                                      In the

      United States Court of Appeals
                     For the Seventh Circuit
                          ____________________  

No.  14-­‐‑1959  
MIR  S.  IQBAL,  
                                                            Plaintiff-­‐‑Appellant,  
                                         v.  

TEJASKUMAR   M.   PATEL,   WARREN   JOHNSON,   and   S-­‐‑MART  
PETROLEUM,  INC.,  
                                       Defendants-­‐‑Appellees.  
                          ____________________  

            Appeal  from  the  United  States  District  Court  for  the  
             Northern  District  of  Indiana,  Hammond  Division.  
                No.  2:12  CV  56  —  James  T.  Moody,  Judge.  
                          ____________________  

     ARGUED  FEBRUARY  24,  2015  —  DECIDED  MARCH  2,  2015  
                   ____________________  

    Before  EASTERBROOK,  ROVNER,  and  SYKES,  Circuit  Judges.  
    EASTERBROOK,   Circuit   Judge.   Through   a   closely   held   cor-­‐‑
poration,  Mir  Iqbal  bought  a  gasoline  service  station.  (He  al-­‐‑
so  guaranteed  its  debts,  so  we  need  not  mention  the  corpora-­‐‑
tion  again.)  Iqbal  contracted  with  S-­‐‑Mart  Petroleum  for  gaso-­‐‑
line.  Iqbal  then  hired  Tejaskumar  Patel  to  conduct  the  busi-­‐‑
ness,   ceding   operational   control   to   him.   He   chose   Patel   on  
the  recommendation  of  Warren  Johnson,  S-­‐‑Mart’s  president.  
2                                                                    No.  14-­‐‑1959  

Patel  ran  the  business  but  did  not  pay  for  the  gasoline,  lead-­‐‑
ing   S-­‐‑Mart   to   sue   on   the   contract   in   an   Indiana   court.   The  
court  entered  a  judgment  of  more  than  $65,000  against  Iqbal  
as  guarantor.  He  did  not  pay,  and  a  settlement  was  reached.  
Iqbal   gave   S-­‐‑Mart   a   note,   secured   by   a   mortgage   on   the  
business   premises.   When   he   still   did   not   pay,   a   state   court  
entered   a   second   judgment   against   him,   and   the   property  
was  sold  in  a  foreclosure  auction.  
    Iqbal   alleges   in   this   federal   suit   that   Patel   and   Johnson  
acted   in   cahoots   to   defraud   him   out   of   his   business.   The  
complaint   accuses   the   defendants   of   racketeering   and   seeks  
treble  damages  under  18  U.S.C.  §1964,  part  of  the  Racketeer  
Influenced  and  Corrupt  Organizations  Act  (RICO).  The  dis-­‐‑
trict   court   dismissed   the   complaint   for   want   of   jurisdiction,  
however,  ruling  that  it  is  barred  by  the  Rooker-­‐‑Feldman  doc-­‐‑
trine  because  it  challenges  the  state  court’s  judgments.  2014  
U.S.  Dist.  LEXIS  45385  (N.D.  Ind.  Mar.  27,  2014).  
     Rooker   v.   Fidelity   Trust   Co.,   263   U.S.   413   (1923),   and   Dis-­‐‑
trict   of   Columbia   Court   of   Appeals   v.   Feldman,   460   U.S.   462  
(1983),   after   which   the   doctrine   is   named,   hold   that   the   Su-­‐‑
preme  Court  of  the  United  States  is  the  sole  federal  tribunal  
authorized   to   review   the   judgments   of   state   courts   in   civil  
litigation.   See   also,   e.g.,   Exxon   Mobil   Corp.   v.   Saudi   Basic   In-­‐‑
dustries   Corp.,   544   U.S.   280   (2005);   Lance   v.   Dennis,   546   U.S.  
459   (2006).   Iqbal   invited   trouble   by   asking   the   district   court  
to  undo  the  foreclosure.  
    When   the   judge   directed   the   parties   to   address   whether  
that   would   be   possible,   consistent   with   the   Rooker-­‐‑Feldman  
doctrine,  Iqbal  contended  that  it  does  not  apply  to  fraud  (ei-­‐‑
ther  fraud  out  of  court  or  fraud  during  litigation).  As  the  dis-­‐‑
trict  court  rightly  replied,  Kelley  v.  Med-­‐‑1  Solutions,  LLC,  548  
No.  14-­‐‑1959                                                                             3  

