Coleman v. District of Columbia , 70 F. Supp. 3d 58 ( 2014 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
________________________________
)
BENJAMIN COLEMAN, through his )
Conservator, ROBERT BUNN, )
)
Plaintiff, )
) Civil Action No. 13-1456 (EGS)
v. )
)
DISTRICT OF COLUMBIA, )
)
Defendant. )
________________________________)
MEMORANDUM OPINION
In the District of Columbia, as in many other jurisdictions, a
homeowner who fails to pay property taxes runs a great risk. A
delinquent property-tax bill becomes a lien, held by the
District, on the homeowner’s property. Continued failure to pay
the delinquent tax bill creates the risk that the District will
sell the property to satisfy the taxes. This practice of
engaging in “tax sales” has long been recognized as a generally
valid exercise of the government’s power to collect taxes.
The devil, however, is in the details. In D.C., the tax-sale
process begins with the sale at auction of a tax lien on the
property to a third party. The homeowner may satisfy that lien
by paying his delinquent tax bill, but the purchaser of the lien
is able to add on top of that bill various costs, including
attorney’s fees. In Mr. Coleman’s case, that caused what began
as a $133.88 tax bill to become a total of over $5,000, all of
which needed to be paid before the lien would be satisfied.
Once the lien is sold to the third party, a six-month waiting
period begins, during which the homeowner may redeem his home by
paying the taxes, along with any penalties, costs, and interest
that are owed. If the entire bill is not paid upon expiration of
the waiting period, the tax-lien purchaser may initiate
proceedings in the Superior Court of the District of Columbia to
foreclose. The Superior Court is empowered to enter a judgment
vesting a fee simple title in the property in the tax-lien
purchaser. In this way, a small sum paid to purchase the lien
becomes full title to a property worth hundreds of thousands of
dollars (in this case, approximately $200,000). The key detail
in this case is that D.C. law provides that any surplus equity
the homeowner has in his home is irrevocably lost, no matter how
small the tax bill nor how valuable the equity.
Mr. Coleman brings a limited challenge to this law. He does
not seek to regain his home, does not dispute that the District
may use tax sales to satisfy delinquent property taxes, and
agrees with the District that he owed $133.88 in property taxes,
plus penalties, costs, and interest. Mr. Coleman’s claim is
against the District’s taking of the entire equity in his home.
The District, he asserts, has provided him no compensation for
2
the loss of that equity, even though its value far exceeds the
taxes, penalties, costs, and interest he owed.
Mr. Coleman claims that such a practice is forbidden by the
Takings Clause of the Fifth Amendment to the United States
Constitution. Accordingly, he filed suit seeking an award of
“just compensation,” as well as a declaration from this Court
that the District’s statute is unconstitutional. The District
has moved to dismiss Mr. Coleman’s Complaint, arguing that this
Court lacks jurisdiction for multiple reasons and that, in any
event, Supreme Court precedent holds that the District’s actions
do not violate the Takings Clause. The Court has considered the
District’s motion, the response and reply thereto, as well as
the applicable law and the entire record in this case. The Court
also held a hearing on the motion to dismiss on September 26,
2014. The Court finds that it has jurisdiction over Mr.
Coleman’s claims and accordingly rejects all of the District’s
jurisdictional arguments. The Court also rejects the District’s
argument that prior Supreme Court precedent has foreclosed Mr.
Coleman’s claim under the Takings Clause. Accordingly, the Court
DENIES the District’s motion.
I. Background
A. Statutory Background
The District of Columbia’s laws governing the procedure for
collecting delinquent property taxes are codified in Chapter 13A
3
of title 47 of the D.C. Code. See Revised Real Property Tax
Sales, D.C. Code § 47-1330, et seq. On the day that a tax—
defined as “unpaid real property tax . . . including penalties,
interest, and costs,” id. § 47-1330(2)—becomes delinquent, the
D.C. Code declares that it “shall automatically become a lien on
the real property.” Id. § 47-1331(a). The Code further directs
the District to “sell all real property on which the tax is in
arrears unless otherwise provided by law.” Id. § 47-1332(a).
Such tax sales follow a procedure set out elsewhere in the
statute. “At least 30 days before” any such sale is to be
advertised, “the Mayor shall mail to the person who last appears
as owner of the real property on the tax roll . . . a notice of
delinquency.” Id. § 47-1341(a). Once thirty days have passed
“from the mailing of the notice of delinquency,” the District
must advertise that the property “will be sold at public auction
because of taxes.” Id. § 47-1342(a). At this public sale, the
District must sell the property “in its entirety,” id. § 47-
1343, “to the purchaser who makes the highest bid.” Id. § 47-
1346(a)(2). Sales are not to be conducted “for less than the
amount of the taxes,” however. Id. § 47-1346(c).
The purchaser receives “a certificate of sale,” which
describes the property and the sale, and indicates “[t]he amount
of taxes for which the real property was offered for sale.” Id.
§ 47-1348(a). The six months following the date of sale are a
4
redemption period, during which the purchaser may not foreclose
the original owner’s right to redeem the property. Id. § 47-
1370(a). The original owner may redeem by paying to the District
“the amount paid by the purchaser . . . exclusive of surplus
with interest thereon,” as well as “other taxes, interest, and
penalties paid by a purchaser,” and “expenses for which the
purchaser is entitled to reimbursement.” Id. § 47-1361(a).
Interest on this amount is calculated at an annual rate of 18%.
Id. §§ 47-1334, 47-1361, 47-1377. If the original owner makes
sufficient payments to the District, the purchaser of the
certificate of sale “shall receive a refund of the payment” with
interest. Id. § 47-1354(b).
Once the six-month redemption period has passed, “a purchaser
may file a complaint to foreclose the right of redemption of the
real property.” Id. § 47-1370(a). This action must be filed
within one year of the date of sale of the lien, or the
certificate of sale becomes void. See id. § 47-1355(a)(1). Even
if such an action is pending, the original owner “may redeem the
real property at any time until the foreclosure of the right of
redemption is final.” Id. § 47-1360. In adjudicating an action
to foreclose the right of redemption, the Superior Court may
“[v]est title in fee simple in the purchaser.” Id. § 47-
1370(b)(2). The purchaser of the tax-sale certificate must bring
the action against the original owner of the property and the
5
District of Columbia, as well as any entity with a particular
interest in the property. See id. § 47-1371(b)(1). The law
permits the Superior Court to issue a final judgment
“foreclosing the right of redemption,” which bars the original
owner from redeeming the property and vests in the purchaser a
deed in fee simple. See id. § 47-1382(a). In doing so, the law
permits the taking of not only the amount of delinquent taxes,
plus any costs, fees, and interest, but also the entirety of the
original owner’s equity in the property.1
B. Factual Background
Benjamin Coleman is a 76-year-old veteran. Compl., ECF No. 1 ¶
26. At all times relevant to this case, he “suffered from severe
dementia,” id. ¶ 27, and this action is brought on Mr. Coleman’s
behalf by Robert Bunn, his guardian who was appointed by the
Superior Court “to manage Mr. Coleman’s legal and financial
affairs.” Id. ¶ 15.
In 2006, Mr. Coleman failed to pay a $133.88 property tax bill
on his home. Id. ¶ 28. The District placed a tax lien on Mr.
Coleman’s home and added $183.47 in penalties to his preexisting
1
The Court notes that subsequent legislation by the Council of
the District of Columbia will alter the process in many ways.
Most importantly, legislation that is scheduled to take effect
in October 2014 grants homeowners whose homes are sold at tax
auction and subsequently foreclosed upon a right to recover a
substantial portion of the equity they had in their homes. See
Residential Real Property Equity and Transparency Act, 62-31
D.C. Reg. 7763 (Aug. 1, 2014).
6
tax obligation. Id. ¶ 29. The lien—of $317.35—was offered for
sale at a public auction in July 2007, when it was sold to
Embassy Tax Services, LLC (“Embassy”). Id. ¶ 30.
Embassy filed an action to foreclose Mr. Coleman’s right of
redemption on February 28, 2008. Id. ¶ 33. It demanded $4,999 in
addition to the lien amount of $317.35 from Mr. Coleman. Id. ¶
34. The additional amount was for “court costs, attorney’s fees,
expenses incurred for personal service of process, expenses
incurred for service of process by publication and fees for the
title search.” Id. Embassy filed the action against Mr. Coleman,
as well as the District, although the District “did not file any
specific claims or defenses.” Id. ¶ 35.
