                                                                                                                           Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


4-17-2007

Mazzella v. Comm PA Dept Ins
Precedential or Non-Precedential: Non-Precedential

Docket No. 06-2325




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                                                      NOT PRECEDENTIAL

            UNITED STATES COURT OF APPEALS
                 FOR THE THIRD CIRCUIT
                      ____________

                           No. 06-2325
                          ____________

                   LOUIS V. MAZZELLA, SR.,

                                   Appellant

                                   v.

            COMMONWEALTH OF PENNSYLVANIA
                 DEPARTMENT OF INSURANCE;
             M. DIANE KOKEN, Individually and as the
  Insurance Commissioner of the Commonwealth of Pennsylvania;
            WILLIAM TAYLOR, Individually and as the
  Deputy Insurance Commissioner for Liquidations, Rehabilitation
     and Special Funds of the Commonwealth of Pennsylvania;
            JOSEPH DIMEMMO, Individually and as the
Director of Bureau of Liquidations and Rehabilitation Administration
             of the Pennsylvania Insurance Department;
    BUREAU OF LIQUIDATIONS AND REHABILITATIONS
                           ____________

          On Appeal from the United States District Court
              for the Middle District of Pennsylvania
                      (D.C. No. 05-cv-01059)
             District Judge: Honorable Yvette Kane
                          ____________

            Submitted Under Third Circuit LAR 34.1(a)
                        March 26, 2007

      Before: FISHER, JORDAN and ROTH, Circuit Judges.

                       (Filed April 17, 2007)
                                       ____________

                                OPINION OF THE COURT
                                     ____________

FISHER, Circuit Judge.

       This appeal arises out of the liquidation of an insolvent insurer, Colonial

Assurance Company (“Colonial”). Louis Mazzella, Sr., a Colonial shareholder who

consented to the liquidation, litigated for years in the Pennsylvania state courts to fight

the liquidation plan proposed by the Commonwealth. After his objections were dismissed

in that forum, he filed an action before the United States District Court for the Middle

District of Pennsylvania, which dismissed his Complaint under the Rooker-Feldman

doctrine, alternatively noting that his claims would be barred by the doctrine of res

judicata. For the reasons that follow, we will affirm the decision of the District Court

under its alternative reasoning.

                                              I.

       As we write only for the parties, we will forgo a lengthy recitation of the factual

and legal background to this case. In March 1984, Colonial was placed into liquidation

proceedings with the consent of Mazzella. During these proceedings, Mazzella filed

numerous pleadings challenging the Pennsylvania Insurance Commissioner’s handling of

the Colonial estate in its capacity as Statutory Liquidator.

       In July 2004, the Pennsylvania Department of Insurance filed its Final Amended

Petition for Distribution in relation to the Colonial estate. Mazzella filed a series of


                                              2
objections in response to this Petition. He also filed a Motion for Surcharge, seeking

monetary relief. In November 2004, the Pennsylvania Commonwealth Court held a

four-day hearing to resolve all outstanding matters related to the liquidation. Mazzella

participated in this hearing.

       On April 29, 2005, the Commonwealth Court entered an order granting the

Department of Insurance’s Final Petition and denying Mazzella’s objections and Motion

for Surcharge. Koken v. Colonial Assurance Co., 885 A.2d 1078 (Pa. Commw. Ct. 2005).

Mazzella filed a post-trial motion with the Commonwealth Court seeking a new trial, a

directed verdict, or judgment notwithstanding the verdict. He also sought injunctive relief

regarding several aspects of the court’s April 29 order. These requests were denied by the

Commonwealth Court on June 3, 2005. Mazzella then appealed the April 29 order to the

Pennsylvania Supreme Court, which affirmed the Commonwealth Court’s decision.

Koken v. Colonial Assurance Co., 893 A.2d 98 (Pa. 2006).

