THOMAS L. LUDINGTON, District Judge.
On June 25, 2019, Plaintiff Thomas A. Fox filed a complaint against multiple Michigan counties and county officials. Plaintiff claims that Defendants' process of foreclosure of property to satisfy unpaid real estate taxes is unconstitutional. He alleges that:
ECF No. 17 at PageID.218-219 (emphasis in original). The complaint seeks to certify the case as a class action to include plaintiffs throughout Michigan who are similarly situated to Plaintiff Fox.
The complaint lists the following counties and their treasurers as Defendants: Gratiot, Saginaw, Bay, Midland, Isabella, Tuscola, Montmorency, Alpena, Oscoda, Alcona, Arenac, Ogemaw, Clare, and Gladwin. ECF No. 1 at PageID.3. The complaint presented five counts, specifically a taking under the Fifth and Fourteenth Amendments, Inverse Condemnation, a violation of the Michigan Constitution, and a violation of the Eighth Amendment. Id. at PageID.11-19.
On August 14, 2019, twenty-five of the Defendants filed a motion to dismiss the complaint. ECF No. 11. On September 4, 2019, Plaintiffs filed an amended complaint adding the following counties and their treasurers as Defendants: Crawford, Genesee, Huron, Jackson, Lapeer, Lenawee, Macomb, Otsego, Presque Isle, Roscommon, Sanilac, St Clair, and Washtenaw. ECF No. 17 at PageID.219. The amended complaint presented three additional counts, specifically violations of procedural and substantive due process and unjust enrichment. Id. at PageID.237-239.
Forty-seven of the Defendants have now filed motions to dismiss the amended complaint and motions for summary judgment. ECF Nos. 22, 23, and 66. Among these Defendants are the twenty-five that previously filed a motion to dismiss the initial complaint. The parties were ordered to show cause why the case should not be stayed pending the Sixth Circuit's resolution of the case Freed v. Thomas, Case No. 18-2312 (6th Cir.). The parties responded to the order to show cause and acknowledged that there was sound reason to stay the case.
For the following reasons, the case will be stayed pending the Sixth Circuit's resolution of Freed.
Plaintiff was the owner of real property in Alma, Michigan in Gratiot County (the "Property"). As of 2017, the Property had "accrued a Tax Delinquency of approximately $3,091.23." ECF No. 17 at PageID.222. Plaintiff claims that in February 2017, Defendant Thomas "seized ownership of the Property on behalf of Gratiot County as its duly elected treasurer." Id. Plaintiff represents that on the date of seizure, the Property had a State Equalized Value of $25,200.00. Plaintiff reasons that "[b]ecause the fair market value of a property is at least twice the amount of its State Equalized Value, this means that the government would have known or should have known that said property had a fair market value of at least $50,400.00." Id. Accordingly, Plaintiff claims that he had $47,308.77 in equity in the Property (the difference between the fair market value of $50,400.00 and the tax delinquency of $3,091.23). Plaintiff contends that by retaining the funds, Defendants Thomas and Gratiot County "took or destroyed" his equity in the Property.
Plaintiff argues that Defendants are seizing property and maintaining the equity pursuant to Michigan's General Property Tax Act ("GPTA"), MCL. § 211.78m(8) which provides:
MCL § 211.78m(8); see also ECF No. 17 at PageID.225.
Plaintiff contends that:
ECF No. 17 at PageID.225.
Plaintiff claims that Defendants' sale of the Property constituted a taking in violation of the Fifth and Fourteenth Amendment, an imposition of an excessive fine in violation of the Eighth Amendment, a violation of substantive and procedural due process, an inverse condemnation, a violation of the Michigan Constitution, and an unjust enrichment. ECF No. 17 at PageID.230-239.
In their motions to dismiss, Defendants argue that this Court lacks jurisdiction to hear Plaintiff's case because of the Tax Injunction Act ("TIA") which provides:
28 U.S.C. § 1341 (emphasis added). Defendants contend that because Michigan provides an adequate remedy for aggrieved taxpayers, the TIA prevents this Court from exercising jurisdiction over Plaintiff's claim.
Plaintiff claims that the TIA does not apply to his complaint because he is not challenging the "assessment, levy or collection" of the Michigan tax. Instead, he is challenging "what happens after the taxation process is completed and excess or surplus equity remains after each county is paid in full for all delinquent taxes, interest, penalties, and fees." ECF No. 17 at PageID.221 (emphasis present in original).
