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Thursday, August 22, 2019

Summary judgment granted in St. Clair County bid rigging suit; Yandle: Jury left with ‘speculation, guesswork’ without evidence of proper penalty rate

By Heather Isringhausen Gvillo | Apr 4, 2018


District Judge Staci Yandle granted summary judgment for St. Clair County tax buyer defendants and closed the case alleging the tax buyers participated in a bid-rigging conspiracy with Treasurer Charles Suarez.

Yandle entered her order granting summary judgment and closing the case filed by Kevin and Kathleen Dvorak on March 29. The plaintiffs’ claims against the remaining defendants were dismissed with prejudice.

The Dvorak’s had sought to certify the case as a class action, which was denied Jan. 23.


Yandle

The Dvoraks filed the eight-count complaint against St. Clair County, Suarez, and numerous individual and associated business 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

Defendant Kenneth Rochman filed a motion for summary judgment individually, maintaining that there are no allegations or evidence connecting him to the alleged conspiracy.

The plaintiffs did not respond to the motion. Therefore, Yandle granted the request.

Several defendants argued in their motions for summary judgment that the applicable statute of limitations bar the plaintiffs’ claims.

The order states that claims for money had and received and breach of fiduciary duty must be filed within five years after the cause of action accrued. Violations of the Sherman Act have a four year statute of limitations. Also, a private action for violation of the Illinois Antitrust Act must be filed within four years after the cause of action accrued.

The tax sale in question in the case took place on November 10, 2008, and the plaintiffs have not alleged any overt acts in furtherance of the alleged conspiracy nor claimed their injuries arose from acts committed after the sale.

The lawsuit was filed on Oct. 17, 2014 – five years and 11 months after the tax sale in question.

However, the plaintiffs argue that their claims are timely by application of the discovery rule, which extends the statute of limitations based on when an injury is discovered or should have been discovered.

Yandle determined that summary judgment on statutes of limitations grounds is inappropriate because she cannot decide the credibility of plaintiff Kathleen Dvorak’s contradictory testimony.

“Thus, when plaintiffs knew or should have known that they allegedly had been victimized by the 2007 auction is a material issue of fact for the jury’s determination,” she wrote.

In regards to federal antitrust claims, the defendants argue that the claims fail because plaintiffs were indirect purchasers instead of direct purchasers.

Yandle wrote that the defendants’ argument fails as to the federal antitrust claims because the plaintiffs are not indirect purchasers with regard to the redemption of the Washington and Schuetz properties.

“Even if plaintiffs were deemed indirect purchasers, the rationale behind an exception to the indirect purchaser doctrine applies under the facts in this case,” Yandle wrote.

The alleged overcharge First Federal Savings Bank assessed to the plaintiffs “was transmitted directly to the Dvoraks, thereby eliminating any distinction between a direct or indirect purchaser. Therefore, summary judgment is not warranted on these grounds,” she continued.

The defendants also challenge the sufficiency of evidence of an antitrust conspiracy, arguing that the plaintiffs are relying on circumstantial evidence. They offer alternate explanations for the higher weighted average bidding, including higher supply due to the early stages of the 2008 financial crisis and lower bidder turnout due to more competing tax auctions taking place the same week than in other years.

The plaintiffs rely on competing tax buyer Ken Brosh’s testimony that the defendants were given advantageous seating positions, that “tied” bids would be awarded to the defendants and that lower bids by non-purchaser defendants would not be accepted.

“If believed, Brosh’s testimony tends to exclude the possibility that the alleged wrongful anticompetitive effect on the market as a whole was the result of independent action. As such, sufficient circumstantial evidence of a conspiracy exists to survive summary judgment on that point,” Yandle wrote.

The defendants also argue that the plaintiffs cannot succeed on their antitrust monopoly claims for failing to provide evidence of monopoly power or exclusionary conduct.

Yandle rejected the argument, stating that the case raises a genuine issue of material fact as to market share and monopoly power and Brosh’s testimony creates a triable issue of fact as to whether there was exclusionary conduct.

Defendants St. Clair County and Suarez further argue that they are exempt from liability on the federal antitrust claims under the Illinois Local Government Antitrust Act.

Yandle held that the defendants failed to “articulate how suppression of competition is a foreseeable result of the Illinois statutory scheme for auctioning of unpaid real estate tax certificates. As such, they have not demonstrated that the state action doctrine applies.”

She also held that the plaintiffs have not identified any evidence that Suarez was involved in the alleged bid rigging.

“In fact, they offer no evidence regarding any actions undertaken by Suarez himself,” Yandle wrote. “They merely cite Defendant John Vassen’s deposition testimony that he had known Suarez for 35 years, considered them ‘friends,’ and that his relationship with Suarez was ‘the same as his relationship to the convicted Madison County Treasurer, Fred Bathon.’”

Yandle called the inferences the plaintiffs draw from Vassen’s testimony “far from reasonable.”

She also held that the plaintiffs references to the Madison County alleged bid rigging conspiracy detail similar conduct alleged in this case, but are “wholly irrelevant” to the claims against Suarez.

“Without evidence of some conduct other than the acceptance of campaign contributions, there is no indication that Suarez was acting outside the scope of his official duties,” Yandle wrote. “For these reasons, the LGAA’s damage exemption applies to the federal antitrust claims asserted against St. Clair County and Suarez.”

Further, Yandle concluded that the plaintiffs must produce competent evidence that the 18 percent penalty rate they paid was more than the reasonable and appropriate penalty rate for those properties in the 2007 tax year, and by how much. Neither of the plaintiffs’ two expert witnesses in the case have provided an opinion as to what the reasonable penalty rate should have been for the properties.

“In the absence of even a scintilla of evidence regarding what the penalty rates on the Washington and Schuetz Properties should have been in 2007, plaintiffs cannot prove antitrust injury or make a submissible case on damages,” Yandle wrote. “The jury would improperly be left to rely on mere speculation and guesswork.”

The defendants also seek to invoke the indirect purchaser doctrine on the plaintiffs’ Illinois antitrust claims. In their argument, they point out that the applicable statute prohibits indirect purchasers from maintaining a class action for antitrust violations.

“But because class certification has been denied in this case, that provision is no barrier to the Dvoraks maintaining their own claims,” Yandle wrote. “Summary judgment is not proper on these grounds.”

Suarez and St. Clair County were granted summary judgment on the state antitrust claims because the plaintiffs have “produced no actual evidence indicating that Suarez engaged in any anticompetitive or collusive activities.”

Yandle also found that summary judgment was appropriate for each of the state common law claims.

She held that Suarez is entitled to public official immunity on the plaintiffs’ breach of fiduciary duty claim.

She held that the plaintiffs’ civil conspiracy claim “must rest on their state antitrust or breach of fiduciary duty claims. Because those claims are subject to summary dismissal, the conspiracy claim fails as well.”

And she held that the plaintiffs’ money had and received claim fails because they are unable to show that their penalty rates were higher than what they reasonably should have been.

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

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