On September 24, 2008, Mr. Coleman’s son sent a handwritten
letter to the Superior Court indicating “that he had recently
moved back into town and had discovered that his father was
‘living alone and had not kept to his medicine.’” Id. ¶ 37. Mr.
Coleman’s son “offered to ‘get most of the payments in on Oct.
3, 2008.’” Id. The Superior Court ultimately held a status
hearing on March 11, 2009, after which it gave Mr. Coleman until
May 27, 2009 to complete his payments. Id. ¶¶ 38–39.
On May 26, 2009, Mr. Coleman’s son sent another letter to the
Superior Court, noting “that his father had ‘been under the
weather,’ but that his father had paid all of the owed taxes.”
Id. ¶ 40. Mr. Coleman’s son also “offered for his father to make
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monthly payments of $850 beginning June 1, 2009” to satisfy the
additional obligations to Embassy. Id. When no one appeared for
Mr. Coleman at the May 27, 2009 status hearing, the Court tried,
unsuccessfully, to contact his son. See id. ¶ 41. The Court then
adopted the proposed payment schedule, stayed the deadline for
Mr. Coleman to redeem his property, and directed Mr. Coleman and
his son to appear for a June 24, 2009 hearing. Id. That hearing
was rescheduled on multiple occasions. Id. ¶ 42.
On March 31, 2010, Embassy moved for a default judgment,
noting “Mr. Coleman’s failure to appear, file a responsive
pleading or file a notice of interest in the property.” Id. ¶
43. The Superior Court granted the motion for a default judgment
on June 11, 2010 and issued a judgment “extinguishing any title,
rights, claims and interests that Mr. Coleman had in the
property.” Id. ¶¶ 44–45. The District of Columbia executed a
deed to Embassy on August 31, 2010. See id. ¶ 46. The home at
that time “had a fair market value of approximately $200,000.”
Id.On December 16, 2010, Embassy filed with the Superior Court a
petition for writ of possession because Mr. Coleman continued to
reside in his home. Id. ¶ 47. On June 9, 2011, Embassy filed a
complaint with the Superior Court’s Landlord-Tenant Branch and
obtained a default judgment on June 22, 2011. Id. ¶¶ 48–49. Mr.
Coleman was evicted on August 5, 2011. Id. ¶ 50. Embassy sold
8
his home for $71,000 in October of 2011. Id. ¶ 51. He continues
to reside in D.C, but “now lives in a group home, a mile from
his former house.” Id. ¶¶ 15, 52.
C. Procedural History
On September 24, 2013, Mr. Coleman brought this lawsuit
against the District of Columbia. See Compl., ECF No. 1. He
alleges that the District’s tax-sale statute violates the
Takings Clause of the Fifth Amendment to the United States
Constitution by taking a homeowner’s surplus equity and
transferring it to a private party without just compensation or
public purpose. Id. ¶¶ 2, 7. Mr. Coleman brings a three-count
Complaint against the District. Count One seeks damages under 42
U.S.C. § 1983. See id. ¶¶ 70–78. Count Two seeks “just
compensation” under the Fifth Amendment. See id. ¶¶ 79–86. Count
Three seeks a declaratory judgment that the provisions of D.C.
law “causing the sale of a home and all of its equity to a third
party are null and void as a violation of the Fifth Amendment.”
Id. ¶¶ 87–90.
On October 18, 2013, the District moved to dismiss. See Def.’s
Mot. to Dismiss (“Mot.”), ECF No. 5. Mr. Coleman filed his
opposition on November 22, 2013. See Pl.’s Opp. to Mot. to
Dismiss (“Opp.”), ECF No. 8. The District filed its reply in
further support of its motion on December 6, 2013. See Def.’s
Reply in Supp. of Mot. to Dismiss (“Reply”), ECF No. 10. The
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Court held a hearing on the motion to dismiss on September 26,
2014. The motion is now ripe for the Court’s decision.
II. Standard of Review
A. Rule 12(b)(1)
A federal district court may only hear a claim over which it
has subject matter jurisdiction; therefore, a Rule 12(b)(1)
motion for dismissal is a threshold challenge to a court’s
jurisdiction. On a motion to dismiss for lack of subject matter
jurisdiction, the plaintiff bears the burden of establishing
that the Court has jurisdiction. Lujan v. Defenders of Wildlife,
504 U.S. 555, 561 (1992). In evaluating the motion, the Court
must accept all of the factual allegations in the complaint as
true and give the plaintiff the benefit of all inferences that
can be drawn from the facts alleged. See Thomas v. Principi, 394
F.3d 970, 972 (D.C. Cir. 2005). However, the Court is “not
required . . . to accept inferences unsupported by the facts
alleged or legal conclusions that are cast as factual
allegations.” Cartwright Int’l Van Lines, Inc. v. Doan, 525 F.
Supp. 2d 187, 193 (D.D.C. 2007) (quotation marks omitted).
B. Rule 12(b)(6)
A motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) “tests the legal sufficiency of a complaint.” Browning
v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). A complaint must
contain “a short and plain statement of the claim showing that
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the pleader is entitled to relief, in order to give the
defendant fair notice of what the claim is and the grounds upon
which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007) (quotation marks and alteration omitted). While detailed
factual allegations are not necessary, a plaintiff must plead
enough facts “to raise a right to relief above the speculative
level.” Id.When ruling on a Rule 12(b)(6) motion, the court may consider
“the facts alleged in the complaint, documents attached as
exhibits or incorporated by reference in the complaint, and
matters about which the Court may take judicial notice.”
Gustave–Schmidt v. Chao, 226 F. Supp. 2d 191, 196 (D.D.C. 2002).
The Court must construe the complaint liberally in plaintiff’s
favor and grant plaintiff the benefit of all reasonable
inferences deriving from the complaint. Kowal v. MCI Commc’ns
Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). The Court must not
accept inferences that are “unsupported by the facts set out in
the complaint.” Id. “Nor must the court accept legal conclusions
cast in the form of factual allegations.” Id. “[O]nly a
complaint that states a plausible claim for relief survives a
motion to dismiss.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)
III. Analysis
A. The Court Has Jurisdiction Over Mr. Coleman’s Claims.
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The District argues that the Court lacks jurisdiction to hear
Mr. Coleman’s claims for four distinct reasons: (1) Counts One
and Three of the Complaint are barred by the federal and D.C.
Tax Injunction Acts, 28 U.S.C. § 1341 and D.C. Code § 47-3307,
as well as the related principle of comity; (2) Count Two of the
Complaint is not ripe for resolution; (3) the case is precluded
by the Rooker-Feldman doctrine; and (4) the case is barred by
the doctrine of res judicata.
1. The Tax Injunction Act
The District’s first jurisdictional argument is that Counts
One and Three of Mr. Coleman’s Complaint—which seek damages for
the loss of surplus equity and a declaratory judgment that the
relevant provisions of the D.C. Code are unconstitutional—
challenge the legality of the District of Columbia’s system for
collecting property taxes in violation of the Tax Injunction
Act, 28 U.S.C. § 1341, and the related principle of comity, as
well as the D.C. Tax Injunction Act, D.C. Code § 47-3307. Mr.
Coleman claims that Counts One and Three do not challenge the
District’s collection of property taxes at all, but instead are
addressed at the separate taking of a homeowner’s surplus
equity. See Opp. at 26–29.
The Tax Injunction Act declares that “[t]he district courts
shall not enjoin, suspend or restrain the assessment, levy or
collection of any tax under State law where a plain, speedy and
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efficient remedy may be had in the courts of such State.” 28
U.S.C. § 1341.2 The Act has been interpreted to bar not only
injunctions, but also actions seeking declaratory judgments
regarding the validity of tax collection. See Great Lakes Dredge
& Dock Co. v. Huffman, 319 U.S. 293, 299 (1943). Moreover,
“[a]lthough the Supreme Court has not decided whether the Act
itself covers damages suits under 42 U.S.C. § 1983, the Supreme
Court has found ‘that taxpayers are barred by the principle of
comity from asserting § 1983 actions against the validity of
state tax systems in federal courts.’” Dist. Lock & Hardware,
Inc. v. District of Columbia, 808 F. Supp. 2d 36, 39 (D.D.C.
2011) (quoting Fair Assessment in Real Estate Ass’n v. McNary,
454 U.S. 100, 116 (1981) (quotation marks, citations, and
alterations omitted).