       Following this disposition, Mazzella commenced a suit in the District Court

against the Pennsylvania Department of Insurance, its Bureau of Liquidations and

Rehabilitations, the Pennsylvania Insurance Commissioner, and Pennsylvania employees

William Taylor and Joseph DiMemmo, alleging that the Defendants violated his civil

rights, engaged in a civil conspiracy, and breached their fiduciary duties in relation to the

Colonial liquidation. On March 16, 2006, the District Court granted the Defendants’

Motion to Dismiss on the ground that it lacked subject matter jurisdiction pursuant to the

Rooker-Feldman doctrine. Alternatively, it noted that even if dismissal under the Rooker-

                                              3
Feldman doctrine were not appropriate, Mazzella’s claims would be barred by issue

preclusion. This appeal followed.1

                                              II.

       On appeal, Mazzella argues that the District Court erred by applying the Rooker-

Feldman doctrine in this case. The doctrine “prevents ‘inferior’ federal courts from

sitting as appellate courts for state court judgments.” In re Knapper, 407 F.3d 573, 580

(3d Cir. 2005). Recently, the Supreme Court narrowed the doctrine, emphasizing that it

“is confined to cases of the kind from which the doctrine acquired its name: cases brought

by state-court losers complaining of injuries caused by state-court judgments rendered

before the district court proceedings commenced and inviting district court review and

rejection of those judgments.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S.

280, 284 (2005). Following the Supreme Court’s holding in Exxon Mobil, we explained

that Rooker-Feldman was not applicable when a party complains of an injury “not caused

by the state-court judgment but instead attributable to defendants’ alleged . . . violations

that preceded the state-court judgment.” Turner v. Crawford Square Apartments III, L.P.,

449 F.3d 542, 547 (3d Cir. 2006) (emphasis in original). Because Mazzella’s federal

Complaint is directed at conduct that preceded the state-court judgment, we agree that this

is not an appropriate case for the application of the Rooker-Feldman doctrine.




       1
        We exercise jurisdiction pursuant to 28 U.S.C. § 1291.

                                              4
       However, in Turner we explained that even if “we reject the district court’s stated

grounds for granting summary judgment in favor of defendants, we nonetheless may

affirm the district court’s order granting summary judgment on other grounds.” 449 F.3d

at 548 (affirming a district court’s summary judgment order on res judicata grounds after

rejecting the district court’s reliance on the Rooker-Feldman doctrine). In this case, the

District Court recognized that even if the Rooker-Feldman doctrine were not applicable,

the doctrine of issue preclusion would bar Mazzella’s claims because he is attempting to

relitigate issues previously determined by the Commonwealth Court.

       The Pennsylvania Supreme Court has explained that “[u]nder the doctrine of res

judicata issue preclusion, when an issue of fact or of law is actually litigated and

determined by a valid final judgment, and determination of the issue was essential to

judgment, the determination on that issue is conclusive in a subsequent action between

the parties, whether on the same or a different claim.” McNeil v. Owens-Corning

Fiberglass Corp., 680 A.2d 1145, 1147-48 (Pa. 1996) (internal footnote omitted).2 The

doctrine “serves the twin purposes of protecting litigants from assuming the burden of

re-litigating the same issue with the same party, and promoting judicial economy through

preventing needless litigation.” Id. at 1148.




       2
        We have noted that “[i]n determining the applicability of principles of res
judicata, we must give the same preclusive effect to the judgment [of the state court] that
the courts in Pennsylvania, the state in which the judgment was entered, would give.”
Turner, 449 F.3d at 548.

