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Mason v. Community Unit School District No. 428

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

September 5, 2019

JAMES C. MASON, GREG W. DAVIS ASHBURY COURT APARTMENTS, LLC, COLONIAL EAST, LLC, COLONIAL WEST, LLC, CARDINAL APARTMENTS, LLC, DIETZ PARK, LLC, JAMES COURT, LLC, NORMAL ROAD APARTMENTS, LLC, JLAR, LLC, JLAR ILLINOIS, LLC, UNIVERSITY HEIGHTS, LLC, MASON TOWNHOME SUITES, 120 N. ANNIE GLIDDEN, LLC, SOUTH 4TH STREET MEGA LAUNDROMAT, LLC, MASON PROPERTIES DEKALB, LLC, Plaintiffs,
v.
COMMUNITY UNIT SCHOOL DISTRICT NO. 428; VICTORIA NEWPORT, JEFF HALLGREN, VALERIE PENA-HERNANDEZ, KERRY MELLOT, RICK SMITH, HOWARD SOLOMON, FRED DAVIS, in their individual and official capacities as members of the DeKalb School Board; and UNNAMED HANDLERS, MAILERS, DRIVERS, and INSIDERS, Defendants.

          MEMORANDUM OPINION AND ORDER

          REBECCA R. PALLMEYER UNITED STATES DISTRICT JUDGE

         Plaintiffs are individuals and businesses that pay local property taxes in DeKalb County, Illinois. In this lawsuit, they allege that Defendant Community Unit School District No. 428 (CUSD 428, a DeKalb public school district), Defendant members of the DeKalb School Board, and unnamed Defendants intentionally allowed students who do not live in DeKalb to attend DeKalb's public schools. Plaintiffs claim that Defendants' conduct violated their constitutional rights to due process and equal protection because it increased their property taxes, a portion of which were "used to pay tuition and other school expenses for" the out-of-district students. (First Am. Compl. [61] ¶ 10.) Plaintiffs assert claims against Defendants under 42 U.S.C. § 1983 for deprivation or violation of constitutional rights; 42 U.S.C. § 1985 for conspiracy to interfere with civil rights; and 42 U.S.C. § 1986 for failure to prevent violations of § 1985. Plaintiffs seek damages, including refunds of property tax overpayments from January 2007 to July 31, 2018. They also request injunctive relief, including an order requiring Defendants to complete a "residency investigation[] of CUSD 428 enrollment and applications . . . according to usual customs and practices." (Id., Prayer for Relief ¶ 6.)

         In July 2018, Plaintiffs filed an amended complaint in response to Defendants' first motion to dismiss. Two motions are currently pending: Defendants have moved to dismiss the First Amended Complaint, and Plaintiffs have moved for summary judgment on their claim for equitable relief, specifically, an order directing Defendants to complete the above-referenced residency investigation. As detailed below, the court grants Defendants' motion to dismiss because (1) the principle of comity counsels against adjudicating Plaintiffs' claims and (2) the Tax Injunction Act, 28 U.S.C. § 1341, divests the court of jurisdiction over Plaintiffs' request for injunctive relief. Plaintiffs' motion for partial summary judgment is terminated as moot.

         BACKGROUND

         The court takes the following facts from Plaintiffs' First Amended Complaint, accepting them as true and viewing them in the light most favorable to Plaintiffs. See, e.g., Heyde v. Pittenger, 633 F.3d 512, 516 (7th Cir. 2011); St. John's United Church of Christ v. City of Chicago, 502 F.3d 616, 625 (7th Cir. 2007).