The Act is “first and foremost a vehicle to limit drastically
federal district court jurisdiction to interfere with so
important a local concern as the collection of taxes.” Rosewell
v. LaSalle Nat’l Bank, 450 U.S. 503, 522 (1981). This is not to
say that the Act bars any lawsuit that relates to tax
collection, however. As the Supreme Court recently held, the Act
2
Similarly, the D.C. Tax Injunction Act provides: “No suit shall
be filed to enjoin the assessment or collection by the District
of Columbia or any of its officers, agents, or employees of any
tax.” D.C. Code § 47-3307.
13
reflects “two closely related, state-revenue-protective
objectives”:
(1) to eliminate disparities between taxpayers who
could seek injunctive relief in federal court—usually
out-of-state corporations asserting diversity
jurisdiction—and taxpayers with recourse only to state
courts, which generally required taxpayers to pay
first and litigate later; and
(2) to stop taxpayers, with the aid of a federal
injunction, from withholding large sums, thereby
disrupting state government finances.”
Hibbs v. Winn, 542 U.S. 88, 104 (2004).
In Hibbs, the Supreme Court articulated the narrow scope of
claims that are subject to the Act, holding that it does not bar
claims that relate generally to “state tax administration”;
rather, the relief sought must disrupt “the collection of
revenue” by “operat[ing] to reduce the flow of state tax
revenue.” Id. at 105, 106. Upon reviewing the Act’s history, the
Supreme Court concluded that “Congress trained its attention on
taxpayers who sought to avoid paying their tax bill by pursuing
a challenge route other than the one specified by the taxing
authority. Nowhere does the legislative history announce a
sweeping congressional direction to prevent federal-court
interference with all aspects of state tax administration.” Id.at 104–05 (quotation marks omitted). “In sum, this Court has
interpreted and applied the [Tax Injunction Act] only in cases
Congress wrote the Act to address, i.e., cases in which state
14
taxpayers seek federal-court orders enabling them to avoid
paying state taxes.” Id. at 107.
Courts have consistently applied the language of Hibbs that
the Tax Injunction Act bars only claims “‘in which state
taxpayers seek federal-court orders enabling them to avoid
paying state taxes,’” BellSouth Telecomms. v. Farris, 542 F.3d
499, 501 (6th Cir. 2008) (quoting Hibbs, 542 U.S. at 107)
(emphasis in original), or, phrased slightly differently, that
the Act applies only “to a lawsuit when the relief granted by a
federal court will ‘operate to reduce the flow of state tax
revenue.’” Okla. ex rel. Okla. Tax Comm’n v. Int’l Reg. Plan,
Inc., 455 F.3d 1107, 1112 (10th Cir. 2006) (quoting Hibbs, 542
U.S. at 106) (emphasis added); see also Luessenhop v. Clinton
Cnty., 466 F.3d 259, 266 (2d Cir. 2006); May Trucking Co. v. Or.
Dep’t of Transp., 388 F.3d 1261, 1267 (9th Cir. 2004).
Mr. Coleman does not seek a court order nullifying his
property tax obligation. Indeed, the District conceded at oral
argument that a ruling in Mr. Coleman’s favor would not allow
him to avoid paying any tax. Mr. Coleman further notes that the
D.C. Code provision at issue defines “tax” narrowly, to
encompass “unpaid real property tax . . . including penalties,
interest, and costs.” D.C. Code § 47-1330(2). Mr. Coleman
concedes that those amounts were due; he seeks only the surplus
equity that remains after those amounts are paid. Accordingly,
15
if Mr. Coleman won this lawsuit, no “tax” would be removed from
the District’s coffers. For that reason, the Tax Injunction Act
does not bar his claims.
The District argues that Mr. Coleman’s claims must nonetheless
be dismissed because their success would frustrate the
“collection” of taxes by holding the process by which the
District collects property taxes unconstitutional. See Mot. at
10–11. Under the District’s view, the law’s treatment of a
homeowner’s surplus equity is inextricably intertwined with the
process by which a tax lien is sold to a third party and a
former homeowner’s right to redeem the property itself is
foreclosed upon. In essence, forfeiting the equity is an extra
incentive for the payment of taxes.
Courts have rejected the argument that the Tax Injunction Act
bars challenges to such independent incentives. Indeed, the
Supreme Court in Hibbs discussed such a case, Judge Friendly’s
decision in Wells v. Malloy, 510 F.2d 74 (2d Cir. 1975). See
Hibbs, 542 U.S. at 109. In Wells, the plaintiff had failed to
pay a state motor-vehicle tax and, as a consequence, the state
suspended his driver’s license. See 510 F.2d at 76. The
plaintiff brought a suit contesting the constitutionality of
that action, but “did not dispute that the tax was due and
owing.” Id. Judge Friendly held that the plaintiff “[c]learly .
. . is not seeking to restrain the ‘assessment’ or ‘levy’ of a
16
tax under state law.” Id. at 77. The state argued that the
plaintiff sought to restrain the “collection” of taxes, but
Judge Friendly rejected a reading of that word “to include
anything that a state has determined to be a likely method of
securing payment.” Id. In using the word “collection”:
Congress was referring to methods similar to
assessment and levy, e.g., distress or execution, that
would produce money or other property directly, rather
than indirectly through a more general use of coercive
power. Congress was thinking of cases where taxpayers
were repeatedly using the federal courts to raise
questions of state or federal law going to the
validity of the particular taxes imposed upon them—not
to a case where a taxpayer contended that an unusual
sanction for non-payment of a tax admittedly due
violated his constitutional rights, an issue which,
once determined, would be determined for him and all
others.
Id. (citations omitted). The plaintiff in Wells was thus not
barred by the Tax Injunction Act. See id. For similar reasons,
Mr. Coleman’s challenge to the District’s taking of the surplus
equity in his home, above and beyond the amounts the District
has defined as the “tax,” is not barred by the Tax Injunction
Act.3
3
The Court need not resolve the dispute over whether a challenge
to the adequacy of a foreclosure notice in the context of a tax
sale is barred by the Tax Injunction Act. Compare Luessenhop,
466 F.3d at 260–61 (Second Circuit holding that the “collection”
of taxes was not at issue where “[n]one of the plaintiffs
dispute[d] the authority of the governmental body to collect the
taxes due . . . . Neither d[id] they contest the assessments of
their property, or the amount of taxes claimed due”), and Burns
v. Conley, 526 F. Supp. 2d 235, 241 (D.R.I. 2007) (plaintiffs’
challenge to the adequacy of notice of a pending tax sale was
17
The District finds superficial support for its position in a
handful of decisions that concluded that challenges to the
legality of a tax sale itself, which sought to recover the taxes
that were paid, are barred by the Tax Injunction Act. These
decisions are easily distinguished. Most prominently, the
District cites Wright v. Pappas, 256 F.3d 635 (7th Cir. 2001),
where a purchaser of tax liens brought suit alleging that the
county from which he purchased the liens had misrepresented the
values of the relevant properties for racially discriminatory
reasons. See id. at 636. The plaintiff sought a “refund [of] the
price he paid for the certificates.” Id. The Seventh Circuit
held that “[a] lien sale is a mode of tax collection; and so an
action to enjoin it, or declare it illegal, or rescind it, or
perhaps even just obtain damages on the ground of its
illegality, would be barred.” Id. at 637. The plaintiff was
barred by the Tax Injunction Act because he “challenge[d] the
mode of collection,” and he sought a refund of the purchase
not barred by the Tax Injunction Act where the plaintiffs “do
not challenge the power of the town to levy sewer assessments
and to conduct tax sales; they would have paid the taxes had
they received notice”), with Dist. Lock & Hardware, 808 F. Supp.
2d at 41–42 (challenge to adequacy of notice or a tax sale was
barred by the Act because it sought “to set aside of undo the
sale” and was thus a challenge to the “collection” of taxes). A
claim regarding the adequacy of notice of a tax sale challenges
an action that, arguably, is part of the tax sale itself. See
Dist. Lock & Hardware, 808 F. Supp. 2d at 41–42. Mr. Coleman
challenges nothing in the tax sale; rather, he argues that the
independent statutory taking of his surplus equity was unlawful.
18
price he paid, which was the functional equivalent of the tax
payment. See id.
Wright does not affect Mr. Coleman’s claims because Mr.
