (a “contested matter” under Rules 4001 and 9014)—is not the vehicle for a Rooker‑Feldman bar.
  • Second, even in an adversary proceeding, the bankruptcy claim must be non‑independent of the state judgment—i.e., success requires the bankruptcy court to review and reject the state‑court result rather than apply bankruptcy law to a separate source of injury (such as a fraudulent transfer under § 548 or a preference under § 547). If the claim is independent, Rooker‑Feldman does not apply, even if the issues overlap with state‑court litigation (Exxon Mobil; Great Western Mining; Philadelphia Entertainment).

This two‑part clarification effectively replaces the amorphous “inextricably intertwined” shorthand and steers bankruptcy courts back to the core Exxon/Great Western inquiry: is the federal claim an improper de facto appeal of a state judgment, or is it an independent bankruptcy claim?

3) Application to Adams: Rooker‑Feldman does not apply; preclusion does. Adams opposed a creditor’s motion for relief from stay—she was not a “federal plaintiff” inviting lower federal courts to review and reject the state foreclosure judgment in an adversary complaint. The doctrine therefore did not deprive the courts of jurisdiction. Yet her arguments merely reasserted the same chain‑of‑title and standing challenges rejected in the New Jersey courts. Under 28 U.S.C. § 1738, the federal courts must give the New Jersey foreclosure judgment the same preclusive effect it would receive in New Jersey.

Applying New Jersey claim preclusion (Watkins):

  • Valid, final, merits judgment: The foreclosure judgment and the denial of reconsideration, affirmed on appeal with certiorari denied, satisfy finality and merits.
  • Identity or privity of parties: EverBank litigated the foreclosure; Nationstar, as assignee and successor, stood in privity. Under N.J. R. 4:34‑3, formal substitution was not required for binding effect on the transferee.
  • Same transaction/occurrence: Adams’s bankruptcy‑court arguments attack the same foreclosure claim and underlying rights. Indeed, counsel conceded they were “attacking the foreclosure judgment.”

The Third Circuit therefore affirmed the lift‑stay order on preclusion grounds, invoking its authority to affirm on any ground supported by the record (Laurel Gardens).

Impact and Forward‑Looking Significance

  • Doctrinal clarity in bankruptcy: The Court decisively narrows the role of Rooker‑Feldman in bankruptcy. Going forward, jurisdictional dismissals should be rare. Courts should ask whether the bankruptcy claim is an independent exercise of Title 11 powers. If yes, adjudicate; if not, assess whether the claim is a disguised appeal (then Rooker‑Feldman applies) or whether it is barred by preclusion.
  • Refocusing lower courts on preclusion: The opinion reinforces that preclusion—not Rooker‑Feldman—does the heavy lifting in repeat‑litigation scenarios after state‑court judgments. This ensures full faith and credit to state judgments and avoids conflating merits bars with jurisdictional defects.
  • Practical effects in foreclosure‑bankruptcy practice:
    • Debtors who have fully litigated foreclosure challenges in state court cannot repackage those same arguments to defeat lift‑stay motions.
    • Creditors should plead and prove preclusion (claim and issue preclusion) rather than move to dismiss for lack of subject‑matter jurisdiction under Rooker‑Feldman.
    • Truly independent bankruptcy remedies (e.g., fraudulent transfer, preference, voidable liens) remain available if properly pleaded via adversary proceedings and not precluded by prior judgments.
  • Alignment with Exxon Mobil and Great Western Mining: The decision harmonizes Third Circuit practice with the Supreme Court’s insistence that Rooker‑Feldman is “confined.” It also implicitly limits earlier decisions (Knapper, Madera) to the extent they were read more broadly pre‑Great Western.
  • Appellate practice: District courts reviewing bankruptcy orders should be cautious about jurisdictional dismissals under Rooker‑Feldman. The correct course, as Adams illustrates, is to exercise jurisdiction and apply state preclusion law under § 1738.

