Full Opinion

In the United States Court of Appeals For the Seventh Circuit ____________________ No. 24-3308 MARY JANE SWEET SPOT, LLC and ASHLEY MCCOY, Plaintiffs-Appellants, v. CITY OF BLUE ISLAND, et al., Defendants-Appellees. ____________________ Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:22-cv-06273 — John Robert Blakey, Judge. ____________________ ARGUED FEBRUARY 25, 2026 — DECIDED OCTOBER 26, 2026 ____________________ Before ROVNER, PRYOR, and KOLAR, Circuit Judges. ROVNER, Circuit Judge. The City of Blue Island, Illinois, de- nied a business license to plaintiffs-appellants Mary Jane Sweet Spot, LLC (“Mary Jane”) and its principal, Ashley McCoy. After unsuccessfully seeking administrative review of the decision in state court, the plaintiffs eventually filed suit in the district court alleging that, in denying them the busi- ness license, Blue Island had denied them due process and 2 No. 24-3308 equal protection, and had also engaged in conspiracy, dis- crimination, and tortious interference. The district court dis- missed the suit for lack of subject matter jurisdiction, reason- ing that it was barred by the Rooker-Feldman doctrine. See Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923); Dist. of Columbia Ct. of App. v. Feldman, 460 U.S. 462 (1983). The plaintiffs ap- peal. We vacate and remand for further proceedings. The dis- trict court had jurisdiction over this suit; Rooker-Feldman does not apply. The bar to this suit, if any, is claim preclusion, an issue the parties have not presented. We leave it to the district court to evaluate the merits of that defense on remand if the defendants choose to pursue it. I. In 2021, Mary Jane and McCoy filed an application for a business license to operate a small bakery in Blue Island (the “City”) that would host “themed days.” Initial inspections and paperwork reviews by the City went well, and, according to McCoy, she was orally advised that the license would be granted. But subsequently, on November 12, 2021, Blue Island de- nied the license. In a detailed letter explaining the denial, the City noted that on October 20, the plaintiffs had held an event on the premises of the as-yet unlicensed business featuring comedians and “infused” treats for which they had required attendees to pay a cover charge of $10. McCoy told police of- ficers who visited the premises during the event that it was a baby shower for a family member. Further, the plaintiffs were advertising a second event on October 31, a “Bring your own Booz[e]” costume party again featuring “infused” treats along with hookah smoking, for which guests were to pay a cover charge of $30. On the City’s insistence that event was No. 24-3308 3 ultimately canceled. The City noted that these events were out of character with the small bakery that McCoy had described in her license application; that she was “initially uncoopera- tive and evasive” when police appeared at the October 20 event; and that she stopped advertising for the Halloween event only when the City ordered her to do so. “Your behav- ior shows a lack of respect for the City, its residents, and its laws.” A04–05. The plaintiffs appealed the license denial, and an officer designated by the City conducted an administrative hearing. The hearing officer recommended that the City Council sus- tain the denial of the license. Under section 110.50(A)(1) of the Blue Island Municipal Code, the plaintiffs had the right to seek further administrative review before the Blue Island City Council (or its designated committee) within 10 days. How- ever, the plaintiffs skipped that step and instead petitioned for administrative review of the City’s decision in the Circuit Court of Cook County. On the City’s motion, the Circuit Court on May 10, 2022, dismissed the petition for review, and on October 5, 2022, de- nied the plaintiffs’ motion to reconsider. The court dismissed the petition on two grounds: (1) in omitting to seek review before the Blue Island City Council, the plaintiffs had failed to exhaust their administrative remedies, and (2) the plaintiffs had filed their petition for administrative review of the deci- sion one day late (after initially submitting their petition timely but without the requisite filing fee). A24, A47–48. The plaintiffs appealed the dismissal to the Illinois Appel- late Court. In a detailed, unpublished order dated December 8, 2023, the appellate court affirmed the dismissal on the basis 4 No. 24-3308 of the plaintiffs’ failure to exhaust their administrative