Coleman “does not challenge the District’s right to collect the
tax owed; the amount of the tax, interest, expenses or penalties
owed; or the right of the District’s taxing authorities to
foreclose on his property to recover that debt.” Opp. at 27. All
he challenges is “the taking of property that was indisputably
not owed for taxes . . . the amount in excess of the tax owed.”
Id. Unlike the plaintiff in Wright, then, Mr. Coleman neither
seeks to recover any tax that was paid (he concedes its
validity), nor to “enjoin,” “declare . . . illegal,” “rescind,”
or “obtain damages on the grounds of . . . illegality” of the
tax sale. Wright, 256 F.3d at 637.4
4
For similar reasons, other cases cited by the District are
distinct. See Schulz v. Williamson, 145 F. App’x 704, 704 (2d
Cir. 2005) (Tax Injunction Act barred action where the
plaintiffs “sought to enjoin defendants from enforcing state tax
laws by adding their names to a list of delinquent taxpayers or
foreclosing on their real property”); Miller v. District of
Columbia, No. 06-1935, 2007 WL 1748890, at *3–4 (D.D.C. June 18,
2007) (concluding that the Tax Injunction Act deprives the Court
of “subject-matter jurisdiction over plaintiffs’ challenge to
the sale of his properties at a tax auction and over his related
request that the tax sale be ‘set aside’”); Dixon v. Oisten, No.
02-CV-72379, 2002 WL 31008840, at *3–4 (E.D. Mich. Aug. 20,
2002) (Tax Injunction Act barred an action when the plaintiff
sought “to either redeem his property or properties or to set
aside the tax sale”), aff’d, 62 F. App’x 105 (6th Cir. 2003);
United States v. Boyce, 153 F. Supp. 2d 1194, 1196 (S.D. Cal.
2001) (finding that a federal district court “is not the proper
19
2. Ripeness
The District’s second jurisdictional argument maintains that
Count II of plaintiff’s Complaint, which seeks an award of just
compensation under the Takings Clause, “is premature” under the
ripeness requirement inherent in all Takings Clause claims. See
Mot. at 12. For a Takings Clause claim to be ripe for judicial
resolution, the plaintiff must show that: (1) “the government
entity charged with implementing the regulations has reached a
final decision”; and (2) the plaintiff has sought “compensation
through the procedures the State has provided,” which must be
“reasonable, certain and adequate . . . at the time of the
taking.” Williamson Cnty. Reg’l Planning Comm’n v. Hamilton
Bank, 473 U.S. 172, 186, 194 (1985); see also 13B Charles Alan
Wright & Arthur R. Miller, Federal Practice and Procedure §
3532.1.1 (3d ed. 2014) (“There must be a final decision to
‘take,’ and the plaintiff must show that there is no other
remedy to provide adequate compensation.”). The District does
not contest that there has been a final decision, and argues
only that Mr. Coleman has not pursued available state remedies.
The requirement that a plaintiff exhaust state compensation
remedies exists because “[t]he Fifth Amendment does not
proscribe the taking of property; it proscribes taking without
[forum] for any challenge . . . regarding the validity of the
[State Franchise Tax Board’s] tax liens”).
20
just compensation.” Williamson, 473 U.S. at 194. Accordingly,
“the State’s action is not complete in the sense of causing a
constitutional injury unless or until the State fails to provide
an adequate postdeprivation remedy for the property loss.” Id.
at 195 (quotation marks omitted). The Supreme Court therefore
found a takings claim unripe where state statutory law permitted
“a property owner [to] bring an inverse condemnation action to
obtain just compensation for an alleged taking of property.” Id.
at 196.
The analysis looks to potential “remedies under state
substantive law.” 13B Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 3532.1 n.43 (3d ed. 2014)
(emphasis added). In the absence of any such remedy, a plaintiff
may immediately bring his claim in federal court. See, e.g.,
Arnett v. Myers, 281 F.3d 552, 564 (6th Cir. 2002) (takings
claim was ripe where “[t]his court’s review of Tennessee law has
revealed no reasonable, certain, and adequate provision for
obtaining just compensation that was available . . . at the time
of the alleged takings in this case”); Clajon Prod. Corp. v.
Petera, 70 F.3d 1566, 1575 (10th Cir. 1995) (where a state
inverse-condemnation action was available only against
government entities with “the power to condemn land,” and the
challenged government entity “lacks the power of eminent domain”
meaning that it was “not subject to Wyoming’s inverse
21
condemnation procedure, Plaintiffs’ takings claim is ripe for
review”); Hoehne v. Cnty. of San Benito, 870 F.2d 529, 533 (9th
Cir. 1989) (in an action alleging a taking in connection with
the denial of a subdivision application, claim was ripe because
at the time of the denial “California law prohibited actions
seeking just compensation as a remedy for regulatory takings”).
A plaintiff cannot ignore potential sources of state remedies,
however. Where, for example, a state constitution contains its
own takings clause, courts have required plaintiffs to bring a
claim under that provision first, even if the availability of
just compensation has not been clearly established. See, e.g.,
Pascoag Reservoir & Dam, LLC v. Rhode Island, 337 F.3d 87, 93
(1st Cir. 2003) (“The Rhode Island Constitution prohibits the
taking of private property for public use without just
compensation and Rhode Island state courts have long allowed
recovery through suits for inverse condemnation.”); Southview
Assocs., Ltd. v. Bongartz, 980 F.2d 84, 100 (2d Cir. 1992)
(holding that the Vermont Constitution “recognizes a cause of
action for a taking generally, even if it has yet to decide
whether recovery can be had for a regulatory taking,” meaning
that the plaintiff must first pursue such a claim); Austin v.
City & Cnty. of Honolulu, 840 F.2d 678, 681 (9th Cir. 1988)
(same under the Hawaii Constitution). Similarly, where a state’s
supreme court has indicated that inverse-condemnation is
22
available as a separate substantive claim, plaintiffs must first
bring such a claim even if its contours are unclear. See, e.g.,
Culebras Enters. Corp. v. Rivera Rios, 813 F.2d 506, 513 (1st
Cir. 1987) (court decisions had indicated that the court “will
entertain an inverse condemnation action for damages when it
believes that property is ‘taken’ by unconstitutionally
excessive governmental regulations,” although damages had never
been awarded under the action); Littlefield v. City of Afton,
785 F.2d 596, 609 (8th Cir. 1986) (court had indicated that an
inverse-condemnation action existed, although it was limited “to
cases where an injunction would not restore plaintiffs to their
original status”).
The District argues that “[l]andowners can bring an inverse
condemnation action in the District of Columbia” and that Mr.
Coleman’s failure to do so renders Count II of his Complaint
unripe. See Mot. at 12. Mr. Coleman correctly notes that the
sole citation provided by the District in support of its
argument that such a substantive claim exists is a reference to
the term “inverse condemnation” in a D.C. Court of Appeals
opinion which addressed only a federal Takings Clause claim
brought pursuant to 42 U.S.C. § 1983. See Potomac Dev. Corp. v.
District of Columbia, 28 A.3d 531, 550–51 & n.9 (D.C. 2011). In
that decision, the D.C. Court of Appeals emphasized that
“District law is not the basis of the cause of action pled in
23
the complaint, which invokes only § 1983.” Id. at 550. The Court
noted that “earlier inverse condemnation cases applied Fifth
Amendment principles in deciding whether a taking has occurred
and what compensation is just,” and the two cases cited by the
D.C. Court of Appeals appear also to have relied on the Fifth
Amendment. See Mamo v. District of Columbia, 934 A.2d 376, 378,
384–85 (D.C. 2007); D.C. Redev. Land Agency v. Dowdey, 618 A.2d
153, 164 (D.C. 1992). The D.C. Court of Appeals, therefore, has
provided no basis to infer the existence of an independent
inverse-condemnation action under D.C. law.
The possibility that a court could fashion such an action is
not sufficient to render Mr. Coleman’s claim unripe. See
Culebras, 813 F.2d at 513 (state supreme court had indicated
that it would entertain such an action under certain
circumstances); Littlefield, 785 F.2d at 609 (same). Nor has the
District identified any other potential source of a remedy. In
fact, it conceded at oral argument that it presented no other
legal authority. The Court finds no basis to infer the existence
of such a remedy, either. The District does not have a
constitution—a common source for a state substantive remedy. See
Pascoag, 337 F.3d at 93; Southview, 980 F.2d at 100; Austin, 840
F.2d at 681. Further, the statute at issue in this case
expressly provides for the taking of plaintiff’s surplus equity
and contains no procedure for the recovery of that surplus.
