TARRIFY PROPERTIES, LLC, individuаlly and on behalf of all others similarly situated v. CUYAHOGA COUNTY, OHIO
No. 21-3801
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Decided and Filed: June 14, 2022
RECOMMENDED FOR PUBLICATION Pursuant to Sixth Circuit
Appeal from the United States District Court for the Northern District of Ohio at Cleveland. No. 1:19-cv-02293—James S. Gwin, District Judge.
COUNSEL
ARGUED: Matthew C. De Re, ZIMMERMAN LAW OFFICES, P.C., Chicago, Illinois, for Appellant. Stephen W. Funk, ROETZEL & ANDRESS, LPA, Akron, Ohio, for Appellee. ON BRIEF: Marc E. Dann, DANN LAW, Lakewood, Ohio, Thomas A. Zimmerman Jr., ZIMMERMAN LAW OFFICES, P.C., Chicago, Illinois, for Appellant. Stephen W. Funk, ROETZEL & ANDRESS, LPA, Akron, Ohio, for Appellee. Matthew P. Yourkvitch, YOURKVITCH & DIBO, LLC, Cleveland, Ohio, for Amici Curiae.
OPINION
SUTTON, Chief Judge. At stake is whether the distriсt court correctly refused to certify a class of owners of foreclosed properties in Cuyahoga County, Ohio, all of whom challenge Ohio‘s tax-foreclosure statute as a taking under the federal and state constitutions. While the claimants share a common legal theory—that the targeted Ohio law does not permit them to capture equity in their properties after the county transfers them to a land bank—they do not have a сognizable common theory for measuring the value in each property at the time of transfer. We affirm.
I.
Ohio law permits counties to tax property within their jurisdiction. County auditors determine each property‘s value every six years.
In addition to this traditional process for dealing with abandoned property, Ohio introduced an alternative process—the land-bank trаnsfer at issue today—in 2008.
Under this alternative process, state law offers several protections for the owners of abandoned property. The Board of Revision must provide notice to landowners,
What landowners cannot do under this alternative approach is obtain the excess equity in the propеrty after the land bank receives it. If such an interest exists, the statute offers no way to capture it.
In May 2019, the Board foreclosed the property. It ordered the transfer of the property to the Cuyahoga County Land Reutilization Corporation. After the 28-day redemption period ended, the county transferred the property. Through each of these steps, Tarrify did not appear at the Board‘s hearing, pay the outstanding taxes, request a transfer to the court of common pleas, or contest the foreclosure of its property.
In October 2019, Tarrify sued Cuyahoga County in federal court under
The district court denied the certification motion and deemed the county tax appraisals inadmissible. A panel of our court permitted an interlocutory appeal of the district court‘s denial of class certification. In re Tarrify Props., LLC, No. 21-0301 (6th Cir. Sept. 8, 2021); see
II.
The Fifth Amendment to the U.S. Constitution, incorporated against the States via the Fourteenth Amendment, says that “private property [shall not] be taken for public use, without just compensation.”
We reserved the federal merits question in Harrison v. Montgomery County, 997 F.3d 643, 652 (6th Cir. 2021). A similar path awaits us today for these claims. Before reaching the merits of each claim, the district court resolved Tarrify‘s motion to certify a class of similarly situated landowners, a sequence appropriate for handling this appeal.
In its motion to certify the class, Tarrify sought relief on behalf of owners of tax-foreclosed properties in which “the total value of that property exceeded the amount of the impositions on that property at the time the transfer occurred.” R.50 at 1. Before certification, a putative class must satisfy several familiar requirements: numerosity, commonality, typicality, and adequate representation. Sandusky Wellness Ctr., LLC v. ASD Specialty Healthcare, Inc., 863 F.3d 460, 466 (6th Cir. 2017). On top of that, for Rule 23(b)(3) classes like Tarrify‘s, the plaintiff also must show predominance (that “the questions of law or fact common to class members predominate оver any questions affecting only individual members“), superiority (that “a class action
The district court did not abuse its discretion in denying Tarrify‘s motion to certify this class. Its decision does not require us to dig too deep into the weeds of class action law because the key impediment to certifying the class—identification of proposed members of the class—haunts every consideration. Although our court typically analyzes each Civil Rule 23 requirement independently, Hicks v. State Farm Fire & Cas. Co., 965 F.3d 452, 459–65 (6th Cir. 2020), the analysis may sometimes overlap. Over and оver, courts have explained that elusive class composition often undermines efforts to meet the ascertainability, predominance, and superiority requirements. Cf. Sandusky Wellness Ctr., 863 F.3d at 471–72 (collecting cases and noting how class identity problems can be analyzed under all three requirements).
