Sutasinee Thana v. Board of License Commissioners

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 15-1660

SUTASINEE THANA; MICHAEL JAMES LOHMAN; THAI SEAFOOD & GRILL,

INC., trading as Thai Palace & Thai Palace & Lounge,

Plaintiffs - Appellants,

v.

BOARD OF LICENSE COMMISSIONERS FOR CHARLES COUNTY, MARYLAND;

PAMELA SMITH, Chair; GUY BLACK, Member; TOMASINA COATES,

Member; STEVEN LOWE, Member; WILLIAM YOUNG, Member,

Defendants - Appellees.

Appeal from the United States District Court for the District of

Maryland, at Greenbelt. Paul W. Grimm, District Judge. (8:14-

cv-03481-PWG)

Argued: May 11, 2016 Decided: June 28, 2016

Before TRAXLER, Chief Judge, and NIEMEYER and KEENAN, Circuit

Judges.

Reversed and remanded by published opinion. Judge Niemeyer

wrote the opinion, in which Chief Judge Traxler and Judge Keenan

joined.

ARGUED: Charles Grant Byrd, Jr., ALSTON & BYRD, Baltimore,

Maryland, for Appellants. Kevin Bock Karpinski, KARPINSKI,

COLARESI & KARP, Baltimore, Maryland, for Appellees. ON BRIEF:

Michael B. Rynd, KARPINSKI, COLARESI & KARP, Baltimore,

Maryland, for Appellees.

NIEMEYER, Circuit Judge:

In this appeal, we decide whether the district court

properly applied the Rooker-Feldman doctrine to dismiss this

federal action challenging the actions of a state administrative

agency that were reviewed in state court.

The Board of License Commissioners of Charles County,

Maryland (“the Board”), revoked the alcoholic beverage license

of a restaurant and lounge known as Thai Palace, as well as two

consent orders that imposed conditions on the license, because

Thai Palace violated certain conditions imposed by the consent

orders. The Circuit Court for Charles County affirmed in part

and remanded in part, and the Maryland Court of Special Appeals

affirmed the circuit court. The Maryland Court of Appeals

declined to grant certiorari.

Shortly after the Circuit Court for Charles County had

ruled and before Thai Palace filed its notice of appeal to the

Court of Special Appeals, Thai Palace commenced this federal

action under 42 U.S.C. § 1983 and the First Amendment,

challenging the actions of the Board. The district court

dismissed the action for lack of subject matter jurisdiction,

based on the Rooker-Feldman doctrine. See Rooker v. Fid. Trust

Co., 263 U.S. 413 (1923); D.C. Ct. of App. v. Feldman, 460 U.S.

462 (1983). The district court concluded that because Thai

Palace “seeks to attribute error to the core of the Board’s

2

order and the circuit court ruling affirming it,” its federal

action “falls neatly within the bounds of the [Rooker-Feldman]

doctrine.”

We reverse and remand, concluding that Thai Palace has,

with this action, commenced an independent, concurrent action

challenging actions by a state administrative agency. Because

Thai Palace did not request the district court to conduct

appellate review of the state court judgment itself, the Rooker-

Feldman doctrine does not apply. See Exxon Mobil Corp. v. Saudi

Basic Indus. Corp., 544 U.S. 280, 284 (2005). To the extent

that the district court concluded that Thai Palace is seeking to

litigate the same claims or issues decided in the state

proceedings, it can, on remand, apply state law principles of

preclusion to bar this action if that proves to be appropriate.

I

Thai Palace -- formally, Thai Seafood & Grill, Inc., and

trading as Thai Palace and Thai Palace & Lounge -- is a

restaurant and lounge in Waldorf, Maryland. Sutasinee Thana,

her husband, and Michael Lohman are the owners of Thai Palace,

and Thana and Lohman hold the alcoholic beverage license on

behalf of Thai Palace. In 2009, Thai Palace 1 filed an

application with the Board for an alcoholic beverage license,

1

We refer collectively to the corporation, Thana, and

Lohman as “Thai Palace.”

3

effectively seeking reinstatement of an earlier license that had

been revoked in 2007 for hosting entertainment that featured

nudity. Following a hearing, the Board and Thai Palace entered

into a consent order dated November 12, 2009, by which the Board

issued the alcoholic beverage license on the condition that Thai

Palace “be operated as a family restaurant” between the hours of

11:00 a.m. and 10:00 p.m. and “that there shall be no

entertainment other than dinner music from either a radio and/or

t.v. . . . without prior written approval of the Board.”