24
Accordingly, because there is no “reasonable, certain, and
adequate” state remedy, Williamson, 473 U.S. at 194, Mr.
Coleman’s claim is ripe for resolution.5
3. Rooker-Feldman
The District’s third jurisdictional argument is that Mr.
Coleman’s case constitutes an unacceptable request that this
Court “review a judicial decision of the D.C. Superior Court,
and . . . adjudicate claims that are a direct result of the 2010
Foreclosure Judgment.” Mot. at 13. Mr. Coleman counters that he
has no objection to the Foreclosure Judgment and does not seek
to overturn that judgment or recover title to his property;
rather, his objection is to the District’s independent taking of
his surplus equity. See Opp. at 36–39.
This argument implicates the Rooker-Feldman doctrine, which
“‘prevents lower federal courts from hearing cases that amount
to the functional equivalent of an appeal from a state court.’”
Magritz v. Ozaukee Cnty., 894 F. Supp. 2d 34, 38 (D.D.C. 2012)
5
Although the District appeared to argue in its pleadings that
Mr. Coleman must litigate his federal claim in the Superior
Court before that claim may become ripe for review in federal
court, Reply at 8–10, the District conceded during oral argument
that this is not the case. This concession was appropriate, as
it is hornbook law that plaintiffs need only resort to existing
“remedies under state substantive law” and that their federal
claims “need not be presented to state courts.” 13B Charles Alan
Wright & Arthur R. Miller, Federal Practice and Procedure §
3532.1 n.43 (3d ed. 2014); see also, e.g., Front Royal & Warren
Cnty. Indus. Park Corp. v. Town of Front Royal, 135 F.3d 275,
283 (4th Cir. 1998); Dodd v. Hood River Cnty., 59 F.3d 852, 860–
61 (9th Cir. 1995).
25
(quoting Gray v. Poole, 275 F.3d 1113, 1119 (D.C. Cir. 2002)).
The Rooker-Feldman doctrine “is based on the jurisdictional
grant codified in 28 U.S.C. § 1257, which authorizes only the
Supreme Court to exercise appellate jurisdiction over state
court judgments.” Liebman v. Deutsche Bank Nat’l Trust Co., No.
13-1392, 2014 WL 526712, at *3 (D.D.C. Feb. 11, 2014).
The doctrine began in a 1923 case in which a plaintiff sought
“to have a judgment of a circuit court in Indiana, which was
affirmed by the Supreme Court of the state, declared null and
void, and to obtain other relief dependent on that outcome.”
Rooker v. Fidelity Trust Co., 263 U.S. 413, 414 (1923). The
Supreme Court found that the plaintiffs’ request was “plainly
not within the District Court’s jurisdiction as defined by
Congress.” Id. at 415.
The Supreme Court revisited the doctrine in 1983 when two
individuals challenged the D.C. Court of Appeals’ denial of
their bar applications pursuant to a rule that all applicants
must prove that they graduated from an approved law school. See
D.C. Court of Appeals v. Feldman, 460 U.S. 462, 463–65 (1983).
The Supreme Court held that the Court of Appeals’ consideration
and denial of the plaintiffs’ applications was “judicial in
nature” and thus could not be reviewed in the district court.
See id. at 479–82. The Court held that the district court also
lacked jurisdiction over plaintiffs’ challenges to the Court of
26
Appeals’ denial of their “petitions for waiver” of the rule,
which relied on an alleged “former policy of granting waivers,”
because those decisions were “inextricably intertwined with the
District of Columbia Court of Appeals’ decisions, in judicial
proceedings, to deny the respondents’ petitions.” Id. at 486–87.
The Supreme Court went on to hold, however, that “[t]o the
extent that [plaintiffs] mounted a general challenge to the
constitutionality of [the Court of Appeals’ rule requiring that
applicants prove they had graduated from an approved law school]
the District Court did have subject matter jurisdiction over
their complaints.” Id. at 482–83.
In 2005, the Supreme Court clarified that Rooker-Feldman is a
limited doctrine that “is confined to cases of the kind from
which the doctrine acquired its name: cases brought by state-
court losers complaining of injuries caused by state-court
judgments rendered before the district court proceedings
commenced and inviting district court review and rejection of
those judgments.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp.,
544 U.S. 280, 284 (2005). Rooker-Feldman does not “stop a
district court from exercising subject-matter jurisdiction
simply because a party attempts to litigate in federal court a
matter previously litigated in state court,” even if “a federal
plaintiff presents some independent claim . . . that denies a
legal conclusion that a state court has reached in a case to
27
which he was a party.” Id. at 293 (quotation marks and
alteration omitted).
The use in Feldman of the phrase “inextricably intertwined”
had created some definitional problems, but Exxon clarified that
issue as well. The phrase was intended to mean only “that a
district-court challenge to [a state-court decision] would be
barred even if the challenge was based on a ground not raised in
the [state-court] proceeding.” Campbell v. City of Spencer, 682
F.3d 1278, 1282 (10th Cir. 2012). Accordingly, “[w]hen the
state-court judgment is not itself at issue, the Rooker-Feldman
doctrine does not prohibit federal suits regarding the same
subject matter, or even the same claims, as those presented in
the state-court action,” nor does it “bar an action just because
it seeks relief inconsistent with, or even ameliorative of, a
state-court judgment.” Campbell, 682 F.3d at 1281 (quotation
marks and alteration omitted). “The essential point is that
barred claims are those complaining of injuries caused by state-
court judgments. In other words, an element of the claim must be
that the state court wrongfully entered its judgment.” Id. at
1283 (quotation marks omitted).
“In assessing the applicability of the Rooker-Feldman doctrine
. . . the fundamental and appropriate question to ask is whether
the injury alleged by the federal plaintiff resulted from the
state court judgment or is distinct from that judgment.” Long v.
28
Shorebank Dev. Corp., 182 F.3d 548, 555 (7th Cir. 1999)
(quotation marks omitted). In conducting this inquiry, “federal
courts cannot simply compare the issues involved in the state-
court proceeding to those raised in the federal-court
plaintiff’s complaint, but instead must pay close attention to
the relief sought by the federal-court plaintiff.” Exec. Arts
Studio v. City of Grand Rapids, 391 F.3d 783, 793–94 (6th Cir.
2004) (quotation marks omitted; emphases in original).
Here, the dispute centers on how Mr. Coleman’s claims are
characterized. To the District, he attacks directly the 2010
Foreclosure Judgment, making this a clear attempt to obtain
review of a state-court judgment. Even though Mr. Coleman’s
Takings Clause argument was not addressed in the 2010
proceedings, if he sought to have that judgment overturned in
this Court, he would be barred by Rooker-Feldman. Indeed, the
District rightly notes that direct attacks on state-court
foreclosure judgments are barred by Rooker-Feldman. See, e.g.,
Magritz, 894 F. Supp. 2d at 38–39 (plaintiff’s challenge to the
tax sale of his property was barred by Rooker-Feldman because he
directly “question[ed] the validity of the underlying 2001
Judgment of Foreclosure”).
The plaintiff contends that his claim is more nuanced than the
District presents. “Mr. Coleman does not seek review or
rejection in this case of the Superior Court judgment entered in
29
favor of Embassy Tax Services and against him,” he “does not
contend that the Superior Court committed error and does not
seek relief from its judgment,” “Mr. Coleman seeks damages and
declaratory relief due to the District’s unconstitutional
statute and taking.” Opp. at 37. Thus, Mr. Coleman challenges
the District’s statutory scheme insofar as it provides for the
taking, not of a foreclosed property, but of the entirety of the
equity in that property, without recourse for a taxpayer to
recover the amount of that equity less any taxes, penalties,
costs, and interest owed.
The District relies heavily on a 1993 decision of the Seventh
Circuit, which held that Rooker-Feldman barred federal-court
jurisdiction over a takings claim that a local government had
unconstitutionally retained the entire proceeds of a tax sale.
See Ritter v. Ross, 992 F.2d 750, 751–52, 754–55 (7th Cir.
1993). In that case, the plaintiffs “admit[ted] that but for the
tax lien foreclosure judgment . . . they would have no
complaint: they would still have their land and would have
suffered no injury.” Id. at 754. “The state court proceedings,
as the Plaintiffs themselves state, ‘are the subject of this
case.’” Id. The Seventh Circuit thus concluded that “their
claims . . . are inextricably intertwined with the merits of
that proceeding.” Id. at 755 (emphasis added). As Mr. Coleman
noted at oral argument, Ritter relied on the “inextricably
30
intertwined” language, which was narrowed significantly in 2005
by the Supreme Court’s Exxon decision.
