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Foreclosed Assets Sales & Transfer Partnership v. Village of West Dunee

United States District Court, N.D. Illinois, Eastern Division

January 11, 2016

Foreclosed Assets Sales and Transfer Partnership, Plaintiff,
v.
Village of West Dundee; David Danielson, in his individual and official capacity; Springhill Gateway LLC, an Illinois Limited Liability Company; and Springhill Gateway LLC, a Delaware Limited Liability Company, Defendants.

          MEMORANDUM OPINION AND ORDER

          Honorable Thomas M. Durkin United States District Judge.

         Foreclosed Assets Sales and Transfer Partnership (“FAST”), a partnership with its principal place of business in Tennessee, alleges that the Village of West Dundee incorrectly assessed certain property taxes related to a business improvement district on a share of a shopping center FAST owned at the time of the allegedly incorrect assessments. (FAST no longer owns the property.) FAST alleges that David Danielson is also responsible for this error in his capacity as the Village's finance director. FAST alleges further that the two Springhill Gateway LLC defendants (one organized in Delaware, the other in Illinois), which also own a share of the shopping center, improperly received the benefits of the business improvement district to FAST's detriment. The Court previously dismissed FAST's claims against the Village and Danielson (the “Village Defendants”). See R. 74 (Bank of Camden v. Village of West Dundee, 2014 WL 6655892 (N.D. Ill. Nov. 21, 2014)). The Court gave FAST the opportunity to replead, which FAST did by filing a fourth amended complaint. R. 107.[1] The Village Defendants have moved to dismiss the claims against them for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). R. 111. For the following reasons, that motion is granted.

         Legal Standard

         A Rule 12(b)(6) motion challenges the sufficiency of the complaint. See, e.g., Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). A complaint must provide “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), sufficient to provide defendant with “fair notice” of the claim and the basis for it. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). This standard “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While “detailed factual allegations” are not required, “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. The complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “‘A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Mann v. Vogel, 707 F.3d 872, 877 (7th Cir. 2013) (quoting Iqbal, 556 U.S. at 678). In applying this standard, the Court accepts all well-pleaded facts as true and draws all reasonable inferences in favor of the non-moving party. Mann, 707 F.3d at 877.

         Background

         “A special service area in the State of Illinois is an area designated by a municipal governmental entity for redevelopment pursuant to the implementation of a statute of the State of Illinois known as the Special Service Area Act, 35 ILCS 200/27-5 et seq.” R. 107 ¶ 9. The statute permits a municipality to issue bonds to raise funds for improvements within the Special Service Area (“SSA”), which are then repaid with a special property tax levied on the taxpayers in the SSA. Id. ¶¶ 10, 17-21.

         The Springhill Gateway Shopping Center is located in the Village. Id. ¶ 6. The Shopping Center is divided into two sections, east and west. Id. ¶¶ 6-8. FAST owns the east section, whereas the Springhill Defendants own the west section. Id.

         The Village adopted an ordinance establishing an SSA to fund a renovation of the Shopping Center. Id. ¶¶ 15, 17. The ordinance authorized issuance of $2.95 million worth of bonds. Id. ¶ 17. The Village only issued $1.5 million worth of bonds. Id. ¶ 19. FAST alleges that its tax assessment was incorrectly based on the potential $2.95 million in bonds, rather than the $1.5 million that was actually issued. Id. ¶ 21. FAST also alleges that this error has affected it disproportionately relative to the west section of the Shopping Center owned by the Springhill Defendants. Id. ¶ 29. FAST alleges that this error has devalued its share of the Shopping Center by $500, 000. Id. ¶ 28.

         In addition to the tax assessment error, FAST alleges that the Village improperly prevented it from leasing space in its share of the Shopping Center to the Salvation Army by denying the Salvation Army the necessary business license. Id. ¶¶ 66-78. FAST alleges that if it had been able to lease space to the Salvation Army it could have sold its share of the Shopping Center for $2.85 million. Id. ¶ 77. FAST alleges that because it was unable to lease space to the Salvation Army it was “forced” to sell the property for $1, 968, 750. Id. ¶ 76.

         FAST also alleges that the Village Defendants have improperly refused to reimburse it for renovation expenses that should be covered by the SSA funding. See Id. ¶¶ 39-54. The disbursement of SSA funds is governed by a contract, the “Disbursement Agreement.” See R. 107-2 at 3-9. The Disbursement Agreement includes language “excluding reimbursement.” Id. at 3 (Section 1.01). But FAST argues that this language only applies to expenses incurred before the Disbursement Agreement took effect.

         In Count I of the fourth amended complaint, FAST seeks damages from the Village Defendants for the “diminution in resale value, ” R. 118 at 6, of its former property due to the alleged tax assessment error. In Count III, FAST seeks to have the Village reimburse it for certain renovation costs pursuant to the Disbursement Agreement. In Count IV, FAST seeks those same reimbursements on an equal protection theory. And in Count V, FAST alleges that the Village tortiously interfered with its lease agreement with the Salvation Army.[2]

         Analysis

         Count I

         In Count I of the fourth amended complaint, FAST alleges that the Village incorrectly calculated the SSA tax FAST owed on the Shopping Center. FAST seeks relief for this allegedly incorrect tax assessment based on the allegation that the mistake “devalued” FAST's share of the Shopping Center “by approximately $500, 000, ” and that this “devaluation has adversely affected the resale value of [FAST's share of the Shopping Center].” R. 107 ¶ 28. These alleged facts were also included in Count I of the third amended complaint. But in that iteration of the complaint, FAST claimed that the Village Defendants violated the SSA Act not simply by imposing an improper tax amount, but by improperly using the tax revenue to “disproportionately benefit” the share of the Shopping Center FAST did not own. FAST argued that the Act requires “a rational relationship between the amount of the ...


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