Flummerfelt v. City of Taylor

• Docket Number: 22-10067
• Decision Date: 21 July 2023
• Parties: JUDY FLUMMERFELT, et al., Plaintiffs, v. CITY OF TAYLOR, et al., Defendants.
• Court: U.S. District Court — Eastern District of Michigan

1

JUDY FLUMMERFELT, et al., Plaintiffs, v. CITY OF TAYLOR, et al., Defendants.

No. 22-10067

United States District Court, E.D. Michigan, Southern Division

July 21, 2023

CURTIS IVY, UNITED STATES MAGISTRATE JUDGE

OPINION AND ORDER ACCEPTING IN PART AND MODIFYING IN PART THE MAGISTATE JUDGE'S JANUARY 6, 2023 REPORT AND RECOMMENDATION (ECF NO. 79)

F. KAY BEHM, UNITED STATES DISTRICT JUDGE

I. PROCEDURAL HISTORY

Plaintiffs Judy Flummerfelt, Frances Ridenour, Anthony Hamilton, and Holly Hamilton, on behalf of themselves and those similarly situated in the City of Taylor, filed suit alleging violations of the United States Constitution and Michigan law on January 11, 2022. They later amended their complaint. (ECF No. 6). The claims in the Amended Complaint arise from the tax foreclosure of the named Plaintiffs' homes located in the City of Taylor. They allege that, through illegal conspiracies, they were denied the surplus value or equity in their foreclosed homes. Defendants are the Wayne County Treasurer and the City of Taylor, the government entities involved in the foreclosure and first sale of the properties.

Plaintiffs also sue former Taylor mayor, Richard Sollars; Taylor Community Development Manager, Jeffery Baum; Shady Awad and his real estate businesses, Realty Transition LLC (“RT”) and Taylor Rehab LLC (“Taylor Rehab”) (collectively, the “Awad defendants”); and Hadir Altoon and his real estate businesses Taylor South Investment LLC (“Taylor South”) and Abigail Investment LLC (“Abigail”) (collectively the “Altoon Defendants”). Plaintiffs allege violations of the Fifth and Eighth Amendments, due process, and Michigan law.

The City of Taylor, Wayne County, the Awad defendants, and Sollars moved to dismiss the amended complaint. (ECF Nos. 29 46, 48, 66). On order of the Magistrate Judge, the parties except Sollars, filed supplemental briefing regarding the Sixth Circuit decision, Hall v. Meisner, 51 F.4th 185 (6th Cir. 2022). (ECF Nos. 71-73, 76-78). Magistrate Judge Curtis Ivy, to whom this matter was referred, issued a Report and Recommendation on the motions to dismiss. (ECF No. 79). Plaintiffs and Wayne County filed objections (ECF Nos. 80, 81), and the parties have filed responses and replies (ECF Nos. 82, 83, 84, 86, 87, 88, 89, 90, 91). Those objections will be addressed below.

II. REPORT AND RECOMMENDATION

The R&R ably sets out the pertinent facts and allegations at issue in this matter:

As mentioned, this case arises out of the events following the tax foreclosures of Plaintiffs' properties in Taylor, Michigan. Michigan's General Property Tax Act (“GPTA”) provides the statutory process by which a governmental entity in the state collects unpaid and delinquent real property taxes through property forfeiture and foreclosure. Under the Act, at the time of the events alleged, if property taxes remained unpaid in the prescribed twelve-month period, the property was forfeited to the county treasurer. M.C.L. §§ 211.78a(2), 211.78g(1). This forfeiture allowed the Foreclosing Governmental Unit (“FGU”) to petition for a judgment of foreclosure on the property. The FGU was not, however, required to seek foreclosure. If it did not, the State could then seek foreclosure. M.C.L. §§ 211.78(6); (3)(a). If, during the foreclosure process, the owner did not redeem the property, the FGU would obtain a court order vesting absolute title to the property in itself. M.C.L. § 211.78k(5)(a). Michigan then had the option to purchase the property at the greater of either the minimum bid (the amount of delinquent taxes, interests, and costs) or the fair market value. If the State declined to purchase the property, the city in which the property was located could purchase the property for the minimum bid.1 M.C.L. § 211.78m(1). After purchasing the property, the state or local government could then sell the property at a public auction. Important here, the former owner had no right to any of the proceeds, no matter the sale price. Rafaeli, LLC v. Oakland Cnty., 505 Mich. 429, 434 (2020).

Wayne County acted as the FGU pursuant to the GPTA. After Plaintiffs did not redeem their properties, title to the properties was vested in the County. The State elected not to purchase the properties. The City of Taylor then purchased the properties for the minimum bid, or the amount of the tax delinquency plus costs. The city later sold the properties variably to Awad and Altoon, who then resold them earning significant profit. Plaintiffs realized none of the profits.

