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Dvorak v. St. Clair County

United States District Court, S.D. Illinois

January 23, 2018

KEVIN DVORAK, et al., Individually and as the Representative of a Class of Similarly Situated Persons, Plaintiffs,
ST. CLAIR COUNTY, ILLINOIS, et al. Defendants.



         Plaintiffs Kevin Dvorak and Kathleen Dvorak[1] are proceeding on an eight count class action Complaint (Doc. 2). The case involves an alleged conspiracy to fix St. Clair County, Illinois real estate tax sales so that owners were required to pay artificially high interest penalties to redeem their properties. The defendants include St. Clair County, St. Clair County Treasurer Charles Suarez, and a number of individual and business purchasers who are alleged to have participated in the conspiracy (collectively, “Purchaser Defendants”). Now pending before the Court is Plaintiffs' Motion for Class Certification (Doc. 208). Defendants have all replied (Docs. 219, 221, 222, 224, and 230). For the following reasons, Plaintiffs' Motion for Class Certification is DENIED.


         This case revolves around St. Clair County, Illinois real estate tax sales for properties for which the prior year's property taxes are delinquent. The County Collector (an ex officio role of the County Treasurer) conducts the sales. Purchasers do not receive clear title to the property at issue, but rather a Certificate of Purchase and the right to collect the amount of unpaid taxes from the owner plus a “penalty” ranging from 0 to 18 percent interest. Each successful bidder pays the county the amount of the delinquency. The winning bidder for a given parcel is the one who is willing to accept the lowest penalty rate if the owner exercises his/her/its right of redemption. The maximum penalty percentage that may be bid is 18 percent, and if no bids are received on a given property, it reverts to the County at the maximum penalty rate.

         For example, a property with a $2000 overall delinquency is offered at the tax sale. One bidder offers 18 percent - meaning that he will pay the $2000 to the county and charge the property owner an additional 18 percent, if she wishes to redeem the property. Another bidder offers 13 percent - meaning that the property owner would pay less to redeem the property. If no lower bids are received, the second bidder receives the Certificate of Purchase.

         If a property owner fails to redeem a property within the statutory redemption period, the successful bidder may file a Petition for a tax deed. Once a tax deed is issued, it conveys merchantable title, free and clear from most previous interests in the property.

         If the property is redeemed, the purchaser of the tax lien receives the certificate amount (what is owed to the county) plus the penalty percentage. The penalty rate increases every six months by the amount of the penalty rate that was originally bid. Using the above example, the property owner would owe the winning bidder $2, 260 if redeemed within six months, $2, 520 if redeemed between six months and a year, $2, 780 if redeemed between a year and 18 months, etc. The holder of a tax lien may also pay subsequent unpaid real estate taxes on a property and claim an automatic 12 percent penalty on the subsequent taxes.

         Because the cost of redemption is usually significantly less than the market value of the property, there is a strong incentive for anyone holding a sizeable ownership or security interest in the property to redeem it following a tax sale. If a property owner is unable to pay the cost of redemption, it is common for a mortgage holder or other lienholder to redeem on behalf of the property owner in order to preserve their interest. The amount paid on the owner's behalf is then added to the owner's outstanding obligation.

         Here, Plaintiffs maintain that something went very wrong with this process at the St. Clair County tax sales conducted in 2007 and 2008. Specifically, they allege that Defendant Suarez-in exchange for political contributions for himself and the “Democrat Party of St. Clair County”- arranged for the auctioneer to recognize the Purchaser Defendants as winning bidders (presumably in cases of identical bids) and to distribute the winning bids from the various auctions between the Purchaser Defendants. (Doc. 2 at ¶¶74, 79). They also allege that Suarez arranged for the Purchaser Defendants to have advantageous seating positions and caused the auctioneer to ignore subsequent lower bids, thereby artificially inflating the penalty rates. For their part, the Purchaser Defendants are alleged to have agreed to keep their bids at or near the 18 percent statutory maximum penalty rate. (Id. at ¶74).

