Arkona, LLC v. Cheboygan, County of ( 2022 )

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION ARKONA LLC and DIANNE KASBOB, on behalf of themselves and all others similarly situated, Plaintiffs, Case No. 1:19-cv-12372 v. Honorable Thomas L. Ludington United States District Judge COUNTY OF CHEBOYGAN and COUNTY OF MONROE, Defendants. _______________________________________/ OPINION AND ORDER GRANTING IN PART PLAINTIFFS’ MOTION TO LIFT STAY AND DIRECTING PARTIES TO APPEAR FOR SCHEDULING CONFERENCE This is a class action brought under 42 U.S.C. § 1983 to recover the surplus proceeds from tax-foreclosure sales conducted in two Michigan counties. In June 2021, the case was stayed pending the disposition of a set of cross-appeals in Freed v. Thomas, Nos. 21-1248/21-1288/21-1339 (6th Cir. 2021). Freed is set to decide at least two issues relevant to this case: (1) whether tax-equity claimants may hold Michigan counties liable under Monell v. Department of Social Services of City of New York,1 and (2) whether just compensation under the Fourteenth Amendment equals the surplus proceeds of the foreclosure sale (i.e., the difference between the delinquent taxes and the sale price) or the “lost equity” in the property (i.e., the difference between the delinquent taxes and the fair-market value). See Br. for Def.-Appellee Michelle Thomas and Def.-Appellee/Cross-Appellant County of Gratiot at 3, Freed v. Thomas, Nos. 21-1248/21-1288 (6th Cir. Mar. 7, 2022). 1 436 U.S. 658 (1978). Recently, in a similar case pending before this Court, the Sixth Circuit held that sovereign immunity does not shield Michigan counties from tax-equity actions brought under § 1983. See Fox v. Saginaw Cnty. ex rel. Bd. of Commissioners, No. 21-1108, 2022 WL 523023, at *4–6. (6th Cir. Feb. 22, 2022). Although the Sixth Circuit expressly declined to reach the Monell issue due to lack of jurisdiction, its rationale for denying sovereign immunity seems to favor Monell liability. See id. at *6 (“The counties were not required to act as an FGU or to foreclose on any given property, and yet they chose to do so.”); Westmoreland v. Butler Cnty., 29 F.4th 721, 730 (6th Cir. 2022) (“Under Monell, a municipality can be liable under § 1983 when an official ‘policy or custom’ caused a violation of the plaintiff's constitutional rights.” (quoting Monell, 436 U.S. at 694)). Given the Sixth Circuit’s recent decision, Plaintiffs have filed a motion to lift the stay, arguing that the equities now favor issuing class notice and completing discovery. See ECF No. 45 at PageID.946 (noting that “Freed has been pending for more than a year at the Sixth Circuit and even the State of Michigan . . . has argued that the counties are at least liable as to surplus proceeds”). Plaintiffs also seek to compel the parties to attend a scheduling conference that will be held in Fox on May 10, 2022.2 Defendants, however, seek to keep the stay in place. ECF No. 47. They note that the Sixth Circuit remains poised to decide many of the remaining issues in this case, including Monell liability and the proper measure of compensation. Id. at PageID.959–60. “The power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes in its docket . . . .” FTC v. E.M.A. Nationwide, Inc., 767 F.3d 611, 626–27 (6th Cir. 2014) (quoting Ohio Env’t Council v. U.S. Dist. Ct., 565 F.2d 393, 396 (6th Cir. 2 Counsel in this case is also counsel in Fox. 1977)). “Where the stay motion is premised on the alleged significance of another case’s imminent disposition, courts have considered the potential dispositive effect of the other case, judicial economy achieved by awaiting adjudication of the other case, the public welfare, and the relative hardships to the parties created by withholding judgment.” Caspar v. Snyder, 77 F. Supp. 3d 616, 644 (E.D. Mich. 2015). To the extent Plaintiffs seek to lift the stay to attend the Fox scheduling conference, their motion is well founded. This case and Fox present many of the same issues and share some of the same counsel. For these reasons, allowing counsel to discuss these issues and their case-management needs at one meeting would serve judicial economy. To the extent Plaintiffs seek to lift the stay entirely, however, their motion is best addressed after the scheduling conference. The conference will provide this Court—and the parties—with a better understanding of the case, the parties’ case-management needs, and the parties’ “relative hardships.” See Caspar, 77 F. Supp. 3d at 644. The parties might even reach a scheduling agreement that resolves the stay issue. Accordingly, it is ORDERED that Plaintiffs’ Motion to Lift the Stay, ECF No. 47, is GRANTED IN PART and DENIED IN PART. Plaintiffs’ Motion is GRANTED to the extent they seek to compel the parties to attend the scheduling conference on May 10, 2022. Plaintiffs’ Motion is DENIED WITHOUT PREJUDICE in all other respects. Further, it is ORDERED that the parties are DIRECTED to appear for a scheduling conference on May 10, 2022, at 10:00 AM EDT. Dated: April 14, 2022 s/Thomas L. Ludington THOMAS L. LUDINGTON United States District Judge