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ALEXANDER v. PHOENIX BOND & INDEMNITY
July 3, 2001
EDWARD P. ALEXANDER AND MARILYN M. ALEXANDER, ON BEHALF OF THEMSELVES AND OTHER SIMILARLY SITUATED INDIVIDUALS, PLAINTIFFS,
PHOENIX BOND & INDEMNITY COMPANY, NATIONAL INDEMNITY CORPORATION, MIDWEST REAL ESTATE INVESTMENT COMPANY, MILFORD ARDELL, ALLEN KAPLAN AND FRED SHANDLING, INDIVIDUALLY AND D/B/A REGENT PROPERTIES, REGENT PROPERTIES, CAPITAL ASSET RESEARCH CORPORATION, LTD., OAK PARK INVESTMENTS, INC., BARRETT ROCHMAN, INDIVIDUALLY AND D/B/A S.I. SECURITIES, S.I. SECURITIES, INC., FIRST FINANCIAL FUNDING CO., DAVID GRAY AND BONNIE GRAY D/B/A PARTNERS, C.B.B.B., INC., D.S. TAX ASSOCIATES, LTD., NOBLE TAX INVESTORS, INC., DEFENDANTS.
The opinion of the court was delivered by: Wayne R. Andersen, District Judge
MEMORANDUM OPINION AND ORDER
This case is before the Court on a collective motion for summary
judgment filed by all remaining defendants and individual motions for
summary judgment. In this case, plaintiffs allege violations of the
Sherman Act and the Illinois Antitrust Act. Plaintiffs allege that
defendants conspired to fix the bidding rate at the 1996 Annual Cook
County Property Tax Sale. In support of their allegations, plaintiffs
highlight the fact that the average winning bid rate at the 1996 Tax Sale
was 15.71%, compared to the average rates of 2.1% and 3.11% for the two
previous years. For the following reasons, defendants' motions for summary
judgment are granted in part and denied in part.
I. General Tax Sale Background
The Cook County Collector has a variety of procedures to obtain payment
of delinquent property taxes. Phoenix Bond and Indemnity et al v.
Pappas, 2000 Ill. App. Lexis 35, *1 (Illinois Appellate Court 1st Dist.
2000). The Collector will generally proceed in rem and file, in the
Circuit Court of Cook County, for a judgment in the amount of taxes due
plus costs and obtain a court order authorizing sale in satisfaction of
the judgment. Id. If the Circuit Court grants approval, the delinquent
taxes go to public auction. Pursuant to the Illinois Property Tax Code,
the Collector publishes a list of parcels for which property taxes are
delinquent. The Collector also publishes notice of its intention to apply
for a judgment and order of sale of the tax delinquent properties. 35
ILCS 200/21-110 (West 2001). The delinquent properties are then sold at
the Cook County Annual Tax Sale.
The 1996 Annual Tax Sale, held from January to March of 1998, is the
subject of the instant lawsuit. At the sale, properties for which 1996
taxes were delinquent were presented through a descending open outcry
auction. Tax buyers, the defendants, bid a penalty rate that delinquent
tax payers must pay in order to redeem the property. Under Illinois
statute, bidders are allowed to bid penalty rates that range
and 0%. 35 ILCS 200/21-215 (West 2001). A delinquent tax payer may redeem
the parcel within two years of purchase by the tax buyer. The tax payer
must pay the judgment, interest, the tax buyer's costs, and the penalty
which accrues at six month intervals at the rate bid during the auction.
Three to five months before the expiration of the redemption period, the
tax buyer may file for a tax deed. The tax deed will be granted if the
property is not redeemed during the statutory period. The tax deed gives
the tax buyer ownership of the land in fee simple, subject to certain
easements and covenants. 35 ILCS 200/22-70 (West 2001).
Under the rules of the auction, the auctioneer will not seek a lower
bid. The bidding is descending, which means that the bidding starts with
the highest penalty rate and then makes its way downward. Buyers shout
out penalty rates. The buyer to shout the lowest rate is granted the
property. If tie bids are shouted simultaneously and no lower bid is
submitted, the auctioneer will select the winning bidder in a manner so
that no particular bidder obtains a disproportionate share of the
If no bid is made on a property, that property is forfeited. There are
several options for the Collector after a forfeit, but the only one that
concerns this lawsuit is that tax buyers may redeem the forfeited
property from the County and receive a statutorily set 12% penalty rate.
In order to participate in the Cook County Annual Tax Sale, prospective
bidders must file an irrevocable letter of credit or bond at least ten
days prior to participating in the auction. 35 ILCS 200/21-220 (West
2001). The amount of the letter of credit must be 1.5 times the value of
the total tax due on any and all properties purchased. Id. It is the
responsibility of the tax buyer to maintain credit in the amount of 1.5
times the value of any unpaid portion of tax, from which the Collector
can draw in the event payment is not made forthwith by the tax buyer.