Take ascertainability. A “class definition must be sufficiently definite so that it is administratively feasible for the court to determine whether a particular individual is a member of the рroposed class.” Id. at 471 (quotation omitted). If “mini-trials” become necessary to determine who is in and who is out, the class-action vehicle imposes inefficiencies rather than ameliorates them. Id. at 471–74. The key impediment in this case is that the court must ask whether a given property‘s fair market value exceeds the taxes owed at the time of the transfer to determine who is in the class. Determining fair market value requires an independent and individualized аssessment of each absent class member‘s property. As the appraisal experts on both sides agree, the valuation of real property depends on many circumstances, including the size, location, use, and condition of the property and the relevant market conditions at the time of the transfer. The market and physical conditions of each property will vary. So too will the dates of each transfer. As such, a cоurt must conduct an individualized, fact-intensive, and adversarial process to determine the fair market value for each property.
Such are the vagaries of fair market value that it is not even clear whether the lead class member, Tarrify, comes within the class. The county‘s expert testified that Tarrify‘s property value fell below the taxes owed. If accurate, that means Tarrify itself falls outside the proposed class.
Other problems bubble uр from the imperative of matching these claims with this class definition. Common questions subject to classwide proof must predominate over individualized questions, prompting us to ask whether the proposed class action beats the conventional approach of resolving disputes on a case-by-case basis in terms of efficiency and administrability. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348–57 (2011). Problems emerge on these predominance and superiority fronts, most acutely, when a controlling issue requires individualized determinations ill-equipped for classwide proof. Sandusky Wellness Ctr., 863 F.3d at 468–72; Pipefitters Loc. 636 Ins. Fund v. Blue Cross Blue Shield of Mich., 654 F.3d 618, 631-32 (6th Cir. 2011); Woodall v. Wayne County, No. 20-1705, 2021 WL 5298537, at *5–8 (6th Cir. Nov. 15, 2021).
Even as the claims turn on a question that is easy to understand—does each property include surplus equity?—they require
Tarrify offers several potential ways to sidestep this conclusion. None suffices.
Tax appraisals. Tarrify maintains that the 2018 tax valuations by the Cuyahoga County Auditor solve the problem of determining the fair market value of each property. Why worry about individualized inquiries if the Auditor has already done them for each property? And why tarry over their accuracy given that the Auditor relies on them for each tax assessment? What is sauce for tax assessment impositions, Tarrify claims, should be sauce for fair market value takings claims.
But what seems simple is not. A government‘s assessment of the value of property for tax purposes creates a “default valuation” with respect to property value, not an unrebuttable finding of value. FirstCal Indus. 2 Acquisitions, L.L.C. v. Franklin Cnty. Bd. of Revision, 929 N.E.2d 426, 432 (Ohio 2010) (quotation omitted). That explains why Cuyahoga County permits landowners to challenge these assessments.
Consistent with this presumption, it is useful to remember that these property valuations occur only at six-year intervals, creating a mismatch between the time of the appraised value and the time of the transfer. A lot can happen to property values over time, whether one year (as with Tarrify) or more years (as with other members of the proposed class). That is especially so for abandoned property, the only kind of property eligible for transfers to land banks and the only kind of property included in this proposed class. How would a factfinder uniformly measure changes in value caused by abandonment of different properties in different parts of Cuyahoga County for different lengths of time? We cannot envision a generic approach to the problem. Not even sub-classes—say for a sub-class of рroperties transferred in 2019, one for properties transferred in 2020, and so on—would fix the problem. Depreciation of abandoned properties, or for that matter appreciation of them, over time will vary based on what is happening in different parts of the county. Hence the tired—but accurate—expression “location, location, location.” See William Safire, On Language: Location, Location, Location, N.Y. Times Mag., June 28, 2009, at 14 (discussing the origin of the phrase).