                                                5
       Here, there is a valid final order that was entered by the Commonwealth Court and

affirmed by the Pennsylvania Supreme Court, and the parties to the current action are the

same as those in the previous action.3 Thus, the question here is whether Mazzella’s

claims in this case implicate issues that were actually decided by and necessary to the

judgment of the Commonwealth Court. See Cohen v. W.C.A.B., 909 A.2d 1261, 1264

(Pa. 2006). Mazzella has brought three claims in the current case: he alleges that the

Defendants violated his civil rights, engaged in a civil conspiracy, and breached their

fiduciary duties. His civil rights claim under 42 U.S.C. § 1983 is premised on the

Defendants’ denying him access to certain financial information, depriving him of due

process through the handling of the Colonial liquidation, and depriving him of a surplus

by proposing payment of interest to claimants. However, the Commonwealth Court

considered, and rejected, all of these objections. It explained that because it had “allowed

extensive and repeated opportunities to Mazzella to engage in discovery; to obtain

financial information and data from the Liquidator, including Mazzella’s efforts to review

sealed court records . . . ; to meet with auditors of the estate; and ultimately to participate

fully in the evidentiary hearings in the case,” it rejected any “objection, assertion or

contention” that Mazzella had been improperly denied access to any information.



       3
        Although the “identical parties” analysis is slightly strained in this case because
the prior action was a statutory liquidation proceeding, it is clear that each of Mazzella’s
objections were directed at the same parties in that context as they are here, and every
party had a full and fair opportunity to litigate those objections in the prior forum. See
Koken v. Colonial Assurance Co., 885 A.2d 1078 (Pa. Commw. Ct. 2005).

                                               6
Colonial, 885 A.2d at 1094. Furthermore, the Commonwealth Court determined that

“Mazzella’s arguments that the Liquidator abused her authority or discretion in evaluating

and allowing certain claims, or that she reopened the estate after closing it to drain any

potential surplus, simply cannot be sustained . . . .” Id. at 1103. Mazzella’s final civil

rights allegation was similarly considered and rejected by the Commonwealth Court: it

ordered the Defendants to “pay interest to all claimants,” settling his claim that certain

interest payments were improper. Id. at 1100 (emphasis in original). Thus, the issues

underlying Mazzella’s civil rights claim were actually litigated by the Commonwealth

Court, and they were necessary to its approval of the Commonwealth’s Final Plan, which

could only have been approved by rejecting Mazzella’s objections.

       As to Mazzella’s civil conspiracy claim, he must prove that there was an

underlying tort in order to succeed. Boyanowski v. Capital Area Intermediate Unit, 215

F.3d 396, 405-06 (3d Cir. 2000). In other words, this claim rests on a finding that the

Defendants acted unlawfully in carrying out their duties. However, the Commonwealth

Court specifically found that

       Mazzella provided no credible evidence at the hearing to prove any
       impropriety by the Liquidator in the overall handling of the Colonial estate,
       and, in particular, Mazzella failed to show any impropriety in the
       Liquidator’s application of the court-ordered claims bar date, incurring
       expenses to administer the estate, efforts to collect reinsurance, investment
       of assets and/or sale of real estate; or the request to destroy Colonial’s
       records no longer needed to be retained.




                                              7
Colonial, 885 A.2d at 1091. Thus, as with his civil rights claim, the issues underlying

Mazzella’s civil conspiracy claim were actually litigated and necessary to the

Commonwealth Court’s conclusion that Mazzella’s objections should be dismissed.

       Finally, Mazzella alleges that the Defendants breached their fiduciary duties by

failing to account for a number of documents concerning reinsurance and investment

income. However, as the Defendants note, his allegations under this claim are a mirror-

image of his Motion for Surcharge before the Commonwealth Court. Disposing of the

claim, the Commonwealth Court held that “[t]he Liquidator, acting within her broad

statutory powers and in the best interests of all policyholders, creditors and the public,

owes no actionable duty to third parties and individual policyholders or creditors in tort or

contract.” Id. at 1093. As with Mazzella’s other claims, the issues underlying his breach

of fiduciary duty action were actually litigated in the state court and were necessary to the

judgment. As such, this and all of Mazzella’s claims are barred by the doctrine of issue

preclusion and were properly dismissed by the District Court.

                                             III.

       For the foregoing reasons, we will affirm the holding the District Court.




                                              8