reme- dies. A55–64. While the appeal to the state appellate court was pending, the plaintiffs turned to federal court. They filed suit in the dis- trict court in November 2022, the month after the state circuit court denied their motion to reconsider. Pursuant to 42 U.S.C. §§ 1981 and 1983 and the court’s supplemental jurisdiction under 28 U.S.C. § 1367, the operative 10-count, second amended complaint presents multiple Fourteenth Amend- ment claims for the denial of due process, equal protection, and the right to enter into a contract with the City, along with state-law claims for interference with McCoy’s business. There is no question that the federal suit stems from the denial of the business license, which, of course, was also the subject of the state-court proceedings that culminated in the dismis- sal of the plaintiffs’ request for administrative review of the license denial. In a minute entry dated July 25, 2024, the district court or- dered the plaintiffs to show cause why the second amended complaint should not be dismissed for lack of subject matter jurisdiction based on the Rooker-Feldman doctrine, which fore- closes a challenge to state-court decisions in any federal court other than the Supreme Court. Plaintiff[s] seek[] damages based upon alleged constitutional violations from state court deci- sions denying (or possibly revoking) [their] business license. But awarding damages for al- legedly unconstitutional state court decisions necessarily requires a finding that those No. 24-3308 5 decisions were wrong as a matter of law, which under Rooker-Feldman, the court may not do. R. 45. In their response to the show-cause order, the plaintiffs ar- gued that they were not asking the district court to review a state-court decision. R. 46 at 3. They were, rather, challenging an administrative body’s decision to deny them a business li- cense. In fact, the state court had declined to review that deci- sion, and in doing so had deprived the plaintiffs of the oppor- tunity to raise the federal due process and equal protection claims they were now putting before the federal court. R. 46 at 7–9. The district court disagreed and dismissed the complaint. The plaintiffs’ petition for state-court review of their license denial had expressly alleged that the decision of the Blue Is- land hearing officer was inconsistent with Illinois law and had violated their due process rights. R. 47 at 2. By pursuing the same sorts of claims in federal court, the plaintiffs were seeking a second bite at the apple. “This court thus cannot reach the merits of Plaintiffs’ claims without effectively over- turning the Circuit Court’s judgment. In fact, if Plaintiffs suc- ceed on appeal [before the Illinois Appellate Court], Plaintiffs’ constitutional claims will remain very much before the state court.” R. 47 at 3. The district court went on to note that the federal claims the plaintiffs were pursuing in federal court were “inextricably intertwined” with the claims presented to the state court. R. 47 at 3. Accordingly, the district court dis- missed the case for lack of subject matter jurisdiction. 6 No. 24-3308 The plaintiffs then moved for reconsideration. The district court denied reconsideration in a minute entry dated Novem- ber 22, 2024, noting: Plaintiff argues that she was precluded from raising her claim in the state court proceeding. But the Court found otherwise, and the state court record confirmed the finding. As a result, the Court remains persuaded that Rooker- Feldman bars her claim and the prior order [of dismissal] stands. R. 61 (italics ours). The plaintiffs appeal from the denial of their motion to re- consider. II. We review for abuse of discretion the district court’s deci- sion to deny the plaintiffs’ request to reconsider the dismissal of their complaint. See Emerson v. Dart, 109 F.4th 936, 943 (7th Cir. 2024). But, of course, the viability of a complaint presents a question of law. Pirelli Armstrong Tire Corp. Retiree Med. Ben- efits Trust v. Walgreen Co., 631 F.3d 436, 441 (7th Cir. 2011); see also Chapman v. Burke, 186 F.4th 885, 892 (7th Cir. 2026) (dis- missal pursuant to Rooker-Feldman is reviewed de novo). If the district court misunderstood the application of the Rooker- Feldman doctrine, it necessarily abused its discretion in dis- missing the complaint. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990) (“A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence.”), superseded in other respects by Fed. R. Civ. P. 11(c)(2) (1993); Neal v. U.S., 155 F.4th 678, 685 (7th Cir. 2025) (“A decision that No. 24-3308 7 rests on an error of law is always an abuse of discretion.”) (quoting Bridges v. U.S., 991 F.3d 793, 799 (7th Cir. 2021)). We find it clear under Supreme Court and circuit precedent that Rooker-Feldman does not apply here. As this court recognized in its 2024 en banc decision in Gil- bank v. Wood Cty. Dep’t of Human Servs., 111 F.4th 754, 765 (7th Cir. 2024), cert. denied, 145 S. Ct. 1167 (2025), the Supreme Court has “emphasized the ‘limited circumstances’ where Rooker-Feldman should apply, cautioning that the doctrine has no place ‘overriding Congress’ conferral of federal-court ju- risdiction concurrent’ with the jurisdiction of state courts or ‘superseding the ordinary application of preclusion law. …’” (quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 283, 291 (2005)). “Exxon Mobil teaches that district courts should disclaim jurisdiction only in ‘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 766 (quoting Exxon Mobil, 544 U.S. at 284). See also T.M. v. Univ. of Md. Med. Sys. Corp., 608 U.S. —, 146 S. Ct. 1739, 1743–44, 1747–48, 1753–54 (2026); Skinner v. Switzer, 562 U.S. 521, 532 (2011); Lance v. Dennis, 546 U.S. 459, 460 (2006) (per curiam). Pursuant to our decision in Gilbank, Rooker-Feldman will block federal jurisdiction over a case when four elements are present: (1) the federal plaintiff must have been a state-court loser; (2) the state-court judgment must have become final be- fore the federal proceeding began; 1 (3) the state-court 1 The Supreme Court’s recent decision in T.M. limits this finality ele- ment to the extent it clarifies that the Rooker-Feldman bar is not limited to final judgments rendered by the highest court of a State. 146 S. Ct. at 1748– 8 No. 24-3308 judgment must have caused the alleged injury underlying the federal claim; and (4) the claim must invite the federal district court to review and reject the state-court judgment. 111 F.4th at 766. Consideration of the third element above makes clear that the Rooker-Feldman doctrine does not apply here. The third el- ement’s injury requirement “hinges on whether the federal claim alleges an injury ‘caused by the state court judgment’ or ‘an independent prior injury that the state court failed to rem- edy.’” Gilbank, 111 F.4th at 767 (quoting Sykes v. Cook Cty. Cir- cuit Ct. Probate Div., 837 F.3d 736, 742 (7th Cir. 2016)). The state-court judgment here is not the source of the plaintiffs’ injury. Rather, it is the Blue Island administrative hearing of- ficer’s decision sustaining the denial/revocation of the plain- tiffs’ business license that has caused the plaintiff’s injury. See Andrade v. City of Hammond, Ind., 9 F.4th 947, 948, 950–51 (7th Cir. 2021); id. at 952–53 (Sykes, J., concurring); Durgins v. City of E. St. Louis, Ill., 272 F.3d 841, 844 (7th Cir. 2001). In Andrade, the City of Hammond inspected an apartment building and notified the owner that the building was unsafe and repairs were necessary if the building were to be treated as habitable. An evidentiary hearing was held before the city’s Board of Public Works and Safety, following which the Board found that the building was indeed unsafe in violation of 49. Put another way, a state-court judgment may be treated as final for Rooker-Feldman purposes even if it remains subject to further review in state appellate proceedings. Id.at 1744, 1748–49; see also id. at 1761 n.1 (Bar- rett, J., dissenting) (collecting prior circuit court decisions to the contrary, including Parker v. Lyons, 757 F.3d 701, 705–06 (7th Cir. 2014) (per curiam), overruled on other grounds by Hadzi-Tanovic v. Johnson, 62 F.4th 394 (7th Cir. 2023)). No. 24-3308 9 Indiana law and ordered the owner, Andrade, to make repairs or vacate four of the five apartment units. Andrade then sought review of the Board’s decision in Indiana state court. The superior court affirmed the Board’s decision, as did the Indiana Court of Appeals, and thereafter both the Indiana Su- preme Court and the U.S. Supreme Court declined to hear the case. Andrade then filed a federal suit against Hammond, the Board, and various city officials alleging, among other things, that the defendants had violated and conspired to violate An- drade’s due-process rights. The district court dismissed the case for lack of jurisdiction pursuant to Rooker-Feldman. This court reversed, concluding that Andrade’s claims were not barred by Rooker-Feldman. We noted, among other points, that Andrade’s federal claims were not a direct challenge to any state-court order, nor were they “inextricably intertwined” with a state-court judgment. “The complaint alleges, at most, ‘an independent prior injury that the state court failed to rem- edy’ and not an injury ‘caused by the state court judgment.’” 