School Districts File Amicus Curiae Brief in Landmark Federal Property Tax Lawsuit

Last week, nine Cook County school districts and Calumet City filed an amicus curiae (“friend of the court”) brief in the Seventh Circuit Court of Appeals in support of rehearing in the case A.F. Moore & Associates Inc. v. Pappas. The amici parties urge the Court to reverse an unprecedented decision which, if upheld, would allow some tax payers in Cook County to challenge property tax assessments in federal court, rather than proceeding through the state administrative and judicial system. Franczek P.C. represents five of the school districts joining the amicus filing. Plaintiffs, a group of commercial and industrial taxpayers, are challenging their real estate tax assessments on constitutional grounds, claiming $27 million in tax refunds.  If the plaintiffs are successful, the amici would be responsible for refunding 71% of this amount, making the case a matter of urgent concern to the affected taxing agencies.

The federal complaint was filed in in 2018 after plaintiffs grew frustrated with state court proceedings that remain unresolved after more than a decade. In those state court cases, the plaintiffs allege that other properties were systematically underassessed while their properties were not. As a result, the plaintiffs argue that their constitutional rights were violated.

It is highly unusual for a state court property tax dispute to migrate to federal court. The County and the Assessor’s Office filed a motion to dismiss the federal lawsuit arguing, among other things, that the federal court lacks jurisdiction over state court matters because the Tax Injunction Act prohibits federal court involvement so long as there is a “plain, speedy and efficient” remedy under state law. The district court granted the motion to dismiss. However, the Seventh Circuit Court of Appeals reversed, holding that there was in fact no plain, speedy, and efficient remedy in state court.

After the Court of Appeals decision, the County and Assessor immediately filed a petition for rehearing. In support of that petition, Franczek P.C. and others filed an amicus brief on behalf of several affected school districts and one municipality. In the brief, the amici urge the Court to reconsider its position. The reasons put forward for reconsideration focus on the potential exposure to taxing districts from allowing property tax litigation in federal courts, including attorney’s fees and costs, potential class action lawsuits, and the inability of taxing agencies to budget for refunds. The amici argue that at a minimum, the issue of whether plaintiffs have a sufficient remedy under state law should be referred to the Illinois Supreme Court, which is in a better position to adjudicate this issue.

The outcome of this case will have ramifications for all government units in Cook County that rely on property tax revenue. Depending on the school district, the refund exposure could amount to millions of dollars for the multiple years at issue. We will continue to keep our clients advised of the developments on this important issue.