Plaintiff cites to a D.C. District Court case, Coleman v. District of Columbia, 70 F.Supp.3d 58 (2014), with similar claims. The plaintiff in Coleman contested the government's "taking of the entire equity in his home," claiming that the government "provided him no compensation for the loss of that equity, even though its value far exceed[ed] the taxes, penalties, costs, and interest he owed." Coleman 70 F.Supp.3d at 62-63. The plaintiff did not dispute that the government was permitted to sell his house in order to satisfy his delinquent property taxes.
In deciding whether the government had engaged in a taking, the Coleman court relied upon the Supreme Court case Williamson Cnty. Reg'l Planning Comm'n v. Hamilton Bank which provides
Williamson Cnty. Reg'l Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 195 (1985) (quotations omitted). The Coleman court found that the District of Columbia did not have an adequate postdeprivation remedy for the property loss because there was "no basis to infer the existence of an independent inverse-condemnation action under D.C. law." Coleman 70 F.Supp.3d at 71. The court, finding for the plaintiff, held that "the statute at issue in this case expressly provides for the taking of plaintiff's surplus equity and contains no procedure for the recovery of that surplus." Id.
The next year, a case was before Judge Berg in the Eastern District of Michigan with facts almost identical to those in Coleman and in this case. Judge Berg distinguished the case before him from Coleman as follows:
Rafaeli, LLC v. Wayne County, 2015 WL 3522546, at *9 (E.D. Mich. June 4, 2015). Judge Berg's reasoning would appear to also apply to Plaintiff's claim in this case and support the proposition that this Court lacks jurisdiction.
However, the requirement in Williamson that a plaintiff with a takings claim first seek relief in state court was recently called into question by the Supreme Court in Knick v. Township of Scott, Pennsylvania. 139 S.Ct. 2162, 2179 (2019) ("The state-litigation requirement of Williamson County is overruled.").
Id.
Four days after the Supreme Court issued Knick, Plaintiff Fox filed his complaint. He contends that because he has brought a takings claim, this Court may exercise jurisdiction.
The same issue appears to be before the Sixth Circuit in another case. In 2017, one of Plaintiff's attorneys, Phillip L. Ellison, filed a similar complaint on behalf of Donald Freed before Judge Bernard Friedman, also of the Eastern District of Michigan. Freed v. Thomas, Case No. 17-13519. The defendants in that case also included Thomas and Gratiot County. The facts are strikingly similar to the facts here. Freed owned real property in Elwell, Michigan in Gratiot County. Id., ECF No. 1 at PageID.3. Gratiot County valued the property at $97,000. Freed owed taxes and interest totaling $1,109.06. Freed claimed that Thomas seized and sold the property on behalf of Gratiot County, maintaining the equity. Freed claimed that the sale of the property constituted a taking in violation of the Fifth and Fourteenth Amendment as well as an excessive fine in violation of the Eighth Amendment. Id. at PageID.4-5.
Judge Friedman dismissed Freed's claim for lack of subject matter jurisdiction, reasoning that "an adequate remedy exists in Michigan courts." Freed v. Thomas, 2018 WL 5831013, *3 (E.D. Mich. Nov. 7, 2018). He further held that "[r]egardless of the label plaintiff chooses to put on this claim, the Court may not consider it because the effect is to `challenge state tax laws,' a challenge the Tax Injunction Act and comity prevent this Court from entertaining." Id.
Freed subsequently appealed Judge Friedman's decision to the Sixth Circuit. During the appeal process, the Supreme Court issued Knick v. Township of Scott. The next week, Plaintiff filed a letter with the Sixth Circuit, claiming that "[g]iven the Knick decision, federal jurisdiction now clearly exists for Freed to press his Fifth and Eighth Amendment claims, via § 1983,
The facts in Freed v. Thomas and the facts before this Court are almost identical. The claims for relief under the Fifth, Eighth, and Fourteenth Amendments are the same. Most importantly, one of the major questions regarding whether this Court has jurisdiction considering Knick is also the same. The Court sees no reason to resolve this issue while it is pending before the Sixth Circuit. Accordingly, the case will be stayed pending the Sixth Circuit's resolution of Freed v. Thomas.
Among the Defendants listed in Plaintiff's complaint are Alcona County and Cheryl Franks. ECF No. 1. Summons were issued for both Defendants on July 1, 2019, but no certificate of service has been filed nor has an attorney filed an appearance on behalf of either of these Defendants. Accordingly, Plaintiff was ordered to show cause why his claims against Alcona County and Cheryl Franks should not be dismissed for failure to prosecute. Plaintiff filed a motion to "reissue the summonses" for Alcona County and Cheryl Franks. ECF No. 80. Plaintiff's motion will be granted.
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