Durga Property Holdings, Inc. v. City of Effingham, Illinois

and Durga now appeals. We agree that dismissal was proper, but we take a different path of reasoning than the district court.

I

In 2019 the City of Effingham filed suit in Illinois state court to force the owner of the Village Square Mall to perform maintenance work that would address unsafe conditions at the Mall. Durga bought the Mall property in 2020 and subsequently intervened in the case. Then, in August 2020, the state court entered an Agreed Order approved by the parties. The Order detailed a schedule of work Durga would perform at the Mall and specified that if Durga did not comply with the schedule, the City would be authorized to perform the work itself.

Three months later, on November 23, 2020, the state court held an evidentiary hearing at which it found that Durga had failed to substantially comply with the Order's requirements. So the state court authorized the City to complete the work. Durga appealed, but did not prevail, see City of Effingham v. Vill. Square Mall Realty Mgmt. LLC, No. 5-20-0431, 2021 WL 1977186 (Ill. App. Ct. May 17, 2021), and the case became final on August 15, 2022, see City of Effingham v. Vill. Square Mall Realty Mgmt. LLC, No. 19-MR-68 (Ill. Cir. Ct. Aug. 15, 2022).

During this litigation, the City started performing the work at the Mall as authorized by the November 2020 order. As it accrued expenses completing the work and defending itself in court, the City entered liens on the Mall. The City then filed another case in state court in December 2020 to enforce these liens through foreclosure. The court initially entered summary judgment for the City in 2023, but it then granted Durga's motion to stay the judgment and open discovery. After almost a year of discovery and continuances, the state court ultimately entered an order of judgment for foreclosure and sale on July 30, 2024. See City of Effingham v. Durga Property Holdings, Inc., No. 20-CH-22 (Ill. Cir. Ct. July 30, 2024).

Just a few days earlier, on July 24, Durga filed this suit in federal court under 42 U.S.C. § 1983. Durga alleged that the City prevented it from performing maintenance work at the Mall—as the August 2020 Order had required—by refusing to issue the necessary permits. Durga asserted multiple constitutional claims, arguing that the City's denial of permits and eventual foreclosure on the Mall constituted a taking in violation of the Fifth Amendment, a denial of equal protection and substantive due process in violation of the Fourteenth Amendment, and interference with Durga's contracts (its leases of space in the mall) in violation of the Contracts Clause. Durga moved in the district court for preliminary injunctive relief to prevent the sale of the Mall until the federal court resolved its § 1983 lawsuit. The City responded

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by moving to dismiss the case for lack of subject matter jurisdiction under the Rooker- Feldman doctrine. See Rooker v. Fidelity Tr. Co., 263 U.S. 413 (1923); D.C. Ct. of Appeals v. Feldman, 460 U.S. 462 (1983). Alternatively, the City urged the district court to dismiss pursuant to the abstention principles of Younger v. Harris, 401 U.S. 37 (1971). The district court dismissed the case for lack of jurisdiction, concluding that Durga's claims were barred by Rooker-Feldman because granting relief would effectively require reversing the state-court judgment of foreclosure and order of sale. The district court then denied the motion for preliminary injunctive relief as moot. On November 4, 2024—after the district court dismissed the § 1983 suit—the Mall was sold. The sale has yet to close, however, because Durga appealed the state court's order of foreclosure and the Illinois Appellate Court stayed the closing of the sale during the appeal, which is still pending.

Durga now appeals the dismissal of its federal case. It argues that none of its constitutional grievances spring from a state-court judgment, so Rooker-Feldman does not deprive the lower federal courts of jurisdiction to hear Durga's claims.

II

We review the dismissal of a suit for lack of jurisdiction without deference to the district court. See B.D. ex rel. Myer v. Samsung SDI Co., 91 F.4th 856, 860 (7th Cir. 2024). The Rooker-Feldman doctrine applies only when (1) the federal plaintiff is a state-court loser, (2) the state-court judgment became final before the federal proceedings began,

(3) the state-court judgment caused the injury underlying the federal claim, (4) the claim invites a federal court to review and reject that state-court judgment, and (5) the state- court loser did not have a reasonable opportunity to raise the federal issue in state court. See Gilbank v. Wood County Dep't of Hum. Servs., 111 F.4th 754, 766 (7th Cir. 2024) (en banc).

As we understand Durga's allegations, each of its theories of relief seeks to remedy, at least in part, the City's enforcement of liens through foreclosure. Indeed, even where the City's complained-of conduct occurred before the imposition of the liens—as with the alleged discrimination in denying Durga certain permits—the ultimate, cascading harm stemming from its acts is Durga's loss of ownership of the Mall.