F.3d   600   (7th   Cir.   2008),   and   other   decisions   in   this   circuit  
foreclose   such   an   argument.   The   Rooker-­‐‑Feldman   doctrine   is  
concerned   not   with   why   a   state   court’s   judgment   might   be  
mistaken   (fraud   is   one   such   reason;   there   are   many   others)  
but   with   which   federal   court   is   authorized   to   intervene.   See  
Harold  v.  Steel,  773  F.3d  884,  886  (7th  Cir.  2014).  The  reason  a  
litigant  gives  for  contesting  the  state  court’s  decision  cannot  
endow   a   federal   district   court   with   authority;   that’s   what   it  
means  to  say  that  the  Rooker-­‐‑Feldman  doctrine  is  jurisdiction-­‐‑
al.   So   although   we   recognize   that   other   circuits   disagree   on  
this  issue,  or  at  least  that  language  in  their  precedential  deci-­‐‑
sions  is  in  tension—compare  Reusser  v.  Wachovia  Bank,  N.A.,  
525   F.3d   855,   859   (9th   Cir.   2008),   with   Fielder   v.   Credit   Ac-­‐‑
ceptance   Corp.,   188   F.3d   1031   (8th   Cir.   1999)—we   shall   stick  
with  Kelley.  
    Iqbal   maintains,   however,   that   we   abandoned   Kelley   in  
Johnson  v.  Pushpin  Holdings,  LLC,  748  F.3d  769  (7th  Cir.  2014),  
without   so   much   as   citing   it.   That’s   not   how   precedent  
works.   In   this   circuit   it   takes   a   circulation   to   the   full   court  
under   Circuit   Rule   40(e)   for   one   panel   to   overrule   another.  
But  the  panel  in  Johnson  did  not  disagree  with  Kelley.  It  made  
a  different  point,  which  we  now  quote:  
    The   [Rooker-­‐‑Feldman   doctrine]   does   not   bar   a   federal   suit   that  
    seeks  damages  for  a  fraud  that  resulted  in  a  judgment  adverse  to  
    the  plaintiff.  Such  a  suit  does  not  seek  to  disturb  the  judgment  of  
    the  state  court,  but  to  obtain  damages  for  the  unlawful  conduct  
    that  misled  the  court  into  issuing  the  judgment.  It’s  true  that  the  
    plaintiff  is  also  asking  that  the  default  judgments  be  vacated,  and  
    that  is  relief  that  would  violate  the  Rooker-­‐‑Feldman  rule;  but  that  
    claim  can  be  rejected  without  affecting  the  damages  claim.  

Johnson,   748   F.3d   at   773   (citations   omitted).   Like   the   district  
judge   in   our   case,   Johnson   concludes   that   fraud   (no   matter  
4                                                                                   No.  14-­‐‑1959  

how  described)  does  not  permit  a  federal  district  court  to  set  
aside  a  state  court’s  judgment  in  a  civil  suit.  
   What   Johnson   adds—what   the   defendants   in   this   suit  
have  failed  to  appreciate—is  that  federal  courts  retain  juris-­‐‑
diction   to   award   damages   for   fraud   that   imposes   extra-­‐‑
judicial   injury.   The   Supreme   Court   drew   that   very   line   in  
Exxon  Mobil:  
      Nor  does  [the  doctrine]  stop  a  district  court  from  exercising  sub-­‐‑
      ject-­‐‑matter   jurisdiction   simply   because   a   party   attempts   to   liti-­‐‑
      gate  in  federal  court  a  matter  previously  litigated  in  state  court.  
      If   a   federal   plaintiff   “present[s]   some   independent   claim,   albeit  
      one  that  denies  a  legal  conclusion  that  a  state  court  has  reached  
      in   a   case   to   which   he   was   a   party   …   ,   then   there   is   jurisdiction  
      and  state  law  determines  whether  the  defendant  prevails  under  
      principles   of   preclusion.”   GASH   Assocs.   v.   Rosemont,   995   F.   2d  
      726,  728  (7th  Cir.  1993);  accord  Noel  v.  Hall,  341  F.  3d  1148,  1163–
      1164  (9th  Cir.  2003).  

