Antitrust Law Daily Wrap Up, ANTITRUST—Ill. App.: Delinquent tax sales challengers properly certified as class as to liability only, (Sep 9, 2016)

By Edward L. Puzzo, J.D.

In a challenge to the certification of a class of property owners alleging an antitrust conspiracy by buyers of their delinquent property taxes, the Fifth District Illinois Appellate Court in Mount Vernon has ruled that the lower court acted properly in certifying a class for purposes of liability, but had abused its discretion in including in the class certification the issue of damages, because common questions would not predominate over individualized questions when calculating damages (Bueker v. Madison County, Illinois, September 7, 2016, Welch, T.).

Various owners of real property in Madison County, Illinois who had their delinquent property taxes sold at county-run delinquent property tax sale auctions during 2005-2008 brought a putative class action against Madison County and certain tax purchasers. They alleged that the defendants had conspired to artificially inflate the penalty rate bid price on delinquent property taxes during this period, in violation of Section 3 of the Illinois Antitrust Act. This followed certain of the defendants pleading guilty to U.S. Department of Justice (DOJ) charges of Sherman Act violations in connection with the tax sale auctions.

Upon plaintiffs' motion, the circuit court granted certification of a class of persons who owned real property sold at a Madison County tax sale during 2005 through 2008 where the penalty rate bid was 12 percent or higher. The defendants appealed the circuit court's grant of class certification.

The state appellate court found that three out of the four statutory prerequisites for maintaining a class action—that the class is so numerous that joinder of all members is impracticable; that the representative parties will fairly and adequately protect the interest of the class; and the class action is an appropriate method for the fair and efficient adjudication of the controversy—were met. The prerequisite requiring further examination was the commonality and preponderance prerequisite; i.e. that questions of fact or law common to the class predominated over any questions affecting only individual members.

Commonality. The court noted that commonality was shown here by the existence of questions of law and fact common to class members, such as how the Madison County tax sales were conducted for the years in question, the number of parcels successfully bid on by each of the defendants, whether the defendants participated in the conspiracy, and whether the "no trailing bid" policy resulted in increased penalty bids. The court concluded that the lower court had not abused its discretion when it determined that commonality existed.

Predominance. As to the predominance requirement, the defendants argued that the penalty rate delinquent tax owners paid may not have been any more than they would have otherwise paid absent the conspiracy, and consequently individualized determinations on damages would predominate over common questions, making class certification inappropriate. The plaintiffs responded that, under Illinois law, the mere fact that damages may need to be individually calculated does not defeat class certification.

The court recognized that individual questions of injury and damages did not defeat class certification, but opined that the plaintiffs had not demonstrated that individual damages in this case were calculable on a class-wide basis. In its charges, the court noted, the DOJ had found that an individualized review of each particular parcel of property would be required to calculate restitution. 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, the court concluded that the calculation of actual damages would be too individualized to be handled as part of the class action. Thus, the court concluded, the lower court had abused its discretion in finding that the individual issues as to actual damages would not predominate over the common issues.

That being said, the court continued, it was not an abuse of discretion for the lower court to certify a class for liability purposes only, as common issues did predominant over individual concerns on the issue of liability. Accordingly, the appellate court amended the class definition to include liability only. If the lower court determined that liability was proven, the appellate court stated, it could then consider the possibility of certifying subclasses on the damages issue or using an alternate appropriate procedure.

The case is No. 5-15-0282.

Attorneys: Steven C. Giacoletto (Giacoletto Law Office, PC), Aaron G. Weishaar (Kaupp, Reinert, Weishaar & Associates, PC), and Nelson L. Mitten (Riezman Berger PC) for Scott Bueker, Richeson Real Estate, LLC, and Virgil Straeter. Andrew R. Kasnetz (Sandberg, Phoenix & von Gontard, PC) for Blue Sky Vineyards, LLC, CDBR, LLC, Barrett Rochman, Kenneth Rochman, Sabre Group, LLC and SI Securities, LLC. Gordon B. Nash (Drinker Biddle & Reath LLP) for Dennis Ballinger, Jr., Empire Tax Corporation, and Vista Securities, Inc. Paul T. Slocomb (Hoffman & Slocomb) for V.I. Inc., John Vassen, and Joseph Vassen. Alvin C. Paulson for Illinois Mobile Homes, LLC, Illinois Realty Group Holdings, LLC, Illinois Realty Group, LLC, Raven Securities, Inc. and Scott Sieron. Craig L. Unrath (Heyl, Royster, Voelker & Allen) for James Foley and Madison County, Illinois.

Companies: Richeson Real Estate, LLC; Blue Sky Vineyards, LLC; CDBR, LLC; Sabre Group, LLC; SI Securities, LLC; Empire Tax Corporation; Vista Securities, Inc.; V.I. Inc.; Illinois Mobile Homes, LLC; Illinois Realty Group Holdings, LLC; Illinois Realty Group, LLC; Raven Securities, Inc.

Cases: Antitrust IllinoisNews