More instructive is the Ninth Circuit’s recent decision in
Bell v. City of Boise, 709 F.3d 890 (9th Cir. 2013), which
permitted plaintiffs who had been convicted of violating an
ordinance outlawing “camping” in public places to bring a
federal constitutional claim for retrospective damages regarding
the alleged unconstitutionality of that ordinance. See 709 F.3d
at 896–97. Although the plaintiffs sought remedies for the
allegedly unconstitutional enforcement of the ordinance against
them in the form of expungement of their state-court convictions
and damages related to “criminal fines” and “costs of
incarceration” arising out of those convictions, the Ninth
Circuit emphasized that “even if a plaintiff seeks relief from a
state court judgment, such a suit is a forbidden de facto appeal
only if the plaintiff also alleges a legal error by the state
court.” Id. at 894, 897. “Although Plaintiffs sought relief
designed to remedy injuries suffered from a state court
judgment, they did not allege before the court that the state
court committed legal error, nor did they seek relief from the
state court judgment itself”; instead, they “assert as a legal
wrong an allegedly illegal act by an adverse party—the City’s
allegedly unconstitutional enforcement of the Ordinances.” 709
F.3d at 898 (quotation marks and alteration omitted).
31
Mr. Coleman’s claim for compensation for the taking of his
surplus equity in the property survives Rooker-Feldman because
he does not challenge the Foreclosure Judgment, but the
District’s allegedly unconstitutional enforcement of the statute
providing for a taking of his surplus equity. In the language of
Bell, Mr. Coleman’s claim is not “a direct challenge to a state
court’s factual or legal conclusion.” Id. at 897. Indeed, Mr.
Coleman alleges no legal error by the Superior Court. As
discussed previously, he accepts the Foreclosure Judgment, the
loss of his real property, and the satisfaction of his “tax”
debts. See supra Part III.A.1. Just as the Bell plaintiffs
sought damages that grew out of their state-court prosecution,
Mr. Coleman seeks damages that, while related in some sense to
the Foreclosure Judgment, are distinct from it.6
4. Res Judicata
6
The Court is not persuaded by the District’s reliance on the
Tenth Circuit’s decision in Campbell. In that case, a plaintiff
was barred by Rooker-Feldman from bringing a Takings Clause
claim to recover just compensation for the value of horses that
had been the subject of a state-court forfeiture proceeding. See
682 F.3d at 1279. The Tenth Circuit held that Rooker-Feldman
barred that claim because “the deprivation of property that was
allegedly without just compensation . . . was the deprivation
ordered by the state court.” Id. at 1284. The forfeiture was an
“act[] of the state court.” Id. at 1285. Here, by contrast, Mr.
Coleman does not challenge the deprivation ordered by the
Superior Court, he challenges the District’s independent
statutory taking of his surplus equity without avenue for
recovery.
32
The District’s final jurisdictional argument is that Mr.
Coleman’s claims are barred by the doctrine of res judicata
because they “could have been raised in an earlier action but
were not.” Mot. at 16. To determine whether res judicata
applies, the Court must look to the Full Faith and Credit Act,
which provides that judgments of the courts of any state,
territory, or possession “shall have the same full faith and
credit in every court within the United States and its
Territories and Possessions as they have by law or usage in the
courts of such State, Territory or Possession from which they
are taken.” 28 U.S.C. § 1738. This means that a state-court
judgment receives “‘the same respect that it would receive in
the courts of the rendering State.’” Herrion v. Children’s Hosp.
Nat’l Med. Ctr., 448 F. App’x 71, 72 (D.C. Cir. 2011) (quoting
Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 373
(1996)). The parties agree that, under D.C. law, the Court must
determine whether res judicata applies by looking to: “(1)
whether the claim was adjudicated finally in the first action;
(2) whether the present claim is the same as the claim which was
raised or which might have been raised in the prior proceeding;
and (3) whether the party against whom the plea is asserted was
a party or in privity with a party in the prior case.” Calomiris
v. Calomiris, 3 A.3d 1186, 1190 (D.C. 2010) (quotation marks
33
omitted). It is undisputed that Mr. Coleman’s claims were not
actually litigated in a prior proceeding.
The District argues that Mr. Coleman’s claims are nonetheless
barred by res judicata because the Superior Court “rendered a
final judgment on the merits relating to the tax sale
purchaser’s Motion for Entry of Default Judgment” and Mr.
Coleman could have raised his Takings Clause claims in that
action. See Mot. at 17–19. Mr. Coleman responds that he could
not have asserted his claims against the plaintiff in the
Superior Court case, the purchaser of the tax lien, and the
District was a co-defendant, against whom he had no obligation
to raise a cross-claim. See Opp. at 31–32.
In Superior Court, cross-claims are permissive:
A pleading may state as a cross-claim any claim by 1
party against a co-party arising out of the
transaction or occurrence that is the subject matter
either of the original action or of a counterclaim
therein or relating to any property that is the
subject matter of the original action. Such cross-
claim may include a claim that the party against whom
it is asserted is or may be liable to the cross-
claimant for all or part of a claim asserted in the
action against the cross-claimant.
Super. Ct. R. Civ. P. 13(g). The effect of the nearly identical
federal rule is that “a party in a civil action is not precluded
from litigating a claim simply because it had an opportunity to
raise the claim as a cross-claim in a prior suit to which it was
a party.” Corestates Bank, N.A. v. Huls Am., Inc., 176 F.3d 187,
34
199 (3d Cir. 1999); see also RX Data Corp. v. Dep’t of Soc.
Servs., 684 F.2d 192, 196 (2d Cir. 1982); Hall v. Gen. Motors
Corp., 647 F.2d 175, 184 (D.C. Cir. 1980) (R.B. Ginsburg, J.)
(noting “the general rule that cross-claims are permissive, not
compulsory”). The District conceded at oral argument that res
judicata generally would not bar a party from raising in a
subsequent action a claim that would have been a cross-claim in
a prior action.
The District responds that although it and Mr. Coleman were
co-defendants, their interests were so adverse that Mr. Coleman
should have raised his Takings Clause claims against the
District in that proceeding. In support of this argument, the
District cites a handful of clearly distinct cases. Most
prominently, the District cited Kolb v. Scherer Brothers
Financial Services Co., 6 F.3d 542 (8th Cir. 1993), which
treated co-defendants—all of whom held mechanic’s liens on a
property—as adverse in an action brought by another lienholder.
The Eighth Circuit noted that “it would be pure fiction to
conclude that no adversity in fact exists between the parties
merely because they are all designated as defendants.” Id. at
545. Under Minnesota law, each defendant “makes the action his
or hers, for the purpose of enforcing his or her lien” and “any
lienholder entitled to relief may pursue the foreclosure to its
conclusion regardless of whether or not the nominal plaintiff
35
presents a viable lien claim.” Id. (alterations omitted). The
Eighth Circuit went on to note that “[a]ny party who files an
answer in a mechanic’s lien action, though nominally a
defendant, may actually function as a plaintiff with regard to
other named defendants.” Id. The District also cited Eyde v.
Charter Township of Meridian, 324 N.W.2d 775, 779 (Mich. Ct.
App. 1982), in which a plaintiff who had been a losing co-
defendant with a town in an action by town residents seeking to
force a referendum on the town’s re-zoning of the plaintiff’s
property was barred by res judicata in a subsequent suit against
the town seeking to obtain the re-zoning and enjoin the
referendum because the subsequent suit raised arguments “to
defeat the action for a referendum” that could have been raised
in the prior case and “[f]or purposes of [that] defense, the
Township and its residents were the same party.”7
Mr. Coleman and the District were not adverse in the sense
described in Kolb or Eyde. Though the District’s sale of a tax
lien on Mr. Coleman’s property rendered it adverse to Mr.
Coleman in a colloquial sense, the District’s presence as a
7
The other cases cited by the District recited the general rule
that co-parties may be considered adverse in certain situations,
but either held that it did not apply, Exec. Arts, 391 F.3d at
795 (res judicata did not apply because “the City and Executive
Arts did not have any controversy between themselves when the
first decision was rendered”), or described factually distinct
scenarios. See, e.g., Lesher v. Lavrich, 784 F.2d 193, 194–95
(6th Cir. 1986) (claim itself had been actually litigated in a
prior proceeding).