544   U.S.   at   293.   In   other   words,   if   a   plaintiff   contends   that  
out-­‐‑of-­‐‑court   events   have   caused   injury   that   the   state   judici-­‐‑
ary  failed  to  detect  and  repair,  then  a  district  court  has  juris-­‐‑
diction—but   only   to   the   extent   of   dealing   with   that   injury.  
As  we  wrote  in  Johnson,  the  federal  court  cannot  set  aside  the  
state  court’s  judgment.  
     Iqbal   alleges   that   the   defendants   conducted   a   racketeer-­‐‑
ing   enterprise   that   predates   the   state   court’s   judgments.   He  
cannot  have  those  judgments  annulled  but  can  contend  that  
he   was   injured,   out   of   court,   by   being   “set   up”   by   Patel   and  
Johnson   so   that   they   could   take   over   his   business   and   reap  
the   profits   he   anticipated.   The   district   court   believed   that  
any  pre-­‐‑litigation  fraud  is  “intertwined”  with  the  state  court  
judgments   and   therefore   forecloses   federal   litigation,   but  
Exxon   Mobil   shows   that   the   Rooker-­‐‑Feldman   doctrine   asks  
No.  14-­‐‑1959                                                                  5  

what  injury  the  plaintiff  asks  the  federal  court  to  redress,  not  
whether  the  injury  is  “intertwined”  with  something  else.  See  
544  U.S.  at  291;  see  also  Richardson  v.  Koch  Law  Firm,  P.C.,  768  
F.3d   732,   734   (7th   Cir.   2014)   (deprecating   any   inquiry   into  
what  is  intertwined  with  what).  
     Because  Iqbal  seeks  damages  for  activity  that  (he  alleges)  
predates  the  state  litigation  and  caused  injury  independently  
of  it,  the  Rooker-­‐‑Feldman  doctrine  does  not  block  this  suit.  It  
must  be  reinstated.  
     Logically   the   district   court’s   next   inquiry   is   whether   the  
doctrine   of   claim   preclusion   (res   judicata)   applies.   (Exxon  
Mobil  observes,  544  U.S.  293,  that  preclusion  differs  from  the  
Rooker-­‐‑Feldman  doctrine  and  comes  to  the  fore  once  the  fed-­‐‑
eral   court   concludes   that   it   has   subject-­‐‑matter   jurisdiction.)  
At   least   two   decisions   by   intermediate   appellate   courts   in  
Indiana  hold  that  fraud  causing  nonpayment  is  a  compulso-­‐‑
ry   counterclaim   in   a   debt-­‐‑collection   suit.   Ratcliff   v.   Citizens  
Bank,   768   N.E.2d   964,   967–69   (Ind.   App.   2002);   Broadhurst   v.  
Moenning,  633  N.E.2d  326,  331–32  (Ind.  App.  1994).  Cf.  Fox  v.  
Maulding,   112   F.3d   453   (10th   Cir.   1997)   (similar   conclusion  
under  Oklahoma  law).  State  law  determines  the  rules  of  pre-­‐‑
clusion,  see  28  U.S.C.  §1738,  so  the  district  court  will  need  to  
decide   whether   the   Supreme   Court   of   Indiana   is   likely   to  
agree  with  these  decisions,  and  if  so  whether  there  is  any  ex-­‐‑
ception  to  the  rules  of  preclusion.  The  court  also  will  need  to  
consider   whether   Patel   and   Johnson   receive   the   benefits   of  
any   compulsory-­‐‑counterclaim   requirement,   given   that   S-­‐‑
Mart  Petroleum  was  the  sole  plaintiff  in  the  state  actions.  
    The   judgment   is   reversed,   and   the   case   is   remanded   for  
further  proceedings  consistent  with  this  opinion.  