Some two years later, Thai Palace requested that the Board

rescind the November 2009 Consent Order to allow it to once

again provide live entertainment. At the hearing on this

request, the Board declined to rescind the November 2009 Consent

Order but did agree to modify it. Accordingly, the Board and

Thai Palace entered into a second consent order, dated January

12, 2012, which allowed Thai Palace to extend its hours of

operation and also permitted it to offer “instrumental and

acoustical music; Karaoke; [and] DJ music and dancing.” But

this second consent order also provided that Thai Palace “shall

not allow an outside promoter to maintain control of any

entertainment and shall not offer any ‘teenager only’ events or

‘go-go’ entertainment.” 2 Finally, the January 2012 Consent Order

2

According to the complaint, “go-go” music “is a subgenre

associated with funk music that originated in Washington, D.C.

4

provided that it would remain in effect for a period of three

years, after which it would expire and be “null and void and of

no further effect.”

Notwithstanding the terms of the January 2012 Consent

Order, Thai Palace contracted with various “go-go” bands to

perform at Thai Palace. After receiving information about these

concerts from the police, the Board issued an order on June 20,

2013, requiring Thai Palace to show cause why the January 2012

Consent Order “should not be revoked.” Following an evidentiary

hearing, the Board issued a decision revoking the November 2009

Consent Order, the January 2012 Consent Order, and Thai Palace’s

alcoholic beverage license.

Pursuant to Maryland statutory provisions for review of

administrative orders, Thai Palace filed a petition for review

of the Board’s decision in the Circuit Court for Charles County.

See Md. Code Ann., Art. 2B, § 16-101. The circuit court

affirmed the Board with respect to its revocation of the January

2012 Consent Order; concluded that the Board had made no

findings that the November 2009 Consent Order had been violated;

and remanded for further findings in connection with whether

Thai Palace’s alcoholic beverage license should be revoked.

Thai Palace appealed the circuit court’s decision to the

in the mid-1960’s to late 1970’s” and that “remains primarily

popular in the area as a uniquely regional music style.”

5

Maryland Court of Special Appeals, which affirmed by decision

dated January 29, 2016. Thana v. Bd. of License Comm’rs for

Charles Cnty., 130 A.3d 1103 (Md. Ct. Spec. App. 2016).

Thereafter, Thai Palace filed a petition for a writ of

certiorari in the Maryland Court of Appeals, which denied the

petition on May 23, 2016.

Before filing its appeal to the Maryland Court of Special

Appeals, Thai Palace commenced this action under 42 U.S.C.

§ 1983, alleging that, by conditioning its alcoholic beverage

license on its agreement not to host “go-go” entertainment and

by enforcing that condition, the Board had violated its First

Amendment rights. Thai Palace sought declaratory and injunctive

relief, $500,000 in compensatory damages, and attorneys fees and

costs. The Board filed a motion to dismiss the complaint for

lack of subject matter jurisdiction, which the district court

granted by order dated May 14, 2015. The court concluded that

it lacked subject matter jurisdiction under the Rooker-Feldman

doctrine, explaining that Thai Palace “plainly seeks to

attribute error to the core of the Board’s order and the circuit

court ruling affirming it (and thereby, to overturn them).”

From the district court’s order dismissing the complaint,

Thai Palace filed this appeal.

6

II

Thai Palace contends, contrary to the district court’s

holding, that it does not, by this action, “seek review . . . of

the decision of the Circuit Court for Charles County” and that

the district court therefore erred in applying the Rooker-

Feldman doctrine to dismiss the action. It argues that its

federal suit under 42 U.S.C. § 1983 seeks compensatory damages,

as well as equitable relief, for the Board’s conditioning of its

alcoholic beverage license on its agreement not to promote or

offer “go-go” entertainment and for the Board’s enforcement of

that condition, in violation of the First Amendment. Thai

Palace observes that, because “[c]ompensatory damages cannot be

awarded in [its administrative appeal,] . . . the [Rooker-

Feldman] doctrine is not applicable.” It maintains that rather

than dismissing the case for lack of jurisdiction, the district

court should have stayed the case pending the outcome of the

state court proceedings and then applied principles of

preclusion to address the Board’s arguments.

The Board, in contrast, contends that the district court

correctly dismissed this action under the Rooker-Feldman

doctrine, arguing that “[t]here could have been no favorable

resolution to [Thai Palace’s] claim in the district court

without a corresponding determination that the State court’s

judgment, and the Board’s decision affirmed by that State

7

court’s judgment, were decided in error.” The Board notes

further that “[t]here could be no award of compensatory damages

without the same federal review and rejection of the State court

judgment which is precluded by the Rooker-Feldman doctrine.” In

short, the Board argues that Thai Palace “asked the district

court to sit in direct review of the State court’s judgment and

by extension, the underlying decision of the Board, an

administrative agency.” Alternatively, the Board argues that

“there is no longer a justiciable controversy before the Court,

as [the January 2012 Consent Order] became null and void by its

own terms as of January 12, 2015.”