Complex Concepts Simplified

  • Rooker‑Feldman doctrine: A narrow rule that prevents lower federal courts from acting like appellate courts over state‑court judgments. It applies only when a federal plaintiff asks a federal district or bankruptcy court to review and overturn a state judgment.
  • Preclusion (res judicata): A merits‑based bar to relitigation. There are two types:
    • Claim preclusion: You cannot re‑sue over the same claim after a final merits judgment between the same parties or their privies.
    • Issue preclusion (collateral estoppel): You cannot relitigate a specific issue of fact or law that was actually litigated and necessary to a prior final judgment.
  • Independent bankruptcy claim: A claim that arises from bankruptcy law itself (e.g., avoidance under 11 U.S.C. §§ 544, 547, 548; discharge or plan confirmation under §§ 727, 1129, 1325, 1328), not from asking the bankruptcy court to correct a state‑court error. Independent claims do not trigger Rooker‑Feldman even if they intersect with state‑court litigation.
  • Adversary proceeding vs. contested matter:
    • Adversary proceeding: A lawsuit within the bankruptcy case, initiated by a complaint (Fed. R. Bankr. P. 7001–7003). This is the typical context where Rooker‑Feldman might be asserted.
    • Contested matter: Motion practice within the case (e.g., a motion for relief from stay under Rule 4001). Rooker‑Feldman is generally inapplicable here; the right tool is preclusion.
  • Automatic stay and in rem relief: Filing bankruptcy triggers an automatic stay stopping collection actions (11 U.S.C. § 362(a)). A creditor can obtain “in rem” relief (e.g., under § 362(d), including § 362(d)(4)) when there is cause—such as serial filings or schemes to delay—allowing foreclosure against the property notwithstanding future bankruptcies.
  • Privity: A close legal relationship between parties (e.g., assignor and assignee) such that a judgment binds the non‑party successor. Under New Jersey practice (N.J. R. 4:34‑3), litigation can continue in the assignor’s name after a transfer, and the transferee is bound without formal substitution.
  • Full faith and credit (28 U.S.C. § 1738): Federal courts must give state‑court judgments the same preclusive effect those judgments would receive in that state’s courts.

Practical Checklists

For Bankruptcy Courts

  • Ask first: Do we have jurisdiction under 28 U.S.C. § 1334? If yes, Rooker‑Feldman should be applied narrowly.
  • Is the challenge raised via an adversary complaint? If not (e.g., it is a response to a lift‑stay motion), Rooker‑Feldman is generally inapposite; consider preclusion instead.
  • If an adversary complaint is filed, is the claim independent (arising under Title 11) or does it seek review and rejection of a state judgment?
    • Independent claim: adjudicate (subject to preclusion defenses).
    • Non‑independent claim: Rooker‑Feldman may bar jurisdiction.
  • Apply state preclusion law under § 1738 where a state judgment exists.

For Creditors

  • When opposing debtor defenses that rehash state‑court losses, lead with preclusion (claim and issue preclusion) rather than Rooker‑Feldman.
  • On lift‑stay motions, document finality of state judgments and privity (e.g., assignments) to establish preclusion.
  • Consider seeking in rem relief where serial filings or schemes to delay are evident.

For Debtors

  • Understand that arguments rejected in state foreclosure proceedings are likely barred by preclusion in bankruptcy.
  • If you pursue relief in bankruptcy, identify genuinely independent Title 11 claims and file them via adversary proceedings where required. Even then, assess whether preclusion applies.
  • Recognize that bankruptcy is not an appellate forum for state‑court foreclosure judgments; the U.S. Supreme Court is the only federal court with appellate jurisdiction over such state‑court decisions.

Conclusion

In re: Eileen T. Adams reinforces a pivotal jurisdictional and procedural boundary: Rooker‑Feldman is a narrow bar aimed at de facto appeals of state judgments, not a catch‑all for shutting down repetitive litigation. In bankruptcy, it will typically arise only in adversary proceedings and only where the federal claim is not independent of the state decision. The ordinary and proper response to repeat litigation of issues already decided in state court is preclusion under state law, as required by § 1738.

By affirming stay relief on preclusion grounds and rejecting the District Court’s broad use of Rooker‑Feldman, the Third Circuit provides concrete guidance for bankruptcy judges, litigants, and reviewing courts. The decision promotes finality, respects state‑court judgments, and preserves the independent, congressionally granted powers of bankruptcy courts to administer estates and adjust debtor‑creditor relations without trespassing on the Supreme Court’s exclusive appellate jurisdiction over state judgments.

Case Details

Year: 2025
Court: Court of Appeals for the Third Circuit

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