But the state case concerning the foreclosure is not yet final. Under Illinois law, a foreclosure judgment with an order of sale does not finalize a property-foreclosure action. See Romspen Mortg. Ltd. P'ship v. BGC Holdings LLC-Arlington Place One, 20 F.4th 359, 364 (7th Cir. 2021). Instead, judicial confirmation of the sale finalizes such a case.

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And judicial confirmation has not occurred here because Durga's appeal of the foreclosure order remains pending.

Because Durga's federal claims all relate to the still-unresolved foreclosure litigation, the relevant state-court judgment was not final before Durga commenced its § 1983 action. Rooker-Feldman, therefore, does not bar federal jurisdiction. See Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 293 (2005) (rejecting application of Rooker-Feldman where the plaintiff filed suit in federal court "before any judgment in state court").

III

Durga's claims are barred by Younger abstention, however—an alternative basis for dismissal that the City pressed in the district court. As relevant here, this doctrine applies where the exercise of federal jurisdiction would interfere with civil proceedings that implicate a state's interest in enforcing the orders and judgments of its courts. See J.B. v. Woodard, 997 F.3d 714, 722 (7th Cir. 2021). The City's enforcement of its liens on the Mall presents such a state interest. See Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 13-14 (1987) (identifying lien enforcement as the type of important state interest that justifies Younger abstention). Because each of Durga's claims challenges, at least in part, the validity of the liens underlying the foreclosure or the City's use of foreclosure proceedings to take over the Mall property, a federal court judgment favorable to Durga would interfere with the enforcement proceedings pending in state court. That is not the end of the inquiry, however. Younger requires abstention only if the state case (1) is judicial in nature, (2) implicates important state interests, (3) offers an adequate opportunity for review of constitutional claims, and (4) involves no extraordinary circumstances, such as harassment or bias. See FreeEats.com, Inc. v. Indiana, 502 F.3d 590, 596 (7th Cir. 2007) (citing Majors v. Engelbrecht, 149 F.3d 709, 711 (7th Cir. 1998)). Durga's claims satisfy all four conditions.

First, the ongoing state proceeding is clearly judicial—the foreclosure action is currently on appeal with the Illinois Appellate Court. Second, the City asserted in the district court, and Durga never disputes, that enforcing its municipal codes to eliminate dangerous structures is an important state interest. And a state's interests are particularly important where, as here, the underlying case involves local executive action. See Courthouse News Serv. v. Brown, 908 F.3d 1063, 1072-73 (7th Cir. 2018). Third, Durga could have raised its constitutional claims in the state court, though it is unclear from the record whether it did. State courts, such as the Illinois circuit court overseeing the foreclosure, have jurisdiction over constitutional claims, see E. Cent. Ill. Pipe Trades Health & Welfare Fund v. Prather Plumbing & Heating, Inc., 3 F.4th 954, 957 (7th Cir. 2021),

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and Durga would have known when the proceedings started that—in its view—the City's enforcement of the liens would be unconstitutional. Fourth, Durga cites no extraordinary circumstances that justify federal intervention. Our review of the record demonstrates that the City acted only through appropriate court channels, and Durga has provided no basis upon which to conclude that it is being harassed or is the target of bias within the state-court litigation. Further, Durga's assertion that the City is, effectively, trying to unlawfully steal its property lacks any evidentiary foundation. For these reasons, dismissal pursuant to Younger is proper here. And dismissing, rather than staying, the case pursuant to Younger is appropriate because Durga has not asserted, and we have no reason to believe, that the state court could not provide the injunctive and monetary relief Durga seeks. See FreeEats.com, 502 F.3d at 600. We owe a brief word in closing to the nature of the dismissal. The district court dismissed the case with prejudice based on the Rooker-Feldman doctrine. But while dismissals on the merits are generally with prejudice, see St. John v. Cach, LLC, 822 F.3d 388, 392 (7th Cir. 2016), dismissals for a lack of jurisdiction must be without prejudice, see White v. Ill. State Police, 15 F.4th 801, 808 (7th Cir. 2021). Dismissals pursuant to an abstention doctrine, like Younger, fall into the latter category. See Am. Trial Laws. Ass'n v. N.J. Sup. Ct., 409 U.S. 467, 469 (1973); see also Courthouse News Serv., 908 F.3d at 1075 (ordering the district court to dismiss without prejudice on remand). We therefore MODIFY the judgment to state that Durga's claims are dismissed without prejudice. As so modified, the judgment is AFFIRMED.

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