A new auction participant emerged in the 1992 Annual Tax Sale, held in
1994, and changed the dynamic of the tax sale. One of the defendants,
Capital Asset Research Corporation, joined the Cook County sale for the
first time. Its goal was to garner as many tax certificates as it could.
Capital Asset registered multiple bidders for the sale. Registering
multiple bidders is a strategy employed to garner more than a pro rata
share of the taxes because, if the bids are tied, then the auctioneer
attempts to divide equally the properties between the registered
bidders. If one corporation has several bidders present, then each of
those bidders will receive a share of the divided properties. Capital
Asset also employed a strategy of bidding the properties down, which led
to much lower penalty rates at auction.
Capital Asset's success led other tax buyers to follow suit and
register multiple bidders. This led to even lower average winning rates.
Defendants' expert has calculated the average winning bid rates from 1984
through 1996. Plaintiffs's expert calculated the distribution of winning
bids, but only calculated those figures for the period between 1989 and
1996. We first list the most common bid followed by the percent of all
properties in which that penalty rate was the winning bid.
YEAR Properties Sold Average Winning Most Common
Bid Rate Winning Bid
1984 17,099 11.23%
1985 17,853 8.48%
1986 20,008 9.95%
1987 20,084 10.43%
1988 19,186 12.51%
1989 23,140 12.14% 18% (41.73%)
1990 22,500 11.14% 18% (41.51%)
1991 27,442 8.20% 18% (28.40%)
1992 21,852 4.12% 0% (54.01%)
1993 22,044 3.98% 0% (58.65%)
1994 24,797 3.11% 0% (73.03%)
1995 26,159 2.10% 0% (79.73%)
1996 28,287 15.71% 18% (78.19%)
II. Plaintiffs' Timeline for the 1996 Annual Tax Sale
Plaintiffs argue that defendants had multiple opportunities to conspire
before the beginning of the 1996 Tax Sale. Most of the defendants had
principals and agents researching properties in records maintained in the
Cook County Clerk's office on the 4th floor of the County Building at the
same time. Many deponents testified that they would see and converse with
employees or agents of other tax buyers. Furthermore, several defendants
had formerly worked for or with other defendants. For example,
Alexander, employed by National Indemnity Corporation, had formerly been
employed by Phoenix Bond. Kovacevic, employed by Phoenix Bond, had bid
for Midwest at previous sales.
The principals of many of the defendants also had various connections.
Many defendants participated in trade organizations. Furthermore, some of
the defendants were friends. However, plaintiffs have failed to provide
any evidence which suggests that the social activities were involved in
this alleged conspiracy, but they argue that the social activities serve
as evidence that defendants had the opportunity to conspire.
On January 6, 1998, Ardell and Kaplan, of Regent, and Michael Nadler,
Capital Assets' National Risk Manager, had lunch. Plaintiffs allege,
without direct evidence, that the parties agreed to forego the use of
multiple bidders at this meeting. Ardell and Kaplan testified that they
discussed issues unrelated to the upcoming Cook County Tax Sale.
On January 9, 1998, Berland of National informed Cruz, National's lead
bidder, that she would be National's only bidder. On January 2, 1998,
National had registered 21 bidders for the Tax Sale.
The 1996 Annual Tax Sale began on January 12, 1998. On the first
property offered for sale at the Tax Sale plaintiffs allege that Regent,
Midwest, Phoenix Bond and First Financial simultaneously entered
identical bids for 18%. First Financial, Phoenix Bond and Regent deny
that they bid on the first item offered for sale.
Most defendants registered multiple bidders for the Tax Sale, but only
Q.T.S. (An original defendant which has settled with the plaintiffs) and
Regent actually sat their multiple bidders in the bidding area. Only
Q.T.S. actually used its multiple bidders to bid on properties.
Defendants allege that three others, Midwest, Phoenix Bond and Capital
Asset, brought multiple bidders, but had them wait in another room,
uninvolved, at the beginning of the sale.
Q.T.S., through its multiple bidders, won a large share of the initial
properties. After one of the multiple bidders won an item, Cheryl Prosen,
Q.T.S.'s lead bidder, had a conversation with Andrew Marks. Marks asked
Prosen why she was using multiple bidders. Prosen responded that she
could bring as many bidders as she wanted to the Tax Sale. Marks
responded by stating: "[w]ell, we can bring as many bidders as we want to
a sale, too, and if you keep them here, we will." The parties disagree
about the appropriate interpretation of Marks' statement. Plaintiffs
argue that Marks was referring to the conspiracy, but defendants argue he
was merely referring to the family business. Plaintiffs further argue
that the conversation is proof of the conspiracy policing its members
because Q.T.S., after the conversation, sent away its multiple bidders.
As you are all aware the statute provides that during
this sale the property in question shall be awarded to
the bidder who bids the least penalty percentage. In
accordance with the statute, the following procedure
will be implemented.