         Plaintiffs owned real estate and paid property taxes in DeKalb during the time relevant to this lawsuit: January 2007 to July 31, 2018. (Id. ¶¶ 9, 96.) Plaintiff James Mason "and related entities," for example, "have owned 735 real estate units in DeKalb . . . and pay approximately 1.2 million dollars per year in property taxes." (Id. ¶ 101.)[1] According to Plaintiffs, "[m]ore than sixty percent (60%) of [their] property tax payments went to DeKalb Schools in the past 10 years." (Id. ¶ 19.) As noted, Plaintiffs allege that Defendants "intentionally and deliberately encouraged and facilitated the enrollment of out of district students in knowing violation of" the "Illinois School Code residency and tuition payment requirements." (Id. ¶¶ 7, 14.) This conduct, Plaintiffs allege, "forced [them] to pay public school expenses for approximately 1, 200 out-of-district" students. (Id. ¶ 93; see also Id. ¶ 10 (alleging that "a portion of [Plaintiffs'] property tax was used to pay tuition and other school expenses for nonresident tuition violators who were lawfully required to pay tuition to the District"); id. ¶¶ 21-27 (alleging that DeKalb's public school-related expenditures have increased significantly even as the county's population has decreased).) By Plaintiffs' account, "[a]pproximately 15% of the school funding provided by local property owners was overpaid due [to] Defendants' . . . encouragement and facilitation of nonresident tuition violat[ors] enrolled in DeKalb Schools." (Id. ¶ 20.)[2]

         "In response to" the filing of this lawsuit, Defendants "hired National Investigations, Inc.," a "specialized school residency investigation firm," to "investigate nonresident tuition violations." (Id. ¶¶ 28-29.) Defendants initially commissioned National Investigations to analyze a "20% sample" of students but promised DeKalb property owners that the firm would expand its investigation beyond that sample. (See Id. ¶ 36.) Plaintiffs allege that Defendants instead "blocked" and "conspired to stop" the investigation, including by "warning tuition violators not to cooperate" and "coaching violators to submit false evidence." (Id. ¶¶ 32, 37, 39, 63.) In addition, Plaintiffs allege that Defendants selected the sample in a biased manner and "withh[eld] public records" of the investigation. (Id. ¶ 62.) Finally, Plaintiffs allege that Defendants lied about the investigation's findings: Defendants publicly represented the number of residency violations to be 75 percent lower than the number that National Investigations uncovered. (See, e.g., id. ¶¶ 32, 34, 38; see also Id. ¶ 90 (alleging that "Defendants publicly made a false report estimating only 300 of 6, 500 (4.8%) may be in violation of nonresident tuition laws").)[3] A "[s]eventy-five percent (75%) understatement of violators," Plaintiffs allege, "shows approximately 1, 200 out of district tuition violators." (Id. ¶ 47.)

         According to Plaintiffs, the out-of-district students "cost[] local property owners approximately $7, 400 per pupil, or [$8, 800, 000] . . . per year" for approximately ten years. (Id. ¶¶ 48, 96.) Plaintiff Mason, for example, claims he has "paid approximately $100, 000 per year" in property taxes "for out of district tuition violators." (Id. ¶ 102.) Plaintiffs also allege that they have been "over-charged by the additional cost of teacher salaries and pensions as well as building construction and maintenance costs." (Id. ¶ 121.) And they allege that "DeKalb property taxes are in the highest 1% in the nation due in large part due to the Defendants' knowing violations" of Illinois' school residency and tuition payment requirements. (Id. ¶ 15.) Relatedly, Plaintiffs blame Defendants for a local economic downturn. (See, e.g., id. ¶ 16-18, 115 (alleging that property values in DeKalb have "decrease[d] as a result of excessive property tax increases"; excessive property taxes "have driven businesses and homeowners out of DeKalb"; "[a]s a result of the population decrease . . . there are fewer people to share the property tax burden"; and the drop in property values has jeopardized "the stability of . . . local lending institutions").)

