Levy v. Pappas

• Decision Date: 21 December 2007
• Docket Number: No. 06-3182.,06-3182.
• Citation: 510 F.3d 755
• Parties: Charles D. LEVY and Refund Research Associates, Inc., Plaintiffs-Appellants, v. Maria PAPPAS, individually and as Treasurer of Cook County, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

510 F.3d 755

Charles D. LEVY and Refund Research Associates, Inc., Plaintiffs-Appellants, v. Maria PAPPAS, individually and as Treasurer of Cook County, et al., Defendants-Appellees.

No. 06-3182.

United States Court of Appeals, Seventh Circuit.

Argued April 11, 2007.

Decided December 21, 2007.

Steven J. Plotkin (argued), Evanston, IL, for Plaintiffs-Appellants.

Louis R. Hegeman, Paul A. Castiglione (argued), Office of the Cook County State's Attorney, Chicago, IL, for Defendants-Appellees.

Before CUDAHY, KANNE, and DIANE P. WOOD, Circuit Judges.

WOOD, Circuit Judge.

Charles Levy and his defunct company, Refund Research Associates, Inc. ("RRA") (to whom we refer collectively as Levy unless the context requires otherwise), have been locked in battle with the defendants, several Cook County officials and Cook County itself, for some time. The basis for Levy's complaints is the defendants' handling of Levy's efforts, as RRA's agent, to obtain real estate tax refunds for Cook County residents. The defendants contend that most of Levy's claims are barred by (among other things) the Tax Injunction Act ("the Act"), 28 U.S.C. § 1341. The district court agreed with their position, and so do we.

I

The Tax Injunction Act is a somewhat unusual statute, in that it does not confer jurisdiction on the district courts, but instead it deprives them of jurisdiction they would otherwise have to hear certain challenges to state taxes. See, e.g., California v. Grace Brethren Church, 457 U.S. 393, 396, 102 S.Ct. 2498, 73 L.Ed.2d 93 (1982). The standard of review that we apply to the district court's decision here that the Act precludes the plaintiffs' claims, however, is the same as we would use for any jurisdictional challenge. Our review of the legal conclusion that these claims fall within the scope of the Act's prohibition is de novo. Insofar as the district court found facts to support its determination, as is sometimes necessary for jurisdictional decisions, see Arbaugh v. Y & H Corp., 546 U.S. 500, 514 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006), we review those findings of fact for clear error. United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir.2003) (en banc). We recite the facts here in the light of these standards.

Levy was the president and sole shareholder of RRA, an Illinois corporation that has since been dissolved. RRA was engaged in the business of assisting taxpayers in obtaining real estate tax refunds. RRA would examine tax records to determine which taxpayers were entitled to real estate tax refunds, but had not yet received their money. Levy would contact these taxpayers in an effort to convince them to enter into an agreement with RRA whereby RRA would agree to file for a refund on behalf of the taxpayer, and the taxpayer would agree to pay RRA one-third of the money recovered.

In February 1999, Levy filed a lawsuit in Illinois state court against Maria Pappas in her official capacity as Treasurer of Cook County, alleging a conspiracy through which Cook County retained millions of dollars in tax overpayments instead of refunding the amounts to taxpayers or turning over the money to the state of Illinois. After he filed that suit, he alleges, Pappas and other Cook County officials began to retaliate against him personally and against RRA. Specifically, Levy asserts that the Cook County officials placed obstacles in RRA's path to make it difficult for RRA to collect tax refunds for its clients, and that they caused a criminal investigation to be instigated against Levy.

Before the state court lawsuit was filed, RRA typically received requested refund checks approximately 35 days after it filed a refund application. After the lawsuit began, this period ballooned up to approximately 145 days. Levy also began having problems getting refund checks delivered directly to RRA. On one occasion in May 1999, when Levy arrived to collect a set of refund checks, a clerk told Levy that the checks could not be released because the office had lost the forms that authorized the Treasurer's office to release the checks to him instead of to the taxpayers themselves. Levy did not have copies of the authorization forms, and the Treasurer's office refused to release the checks to him based on copies of the contracts between the clients and RRA. It appears that the Treasurer's office still has some of these checks, but it is not clear what happened to the rest.