The principal issue thus presented is whether the district

court properly applied the Rooker-Feldman doctrine to dismiss

this action for lack of subject matter jurisdiction.

The Rooker-Feldman doctrine followed from Congress’ careful

assignment of federal subject matter jurisdiction, allocating

original jurisdiction to the district courts in, for example, 28

U.S.C. § 1330(a) (actions against foreign states), § 1331

(federal question jurisdiction), and § 1332(a) (diversity

jurisdiction), while allocating appellate jurisdiction over

final state court judgments to the Supreme Court in § 1257(a).

The doctrine thus holds that “lower federal courts are precluded

from exercising appellate jurisdiction over final state-court

judgments.” Lance v. Dennis, 546 U.S. 459, 463 (2006) (per

8

curiam). Thus, the Rooker-Feldman doctrine is narrow and

focused, “confined to ‘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.’” Id.

at 464 (quoting Exxon, 544 U.S. at 284).

Of course, Congress could allocate jurisdiction to district

courts to “oversee” state court judgments, as it has done in

authorizing federal habeas review, see Exxon, 544 U.S. at 292

n.8, but it has not done so generally to confer on district

courts appellate jurisdiction over state court judgments. The

doctrine goes no further than necessary to effectuate Congress’

allocation of subject matter jurisdiction between the district

courts and the Supreme Court, as the Exxon Court emphasized in

noting that the doctrine should be applied no broader than the

holdings in the two cases from which the doctrine takes its

name. Id. at 284.

In Rooker, a party that lost before the Indiana Supreme

Court and that failed to obtain review by the U.S. Supreme Court

filed an action in federal district court, challenging the

constitutionality of the state court judgment and seeking to

have it declared “null and void.” 263 U.S. at 414-15.

Affirming the district court’s dismissal of the federal suit for

lack of subject matter jurisdiction, the Supreme Court ruled

9

that the federal suit amounted to an appeal of the state court

judgment and that Congress had vested jurisdiction to entertain

such an appeal only in the Supreme Court. Id. at 415-16.

In Feldman, the plaintiffs sued the District of Columbia’s

highest court in federal district court after the District of

Columbia court denied their requests for a waiver of a bar

membership rule. 460 U.S. at 468. Again, the Supreme Court

affirmed dismissal of the case, holding that while the

plaintiffs could challenge the constitutionality of the bar

admission rule itself in a federal district court, they could

not challenge the District of Columbia court’s judgment denying

their waiver petitions in a federal district court. Id. at 482-

83.

In the years following these two decisions, which together

defined the Rooker-Feldman doctrine, courts, including this

court, broadly interpreted the doctrine as barring the loser in

a state court adjudication “from bringing suit in federal court

alleging the same claim or a claim that could have been brought

in the state proceedings,” thereby sliding the analysis into an

application of claim preclusion principles. Davani v. Va. Dep’t

of Transp., 434 F.3d 712, 713 (4th Cir. 2006) (emphasis added).

In Exxon, however, the Supreme Court corrected this

misunderstanding, warning that such an expansive construction of

the doctrine threatens both to “overrid[e] Congress’ conferral

10

of federal-court jurisdiction concurrent with jurisdiction

exercised by state courts, and [to] supersed[e] the ordinary

application of preclusion law pursuant to 28 U.S.C. § 1738.”

544 U.S. at 283 (emphasis added). Seeking to bring the doctrine

back to its narrow focus, the Exxon Court clarified that, rather

than serving as preclusion by another name, “[t]he Rooker-

Feldman doctrine . . . 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.” Id. at 284 (emphasis added). The Court even

indicated that it sought to restrict the doctrine to cases whose

procedural postures mirrored those in the Rooker and Feldman

cases themselves:

Rooker and Feldman exhibit the limited circumstances

in which this Court’s appellate jurisdiction over

state-court judgments, 28 U.S.C. § 1257, precludes a

United States district court from exercising subject-

matter jurisdiction in an action it would otherwise be

empowered to adjudicate under a congressional grant of

authority[.] In both cases, the losing party in state

court filed suit in federal court after the state

proceedings ended, complaining of an injury caused by

the state-court judgment and seeking review and

rejection of that judgment.

Id. at 291 (citations omitted).

