Arnold v. KJD Real Estate, LLC, ___ F.3d ___ (7th Cir. May 20, 2014)

A former officer of two corporations, who had a substantial ownership interest in both entities, sued  on a theory of shareholder oppression.  The corporate defendants claimed that the suit was settled and moved for enforcement of the purported settlement agreement.  There was no written agreement.  The plaintiff moved to dismiss his action voluntarily and with prejudice.  The state trial court granted the plaintiff’s motion without having ruled on the defendants’ motion for enforcement of the supposed settlement agreement.

Then the shareholder-former officer contracted to sell his stock to a third corporation.  The two defendant corporations asked the original state court judge to vacate the dismissal order based on their claim that the case had been settled.  While their motion was pending before that judge, they filed a separate suit before another state court judge.  In the latter case they obtained a default judgment against the shareholder-former officer and an order directing him to execute the settlement papers and comply with the purported agreement.

The shareholder-former officer filed suit against all three defendants in the United States District Court.  He sought a judgment declaring the relative priority of the two claims against his stock.  The District Court dismissed that action on the basis of the Rooker-Feldman doctrine, which precludes federal courts other than the United States Supreme Court from reviewing state court judgments.

Michael Gross was retained to represent the shareholder-former officer in the United States Court of Appeals.  The Court of Appeals held that the Rooker-Feldman doctrine did not apply and reversed the judgment of the District Court.