On or about May 25, 1999, Peter Karaholios, then Counsel for the Treasurer, told Levy that RRA did not have the right to conduct its business and that liens filed by RRA were invalid. After this point, refund checks were no longer delivered to RRA. By August 2002, Cook County Assessor James M. Houlihan arranged that checks issued to RRA clients would be mailed directly to the client, rather than to RRA.

Employees of the Treasurer's office made it difficult for Levy to get information. In April 1999, James Crawley (then Assistant General Counsel and later Counsel for Treasurer Pappas) informed Levy that incomplete applications for refunds would not be accepted and that the Treasurer's office did not have the personnel to find the "correct CR number" for Levy's applications. Because Levy was being forced to provide complete applications, Levy submitted a freedom-of-information request to inspect the CR book, which contains records of all certificates of error that have been authorized by the County Assessor. The Treasurer's office responded that Levy needed to specify a tax year and to pay a copying charge; Levy parried with a request to view the files in person. The Treasurer's office did nothing. Some time around August 1999, Levy was unable to review microfiche records at the Treasurer's office. Employees at the Treasurer's office informed Levy that in order to obtain a client's microfiche records, he would need a notarized power of attorney from his client. He had never before been required to produce such a form.

In August and September 2001, Levy had difficulty reviewing other records at the Treasurer's office. The Treasurer's office maintains and keeps CR books and JR books (which contain information about whether the authorized refunds have actually been paid). Levy wanted access to these books both in order to conduct RRA's business and to obtain evidence for his state court case. When he asked to inspect the CR and JR books, however, he was told he could not. Levy wrote a letter to Martha Mills, Chief Counsel for the Treasurer, who responded that Levy would be given access to the books. But as of the time when he filed his federal action, Levy had not been given access to the books. Levy alleges that Mills (and the other employees who failed to provide Levy with access to the books) acted at Pappas's direction. Another FOIA request related to Levy's state court suit was stymied, because, Levy believes, Pappas and her employees in the Treasurer's office knew that Levy was behind it. Also, telephone calls by Levy and RRA clients went unreturned while the Treasurer's office returned phone calls placed by refundseekers not represented by RRA.

As if these bureaucratic obstacles were not enough, the County defendants also allegedly retaliated against Levy with threats of criminal action. Around the same month when Levy filed his state court case, Karaholios told Levy that he (Karaholios) had been a prosecutor and that he was going to put Levy out of business. Levy interpreted the comment as a threat to institute criminal charges. In October 2000, Levy was at the Treasurer's office. In the presence of Pappas, Crawley, and Deputy Treasurer William Korukulis, Karaholios told Levy that Levy was "committing fraud by submitting refund applications using Refund Research's FEIN number instead of the taxpayer's social security number." Karaholios added that Pappas planned to submit the applications to the State's Attorney and file a complaint. Pappas picked up the refund applications Levy had with him, waved them at Levy and said, "This is fraud. I'm going to take this to the State's Attorney."

In April 2001, Amy Huang (a supervisor with the Financial Crimes Investigations Unit of the State's Attorney's office) sent letters to more than 500 clients of RRA. The letters stated in part:

Our office is currently conducting a Criminal Grand Jury investigation pertaining to a complaint received from the Cook County Treasurer's office. According to records provided by the Cook County Treasurer's office, you filed a Certificate of Error Refund Application . . ., and designated Refund Research Associates, Inc. as Power-of-Attorney to complete the refund application process. In order for this office to complete its investigation into said matter, please review the attached application and contact [us] if the information is incorrect. Our office would like to talk with you regarding the refund you have filed through Refund Research Associates, Inc.

At least once, a representative of the State's Attorney's office went to the home of an RRA client to ask the client to verify his signature; the client did so. In May 2001, an RRA client telephoned the Treasurer's office and spoke to an employee, Ilene Psarras. When the client asked about the status of her refund, Psarras told the client that checks payable to RRA were not being released because RRA was being investigated for cheating clients out of their money. The State's Attorney never charged RRA or Levy with unlawful conduct.

In 2004, Levy and RRA filed the present action in federal court. The amended complaint named Cook County and the following officials as defendants: Maria Pappas, the Treasurer of Cook County; William Korukulis, the Deputy Treasurer of Cook County; Martha Mills, the Chief Counsel for the Treasurer of Cook County; James Crawley, Counsel for the Treasurer of Cook County; Peter Karaholios, prior Counsel for the Treasurer of Cook County; James M. Houlihan, Assessor of Cook County; and ...