A recent Sixth Circuit case addressed a question that tends to arise frequently in various types of class actions, such as property insurance and environmental cases: whether property valuation questions are appropriate for class action. . The answer here was “no”, and the notice may be useful to accused persons in other contexts.
Tarrify Properties, Inc. v. Cuyahoga County, – F.4th -, 2022 WL 2128816 (6th Cir. June 14, 2022) involved a constitutional challenge to a tax foreclosure proceeding in Ohio that allowed a county to place foreclosed properties in a “land bank” without allow the owner to receive any excess capital. Plaintiff has filed a putative class action lawsuit challenging this foreclosure proceeding under the taking clauses in the federal and state constitutions. The District Court denied class certification and the Sixth Circuit upheld.
The proposed category was defined as owners of tax-relevant foreclosed properties who had excess capital at the time of foreclosure. This was probably the only viable way to define the proposed category, because if there was no excess capital, the owner would have no claim. But it posed what the Sixth Circuit concluded was an insurmountable problem for verifiability (identification of class members) and salience. Class members could not be identified without determining the fair market value of their property at the relevant time, and experts on both sides agreed that would depend on many factors. And if the defendants’ expert was correct, the named plaintiff had no excess equity, which also presented a problem of adequacy of representation.
The plaintiff argued that this problem could be overcome by relying on the assessed values of the properties, or on the basis that the county was bound by the value it used for foreclosure purposes under the collateral estoppel or judicial estoppel. The Sixth Circuit rejected these arguments, explaining that although the rating values are a “default rating”, they were not “irrefutable” or a “conclusive answer”. Valuations were up to six years old and, in any event, could be challenged in litigation. As for estoppel, the county council had not made findings on the fair market value of the properties in its foreclosure order.
The plaintiff also suggested that the grading issues could be resolved by a special master, subclasses, or a new “mass grading” for litigation purposes. The Sixth Circuit also rejected those options because they would still require “mini-trials on the value of each property.”
This decision appears helpful to defendants facing class actions in other contexts where claims involve land values, such as property insurance cases and cases alleging that an environmental nuisance such as odor or dust from a facility has impacted property values in the area.
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