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From Antitrust Law Daily, March 30, 2018

Suit alleging conspiracy to fix real estate tax sales in Illinois county dismissed

By Robert B. Barnett Jr., J.D.

An antitrust suit by two property owners alleging a conspiracy to fix real estate tax sales in order to artificially raise redemption costs for the property owners was dismissed in its entirety where the property owners failed to offer "even a scintilla of evidence" to prove antitrust injury or damages, the federal district court in Benton, Illinois has ruled. While the property owners claimed that the conspiracy caused the redemption rate to be set at the statutory maximum of 18%, they never established what the penalty rates on their properties should have been without the conspiracy, leaving any jury to guess on injury or damages. Furthermore, the county was exempt from federal antitrust claims under the Illinois Local Government Antitrust Act, and the county treasurer was exempt because the property owners offered no evidence that he was acting outside the scope of his official duties (Dvorak v. St. Clair County, Illinois, March 29, 2018, Yandle, S.).

Under Illinois law, winning bidders at property tax sales win the property, subject to the right of the original owner (or the mortgagee) to redeem the property by paying the back taxes plus a penalty. The penalty may be anywhere between 0% and 18%, with the winning bidder being the one who bids the lowest percentage rate. If no one redeems the property, the winning bidder obtains clear title to the property. When two property owners in St. Clair County, Illinois, sought to redeem their properties, they learned that the winning bidder on both properties had bid the statutory maximum of 18%. They then filed a putative class action suit alleging that the county treasurer, the county itself, and various individuals and entities engaged in a conspiracy to rig the winning bids at 18% to raise the penalties they would collect and discourage redemption. They alleged that the treasurer, in return for political contributions, arranged for the auctioneer to recognize co-conspirator purchasers as the winning bidders, who would then share the proceeds. After the property owners’ effort to obtain class certification failed, the alleged conspirators filed a motion for summary judgment.

Federal antitrust claims. In establishing its claim that a conspiracy existed, the property owners produced evidence that the successfully bid tax rates for St. Clair County for 2006 and 2007 (the two years that they maintained the conspiracy existed) were higher both (1) in St. Clair County before and after those years and (2) in other Illinois counties for those years. They also produced evidence that representatives of those people and the entities alleged to have been part of the conspiracy were given advantageous seating positions at the auctions. The alleged conspirators, for their part, offered contrary evidence as to why the rates were higher in those years, which included the 2008 financial crisis that caused turnout at any one auction to be lower because so many more auctions were occurring. The property owners, for their part, sought damages of the difference between what they paid and what they should have paid if no conspiracy existed. Nowhere, however, did the property owners establish "what they should have paid." Without that evidence, the court said, any jury would be forced to improperly guess at injury or damages. As a result, it granted summary judgment to the alleged conspirators for the property owners’ failure to establish injury or damages.

In any event, the county and the county treasurer were exempt from the federal charges. The county was exempt because the Illinois Local Government Antitrust Act exempted it. The treasurer can be held liable, at least for acts outside the scope of his responsibilities as treasure, but the property owners never provided such proof. Evidence that he accepted campaign contributions from the bid winners did not establish a conspiracy to fix tax sales.

Illinois Antirust Act claims. The analysis for the federal antitrust claims applied equally to the state antitrust law claims. The county and the treasurer were both exempt, and the others were not liable in the absence of any proof of injury or damages.

Statute of limitations. The time between the tax sale and the date the suit was filed was five years and 11 months. The applicable statute of limitations for claims under both the Sherman Act and the Illinois Antitrust Act is four years. Questions of fact existed, however, as to when the property owners knew or should have known of the alleged conspiracy. The so-called "discovery rule," therefore, could possibly extend the beginning of the running of the statute of limitations to a later date. As a result, summary judgment on statute of limitations grounds was inappropriate.

Other state law claims. All the other state laws claims were similarly dismissed, for various reasons. For example, a state law civil conspiracy claim was dismissed because a conspiracy requires an underlying wrongful act, which the court had just determined did not exist.

The court, therefore, granted the alleged conspirators’ motion for summary judgment, and it dismissed the case in its entirety with prejudice.

The case is No. 14-CV-1119-SMY-RJD.

Attorneys: Aaron G. Weishaar (Reinert Weishaar & Associates, PC) for Kevin Dvorak. Garrett P. Hoerner (Becker, Hoerner, Thompson & Ysursa, PC) for St. Clair County, Illinois.

MainStory: TopStory Antitrust IllinoisNews

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