         Plaintiffs Kevin and Kathleen Dvorak owned two properties that were sold at the 2007 St. Clair County real estate tax sale conducted in November 2008. (Id. at ¶¶6-11). The first property is located at 518 E. Washington St., O'Fallon, Illinois (“Washington Property”); the second property is located at 619 W. Schuetz St., Lebanon, Illinois (“Schuetz Property”). Both properties were purchased by Defendant White Oak Securities at a penalty rate of 18 percent and redeemed on November 8, 2011 by mortgage holder, First Federal Savings Bank (Docs. 208-4 at 2; 208-5 at 3). Because the redemption took place nearly three years after the sale, $1, 725.03 in penalty interest was assessed on a $1, 597.25 tax bill for the Washington Property. (Doc. 208-5 at 3). Redemption of the Schuetz Property cost $2, 018.22 in penalty interest on a $1, 868.72 2007 tax bill, which was paid by the same mortgage holder. (Doc. 208-4 at 2). Both properties were sold at tax sales before and after the 2006 and 2007 tax year sales at penalty rates ranging from one to three percent. (Docs. 278-2 and 278-3).

         Plaintiffs assert eight causes of actions, including claims against all defendants for Civil Conspiracy (Count I), violations of the Sherman Anti-Trust Act (Counts III and IV) and violations of the Illinois Antitrust Act, 740 ILCS 10/1, et seq. (Counts V-VII). They also assert claims for Money Had and Received against all defendants except Suarez (Count II) and breach of fiduciary duty against Suarez alone (Count VIII). In each Count, Plaintiffs allege damages “based on the difference [between] the amount redeemed and the amount that would have been needed to redeem the property at a reasonable and appropriate penalty rate[, ]” plus attorneys' fees, expenses and trebling of damages where allowed by statute. (Doc. 2)

         Legal Standard

         Plaintiffs move for class certification under Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure, seeking to certify a plaintiff class consisting of:

all owners of real estate parcels that were sold at a St. Clair County Tax sale auction for unpaid real estate taxes for the 2006 and 2007 tax years with respect to which a Certificate of Purchase was obtained at such auction in response to a penalty rate bid in excess of 0 percent, excluding the owners of parcels for which there were no bids and therefore were “sold” to St. Clair County at penalty rate of 18% by operation of statute.

(Doc. 208 at ¶ 3).

         To be certifiable, a class must be definable and must meet the requirements of numerosity, commonality, typicality and adequacy of representation. See Fed. R. Civ. P. 23(a); Alliance to End Repression v. Rochford, 565 F.2d 975, 977 (7th Cir. 1977). The case must also fall within one of the three enumerated Rule 23(b) categories. Spano v. The Boeing Co., 633 F.3d 574, 583 (7th Cir. 2011) (“(1) a mandatory class action (2) an action seeking final injunctive or declaratory relief, or (3) a case in which the common questions predominate and class treatment is superior.”).

         A class may be certified only if a district court is “satisfied, after a rigorous analysis, ” that compliance with Rule 23 has been shown, even if the analysis entails some overlap with the merits. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (2011). Although a plaintiff bears the burden of showing that the proposed class satisfies the Rule 23 requirements, he “need not make that showing to a degree of absolute certainty.” Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 811 (7th Cir. 2012) (internal citation omitted).


         As an initial matter, Defendants Dennis Ballinger Sr., Dennis Ballinger Jr., Empire Tax Corp. and Vista Securities, Inc. (collectively “Ballinger Defendants”) challenge the proposed class definition as “fatally overbroad.” (Doc. 230 at 23). They object to the inclusion of every owner whose property was purchased or a penalty rate above 0% in the 2006 and 2007 tax sales, arguing that definition may encompass a significant number of property owners (1) whose penalty rate was at or below what it would have been in a “normal” year, (2) whose ...

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