Rivet v. Regions Bank of Louisiana

Background

Four individuals who held a second mortgage on New Orleans property sued in Louisiana state court after the property changed hands. A prior bankruptcy proceeding had approved a sale and ordered liens canceled, but the second mortgage remained on the public rolls. The mortgage holders asked a state court to recognize or enforce their mortgage, or to award damages. The bank and later property buyers removed the case to federal court, arguing the earlier bankruptcy orders had already extinguished the mortgage rights.

Reasoning

The Court asked whether a defendant can move a state-law case into federal court simply by saying a prior federal judgment bars the plaintiff’s claim. Applying the well-pleaded-complaint rule, the Court explained that federal courts get cases only when the plaintiff’s own complaint raises a federal question. A defense — here, that a prior federal judgment precludes the claim — is not part of the plaintiff’s claim. The Court held that a prior federal judgment that extinguishes a state claim is an affirmative defense for the state court to decide and does not transform the state claim into a federal one. The Court also limited a previous passing comment in an earlier case, saying that comment does not create a general exception allowing removal on preclusion grounds. The Supreme Court reversed the appeals court and sent the case back for further state-court proceedings.

Real world impact

The decision means defendants cannot force state-law property or mortgage disputes into federal court merely by invoking an earlier federal judgment; state courts must decide whether that earlier judgment really ended the claim. The ruling is procedural and sends the dispute back to state court for adjudication and possible further review by higher courts.