9 F.4th at 950–51 (quoting Sykes, 837 F.3d at 742). “[Andrade’s] federal claims could exist even without any state-court judg- ment. And for that reason, ‘the injur[ies] complained of by [Andrade can] be separated from [the] state court judgment.’” Id. at 951 (emphasis in original) (quoting Jakupovic v. Curran, 850 F.3d 898, 903 (7th Cir. 2017)). Whether Andrade’s federal suit might fail for other reasons, such as preclusion, was a matter that we left for the district court to determine on re- mand. Id. Judge Sykes concurred, agreeing that the Indiana courts had at most failed to remedy the injuries caused by state non- judicial actors (especially since their review was circum- scribed by state administrative law). 10 No. 24-3308 Although Andrade is a “state-court loser,” Exxon, 544 U.S. at 284, his injuries preceded, and are independent of, any state-court judgment. The thrust of his due-process challenge con- cerns Hammond’s building-code enforcement and resulting demolish-or-repair order against his property. That order was the product of a lengthy investigation of unsafe conditions at the property by Hammond officers and administra- tion before the Board. … 9 F.4th at 953 (Sykes, J., concurring). Our decision in Durgins, 272 F.3d 841, indicates that it is the doctrine of claim preclusion, rather than the Rooker- Feldman doctrine, that might bar the plaintiffs’ federal action in a case such as this one. In Durgins, an East St. Louis police officer, Durgins, was suspended and ultimately discharged following an investigation into possible workplace misconduct which revealed that she had falsified her employment credentials by concealing her criminal record. A hearing was then held before the city’s Board of Police and Fire Commissioners, which upheld her discharge upon finding that she had indeed falsified her credentials. A state court subsequently declined to overturn the Board’s decision. Durgins then filed a federal action pursuant to section 1983 contending that her discharge violated her First Amendment right to free speech, in that it was her criticism of fellow police officers that had led to the investigation and the decision to fire her. The case went to trial in the district court, and the jury found in Durgins’ favor and awarded her damages. On appeal, this court reversed the judgment, finding that claim preclusion barred Durgins’ federal suit. We noted that No. 24-3308 11 Durgins had a hearing before the Board of Police and Fire Commissioners, after which she had an opportunity for re- view in state court. “There[,] she could have argued not only that the Board acted on insufficient evidence, or used im- proper procedures, but also that the City initiated the dis- charge proceedings in retaliation for protected speech.” Id. at 843. We acknowledged that Durgins’ constitutional objection to her discharge could not have been resolved on the record before the Board, “but Illinois permits constitutional claims (including those based on 42 U.S.C. § 1983) to be joined with administrative-review proceedings and explored in discov- ery.” Id. Thus, Durgins could have presented all of her theo- ries—"evidentiary, statutory, and constitutional”—to the state court when she sought administrative review of the Board’s decision. And because Durgins could have pursued her First Amendment claim in state court, the state court pro- ceeding foreclosed any subsequent action in federal court arising out of the same transaction. Id. at 843–44. Durgins concluded with “[a] brief word … about the Rooker-Feldman doctrine.” Id. at 844. Normally the Rooker-Feldman doctrine applies when the injury is inflicted by the state court’s decision, while if all the state court has done is fail to rectify an injury caused by some other ac- tion then claim preclusion is the appropriate doctrine. This understanding places a suit such as Durgins’s on the preclusion side of the line: the injury comes from her discharge, not from the state court’s failure to order her reinstate- ment. 12 No. 24-3308 Id. (citations omitted). The court noted that all but one of this court’s precedents dealing with federal § 1983 suits following administrative-review actions in state court had applied the doctrine of claim preclusion, rather