Only the person offering to pay the amount due on each
property for the least penalty percentage will be the
successful purchaser of that property.
No bid shall exceed 18% and if multiple simultaneous
bids of the same percentage are made, no one of these
bids being the least, none will be accepted.
If multiple simultaneous bids are received at the same
percentage, bidders will be given an opportunity to
bid at a lower percentage and if no bid of a lower
percentage is received, the property will be
The Tax Collector instituted the rule in order to guarantee and promote
competitiveness. The imposition of the forfeiture rule led to lower
bids. Furthermore, after the forfeiture rule was instituted, only four
properties were forfeited due to multiple simultaneous bids. On the second
day of the forfeiture rule, January 22, 1998, three items in a row and
one later received only simultaneous bids at 18%. These items were
forfeited despite the fact that the auctioneer gave the group the
opportunity to go lower. The next day, Cruz of National bought the four
items "over the counter". Therefore, she received a penalty rate of 12%
for those four properties.
Phoenix Bond, Midwest, Oak Park and S.I. brought an action for a
temporary restraining order and a permanent injunction in the Circuit
Court of Cook County. The four forfeited items formed the basis for their
complaint. On January 27, 1998, the plaintiffs obtained a temporary
restraining order blocking enforcement of the forfeiture rule.
Immediately thereafter, tax buyers resumed making simultaneous 18% bids.
A string of nearly 500 items in a row were bought at 18%.
Plaintiffs submitted several sets of numbers comparing the 1996 Tax
Sale to the 1995 Tax Sale. At the 1996 Annual Tax Sale, 78.19% of
properties sold for 18% penalty rate. At the 1995 Sale, 79.73% of the
properties sold for 0% penalty rate. At the 1995 Sale, there were only
three runs of 10 or more items in a row sold at 18%. At the 1996 Sale
there were 426 such runs.
III. Procedural Background
Maria Pappas, the Cook County Treasurer and ex-officio County Collector
of Cook County, appealed the Circuit Court decision granting the TRO and
summary judgment in favor of the tax buyers. The Illinois Appellate Court
reversed the Circuit Court and ordered entry of summary judgment in favor
of the County Collector. Phoenix Bond and Indemnity Co. et al v. Pappas,
2000 Ill. App. Lexis 35, *21 (1st Dist. 2000). The tax buyers appealed
that decision to the Illinois Supreme Court. The Illinois Supreme Court
affirmed the Illinois Appellate Court, finding that the County Collector
had the authority to institute the forfeiture rule. Phoenix Bond &
Indemnity Co., et al v. Pappas, 2000 Ill. Lexis 1715, *9 (2000).
Alexander, on behalf of himself and similarly situated plaintiffs,
filed his First Amended three-Count Complaint before this court on July
22, 1998. In Count I, he alleged a violation of Section 1 of the Sherman
Antitrust Act, 15 U.S.C. § 1, and sought treble damages under Section
15 of the Clayton Act, 15 U.S.C. § 15. In Count II, he alleged a
violation of Section 10/3(1)
of the Illinois Antitrust Act, 740 ILCS
10/3(1) (West 2001). In Count III, he alleged a violation of Section
10/3(2) of the Illinois Antitrust Act, 740 ILCS 10/3(2) (West 2001). As a
remedy for the violations alleged in Counts II and III, he sought treble
damages under Section 7 of the Illinois Antitrust Act, 740 ILCS 10/7
On September 30, 1999, we granted plaintiffs' motion for class
certification in part and certified a class consisting of all property
owners or other persons responsible for payment of real estate taxes for
property located in Cook County, Illinois whose taxes for the tax year
1996 were sold by the Cook County Treasurer at the 1996 Annual Tax Sale
for a penalty rate greater than 0%.
Summary judgment is appropriate when the pleadings and supplemental
material present no genuine issue of material fact and the moving party
is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex
Corp. v. Catrett, 477 U.S. 317 (1986). To survive a defendant's motion
for summary judgment, a plaintiff must present sufficient evidence to
show the existence of each element of its case on which it will bear the
burden at trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 585-86 (1986). Because this case comes to us on
defendants' motions for summary judgment, "[t]he evidence of
[respondents] is to be believed, and all justifiable inferences are to be
drawn in [their] favor." Anderson v. Liberty Lobby. Inc., 477 U.S. 242,
The parties dispute what standard we should apply to a summary judgment
on an antitrust case. Plaintiffs reference an old standard disfavoring
the use of summary judgment for antitrust claims. Plaintiffs note the
that the Supreme Court has stated that "summary procedures should be used
sparingly in complex antitrust litigation where motive and intent play
leading roles, the proof is largely in the hands of the alleged
conspirators, and hostile witnesses thicken the plot . . . Trial by
affidavit is no substitute for trial by jury ...