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Friday, April 3, 2020

Tax buyers seek summary judgment in St. Clair County bid-rigging suit; Residents file individual oppositions

By Heather Isringhausen Gvillo | May 24, 2017

Law money 01

St. Clair County residents alleging several tax buyers participated in a bid-rigging conspiracy filed oppositions to the defendants’ motions for summary judgment.

According to the complaint, two couples sued St. Clair County Treasurer Charles Suarez and tax buyers in the U.S. District Court for the Southern District of Illinois on Oct. 17, 2014, alleging a conspiracy similar to one that sent former Madison County treasurer Fred Bathon to prison.

John Bloyer Jr., Adrianne Bloyer, Kevin Dvorak and Kathleen Dvorak, all of O’Fallon, claim the alleged conspirators artificially inflated interest rates at tax sales in 2007 and 2008. They claim Suarez illegally rigged bids at sales of delinquent taxes to enrich Democratic campaign contributors.

The motions for summary judgment were all separately filed March 24, making individual arguments.

On behalf of the plaintiffs, Nelson Mitton of Riezman Berger PC in St. Louis filed several memorandums in opposition to the defendants’ motion for summary judgment on May 12.

Barrett Rochman, Sabre Group LLC and SI Securities LLC filed their motion for summary judgment through Andrew Kasnetz, Timothy Sansone and Natalie Kussart of Sandberg Phoenix & von Gontard PC in St. Louis.

Kenneth Rochman also filed a separate motion for summary judgment through Sansone, Kasnetz and Kussart.

They argue that the plaintiffs are barred from bringing Sherman antitrust claims against the defendants, claiming they are “indirect purchasers” because their bank redeemed their property on their behalf.

In the plaintiffs’ opposition, Mitton argued that the plaintiffs are direct purchasers of the over-penalized property taxes because the entire cost of the redemption was rolled into their mortgage principal.

“Even if Plaintiffs are considered indirect purchasers of the tax bids, they would still have standing to bring their Sherman anti-trust claims as there would be no threat of Defendants making duplicitous payments or of the court having to waste time apportioning the overcharge costs to multiple parties,” the opposition states.

Rochman, Sabre Group and SI Securities also argue that they lacked monopoly power over the St. Clair County tax auctions and cannot be found liable.

However, Mitton argues that evidence shows the defendants “possessed exclusionary power and price setting power over the tax auctions.” They allegedly won 87.81 percent of the tax auction bids, with 92.3 percent of those purchases made at the maximum of 18 percent.

Defendants John Vassen, Joseph Vassen and VI Inc. filed their one-page motion for summary judgment through Paul Slocomb of Hoffman Slocomb LLC in St. Louis.

They argue that the plaintiff’s claims are time-barred under the statute of limitations.

Mitton wrote in the opposition that the plaintiffs didn’t discover they were injured until June 2014, and their allegations rely upon the discovery rule, “which postpones the beginning of the limitations period to the date when the plaintiff discovers or could have discovered that he has been injured.”

Defendants Dennis Ballinger Sr., Dennis Ballinger Jr., Empire Tax Corp. and Vista Securities Inc. filed their motion for summary judgment through Gordon Nash, Daniel Delaney and Patrick Kelleher of Drinker Biddle & Reath LLP in Chicago.

They argue that the plaintiffs have not provided adequate evidence supporting claims of an antitrust conspiracy.

In the opposition, Mitton argues that the plaintiffs have adduced evidence of an antitrust conspiracy that excludes the possibility that the defendants were acting independently.

“Although all Defendants in this case certainly wish otherwise, there is simply no requirement that Plaintiffs come forth with direct evidence of an antitrust conspiracy, which may be proved solely by circumstantial evidence,” the opposition states.

“It is not surprising that there is no smoking gun in the form of an admission in this case.

“For example, Barrett Rochman, convicted of price-fixing the neighboring Madison County tax sales, testified that the tax buyers explicitly avoided conversations about the penalty rate. The convicted tax buyers all plead guilty to an ‘implicit agreement.’

“This case, like many antitrust cases, is a case that is proved by circumstantial evidence,” the opposition continues.

Mitton argues that the tax purchaser defendants only bid the maximum penalty rate, in “sharp contrast” to years both before and after the sale.

“Because of the nature of the auction, which was open outcry in a room, the tax purchaser defendants had more than ample opportunity to meet,” the opposition states. “There is no dispute that some did so, lunching together.”

The Ballinger defendants also argue that they had no way to prevent non-collusive tax buyers from undercutting their collusive bids.

In response, Mitton argues that competing tax purchaser, Dr. Ken Brosh, testified that lower bids were ignored by county officials even when they were brought to their attention.