The rooting and uprooting that time imposes on abandoned properties and the idiosyncrasies of location are not the only difficulties with using tax valuations. No less problematically, they use a rough justice method for valuing property. Taxation requires “uniformity in the mode of assessment upon the taxable valuation” and ease of administration, Poffenberger v. Bd. of Revision of Clermont Cnty., 375 N.E.2d 65, 67 (Ohio Ct. App. 1977) (quotation omitted), two goals that shortchange accuracy when it comes to specific properties. The mass appraisal methodology used by counties, most notably, does not consider the interior conditions of each property.
Tarrify seeks to avoid the conclusion that flows from this general rule. Noting that the imposition of taxes under Ohio law should reflect “as nearly as practicable” a property‘s “true value,”
The facts of the named plaintiff‘s case illustrate the problem. Tarrify‘s property sat abandoned for more than a year between the 2018 tax appraisal and its transfer to the land bank. No one disputes that Tarrify‘s property experienced extensive vandalism that significantly damaged the interior of the building. Yet the auditor‘s mass appraisals dо not take such internal conditions into account. All of the parties’ appraisal experts agree as a result that the fair market value of the property on the transfer date was significantly lower than the auditor‘s 2018 valuation. One expert found that Tarrify‘s property value dropped significantly—by around $150,000—removing any equity in the property at all. Accurate or not, that valuation and the others confirm that an attempt to use tax valuations would prompt one individualized dispute after another. So far as the record and pleadings show, it is difficult to see how the fair market value of just one property covered by the class definition could be established for takings purposes by the six-year tax valuations.
Mass county-wide tax valuations, it is true, have become more sophisticated over time. In some settings, it is also true, Ohio permits the use of an “auditor‘s then-current valuation” of рroperty as “rebuttable” “prima-facie evidence” of fair market value “regardless of whether an independent appraisal has been performed.”
In view of this conclusion, we need not resolve whether the district court should have permitted the tax valuations to be considered in resolving the class-certification motion. Admissible or not, they do not show that this class should have been certified.
Collateral Estoppel. Tarrify separately argues that the Board‘s transfer of the relevant properties rests on the county‘s tax valuations, collaterally estopping the county from arguing that the properties’ fair market values fall below the tax valuations.
Federal courts apply the preclusion law of the State that rendered the initial judgment. CHKRS, LLC v. City of Dublin, 984 F.3d 483, 490 (6th Cir. 2021). Ohio law requires collateral estoppel, often given the user-friendly name of issue preclusion, when: (1) there are identical parties (or parties in privity) across two suits; (2) there was a final judgment in the earlier suit; and (3) “the relevant ‘issue‘” was “‘actually’ and ‘necessarily’ litigated in the prior case.” Id. at 491.
Tarrify fails to successfully navigate the third requirement. At issue is whether the prior tribunal actually “resolved the issue” at play. Id. It did not. The Board never made any findings on the fair market value of the property in its tax foreclosure order. Nor was it necessary to do so, as the Board may order transfer of the property “regardless of whether the value of the taxes, assessments, penalties, interest, and other charges due on the parcel, and the costs of the action, exceed the fair market value of the parcel.”
It does not help matters that the Board may resolve the fair market value of property in other circumstanсes. True,
Tarrify adds that the county regularly testifies before the Board about the auditor‘s most recent tax valuation of the property. Fair enough. But the Board, even so, still did not “resolve[] the issue” of fair market value at the time of transfer in this case. CHKRS, 984 F.3d at 491. That the county presents such evidence to determine ballpark values does not estop it from showing fair market value at the time of transfer or for that matter preclude the property owner from doing the same.
Judicial estoppel. Tarrify likewise invokes judicial estoppel to bind the
Repetition of the key theme of its appeal—that tax valuations “[e]ither” “reflect the ‘true value’ of the prоperties or they do not,” Appellant‘s Br. 36—does not make it so. General valuations for tax purposes in six-year intervals do not establish fair market value on the day of a transfer for every property in the class—or even a meaningful number of them.
Alternative measures. Tarrify also identifies three alternative measures that might make classwide relief more palatable: (1) appointing a special master to determine fair market value disputes, (2) creаting subclasses based on the extent that the tax appraisal value exceeds tax impositions, and (3) conducting a new “mass appraisal” for all properties at issue. But none of these proposals cures the problem that this case will boil down to mini-trials over each property‘s value upon transfer. The party seeking certification bears the burden of showing compliance with Civil Rule 23. Sandusky Wellness Ctr., 863 F.3d at 466. Tarrify has not shown that the district court abused its discretion in rejecting these or any other arguments.
We affirm.