         Plaintiffs allege that at all relevant times, "Defendants, individually and in their official capacities]," were "acting as employees, officials or agents of the DeKalb School District." (Id. ¶ 81.) They further allege that "[a]ny action by non-government employees was done at the direction and under the control of state actors." (Id.) In Count I of their First Amended Complaint, Plaintiffs assert a claim under 42 U.S.C. § 1983 against all Defendants for violations or deprivations of their constitutional rights. (Id. ¶¶ 149-157 (alleging, among other things, that Defendants "subjected [them] to excessive and unlawful public school charges and covered up their conspiracy, in violation of due process and equal protection" under the Fifth and Fourteenth Amendments to the U.S. Constitution).) In Count II, Plaintiffs assert a claim under § 1983 against Defendant CUSD 428 for promulgating, sanctioning, concealing, and exhibiting deliberate indifference to policies that violated Plaintiffs' constitutional rights. (See Id. ¶¶ 158-66.) The alleged policies "include failing and refusing to impartially investigate, discipline or prosecute employees, parents, mailers, handlers, and others who violate laws including school residency misdemeanors." (Id. ¶ 164-65.) In Count III, Plaintiffs assert a claim under 42 U.S.C. § 1985(2) against all "individual Defendants" for conspiring with the purpose of "impeding, hindering, obstructing, and defeating the due course of justice in the State of Illinois, County of DeKalb, and DeKalb School District," with the intent to deprive Plaintiffs of due process and equal protection. (Id. ¶¶ 167-71.) In Count IV, Plaintiffs assert a claim under 42 U.S.C. § 1985(3) against all "individual Defendants" for "conspir[ing] for the purpose of" (1) depriving Plaintiffs of "equal protection and immunities under the law"; (2) "preventing and hindering the constituted authorities from giving and securing to Plaintiffs equal protection of the law"; and (3) "preventing and hindering the constituted authorities from giving and securing to Plaintiffs equal protection of the law" and ensuring that Plaintiffs were not "depriv[ed] of liberty and property without due process of law." (Id. ¶¶ 172-75.) Finally, in Count V, Plaintiffs assert a claim under 42 U.S.C. § 1986 against all "individual Defendants" for failing to "intervene to prevent the wrongdoing committed against Plaintiffs by Defendants." (Id. ¶¶ 176-79.)

         Plaintiffs seek approximately $134, 094, 592 in "general" and "special" damages. (Id. ¶ 128; id., Prayer for Relief ¶¶ 1-2.) The damages request includes return of property taxes Plaintiffs paid from 2007 to 2018 as a result of "nonresident tuition violations" and to cover the cost of extra teachers, staff, and school buildings necessary to accommodate out-of-district students. (See Id. ¶ 128; see also, e.g., Id. ¶¶ 48, 119, 103-04.) The request also includes nearly $20 million for "loss in property values due to nonresident tuition violators." (Id. ¶ 128.)[4] Plaintiffs also seek punitive damages against the "individual Defendants]," attorneys' fees, costs, and interest. (See id., Prayer for Relief ¶¶ 3-5, 10, 14-15.) Finally, Plaintiffs request injunctive relief, including an order that Defendant CUSD 428 must "pay for and cooperate with National Investigations . . . to conduct full residency investigations of CUSD 428 enrollment and applications for enrollment from July 24, 2018 through July 24, 2023 according to usual customs and practices." (Id., Prayer for Relief 6.)[5]

         DISCUSSION

         Defendants argue that "all of Plaintiffs' claims are local property tax disputes." (Defs.' Mem. in Supp. of Mot. to Dismiss ("Defs.' Br.") [81], 12.) Accordingly, Defendants maintain, the court should dismiss the claims based on the principle of comity and for lack of subject matter jurisdiction pursuant to the Tax Injunction Act, 28 U.S.C. § 1341. Defendants also argue that the court should dismiss all claims for failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). For the following reasons, the court concludes that the comity doctrine bars all of Plaintiffs' claims and, in addition, that the Tax Injunction Act prohibits the court from exercising subject matter jurisdiction over Plaintiffs' request for injunctive relief.

         A. Legal Standard

         In considering a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), the "district court must accept as true all well-pleaded factual allegations and draw all reasonable inferences in favor of the plaintiff." St. John's, 502 F.3d at 625 (quoting Long v. Shorebank Dev. Corp., 182 F.3d 548, 554 (7th Cir. 1999)). "[T]he district court may properly look beyond the jurisdictional allegations of the complaint and ...


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