“Moreover, the claim that the bids simply could have been underbid is actually indicative of collusion, and tends to exclude the possibility of independent action. In absence of collusion, one would expect that underbidding would have occurred. Its absence, shown by records, therefore indicates collusion,” the opposition states.

The defendants further argue that class certification is improper because individual damages could not be calculated.

Mitton alleges the argument fails because most of the parcels sold at the maximum percentage.

“Put simply, 90% of the parcels went at 18% during the affected years. If defendants are going to argue that each parcel is unique in contesting certification in this case, this is further evidence of their collusion, because apparently they all uniformly bid only 18% on the (sic) nearly every parcel, indicating collusion,” he wrote.

Mitton argues that no defendant has provided evidence that their interest rates were higher during the affected years and only showed that in general interest rates were higher. The defendants were also only bidding on parcels at low penalty rates.

The Ballinger defendants also argue that the time change for the auction and additional bidders in 2008 explain the bids.

However, Mitton argues that the defendants are “cherry picking” a “favorable” year to support their arguments.

“Defendants make no attempt to compare the tainted sales to prior years, where there was no such change in timing, because they know it defeats their argument,” the opposition states.

St. Clair County and Suarez filed their motion for summary judgment through Garrett Hoerner of Becker Hoerner Thompson & Ysursa PC in Belleville.

They argue that the plaintiffs’ conspiracy claim cannot be based on a violation of the Illinois Anti-Trust Act.

Mitton argues in the opposition that the plaintiffs have properly pleaded a claim of civil conspiracy by pleading that conduct by the defendants constitutes an “overt, tortious or unlawful act committed in furtherance of the conspiracy.”

“The unlawful acts included engaging in a bid rigging and price fixing scheme, the implementing of a “no trailing bid” policy that eliminated the competitive auction process, and directing the auctioneer to disperse winning bids among the campaign contributors of Charles Suarez,” Mitton wrote.

St. Clair County and Suarez also argue that they are immune from antitrust claims.

However, Mitton argues that “none of these doctrines apply to Suarez’s actions in conspiring with his fellow Defendants as his conduct was outside the scope of authority that Illinois granted to him and St. Clair County.”

“In the case at hand, Illinois never granted St. Clair County the authority to enter into a monopoly conspiracy with the defending tax bidders. While it is true that Illinois did grant St. Clair the ability to run a tax sale for delinquent taxes, nothing in that statute permitted the county treasurer to develop a scheme to shut out competing tax bidders in favor of certain select few.”

In fact, the county was required to accept only the lowest penalty bid.

Suarez is also not immune against a fiduciary duty claim under the public official immunity doctrine, Mitton argues.

Suarez claims that the public official immunity doctrine bars a finding against him individually, but Mitton points out that a public officer is only immune from individual liability for discretionary duties in good faith.

“As Suarez did not have the discretion to enter into an antitrust conspiracy and allow trailing bids to be ignored, and yet still did so in bad faith, he cannot avail himself of this doctrine.

Defendants Scott Sieron and Raven Securities Inc. filed a motion for summary judgment through Alvin Paulson of Belleville.

They argue that they continued to bid for some parcels at the max rate, meaning the plaintiffs cannot use a “weighted average bid” comparison to show that they participated in a conspiracy.

Mitton argues in the opposition that their “blanket assertion” does not warrant the entry of summary judgment.

“Further, the Sieron defendants have not provided the court with the relevant comparison of their weighted average bids during the conspiracy years. Defendants do not explain why the only comparison they made to the 2006 and 2007 tax sales is the 2013 and on tax sales,” Mitton wrote.

Defendants Scott McLean, Land of Lincoln Securities LLC, White Oak Securities LLC and Algonquin Securities LLC filed their motion for summary judgment through Mark McLean of McCarthy Leonard & Kaemmerer LC in Town and Country, Mo.

They also argue that the plaintiffs cannot use a “weighted average bid” comparison to show that the Sieron defendants participated in conspiracy.

They add that there is no evidence that they participated in a conspiracy.

In the opposition, Mitton wrote that McLean is a convicted felon as a result of his anti-competitive bidding in the Madison County tax sales.

“The bidding in St. Clair was most comparable to Madison County, and there is further evidence that he was receiving beneficial treatment over other tax purchasers,” the opposition states.

U.S. District Court for the Southern District of Illinois case number 3:14-cv-1119

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Organizations in this Story

Drinker Biddle & Reath LLPMcCarthy, Leonard and KaemmererBecker, Hoerner, Thompson & YsursaSt. Clair County Circuit CourtU.S. District Court for the Southern District of IllinoisSandberg Phoenix & Von Gontard P.C