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Non-settling tax buyers oppose motion to approve notice of partial settlement in bid rigging class action

MADISON - ST. CLAIR RECORD

Thursday, November 21, 2024

Non-settling tax buyers oppose motion to approve notice of partial settlement in bid rigging class action

Lawsuits
Andrewkasnetz

Kasnetz

Several tax buyer defendants accused of participating in a Madison County bid-rigging conspiracy from 2005 to 2008 are opposing a proposed $300,000 partial settlement agreement, arguing that the proposal asks the court to approve the notice rather than the substance of the settlement. 

Defendants Barrett Rochman, who is deceased, Kenneth Rochman, Blue Sky Vineyards LLC, CDBR LLC, Sabre Group LLC and SI Securities LLC filed a response in opposition to the motion to approve the notice of partial settlement on March 21 through attorney Andrew Kasnetz of Sandberg Phoenix & von Gontard in St. Louis. 

They argue that the motion to approve notice of the settlement is “incomplete and does not meet the requirements of Illinois law governing class action settlements.”

“Specifically, the motion asks this court only to approve the proposed notice to the class but does not ask this court to approve the substance of the settlement itself as required by Illinois law,” Kasnetz wrote. 

“Plaintiffs have not presented the necessary information and documentation to allow the court to conduct the required fairness analysis,” he added. “Plaintiffs have not articulated or demonstrated any workable damages methodology necessary to administer a class settlement.” 

The defendants argue that the plaintiffs are attempting to quickly bypass the procedural requirements for class action settlements. 

Defendants Joseph Vassen, John Vassen and VI Inc. filed a joinder to the opposition on March 22 through attorney Paul Slocomb of Hoffman Slocomb LLC in St. Louis. 

Defendant James Foley also filed a joinder to the opposition on March 24 through attorney Ann Barron of Heyl Royster Voelker & Allen PC in Edwardsville. 

“Mr. Foley further states that the defendants have not been provided a copy of any settlement agreements so that defendants can evaluate the settlement reached by plaintiffs,” Barron wrote. 

“While a date for a fairness hearing has not been set, plaintiffs have failed to provide any evidence or argument showing that the settlement is fair, reasonable and adequate as required by Illinois law,” Barron added. “Nor is there any indication that if the settlements were to be approved the remaining defendants would receive any set off of the full settlement amounts.” 

On Feb. 11, attorney Steven Giacoletto, who represents a class of property owners, filed the motion to approve notice of the proposed partial settlement agreement with defendants Dennis D. Ballinger Jr., Empire Tax Corp., Vista Securities Inc. and John Scott. 

The notice states that if the proposed settlement is approved, $150,000 will be paid by or on behalf of Scott and $150,000 will be paid by or on behalf of Dennis Ballinger Jr, Dennis Ballinger Sr, Catherine Ballinger, Michael Ballinger, Dome Real Estate, Empire Tax and Vista Securities. Catherine Ballenger, Michael Ballinger and Dome Real Estate are not named as defendants in the class action. 

The settlement notice also states that “all defendants have denied all claims against them and asserted affirmative defenses which, if valid, avoid legal responsibility or liability of the defendant who has asserted that defense.”

According to a motion for summary judgment filed in September 2018, Ballinger is an officer for Empire Tax and Vista Securities and owns a partial interest in the companies, “which are corporations with other shareholders, officers and employees, and engaged in the real estate investment business, including the purchase of delinquent taxes.”

The defendants argued that “Ballinger did not personally purchase any delinquent taxes at any of the Madison County auctions or anywhere else at any time. Ballinger did not even attend any of the Madison County auctions at issue and submitted no bids at those auctions for anyone.”

The settling defendants also previously filed motions to dismiss, arguing that they were not members of the alleged conspiracy and are not liable to those who may have been part of the scheme. 

In the motion to approve notice of the proposed settlement agreement, Giacoletto asked to publish the agreement in the same fashion as the approved notice of pending class action. The method for providing notice was granted on Sept. 16, 2021.

Scott had previously joined an objection to the class action notice that had been filed by Foley. 

According to the proposed settlement notice, the class consists of: All persons who owned any parcel of real estate for which a tax sale certificate was sold at a Madison County tax sale auction in the years 2005, 2006, 2007, and/or 2008 and with respect to which a certificate of purchase was obtained at such auction in response to a penalty rate bid in excess of 12 percent and with respect to which a sale in error was not ordered by the court. This class does not include any property owners whose property was not bid upon at the relevant tax sale and was therefore forfeited to the State of Illinois, including those properties that went to the Madison County Trustee at a penalty bid rate of 18 percent.