than Rooker-Feldman. The one exception was a case in which the parties themselves had couched their arguments in Rooker-Feldman terms and this court had done the same; but Durgins described that one out- lier as “a preclusion decision in Rooker-Feldman clothing.” Id. Button v. Harden, 814 F.2d 382 (7th Cir. 1987), abrogated in part on other grounds by Spiegla v. Hull, 371 F.3d 928, 941–43 (7th Cir. 2004)—among the cases cited by Durgins—adds that a plaintiff who wishes to challenge the results of an Illinois administrative hearing on constitutional grounds, as the plaintiffs wish to do here, has two options open to her: (1) she can immediately file suit in federal court under section 1983, without having first to exhaust her state administrative rem- edies, see Patsy v. Bd. of Regents of State of Fla., 457 U.S. 496 (1982), superseded in part by Prison Litigation Reform Act of 1995, 42 U.S.C. § 1997e(a); or (2) she can, after exhausting her state administrative remedies, petition the state court for ju- dicial review of the hearing officer’s determination. Button, 814 F.2d at 384. If she pursues the latter route, she runs the risk of claim preclusion if she later attempts to pursue relief in federal court, particularly where she could have raised her constitutional claim in state court. Id. In this case, the plaintiffs attempted to pursue the second of the two options identified in Button, although they did so without exhausting their administrative remedies: After the hearing officer took evidence and sustained the City’s denial of a business license, the plaintiffs petitioned for review of the hearing officer’s determination in Illinois state court. In their No. 24-3308 13 petition to the circuit court, they included a constitutional claim asserting that they had been denied due process. After the circuit court dismissed the case, the plaintiffs appealed to the Illinois Appellate Court, which affirmed the dismissal. Having availed themselves of a state-court forum, they now seek a second bite at the apple in federal court. As Andrade and Durgins make clear, the potential problem with the plaintiffs’ federal suit is not Rooker-Feldman: The plaintiffs’ injury pre-dates the litigation in state court, and that injury resulted from the hearing officer’s adverse deter- mination upholding the denial of a business license to the plaintiffs. The most that can be said of the litigation in state court was that it failed to correct the alleged wrong done by the hearing officer. As such, the Rooker-Feldman doctrine does not apply here. Whether claim preclusion might bar the plaintiffs’ federal suit is not a question we address. The defendants-appellees have not raised this issue, and the parties have not briefed it. The party presentation principle consequently prevents us from taking it up sua sponte. See Margolin v. Nat’l Ass’n of Im- migr. Judges, 608 U.S. 339, 343 (2026) (per curiam); Lukaszczyk v. Cook County, 137 F.4th 671, 674 (7th Cir. 2025). The plaintiffs’ counsel has suggested that claim preclusion would not apply here because the state court’s dismissal of the plaintiffs’ peti- tion for review was not a final judgment on the merits of the claims presented there. See Strickland v. City of Markham, 178 F.4th 347, 350 (7th Cir. 2026) (per curiam) (identifying “a final judgment on the merits rendered by a court of competent ju- risdiction” as the first element of a defense of claim preclusion under Illinois law); Watkins v. Ingalls Mem. Hosp., 2018 IL App (1st) 163275 ¶ 70 n.4 (prior dismissal of suit for failing to 14 No. 24-3308 exhaust administrative remedies does not constitute final judgment on merits for res judicata purposes) (citing Ill. Health Maint. Org. Guar. Ass’n v. Dep’t of Ins., 864 N.E.2d 798, 817 (Ill. App. Ct. 2007)). In any case, it is for the defendants to assess the potential merits of a claim preclusion defense and to decide whether to pursue it. And if the defendants do elect to raise such a defense, it is a matter for the district court to resolve in the first instance. We express no opinion on the matter. Our analysis ends with the determination that the Rooker-Feldman doctrine does not apply here. III. The district court erred in dismissing the case for want of jurisdiction based on Rooker-Feldman. That doctrine does not apply to this suit, as the state-court judgment was not the cause of the plaintiffs’ alleged injuries. The judgment of dis- missal is REVERSED, and the case is REMANDED for further proceedings consistent with this opinion.