Madison - St. Clair Record

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Madison County, tax buyer petitions to appeal class certification in bid rigging case

By Heather Isringhausen Gvillo | Jul 24, 2015


Roughly one month after visiting judge William Becker filed an official order granting class certification in a Madison County class action, defendants accused of participating in the alleged bid rigging scheme filed petitions to appeal the order, saying the order was rushed.

Defendant Madison County and tax buyer James Foley filed separate petitions for leave to appeal to the Fifth District Appellate Court through attorney Craig Unrath of Heyl Royster on July 13.

They argue that Becker hastily approved class certification before having answers on heavily-debated issues, such as how to calculate damages and whether every class member’s property was a delinquent sale.

“The trial court chose to take a ‘we’ll figure it out later’ approach,” both petitions state

“Such an approach is not supported by class action jurisprudence.”

“Neither plaintiffs nor the trial court, however, have provided any analysis of how this action raising numerous counts against over 20 different defendants could be conducted on a class-wide basis," the petitions state. "There is no discussion of how a trial can be conducted on different theories against different defendants. There is no discussion of what damages methodology can be used. Punting these issues for resolution down the road is not appropriate."

The class consists of anyone who owned a parcel of property that was sold at a Madison County tax sale auction from 2005 to 2008 at a penalty rate of 12 percent or higher.

Becker, a Clinton County associate judge, was appointed to preside over the case to avoid the appearance of conflicts of interest.

Federal prosecutors, who brought down former Madison County treasurer Fred Bathon and tax buyers, say that between 2005 and 2009, tax buyers engaged in price fixing by only bidding the statutory maximum interest rate of 18 percent. The rigging was so pervasive that distressed homeowners were charged the maximum rate on nearly every property tax lien sold during that period.

Bathon was convicted of structuring property tax sales in a way that eliminated competitive bidding and increased interest rates for the tax buyers in exchange for campaign contributions.

He and tax buyers Barret Rochman, Scott McLean and John Vassen pleaded guilty to antitrust violations in 2013.

Bathon was sentenced to 30 months in prison, but only had to serve 18 months. He was released on June 25.

In their petitions, the defendants argue that the trial court abused its discretion when it certified the class action, by failing to consider the following:

- Plaintiffs bear the burden of proof in establishing all of the elements for class certification and must do more than rely on the mere allegations in their complaint;

- Plaintiffs must possess a valid cause of action against the defendants before a class can be certified;

- Individual issues predominate, particularly with respect to damages, making class certification improper;

- Plaintiffs are not adequate class representatives as they have competing interests and did not purchase taxes in all of the tax years in question from all of the defendants; and 

- A class action is not appropriate for the fair and efficient adjudication of this case.

In addition to an order reversing Becker’s class certification, Madison County requests the appellate court to dismiss the claims made against it.

Unrath noted that all but two claims against Madison County have been dismissed – claims for sales in error and money had and received. The defendant argues that these claims are not viable and class certification, let alone the allegations themselves, are improper.

In the petition, Unrath wrote that the Sales in Error statute is “designed to benefit the tax buyer, not the delinquent tax payer.”

“By the precise language of the statute, the class representatives lack standing to pursue a claim for Sale in Error as they are not alleged to be tax buyers and have not shown that they are tax buyers,” he wrote.

Reiterating that the class representatives do not have standing to pursue a Sale in Error claim, Unrath adds that a class action claim for sale in error requires consideration of individualized issues for each parcel of property, making class certification inappropriate.

“When the statutory factors are reviewed, it becomes apparent that successful adjudication of one plaintiff’s claim will not establish a right of recovery in any other class member.

“Class action precedent mandates that a judgment in favor of the class members should decisively settle the entire controversy, and all that should remain is for other members of the class to file proof of their claim,” the petition states.

As for the money had and received claim, Unrath argues that the plaintiffs failed to allege any facts suggesting Madison County retained any money as a result of Bathon’s tax-buying system.

“Put simply, no money was ‘had,’ nor was any ‘received,’” he wrote 

Madison County asserts that it received no benefits from Bathon’s conduct.

“For each putative class member, a determination of Madison County’s liability for money had and received cannot be made without an evaluation of whether Madison County retained funds from the individual absent class member’s payment of allegedly excessive penalty rates," Unrath wrote.

“This is especially true in this case where, as a matter of practice and as plaintiffs concede, Madison County did not retain money paid due to the allegedly excessive penalty rates but would have simply passed that money on to the tax buyers."

Both defendants contend class representatives Scott Bueker, Virgil Straeter and Richeson Real Estate bore the burden of demonstrating that class certification was proper, which they failed to do, the petitions state.

“Plaintiffs neglected to provide any discussion or analysis as to how damages could be tried or determined. The reason for this oversight is readily apparent – the individualized nature of damages so predominates over any common issues that class certification is improper,” Unrath wrote.

The defendants reiterate that in order to determine damages and causation, the court would have to conduct an “extensive” analysis into every single parcel of land and every single tax sale.

“Plaintiffs neglected to provide any discussion or analysis as to how damages could be tried or determined and the trial court could not come up with a plan on its own

Instead, it said it is satisfied that an appropriate method can be reached. If this class is to be certified, litigants have a right to know how damages will be calculated,” Foley’s petition states.

Additionally, they accuse the three plaintiffs of being inadequate class representatives, arguing that none of them had delinquent taxes for all of the appropriate years and did not have taxes purchased by all of the named defendants. 

“Moreover, as part of this action, Straeter wants to challenge his property tax assessments and recover some of the underlying property taxes he paid on his property," the petitions state. "This makes Straeter’s claim significantly different from those of absent class members."

Because Foley is accused as a tax buyer participating in Bathon’s scheme, his petition specifically argues that claims against him cannot be proven on a class-wide basis, meaning class certification should not have been approved.

“As a consequence, allowing certification of the claims against Mr. Foley without this primary showing (and exposing Mr. Foley to the burdens and expenses associated with a certified class) violates basic notions of fairness and justice,” Unrath wrote.

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