In Harold v. Steel, the United States Court of Appeals for the Seventh Circuit affirmed dismissal of a Fair Debt Collection Practices Act (FDCPA) suit based on the Rooker-Feldman doctrine. In the case, a small claims court in Marion County, Indiana, entered a judgment against Kevin Harold for a little more than $1,000. He did not pay, even though he had agreed to the judgment's entry. Almost two decades later, Christopher Steel, claiming to represent the judgment creditor, asked the court to garnish Harold's wages. It entered the requested order, which Harold moved to vacate, contending that Steel had misrepresented the judgment creditor's identity (transactions after the judgment's entry may or may not have transferred that asset to a new owner) and did not represent the only entity authorized to enforce the judgment. But Harold did not contend that the request was untimely.
After a hearing, a state judge sided with Steel and maintained the garnishment order in force. Instead of seeking review within Indiana's judiciary, Harold then filed a federal suit under the FDCPA, contending that Steel and his law firm had violated 15 U.S.C. § 1692e by making false statements. The district court dismissed the lawsuit for want of subject‐matter jurisdiction, ruling that it is barred by the Rooker-Feldman doctrine because it contested the state court's decision.
The Seventh Circuit held that Harold might have used § 1692e to file a counterclaim in Indiana and could have appealed within the state system. But, he did neither. The Seventh Circuit, therefore, held that his federal suit was properly dismissed. Specifically, the Seventh Circuit held:
It is easy to imagine situations in which a violation of federal law during the conduct of state litigation could cause a loss independent of the suit's outcome. The Fair Debt Collection Practices Act limits debt collectors to suits in the "judicial district or similar legal entity" where the contract was signed or the debtor resides. If a debt collector violates that statute, it inflicts an injury measured by the costs of travelling or sending a lawyer to the remote court and moving for a change of venue, no matter how the suit comes out. Harold was not injured in that way, however. He complains about representations that concern the merits. If Steel's client did not own the judgment, then Harold was entitled to a decision in his favor. No injury occurred until the state judge ruled against Harold. The need to litigate was not a loss independent of the state court's decision; costs of litigation were inevitable whether or not Steel was telling the truth about his client's rights—and it should be cheaper to defeat a false claim than to defeat a true one. As Harold sees things, the Rooker–Feldman doctrine does not apply to the procedures that state courts use to reach decisions or the evidence that state judges consider. This line of argument is embarrassed by the fact that Rooker itself arose from a contention that the state court (at the adverse litigant's instigation) had used constitutionally forbidden procedures to reach its judgment.
This decision is part of a larger trend of federal courts recognizing the Rooker-Feldman defense in FDCPA cases. Troutman Sanders regularly represents clients under the FDCPA and in related contexts where the Rooker-Feldman defense is often possible. The firm will continue to monitor this and other like cases.
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