District Judge Staci Yandle denied class certification in a bid rigging suit against former St. Clair County treasurer Charles Suarez and several tax buyers, concluding that a class action would “rapidly become unmanageable.”
“While it would be more efficient to consolidate the litigation as it relates to that existence of a conspiracy, that benefit is outweighed by the necessity of conducting hundreds of thousands of individualized hearings on impact and damages,” she wrote in her Jan. 23 order.
Yandle noted that several individuals may not be interested in personally controlling their claims due to the “relatively low” individual recovery potential, but she held that class certification would be inappropriate.
Class certification was granted in a similar bid rigging suit in Madison County. Visiting judge William Becker of Clinton County granted class certification in Madison County, concluding that he could reach an appropriate method to calculate damages.
Fifth District Appellate Court judges affirmed the Madison County class certification, stating that “all class members will rely on the same discovery, same witnesses, and other evidence to prove the existence of the conspiracy …”
In the St. Clair County case, plaintiffs Kevin Dvorak and Kathleen Dvorak sought class certification in their eight-count complaint against Suarez and a number of tax purchasers who participated in the tax sales for the 2006 and 2007 tax years. Those sales were conducted in 2007 and 2008.
The plaintiffs allege the defendants participated in a conspiracy to fix St. Clair County real estate tax sales so that owners were required to pay “artificially high” interest penalties at or near the maximum 18 percent rate in order to redeem their properties.
They further allege Suarez arranged for the auctioneer to recognize the purchaser defendants as winning bidders in exchange for political contributions for himself and the Democratic Party of St. Clair County.
The Dvoraks owned two properties that were sold at the 2007 St. Clair County real estate tax sale conducted in November 2008. The properties are located at 518 E. Washington St. in O’Fallon and 619 W. Schuetz St. in Lebanon. Both properties were purchased by defendant White Oak Securities at a penalty rate of 18 percent and redeemed on Nov. 8, 2011, by mortgage holder First Federal Savings Bank.
Because the redemption took place nearly three years after the sale, $1,725.03 in penalty interest was assessed on a $1,597.25 tax bill for the Washington Property. Redemption on the Schuetz property cost $2,018.22 in penalty interest on a $1,868.72 tax bill
Defendants Dennis Ballinger Sr., Dennis Ballinger Jr., Empire Tax Corp. and Vista Securities Inc. challenged the proposed class definition as “fatally overbroad.”
The defendants objected to the inclusion of every owner whose property was purchased on a penalty rate above 0 percent in the 2006 and 2007 tax sales. They argued that the definition “may encompass a significant number of property owners whose penalty rate was at or below what it would have been in a ‘normal year,’ whose property was not redeemed and therefore did not pay the allegedly inflated penalty rates, or whose claims would be barred by the statute of limitations,” the order states.
Yandle rejected the claim, writing that “the mere fact that a proposed class contains members who ultimately will not be able to recover once the merits of the case are reached does not preclude certification of the class.”
She stated that it is “unclear from the pleadings and the parties’ submissions whether the proposed class includes a significant or trivial number of such owners.”
However, addressing the class certification requirements, Yandle concluded that the plaintiff's claims are subject to a statute of limitations defense.
“The Plaintiffs contend that application of the ‘discovery rule’ moves the accrual for their claims forward to at least a press conference in May of 2014, making the filing of the Complaint timely.
“Under the discovery rule, the accrual date for statute of limitations purposes ‘is not determined when the injury occurs but when it is discovered or should have been discovered,” Yandle wrote.
“The question of when the Dvoraks knew or should have known that they had been wrongfully injured renders their claims vulnerable to a statute of limitations defense not necessarily applicable to other members of the putative class,” she continued.
The Dvoraks claim they became aware of the alleged conspiracy after Madison County Board Chairman Kurt Prenzler held a press conference disclosing the issue in June 2014.
However, Kathleen Dvorak testified that she and her husband did not become aware of any possible conspiracy until October 2014 when a letter was left at the Washington property. She also testified that she suspected something was wrong with the tax sale shortly after the auction because she had prior experience redeeming properties at a “much lower interest rate.”
Yandle held that given the discrepancies, “one could reasonably find that the statutes of limitations began to run for the Dvoraks when Kathleen Dvorak received the 18 percent rate information.”
Yandle noted that some putative class members may not have prior experience with redeeming properties through tax sales, meaning Prenzler’s press conference could be the first notice of injury.
“Because the Dvoraks’ claims may be dismissed on grounds not applicable to absent class members, their claims are not sufficiently typical to support class certification,” Yandle wrote.
Further, she held that because the Dvoraks’ claims may be subject to a statute of limitations defense, it would be inappropriate to certify the class with them as the only class representatives.
Yandle also concluded that evidence presented will vary from member to member when proving injury and determining damages.
“In this case, the ‘fact of injury’ is not susceptible to common class proof, and would require individualized inquiry to determine whether the sale of a given parcel was actually higher than it would have been in the absence of the alleged conspiracy,” the order stats.
Yandle wrote that the plaintiffs failed to identify a class-wide applicable method for determining whether a given parcel was impacted by the conspiracy.
“In the absence of a class-wide factual or statistical methodology for determining which properties were affected by the alleged antitrust violations, the Court would be forced to engage in a complicated and tedious property-by-property analysis of whether each property was purchased at a higher rate than it would have in a non-tainted auction – presumably by taking into consideration a combination of historical data (if a given property had been sold in other years) and expert testimony as to that parcel’s characteristics as viewed by a disinterested tax auction purchaser,” she wrote.
On Jan. 11, Yandle set the case for a jury trial on Aug. 20 at 9 a.m.
U.S. District Court for the Southern District of Illinois case number 3:14-cv-1119