To emphasize the narrow role that the Rooker-Feldman

doctrine is to play, the Supreme Court has noted repeatedly

11

that, since the decisions in Rooker and Feldman, it has never

applied the doctrine to deprive a district court of subject

matter jurisdiction. See, e.g., Skinner v. Switzer, 562 U.S.

521, 531 (2011); Lance, 546 U.S. at 464; Exxon, 544 U.S. at 287.

Similarly, since Exxon, we have never, in a published opinion,

held that a district court lacked subject matter jurisdiction

under the Rooker-Feldman doctrine.

To be sure, the distinction between preclusion principles

and the Rooker-Feldman doctrine can sometimes be subtle, but it

is nonetheless important to maintain. Preclusion principles are

designed to address the tension between two concurrent,

independent suits that results when the two suits address the

same subject matter, claims, and legal principles. Whereas the

Rooker-Feldman doctrine, by contrast, assesses only whether the

process for appealing a state court judgment to the Supreme

Court under 28 U.S.C. § 1257(a) has been sidetracked by an

action filed in a district court specifically to review that

state court judgment. Thus, if a plaintiff in federal court

does not seek review of the state court judgment itself but

instead “presents an independent claim, it is not an impediment

to the exercise of federal jurisdiction that the same or a

related question was earlier aired between the parties in state

court.” Skinner, 562 U.S. at 532 (emphasis added) (internal

quotation marks and alterations omitted) (quoting Exxon, 544

12

U.S. at 292-93). Rather, the Court has recognized that

Congress’ policy allows for concurrent litigation in federal and

state courts, noting that any tensions between the two

proceedings should be managed through the doctrines of

preclusion, comity, and abstention. Exxon, 544 U.S. at 292-93.

Consistent with this narrow articulation of the Rooker-

Feldman doctrine, the Supreme Court has also recognized that

state administrative and executive actions are not covered by

the doctrine. See Verizon Md. Inc. v. Pub. Serv. Comm’n of Md.,

535 U.S. 635, 644 n.3 (2002) (“[T]he [Rooker-Feldman] doctrine

has no application to judicial review of executive action,

including determinations made by a state administrative

agency”); see also Lance, 546 U.S. at 464; Exxon, 544 U.S. at

287. State administrative decisions, even those that are

subject to judicial review by state courts, are beyond doubt

subject to challenge in an independent federal action commenced

under jurisdiction explicitly conferred by Congress.

In the circumstances of this case, we conclude that this

federal action is a concurrent, independent action supported by

original jurisdiction conferred by Congress on federal district

courts, even though the complaint in the action includes claims

and legal arguments similar to or the same as those made in the

state proceedings, and that therefore it is not barred by the

13

Rooker-Feldman doctrine. There are several reasons supporting

this conclusion.

First, if we apply strictly the Supreme Court’s instruction

that the Rooker-Feldman doctrine is to be “confined to cases of

the kind from which the doctrine acquired its name,” Exxon, 544

U.S. at 284, we would conclude that the doctrine does not apply

here because the district court here was not called upon to

exercise appellate jurisdiction over a final judgment from “the

highest court of a State in which a decision could be had,” 28

U.S.C. § 1257(a) (emphasis added), as was the case in both

Rooker and Feldman. In those cases, instead of seeking review

in the Supreme Court of a judgment entered by the State’s

highest court, the losing party pursued review of the judgment

in a federal district court, frustrating the Supreme Court’s

exclusive jurisdiction over such a judgment. See 28 U.S.C.

§ 1257(a) (providing that “[f]inal judgments or decrees rendered

by the highest court of a State in which a decision could be

had, may be reviewed by the Supreme Court” in cases raising

federal questions); see also Exxon, 544 U.S. at 291 (noting

that, in both Rooker and Feldman, the plaintiff “filed suit in

federal court after the state proceedings ended” (emphasis

added)). Obviously, the case before us does not fit that

profile.

14

Second, and more fundamental to the controlling indicia

articulated by the Supreme Court in Exxon, Thai Palace’s action

was, and is, challenging the action of a state administrative

agency, rather than alleging injury caused by a state court

judgment. Nowhere in its complaint did Thai Palace seek review

of the judgment of the Circuit Court for Charles Country.

Instead, as the district court acknowledged, its claims are

premised on injuries allegedly caused by the Board. Because

Thai Palace’s federal action does not seek redress for an injury

allegedly caused by a judgment of a state court, the Rooker-

Feldman doctrine does not apply. See Exxon, 544 U.S. at 284

(holding that the Rooker-Feldman doctrine applies only to cases

brought to “complain[] of injuries caused by state-court

judgments”).