36
defendant in the Superior Court case was largely pro forma. The
proceeding sought to determine whether Embassy could foreclose
Mr. Coleman’s right of redemption, and the District had no
property right to enforce against Mr. Coleman. This was far from
the Kolb parties, who all had competing property interests and,
pursuant to state law, could “function as a plaintiff with
regard to the other named defendants.” 6 F.3d at 545. Nor were
the District and Embassy “the same party” for the purposes of
any defense that Mr. Coleman may have raised in the Superior
Court action. See Eyde, 324 N.W.2d at 795. Just because Mr.
Coleman and the District did not have identical interests does
not make them sufficiently adverse to trigger a compulsory
counterclaim. Accordingly, Mr. Coleman was not required to raise
his Takings Clause claims against the District and is not barred
by res judicata from doing so now.
B. Mr. Coleman Has Stated a Claim for a Violation of the
Takings Clause.
In addition to its jurisdictional arguments, the District
argues that Mr. Coleman fails to state a claim for a violation
of the Takings Clause. Plaintiff’s theory is that the District
has effected an unconstitutional taking by precluding him
entirely from obtaining the surplus equity in his home that
remains after subtracting the taxes, penalties, costs, and
interest he owed. Mr. Coleman’s argument implicates a series of
37
Supreme Court decisions applying the Takings Clause to tax
sales.
The story begins in 1881. That year, the Supreme Court had
occasion to interpret a federal statute that permitted the
federal government to engage in tax sales to recover delinquent
tax debts. See United States v. Taylor, 104 U.S. 216, 218
(1881). The Court interpreted the statute to mean that the
former owner “would be entitled to the surplus money” after the
tax sale. See id. This statutory interpretation became relevant
three years later in United States v. Lawton, 110 U.S. 146(1884). In that case, an heir to an individual whose property
was sold under the same statute sought “surplus proceeds of the
sale” and was denied. Id. at 149. In light of the fact that the
statute required that the surplus be provided to that
individual, the Supreme Court stated that “[t]o withhold the
surplus from the owner would be to violate the fifth amendment
to the constitution, and deprive him of his property without due
process of law or take his property for public use without just
compensation.” Id. at 150.
In 1956, the Supreme Court revisited the issue in Nelson v.
City of New York, 352 U.S. 103 (1956). In that case, the City of
New York had utilized a tax-sale procedure. See id. at 105–06.
The City retained one of the properties at issue and retained
the proceeds of the sale of the other property, which “far
38
exceed[ed] in value the amounts due.” Id. at 109. The plaintiffs
alleged that this constituted a violation of the Due Process
Clause and the Takings Clause. See id. As to the takings issue,
the Supreme Court examined Lawton, but noted that “the statute
involved in that case had been construed . . . to require that
the surplus be paid to the owner.” Id. at 110. The Nelson Court
stated:
But we do not have here a statute which absolutely
precludes an owner from obtaining the surplus proceeds
of a judicial sale. In City of New York v. Chapman
Docks Co., an owner filed a timely answer in a
foreclosure proceeding, asserting his property had a
value substantially exceeding the tax due. The
Appellate Division construed [the tax-sale statute] to
mean that upon proof [that the sale value
substantially exceeded the amount of taxes due] a
separate sale should be directed so that the owner
might receive the surplus.
Id. (citation omitted). The statute had therefore previously
been interpreted to provide an avenue for the recovery of
surplus equity. The Supreme Court went on:
What the City of New York has done is to foreclose
real property for charges four years delinquent and,
in the absence of timely action to redeem or to
recover[] any surplus, retain the property or the
entire proceeds of its sale. We hold that nothing in
the Federal Constitution prevents this where the
record shows adequate steps were taken to notify the
owners of the charges due and the foreclosure
proceedings.
Id. (emphasis added).
Mr. Coleman seizes on the first quote—“we do not have here a
statute which absolutely precludes an owner from obtaining the
39
surplus”—to argue that Nelson does not foreclose his claim. The
District focuses on the second—upholding the retention of “the
entire proceeds of its sale” due to “the absence of timely
action to redeem or to recover[] any surplus.” Id. Mr. Coleman’s
view of Nelson is correct. The Supreme Court clearly held open
the question presented by Mr. Coleman when it noted “[b]ut we do
not have here a statute which absolutely precludes an owner from
obtaining the surplus proceeds of a judicial sale.” Id. The
subsequent language cited by the District does not foreclose Mr.
Coleman’s claim because D.C. provides no action to recover any
surplus.8 Mr. Coleman’s claims, therefore, are not foreclosed by
Nelson.
The story resumes in 1969. In Balthazar v. Mari Limited, 301
F. Supp. 103 (N.D. Ill. 1969), a three-judge panel of the U.S.
District Court for the Northern District of Illinois was
presented with a case in which the plaintiffs alleged a
violation of the Due Process and Takings Clauses when their
property was sold in a tax sale, pursuant to a statute which
held that “when an owner fails to redeem [his property] . . .
the purchaser [of the tax lien] may obtain the property for a
8
At oral argument, the District argued that Nelson overruled
Lawton. As the District conceded, nothing in the language of
Nelson indicates that Lawton was being overruled. In fact, the
Court in Nelson explained that its decision was consistent with
Lawton, noting that “the statute involved in that case had been
construed . . . to require that the surplus be paid to the
owner.” Id. at 110.
40
fraction of its market value, thus gaining as a windfall all
surplus value which exceeds the land’s tax and interest
liabilities. Id. at 104–05. The only mention of the Takings
Clause in the district court’s decision was in a footnote, which
did not mention Nelson and stated: “Relying upon Supreme Court
condemnation cases, plaintiffs also maintain that they were
deprived of ‘just compensation’ for their property. These cases
are inapplicable. Rather than taking private property for a
public purpose, Illinois is here collecting taxes which are
admittedly overdue.” Id. at 105 n.6.
The Supreme Court summarily affirmed the judgment of the
district court without elaboration. See Balthazar v. Mari Ltd.,
396 U.S. 114 (1969). The Court’s Opinion stated only: “The
motions to affirm are granted and the judgment is affirmed. Mr.
Justice Douglas is of the opinion that probable jurisdiction
should be noted.” Id. at 114. The District argues that this
forecloses Mr. Coleman’s claims because, it believes, the claim
presented in Balthazar was identical to Mr. Coleman’s. This
argument is tenuous from the outset because “[a]n unexplicated
summary affirmance settles the issue for the parties, and is not
to be read as a renunciation by this Court of doctrines
previously announced in our opinions after full argument.”
Mandel v. Bradley, 432 U.S. 173, 176 (1977) (quotation marks
omitted). A summary affirmance operates to “reject the specific
41
challenges presented in the statement of jurisdiction,”
“prevent[s] lower courts from coming to opposite conclusions on
the precise issues presented and necessarily decided by those
actions,” and “should not be understood as breaking new ground
but as applying principles established by prior decisions to the
particular facts involved.” Id. Accordingly, “[a] summary
disposition affirms only the judgment of the court below, and no
more may be read . . . than was essential to sustain that
judgment.” Anderson v. Celebrezze, 460 U.S. 780, 785, n.5
(1983).
The jurisdictional statement filed with the Supreme Court by
the plaintiffs in Balthazar claimed that “[t]he court below[]
relied solely on a misapprehension of this Court’s opinion in
Nelson v. New York. In that case[,] this Court upheld a
statutory tax deed system because it met the requirements of due
process as it provided a means for excess value over the
delinquency to go to the benefit of the property owner.”
Jurisdictional Statement, Balthazar v. Mari Ltd., No. 593, 1969
WL 136737, at *2 (U.S. Sept. 15, 1969). The plaintiffs asserted
that they presented the question “[w]hether the Illinois ‘tax
deed’ statute is invalid as allowing confiscation of property
without an opportunity for just compensation,” especially in
light of the fact that “[t]here is no way under the Illinois
42
statute for an owner who is unable to redeem to obtain his
equity above his tax debt.” Id. at *2, 4.
