Adon v. City of New York

Background

Plaintiffs were 1600 Nelson Avenue Housing Development Fund Corporation, which owned a cooperative building, and 14 individual shareholders. They sued the City of New York; two City officials; Neighborhood Restore Housing Development Fund Corporation; and Bronx Pro Group, LLC. Their 15 claims arose from the City’s in rem foreclosure—the foreclosure of property itself—to collect municipal tax, water, and sewer charges, followed by a transfer of the property under the City’s Third Party Transfer Program.

The City began foreclosure proceedings in 2015. A New York state court entered a default foreclosure judgment in 2017, and the property was transferred to Neighborhood Restore in 2018. Plaintiffs alleged that the property was not legally “distressed,” that they did not receive required notices, and that they were not compensated for surplus value exceeding the municipal liens. The cooperative corporation later sought to vacate the foreclosure judgment in state court. The state trial court denied that motion, the Appellate Division affirmed, and the New York Court of Appeals denied leave to appeal. A later motion to renew was also denied in 2024.

Defendants’ motions

The Municipal Defendants and Non-Municipal Defendants each moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which concerns subject-matter jurisdiction, and Rule 12(b)(6), which concerns whether a complaint states a legally sufficient claim.

Rooker-Feldman ruling

The court held that the Rooker-Feldman doctrine barred the portions of the claims seeking reversal of the state foreclosure judgment or compensatory damages exceeding the property’s surplus value after the tax arrears were accounted for. That doctrine generally prevents a federal district court from acting as an appeals court reviewing a state-court judgment.

The court found that the required conditions were met: the plaintiffs had lost in state court, complained of injuries caused by the state foreclosure judgment, asked the federal court to reject that judgment, and filed this federal case after the state proceedings had ended. The court rejected the argument that the state proceedings remained open because the cooperative corporation had sought renewal of its motion to vacate. The court noted that the renewal motion had been denied and that the relevant state proceedings had already ended when this federal case was filed.

The court dismissed the portions of Counts I, II, III, IV, and V identified in the opinion as barred by Rooker-Feldman, as well as Count XV in its entirety. The court did not apply Rooker-Feldman to claims against the Non-Municipal Defendants that did not seek reversal of the foreclosure or damages above the property’s surplus value.

Standing to seek equitable relief

The Municipal Defendants argued that plaintiffs lacked standing to seek declaratory and injunctive relief concerning the constitutionality and future use of the Third Party Transfer Program. Standing requires a plaintiff to show an actual or sufficiently imminent injury that the requested relief could remedy.

The court agreed. Because the property had already been foreclosed upon and the plaintiffs’ interests had been extinguished, the court found no impending future injury that an injunction or declaration would address. The court dismissed Count XIV for lack of standing under Rule 12(b)(1).

Federal claims and limitations period

Counts I–V asserted claims under 42 U.S.C. §§ 1983 and 1985. The court applied New York’s three-year limitations period, which begins when a plaintiff knows or has reason to know of the injury. The court found that plaintiffs knew, or should have known, of the foreclosure and transfer by September 26, 2018, at the latest, when the cooperative corporation moved in state court to vacate the foreclosure judgment and reverse the transfer. Because plaintiffs filed this action in November 2023, the court held that Counts I–V were untimely and dismissed them under Rule 12(b)(6).

The court rejected plaintiffs’ arguments that the notice-related claims were not time-barred, that the takings claim was not timely until later state proceedings ended, that the Supreme Court’s decision in Knick v. Township of Scott postponed the filing deadline, that the alleged harm was a continuing violation, or that equitable tolling applied. The court held that the taking and transfer were completed no later than September 13, 2018, and that plaintiffs had actual notice by September 26, 2018. It also found that plaintiffs had not shown fraud, extraordinary circumstances, or another reason that prevented timely filing.

State and local claims

Counts VI–XIII arose under state and local law. After dismissing all federal claims, the court declined to exercise supplemental jurisdiction—the federal court’s authority to hear related state-law claims—under 28 U.S.C. § 1367(c). The discussion states that Counts VI–XII were dismissed without prejudice to litigation in a court with proper jurisdiction. The conclusion states that the court declined jurisdiction over Counts VI–XIII, creating an apparent discrepancy concerning the stated disposition of Count XIII.

Disposition

The court granted both defendants’ motions to dismiss. Counts XIV and XV were dismissed under Rule 12(b)(1) for lack of standing and lack of jurisdiction, respectively. Counts I–V were dismissed under Rule 12(b)(6) as untimely. The court declined supplemental jurisdiction over Counts VI–XIII, and directed the Clerk to enter judgment, terminate the pending motions, and close the case.