Third, and more generally, because Thai Palace challenges

state administrative actions, the Rooker-Feldman doctrine does

not apply as a categorical matter. See Exxon, 544 U.S. at 287

(“Rooker-Feldman does not apply to a suit seeking review of

state agency action”); Verizon Md., 535 U.S. at 614 n.3 (same).

Fourth, the differences between the two proceedings

demonstrate that this federal action must be seen as an

independent, concurrent action that does not undermine the

Supreme Court’s jurisdiction over any state court judgment. See

Skinner, 562 U.S. at 532. The state proceeding in this case was

15

an agency-initiated proceeding, in which limited and deferential

judicial review was afforded. The agency’s authority extended

only to issuing, modifying, and revoking Thai Palace’s alcoholic

beverage license, and judicial review was limited to determining

whether the Board’s decision was “supported by substantial

evidence” and whether the Board “committed [an] error of law.”

Paek v. Prince George’s Cnty. Bd. of License Comm’rs, 851 A.2d

540, 544 (Md. 2004). Moreover, in reviewing the Board’s

decision, Maryland courts could only modify, affirm, reverse, or

remand the proceedings to the Board, possessing no authority to

award damages. See Md. Code Ann., Art. 2(B), § 16-101(e)(4).

Any final judgment by the State’s highest court could then be

reviewed by the Supreme Court under 28 U.S.C. § 1257(a). This

action, on the other hand, was commenced under 42 U.S.C. § 1983

to challenge the constitutionality of the Board’s actions under

the First Amendment, and the district court possessed original

subject matter jurisdiction over such an action under 28 U.S.C.

§ 1331 (federal question jurisdiction). In addition to

declaratory and injunctive relief, Thai Palace also sought

damages. In these circumstances, the Supreme Court, as well as

our court, has never held that a federal district court is

barred by the Rooker-Feldman doctrine from exercising its

subject matter jurisdiction over such a concurrent proceeding,

even though the district court would have to give effect to 28

16

U.S.C. § 1738, which requires federal courts to “give the same

preclusive effect to a state-court judgment as another court of

that State would give.” Parsons Steel, Inc. v. First Alabama

Bank, 474 U.S. 518, 523 (1986).

And fifth, while pursuing this independent, concurrent

action, Thai Palace in fact never sought to bypass the Supreme

Court’s appellate jurisdiction under 28 U.S.C. § 1257(a) over

any relevant state court judgment. To the contrary, it

challenged the judgment of the Circuit Court of Charles County

by appealing it to the Maryland Court of Special Appeals and

ultimately the Maryland Court of Appeals, thereby remaining on

track for potential review by the U.S. Supreme Court. Thus,

Thai Palace did not frustrate the Supreme Court’s jurisdiction,

and the purpose behind the Rooker-Feldman doctrine was not

implicated.

Rather than limit itself to the narrow question of whether

it was called upon to exercise appellate jurisdiction over a

state court judgment, the district court effectively applied

preclusion principles to conclude that the Rooker-Feldman

doctrine divested it of subject matter jurisdiction. For

example, the court noted that, in this action, Thai Palace was

presenting “the substance of the very constitutional challenge”

that the Circuit Court for Charles County addressed; that it

“could not possibly rule in [Thai Palace’s] favor on these

17

claims without finding error by the state court”; and that Thai

Palace’s “success on the merits would necessitate a finding that

the state court wrongly decided the issues before it.”

(Internal quotation marks and citations omitted). Yet these

observations about the similarity of the claims are beside the

point. While the court’s concerns may have been accurate and

valid, they do not relate to whether Rooker-Feldman applies.

See Exxon, 544 U.S. at 293 (“Nor does [the Rooker-Feldman

doctrine] stop a district court from exercising subject-matter

jurisdiction simply because a party attempts to litigate in

federal court a matter previously litigated in state court”).

Rather, the district court’s concern that it could not rule in

Thai Palace’s favor without attributing error to the state court

amounted to the application of traditional preclusion

principles.

At bottom, we conclude that this federal action, commenced

by Thai Palace under 42 U.S.C. § 1983 and alleging injury

inflicted by actions of a state administrative agency, qualifies

as an independent, concurrent action that does not undermine the

Supreme Court’s appellate jurisdiction over state court

judgments, and accordingly the Rooker-Feldman doctrine does not

apply. Of course, this is not to say that this action can

continue if it is barred under state preclusion principles.

Nonetheless, in this posture at this time, we must reverse the

18

district court’s Rooker-Feldman ruling and remand for further

proceedings. 3

REVERSED AND REMANDED

3 We note that this case is not moot, as the Board claims,

given that Thai Palace seeks compensatory damages for past harm.

19