Philadelphia Entertainment & Development Partners, LP v. Commonwealth of Pennsylvania Department of Revenue

A federal court can undermine a state court judgment without offending Rooker-Feldman, Third Circuit says.

- Rochelle Quick Take

View Rochelle Summary
Case Type:
Business
Case Status:
Reversed and Remanded
Citation:
No. 17-1954 (3rd Circuit, Jan 11,2018) Published
Tag(s):
Ruling:
In this precedential opinion, the Third Circuit Court of Appeals reversed and remanded the case back to the district court for further proceedings. The Third Circuit found, among other things, that the bankruptcy court erred when it concluded the Rooker-Feldman doctrine barred its review of the trustee-appellant’s fraudulent transfer claim, and that the district court likewise erred in affirming the bankruptcy court’s decision.
Procedural context:
The debtor-appellee, Philadelphia Entertainment & Development Partners LP (“PEDP”), exhausted its remedies through state court proceedings challenging the PA Gaming Control Board’s decision to revoke PEDP’s slot machine license. Thereafter, PEDP filed for Chapter 11 bankruptcy, and confirmed its Chapter 11 liquidation plan. The bankruptcy court appointed a trustee over the plan’s created liquidation trust, and the debtor filed an adversary complaint against defendants Commonwealths. The bankruptcy court dismissed PEDP’s complaint under the Rooker-Feldman doctrine, and the trustee appealed. The district court affirmed, and the trustee appealed. The Third Circuit reversed and remanded the case back to the district court.
Facts:
Prior to the Chapter 11 bankruptcy, the PA Gaming Control Board awarded a slot machine license to the debtor-appellee PEDP. The debtor paid the Board a one-time $50 million fee for the license but later failed to meet certain license requirements. Consequently, the Board entered an order revoking its license to the debtor, and the debtor appealed to the Commonwealth of PA Court. The Commonwealth court upheld the Board’s order, and the debtor appealed to the Supreme Court of PA, which denied the debtor’s petition for review of its case. Shortly thereafter, the debtor-appellee filed for Chapter 11 bankruptcy, and confirmed its Chapter 11 liquidation plan. The bankruptcy court appointed Persil LLC as trustee over the liquidation trust that was created under the Ch. 11 plan. Thereafter, the debtor commenced an adversary proceeding against the Commonwealths, alleging, among other things, that the license revocation should be avoided as a fraudulent transfer under 11 U.S.C. §§ 544 and 548. The bankruptcy court dismissed the adversary complaint, finding the Rooker-Feldman doctrine barred its review, and the trustee appealed. The district court affirmed, and the trustee appealed to the Third Circuit. The Third Circuit, relying in part on its earlier decision in Great Western, held that the Rooker-Feldman doctrine applies when four requirements are met, and that the fourth requirement – the plaintiff invites the district court to “review and reject” the state court judgment – was not met in the present case. The Third Circuit further held that as long as a federal court does not reconsider the state court’s legal conclusions, a federal court can address the same issue(s) previously litigated in state court, and reach a conclusion that contradicts the first court’s judgment. For these reasons and more, the Third Circuit ultimately reversed and remanded the case back to district court for further proceedings, finding the bankruptcy court erred when it concluded the Rooker-Feldman doctrine barred its review of the trustee’s fraudulent transfer claim.
Judge(s):
Chagares, Restrepo, and Greenberg, Circuit Judges

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!

About us in numbers

3012 in the system

2911 Summarized

1 Being Processed