The District argues that this is evidence that the Supreme
Court viewed the Balthazar statute as no different from the
Nelson statute, but that is entirely at odds with Nelson itself,
which expressly reserved the question whether a tax sale law
with no avenue for recovery of the surplus would be
constitutional. As Mr. Coleman notes, it would be odd to “assume
that the Court silently determined the question that it
specifically reserved in Nelson.” Opp. at 24. Moreover,
Balthazar differs from Mr. Coleman’s case in a number of ways
that make its summary affirmance unhelpful. First, the remedies
sought in each case differ significantly. Mr. Coleman seeks just
compensation and a corresponding declaratory judgment. The
plaintiffs in Balthazar did not sue a defendant that could have
paid just compensation, Balthazar, 301 F. Supp. at 103, and they
appear to have sought an injunction because their case was
brought pursuant to a jurisdictional statute providing for a
three-judge panel to hear applications for injunctions
“‘restraining the enforcement, operation or execution of any
state statute.’” Opp. at 24–25 n.2 (quoting 28 U.S.C. § 2281)
(repealed 1976).
Given the narrow interpretation accorded summary affirmances—
which Justices have recently described as “a rather slender reed
43
on which to rest future decisions,” Morse v. Republican Party of
Va., 517 U.S. 186, 203 n.21 (1996) (quotation marks omitted),
and as “carr[ying] little more weight than denials of
certiorari,” Hohn v. United States, 524 U.S. 236, 260 (1998)
(Scalia, J., dissenting)—these factual distinctions and the
Supreme Court’s express reservation of the relevant question in
Nelson counsel in favor of reading the summary affirmance in
Balthazar narrowly, to hold that the injunctive relief sought
against defendants who could not pay just compensation was not
warranted. This holding, even if undisturbed by subsequent
doctrinal developments, does not foreclose Mr. Coleman’s claim.
Only a handful of post-Balthazar decisions have addressed a
federal Takings Clause claim regarding the taking of equity
without avenue for its recovery.9 Three decisions have denied
such claims on the grounds that Nelson foreclosed such a claim.
See Reinmiller v. Marion Cnty., No. CV-05-1926, 2006 WL 2987707,
at *3 (D. Or. Oct. 16, 2006); City of Auburn v. Mandarelli, 320
A.2d 22, 32 (Me. 1974); Ritter v. Ross, 558 N.W. 2d 909, 912
9
The District cited a recent decision of the Second Circuit, but
that decision did not address a Takings Clause claim at all; it
analyzed the due-process elements of Nelson and rejected a claim
that the retention of the surplus from a tax sale infringed on
“rights to due process and equal protection.” Miner v. Clinton
Cnty., 541 F.3d 464, 475 (2d Cir. 2008).
44
(Wis. Ct. App. 1996).10 All three, however, recognized that such
a claim could be stated where a state statute or constitutional
provision granted an interest in the surplus equity. See
Reinmiller, 2006 WL 2987707, at *3; City of Auburn, 320 A.2d at
32; Ritter, 558 N.W. 2d at 912–13.11
This Court draws two clear principles from the Supreme Court’s
decisions in Lawton and Nelson. Nelson makes clear that a
Takings Clause violation regarding the retention of equity will
not arise when a tax-sale statute provides an avenue for
recovery of the surplus equity. 352 U.S. at 109. Lawton makes
clear that a Takings Clause violation will arise when a tax-sale
statute grants a former owner an independent property interest
10
Courts have rejected Takings Clause challenges to tax sales
themselves, but these decisions do not shed light on the meaning
of Nelson because the courts were not presented with claims
regarding surplus equity. See, e.g., Speed v. Mills, 919 F.
Supp. 2d 122, 129 (D.D.C. 2013); Indus. Bank of Wash. v. Sheve,
307 F. Supp. 98, 99 (D.D.C. 1969).
11
In addition, two Justices of the Supreme Court of New
Hampshire indicated their belief that the federal Takings Clause
and its New Hampshire counterpart require the ability to recover
surplus equity. See First N.H. Bank v. Town of Windham, 639 A.2d
1089, 1097–98 (N.H. 1994) (Horton, J., concurring) (“May the
taxing power include an arbitrary forfeiture, a movement of
property to the State without just compensation? I think not,
and instead would subscribe to an interpretation of the tax lien
enforcement provisions that would satisfy these constitutional
objections by limiting recovery to the obligation secured by the
lien.”). This position was ultimately adopted as an
interpretation of the New Hampshire Constitution. See Thomas
Tool Servs., Inc. v. Town of Croydon, 761 A.2d 439, 441 (N.H.
2000). Vermont interprets its constitution similarly. See Bogie
v. Town of Barnet, 270 A.2d 898, 900–01 (Vt. 1970).
45
in the surplus equity and the government fails to return that
surplus. 110 U.S. at 149. The question Mr. Coleman’s case
presents is: What if the tax-sale statute does not provide a
right to the surplus and the statute provides no avenue for
recovery of any surplus? A property interest in equity could
conceivably be created by some other legal source. In that
circumstance, failure to provide an avenue for recovery of the
equity would appear to produce a result identical to Lawton:
Property to which an individual is legally entitled has been
taken without recourse.12 The issue, then, is whether Mr. Coleman
has a property interest in his equity and, if so, whether an
unconstitutional taking of that property has been alleged.
The Fifth Amendment to the United States Constitution
provides, in relevant part, “nor shall private property be taken
for public use, without just compensation.” Inherent in the
Amendment, then, is that “property” must be at issue. “Because
the Constitution protects rather than creates property
interests, the existence of a property interest is determined by
12
One of the decisions to interpret Nelson grasped this point in
part when it held that where the government “retain[s] the
entire amount of the sale proceeds,” the Takings Clause comes
into play “only if the state constitution or tax statutes create
[a property interest in the surplus].” Ritter, 558 N.W. 2d at
910, 912. The Wisconsin Court of Appeals “consider[ed] whether
the [plaintiffs] had a property interest in the excess proceeds
of the foreclosure sale” and, upon concluding that they did not
under Wisconsin law, denied their Takings Clause claim. Id. at
912–13.
46
reference to ‘existing rules or understandings that stem from an
independent source such as state law.’” Phillips v. Wash. Legal
Found., 524 U.S. 156, 164 (1998) (quoting Bd. of Regents v.
Roth, 408 U.S. 564, 577 (1972)). Lawton indicated that such an
interest may be created by a statute that requires the refunding
of surplus equity after a tax sale. See Lawton, 110 U.S. at 149.
Mr. Coleman contended that he has a protected property interest
in the equity in his home based on principles of D.C. law and
decisions of the D.C. Court of Appeals. See Opp. at 18 (citing
Lewis v. Lewis, 708 A.2d 249 (D.C. 1998); Gore v. Gore, 638 A.2d
672 (D.C. 1994)). Mr. Coleman similarly argued that he
establishes the remaining elements of a Takings Clause claim:
that his property was “taken”; that he was provided no “just
compensation”; and that the taking was not for a “public
purpose.” See id. at 18–22.
The Court need not—and indeed cannot—address the viability of
these arguments because the District failed to respond to them.
Neither its motion nor its reply brief challenged whether Mr.
Coleman satisfied the elements of a Takings Clause claim.
Instead, the District declared that “[t]he District’s
substantive defense is based on the Supreme Court’s treatment of
tax sale foreclosure statutes in decisions that [the District
claims] are directly on point. There is no reason to defend a
tax sale foreclosure statute as a Fifth Amendment taking because
47
no court has found that to be the appropriate analysis.” Reply
at 15. “Because the District failed to address these [issues] in
its motion ‘and fail[ed] to respond to Plaintiff’s point[s] in
its Reply, the Court will deem [them] abandoned at least for
now.’” McGinnis v. District of Columbia, No. 13-1254, 2014 WL
4243542, at *15 (D.D.C. Aug. 28, 2014) (quoting Ashraf-Hassan v.
Embassy of France, 878 F. Supp. 2d 164, 173–74 (D.D.C. 2012));
see also Lewis v. United States, No. 90-991, 1990 WL 179930, at
*2 (D.D.C. Oct. 29, 1990); cf. Herbert v. Nat’l Acad. of
Sciences, 974 F.2d 192, 196 (D.C. Cir. 1992) (noting the court’s
“dependence as an Article III court on the adversarial process
for sharpening the issues for decision” as a reason to decline
to consider arguments newly raised in a reply brief).
Accordingly, the Court must assume that Mr. Coleman established
the existence of an independent property interest in the equity
in his home, as well as the remaining elements of a Fifth
Amendment Takings Clause claim.
IV. Conclusion
For the foregoing reasons, the District’s motion to dismiss is
DENIED. An appropriate Order accompanies this Memorandum
Opinion.
Signed: Emmet G. Sullivan
United States District Judge
September 30, 2014
48