Reinsurance Focus

This appeal arose out of the liquidation of an insolvent insurer, Colonial Assurance Company (“Colonial”). The Plaintiff, a Colonial shareholder, litigated for years in the Pennsylvania state courts to fight the liquidation plan proposed by Pennsylvania. After his objections were dismissed in that forum, he filed an action in United States District Court alleging that the Defendants violated his civil rights, engaged in a civil conspiracy, and breached their fiduciary duties in relation to the Colonial liquidation. The District Court dismissed his claims under the Rooker-Feldman doctrine, alternatively holding that his claims were barred by the doctrine of res judicata.

On appeal, the Third Circuit concluded that this was not an appropriate case for the application of the Rooker-Feldman doctrine because the Plaintiffs’ Complaint was directed at conduct that preceded the state-court judgment. The Court explained that the Rooker-Feldman doctrine, which prevents inferior federal courts from sitting as appellate courts for state court judgments, does not apply 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.” (citations omitted). Nevertheless, the Third Circuit held that dismissal was appropriate because the Plaintiff’s claims were barred by the doctrine of res judicata. All of the elements of res judicata were satisfied, because the parties to the two actions were identical, all of the claims were actually litigated in the prior state court action, and determination of the claims was necessary to the entry of the judgment by the state court. Mazzella v. Commonwealth of Pennsylvania, Case No. 06-2325 (3d Cir. Apr. 17, 2007).