The proposed settlement notice informs class members of their rights to opt out of the settlement.

“You may exclude yourself from the proposed class action settlement agreement by providing written notice …,” the proposed notice states. “If you do so, you will not receive any cash payment, but you will not release any claims you may have against the settling defendants and are free to pursue whatever legal rights you may have by pursuing your own lawsuit against the settlement defendants at your own risk and expense.” 

If the settlement notice is approved, notices to opt out must be submitted by May 15. 

Bid-rigging allegations

According to a third amended complaint filed by class co-counsel Nelson Mitten of St. Louis on Sept. 25, 2017, the class alleges former Madison County Treasurer Fred Bathon arranged for tax buyers to charge interest rates at the maximum legal limit of 18 percent at auctions of delinquent property taxes from 2005 to 2008. 

The plaintiffs allege Bathon conspired with each tax purchaser defendant to establish a “no trailing bid” policy, meaning the process required one-time, simultaneous bidding. Rather than allowing a series of bids, all bidders had to bid at once, with the auctioneer accepting the lowest bid that was heard.

The defendants allegedly then made an agreement with Bathon to bid the maximum of 18 percent in the simultaneous bidding.

Mitten wrote that Bathon used a seating chart to ensure that the tax purchaser defendants would be recognized by the auctioneer and the Madison County employees conducting the sales as the winning bidders.

The plaintiffs allege auctioneer Foley was supposed to “foster competition in order to obtain the lowest penalty percentage.” However, Mitten wrote that he agreed to act in concert with the conspiracy by accepting the bids at the maximum rate. 

The plaintiffs allege that as the actions of the tax purchaser defendants became evident, other purchasers also began bidding higher than they otherwise would have.

“Because there was no or virtually no competitive bidding, the bidding was rigged, prices were fixed, and almost every single property was sold at the statutory maximum penalty percentage of 18 percent,” Mitten wrote.

Then after Bathon resigned, every annual tax sale conducted has resulted in an average penalty bid of less than 5 percent, the suit states.

The plaintiffs allege that in return for rigging the tax sales, Bathon received campaign contributions and support from tax purchasers.

Bathon was charged in February 2013 with violating the Sherman Antitrust Act. He pleaded guilty the same day. Defendants Scott McLean, Barrett Rochman and Joe Vassen also entered guilty pleas to federal antitrust charges in October 2013.

The complaint was originally filed on Feb. 13, 2013, and has gone through years of litigating to determine which defendants are proper. Madison County moved for dismissal as a defendant in the original complaint, and the trial court dismissed counts for conspiracy and respondeat superior for failure to state a cause of action. 

In response, two new class actions were filed in March 2013. The plaintiffs in the original case then filed a consolidated amended complaint on Feb. 24, 2014. A second amended complaint under the theory of res judicata was filed on July 11, 2014. 

Madison County was again dismissed as a defendant when the Fifth District Appellate Court concluded that the plaintiffs could not state a valid claim against the defendant. Presiding Judge J. Marc Kelly of Fayette County then granted the plaintiffs’ request to amend their complaint to rejoin Madison County and former treasurer Kurt Prenzler as defendants following Bathon’s May 2017 deposition. Prenzler currently serves as Madison County Board Chairman. 

During his deposition, Bathon testified that numerous Madison County officials knew of, and participated in, the alleged conspiracy. 

Madison County moved for dismissal again arguing that the complaint is barred by the doctrine of res judicata, the doctrines of waiver and collateral estoppel, and the statute of limitations. Kelly granted the motion on May 22, 2020. 

Claims against tax-buyer defendants and county officials remain pending.

Several defendants filed motions for summary judgment in January 2019. A hearing had been set for Dec. 13, but the docket does not yet reflect any rulings on those motions. 

The defendants seeking summary judgment have made various arguments, including allegations that the plaintiffs’ claims are barred by the statute of limitations and that several defendants were not involved in a conspiracy with respect to sales of delinquent property taxes in Madison County.

The plaintiffs responded by filing memorandums in opposition to the defendants’ motions for summary judgment, arguing that there is “ample” evidence for the jury to find that the defendants agreed to the collusion and participated in the conspiracy.

A motion to dismiss was also filed on behalf of Rochman, who died in January 2021. A ruling on that motion has not yet been entered. 

Madison County Circuit Court case number 13-L-276

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