Federal appeals court panel revives Detroit property tax lawsuit

Sarah Rahal
The Detroit News

Detroit homeowners who sued the city over late property tax appeal notices will have a new day in court after their lawsuit was initially thrown out, a panel of federal appeals judges ruled Monday. 

In a 2-1 decision, a three-judge panel of the U.S. 6th Circuit Court of Appeals overturned a district court's decision last year that dismissed the class-action lawsuit and demanded further proceedings. 

The lawsuit said on Feb. 14, 2017, the city of Detroit mailed more than 260,000 tax assessment notices to homeowners informing them of an "extended assessors review schedule" that would conclude just four days later on Feb. 18, 2017.

The city made a mistake by mailing out property tax assessments for the 2016 tax year 13 days late, said Judge Julie Smith Gibbons, writing for the majority. To remedy this, the day assessments were mailed, the Detroit City Council extended the period to protest before the Board of Assessors by 13 days.

Several news outlets reported the extension and that the city had waived the requirement to appear before the Board of Assessors so residents could appeal directly to the Board of Review. However, the city of Detroit did not distribute individualized mailers to the homeowners to inform them of the extended review or the waiver of their protest requirement, according to the ruling.

"The district court granted defendants’ motions to dismiss for lack of subject matter jurisdiction, finding the Tax Injunction Act (“TIA”) and the principle of comity barred plaintiffs’ action," wrote Gibbons, an appointee of former President Ronald Reagan, who was joined by Judge John Nalbandian, an appointee of former President Donald Trump. "Because we find the state remedy is uncertain, federal jurisdiction is permitted. We reverse and remand for further proceedings."

Plaintiffs Deborah Howard, Flossie Byrd, William and Billie Hickey, and Jeffrey Stevenson filed the complaint in the Eastern District of Michigan alleging city officials violated their due process rights with the untimely mailings and failure to communicate the extension and waiver.

They argued that the State Tax Commission is at fault since it assumed control of Detroit's property tax assessment process from 2014 through 2017 and that Wayne County is “complicit in the denial of due process by foreclosing on delinquent homes where their owners had no opportunity to appeal their assessments” and has been unjustly enriched.

Plaintiffs are seeking monetary relief for the alleged denial of due process.

But Judge Danny Boggs, a Reagan appointee, wrote a dissent arguing the case doesn't involve federal jurisdiction. The plaintiffs weren't denied due process since they didn't take advantage of appeals venues offered through the city and state, he said. 

The plaintiffs could have taken their appeals "directly to the Board of Review, even if they never appeared before the Board of Assessors — essentially extending the 

timeline to file an initial grievance by a further 13 days," Boggs wrote in his opinion, adding that there were other avenues of appeal through the Michigan Tax Tribunal, state Court of Appeals and state Supreme Court.

"Michigan has provided a 'plain, speedy and efficient remedy' for appellants’ claims. Thus, the federal courts cannot decide them, while the Michigan courts can and should," he said. 

Deputy Corporation Counsel Chuck Raimi said in a Tuesday statement to The Detroit News Tuesday that the city will continue to fight in court.

"We are disappointed in the ruling by the Court of Appeals ruling and will vigorously defend our position in District Court," Raimi said.


Twitter: @SarahRahal_