Madison - St. Clair Record

Friday, August 23, 2019

Bid-rigging class action can proceed; Supreme Court refuses to hear county, tax buyers' appeal

By Ann Maher | Jan 27, 2017

An Illinois Supreme Court decision issued on Wednesday means that a class action trial over bid rigging by former Madison County treasurer Fred Bathon and others can proceed.

The high court denied defendants' petition for leave to appeal a Fifth District Appellate Court ruling, which found that visiting judge William Becker did not abuse his discretion in certifying a class of distressed property owners who were charged excessive interest rates at auctions of delinquent property taxes.

Whether the case proceeds to trial or settlement ensues remains to be seen.

And while the appellate court ruled that class certification was appropriate on common questions, justices said last September that individual damages have to be decided separately.

Associate Circuit Judge William Becker presides over the action by special assignment as visiting judge from Clinton County.

Plaintiffs claim that at auctions of delinquent property taxes from 2005 to 2008, Bathon arranged for tax buyers to charge interest at the legal limit of 18 percent.

Bathon pleaded guilty of antitrust violations in 2013, and served a sentence.

Tax buyers Scott McLean, Barrett Rochman and John Vassen also served sentences.

Former U.S. attorney Stephen Wigginton, who prosecuted Bathon and the tax buyers, did not seek restitution for property owners, finding individual calculation of damages would be impracticable.

Property owners later filed three suits proposing class actions against Bathon and tax buyers in Madison County circuit court.

Becker’s predecessor on the special assignment, Clinton County circuit judge Dennis Middendorf, consolidated the actions.

The single action alleged civil conspiracy and violations of Illinois antitrust law against Bathon, McLean, Rochman, and Vassen.

The suit also sought damages from tax buyers Dennis Ballinger, Kenneth Rochman, Scott Sieron and Joseph Vassen, as well as others who are no longer in the action.

It alleged breach of fiduciary duty against Bathon and sought action against the bond he executed as treasurer.

It included a count against the county and then treasurer Kurt Prenzler, who is now county board chairman, seeking recovery under state law for sales in error.

Finally, it included a count against the county for money had and received, a claim similar to unjust enrichment.

Defendants opposed class certification, echoing Wigginton’s conclusion that individual calculations weren’t practical.

Becker held a hearing on class certification and granted it, finding that common questions of law or fact predominated over individual questions.

He wrote that almost 10,000 delinquent tax sales occurred in the relevant time.

He defined the class as all who paid 12 percent or higher.

Regarding damages, he wrote, “The problem is that if the alleged tax sale scheme is proved true, all or some of the defendants created a system whereby it is difficult if not impossible for an individual plaintiff to prove that a lower rate would have been bid and what that rate would have been for a particular piece of property.”

He concluded that he could reach an appropriate method to calculate damages.

The tax buyers, the county, and Foley petitioned the Fifth District appellate court for interlocutory review, and Fifth District judges denied it.

Defendants asked the Illinois Supreme Court for leave to appeal, and obtained instead a supervisory order directing the Fifth District to hear their appeal.

Fifth District judges heard it and decided Becker didn’t abuse his discretion by certifying a class action.

“Although we recognize that four of the defendants pleaded guilty to the conspiracy in federal court, the determination of whether the remaining defendants, including Foley, were involved in the unlawful behavior is still at issue in the case,” Justice Thomas Welch wrote.

“Foley claims that he was not the auctioneer at the tax sale who picked the winning bids and that he was not even present at the 2008 tax sale.

“Antitrust conspiracies often have to be proven from inferences drawn from the circumstantial evidence.

“All class members will rely on the same discovery, same witnesses, and other evidence to prove the existence of the conspiracy, whether the remaining defendants were part of the alleged conspiracy, and a causal connection between the conspiracy and any injury.”

Welch rejected a defense argument that statutes of limitation precluded the claims.

“Although we recognize that this is an issue that will need to be determined, commonality is not destroyed where class members may be affected differently by the applicability of the statute of limitations,” Welch wrote.

Although the Justices found Becker didn’t abuse his discretion by certifying a class action, they found he abused his discretion by not limiting it to liability.

Welch wrote that findings of the Department of Justice supported this conclusion.

“Without a methodology to calculate damages on a class wide basis and given the unique characteristics of real property as well as the subjective nature of the bidding process, we conclude that the calculation of actual damages would be too individualized to be handled as part of the class action,” he wrote.

“If individual damage determinations are necessary, the court can utilize various procedures to determine damages, including the creation of subclasses.

“Furthermore, if the class becomes unmanageable at some later time in the litigation, the court always has the option to set aside the class certification or a portion of it.”

Finally, he excused Madison County and Prenzler from the proceedings.

He wrote that nothing in statutory language allows a delinquent property tax owner to bring a statutory sale in error cause of action against the county.

Regarding money had and received, he wrote that plaintiffs alleged no facts suggesting the county retained any money as a result of the alleged conspiracy.

Steven Giacoletto of Collinsville, Aaron Weishaar of St. Louis, and Nelson Mitten and Paul Grote of Clayton represent plaintiffs.

Andrew Kasnetz, Timothy Sansone, Natalie Kussart, and Michele Parrish, all of Sandberg Phoenix in St. Louis, represent the Rochmans.

Gordon Nash and Daniel Delaney of Chicago represent Ballinger.

Paul Slocomb of St. Louis represents the Vassens.

Alvin Paulson of Belleville represents Sieron.

Craig Unrath of Heyl Royster in Peoria represented the county and continues to represent Foley, along with Michael Schag, Patrick Cloud, and Ann Barron, all of Heyl Royster in Edwardsville.

Bathon didn’t participate in the appeal.

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Organizations in this Story

Heyl Royster Illinois Supreme Court Madison County