Plaintiffs allege the defendants conspired to deprive them of the surplus value or equity in the properties. According to Plaintiffs, in 2015, Taylor created a program called the Right of First Refusal program (“ROFR program”). Under this program, Taylor exercised its ROFR to acquire tax-foreclosed properties in Taylor from Wayne County under the GPTA. Taylor then selected a developer to acquire, redevelop, and resell the properties. (ECF No. 6, PageID.76-77). Sollars allegedly had control and influence over the ROFR program, including which developers would be chosen to participate. In July 2015, Sollars recommended to Taylor's City Council that Awad's company, RT, be awarded all tax-foreclosed properties in the city. Soon after, Awad was awarded all 95 tax-foreclosed properties in the ROFR program. (Id. at PageID.77-78, 49). In return, Sollars received tens of thousands of dollars in cash and services from Awad. This scheme allegedly continued for years. (Id. at PageID.78, ¶ 50). Similarly, from September 2017 through January 2019, Sollars received kickbacks from defendant Altoon, who acquired tax-foreclosed properties and provided Sollars substantial sums of money to his campaign fund. (Id. at PageID.79, ¶ 54).

Flummerfelt's property accrued around $15,000 in unpaid taxes. After the foreclosure, the City conveyed the property by quitclaim deed to RT for $10.00. RT later transferred the property to Taylor Rehab for $10.00. The property was sold nearly two years later for $165,000. (Id. at PageID.89-90). Ridenour's property accrued $2,904.87 in delinquent property taxes. After the County foreclosed on the property and Taylor acquired it for the minimum bid, Taylor conveyed the property to RT by quitclaim deed for $10.00. (Id. at PageID.90).

Plaintiffs do not indicate that the Ridenour property was sold again. The Hamilton property accrued $3,396.09 in delinquent taxes. Taylor conveyed the property to RT by quitclaim deed for an unspecified amount. The Hamilton property was sold by RT for $55,000 about three years later. (Id. at PageID.90-91).

Awad and Altoon pleaded guilty to federal charges of conspiracy to commit bribery concerning programs receiving federal funds under 18 U.S.C. §§ 371 and 666(a). (Id. at PageID.85, ¶¶ 46-80). Sollars was awaiting trial related to the same scheme at the time the complaint was filed.

(ECF No. 79, PageID.741-744).

The Magistrate Judge made the following recommendations regarding the parties' motions to dismiss:

1. Plaintiffs concede that Wayne County is the only proper defendant for its Fifth Amendment takings claims and thus, agrees that the Takings claim against the City of Taylor should be dismissed.

2. Plaintiffs concede that their federal takings claims against the County are time-barred and should be dismissed.

3. The Michigan inverse condemnation claim against the City of Taylor should be dismissed because claims for vindication of their property rights can only be brought against the County.

4. The Michigan inverse condemnation claim against the County remains viable and is not barred by the statute of limitations.

5. Plaintiffs procedural and substantive due process claims against Wayne County should not be dismissed.

6. Plaintiffs' conspiracy and RICO claims against the Awad Defendants should be dismissed because the injury to Plaintiffs occurred when the County took title to their property and no injury occurred when the City deeded the property to the individual defendants. And to say otherwise would be an unauthorized extension of the property rights identified in Hall.

7. Defendant Sollars' motion to dismiss should be granted for the same reasons as the Awad Defendants.

III. STANDARD OF REVIEW

A party may object to a magistrate judge's report and recommendation on dispositive motions, and a district judge must resolve proper objections under a de novo standard of review. 28 U.S.C. § 636(b)(1)(B)-(C); Fed.R.Civ.P. 72(b)(1)-(3). This court “may accept, reject or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” Id. “For an objection to be proper, Eastern District of Michigan Local Rule 72.1(d)(1) requires parties to ‘specify the part of the order, proposed findings, recommendations, or report to which [the party] objects' and to ‘state the basis for the objection.'” Pearce v. Chrysler Grp. LLC Pension Plan, 893 F.3d 339, 346 (6th Cir. 2018). Objections that dispute the general correctness of the report and recommendation are improper. Miller v. Currie, 50 F.3d 373, 380 (6th Cir. 1995).

Moreover objections must be clear so that the district court can “discern those issues that are dispositive and contentious.” Id. (citing Howard v. Sec'y of Health and Human Servs., 932 F.2d 505, 509 (6th Cir. 1991)); see also Thomas v. Arn, 474 U.S. 140, 147 (1985) (explaining that objections must go to “factual and legal” issues “at the heart of the parties' dispute”). In sum, the objections must be clear and specific enough that the court can squarely address them on the merits. See Pearce, 893 F.3d at 346. And, when objections are “merely perfunctory responses . . . rehashing . . . the same arguments set forth in the original petition, reviewing courts should review [a Report and...