Court Opinion

ID: 9838513
Source: CourtListenerOpinion
Date Created: 2023-09-06 17:01:35.465169+00
Date Added: 2024-06-11T18:02:38.798709
License: Public Domain

RECOMMENDED FOR PUBLICATION
                               Pursuant to Sixth Circuit I.O.P. 32.1(b)
                                      File Name: 23a0208p.06

                   UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT

                                                            ┐
 DONALD FREED,
                                                            │
                   Plaintiff-Appellant/Cross-Appellee,      │
                                                            │
       v.                                                   │
                                                             >        Nos. 21-1248/1288/1339
                                                            │
 MICHELLE THOMAS,                                           │
                                 Defendant-Appellee,        │
                                                            │
                                                            │
 COUNTY OF GRATIOT, MICHIGAN,                               │
               Defendant-Appellee/Cross-Appellant,          │
                                                            │
 MICHIGAN DEPARTMENT OF ATTORNEY GENERAL,                   │
                                                            │
                            Intervenor-Appellee.            ┘

 Appeal from the United States District Court for the Eastern District of Michigan at Bay City.
                 No. 1:17-cv-13519—Bernard A. Friedman, District Judge.

                                   Argued: August 1, 2023

                            Decided and Filed: September 6, 2023

                  Before: SILER, GIBBONS, and LARSEN, Circuit Judges.
                                  _________________

                                           COUNSEL

ARGUED: Philip L. Ellison, OUTSIDE LEGAL COUNSEL PLC, Hemlock, Michigan, for
Appellant/Cross-Appellee. Douglas J. Curlew, CUMMINGS, MCCLOREY, DAVIS & ACHO,
P.L.C., Livonia, Michigan, for Appellee and Appellee/Cross-Appellant. Matthew B. Hodges,
MICHIGAN ATTORNEY GENERAL’S OFFICE, Lansing, Michigan, for Intervenor-Appellee.
Theodore W. Seitz, DYKEMA GOSSETT PLLC, Lansing, Michigan, for Amicus Curiae. ON
BRIEF: Philip L. Ellison, OUTSIDE LEGAL COUNSEL PLC, Hemlock, Michigan, for
Appellant/Cross-Appellee. Douglas J. Curlew, CUMMINGS, MCCLOREY, DAVIS & ACHO,
P.L.C., Livonia, Michigan, for Appellee and Appellee/Cross-Appellant. Matthew B. Hodges,
MICHIGAN ATTORNEY GENERAL’S OFFICE, Lansing, Michigan, for Intervenor-Appellee.
Theodore W. Seitz, DYKEMA GOSSETT PLLC, Lansing, Michigan, for Amicus Curiae.
 Nos. 21-1248/1288/1339                Freed v. Thomas, et al.                          Page 2

                                      _________________

                                           OPINION
                                      _________________

       SILER, Circuit Judge.       Although Plaintiff Donald Freed prevailed on his Fifth
Amendment claim before the district court, he appeals because the district court declined to
award him the fair market value of his property minus his debt. Freed argues that the district
court erred by (1) violating his Fifth or Eighth Amendment rights by awarding him “the
difference between the foreclosure sale and [his] debt” instead of the fair market value of his
property; (2) granting qualified immunity to Michelle Thomas, Gratiot County’s (“the County”)
treasurer; and (3) denying without prejudice his motion for attorney’s fees. The County cross-
appeals, arguing that the district court improperly held it liable for Freed’s 42 U.S.C. § 1983
claims. We affirm.

                                                I.

       After Freed fell behind approximately $1,100 on his property taxes, Thomas, acting on
behalf of the County and pursuant to Michigan’s General Property Tax Act (GPTA), foreclosed
on Freed’s property and sold it at a public auction for $42,000. The County retained the entire
proceeds. Freed sued the County and Thomas under § 1983, alleging (1) an unconstitutional
taking under the Fifth and Fourteenth Amendments by state and local officials; and (2) an
unconstitutional excessive fine under the Eighth Amendment.        The district court, applying
Wayside Church v. Van Buren County, 847 F.3d 812 (6th Cir. 2017), dismissed Freed’s
complaint for lack of subject matter jurisdiction, finding that the Tax Injunction Act (TIA) and
principles of comity prevented it from hearing the case.

       We reversed and remanded. Freed v. Thomas, 976 F.3d 729 (6th Cir. 2020), reh’g en
banc denied (Nov. 4, 2020). We held that (1) the TIA did “not preclude the exercise of federal
jurisdiction . . . because Freed is not attempting to enjoin Michigan’s assessment, levy, or
collection of a state tax”; (2) the doctrine of comity did not prevent this suit from proceeding
“because Freed is not challenging the validity of Michigan’s tax procedures”; and (3) we were
not bound by Wayside Church because the opinion’s discussion of the TIA and comity issues
 Nos. 21-1248/1288/1339                 Freed v. Thomas, et al.                           Page 3

was simply “persuasive dictum.” Id. at 734, 737–38, 740. We also noted that the Supreme Court
overruled Wayside Church’s subject matter jurisdiction analysis when it held “that [a] property
owner may bring a takings claim [in federal court] under § 1983 upon the taking of his property
without just compensation by a local government.” Id. at 733–34 (quoting Knick v. Township of
Scott, 139 S. Ct. 2162, 2179 (2019)) (alterations in original).

       On remand, the district court granted summary judgment in favor of Freed on his Fifth
Amendment claim and denied summary judgment on his Eighth Amendment claim. It rejected
Freed’s argument that he was entitled to the fair market value of his property, minus his debt,
and instead held that Freed was “owed just compensation in the amount of the difference
between the foreclosure sale and [his] debt, plus interest on this amount from the date of the
foreclosure sale.” This meant that Freed was owed about $40,900 plus interest—approximately
$56,800 less than he was seeking. The court also held that Freed’s claims against Thomas were
barred by qualified immunity.

       Freed appealed, and the County cross-appealed. Freed also filed a motion for attorney’s
fees following the entry of judgment, which the district court denied without prejudice under
Federal Rule of Civil Procedure 54(d)(2)(B). It noted that “it would be premature to decide
plaintiff’s motion” pending the appeal and ordered the period for filing a motion for attorney’s
fees be extended until fourteen days after the appeal mandate is issued. Freed appealed the
denial of his attorney’s fees motion.

                                                 II.

       We review a district court’s grant of summary judgment de novo. Smith v. City of
Toledo, 13 F.4th 508, 514 (6th Cir. 2021).

                                                 A.

                                                 1.

       Freed first argues that the district court should have awarded him the fair market value of
his property pursuant to either the Fifth or the Eighth Amendment.
 Nos. 21-1248/1288/1339                       Freed v. Thomas, et al.                                       Page 4

                                                         a.

         The Supreme Court recently resolved a case with similar facts.                        Hennepin County,
Minnesota, sold the delinquent taxpayer’s house “for $40,000 to satisfy a $15,000 tax bill” and
kept the remaining $25,000. Tyler v. Hennepin County, 598 U.S. 631, 634 (2023). The district
court there dismissed for failure to state a claim, and the Eighth Circuit affirmed. Id. at 636. The
Supreme Court unanimously reversed, affirming “the principle that a taxpayer is entitled to the
surplus in excess of the debt owed.” Id. at 642.

         Here, the district court held at the motion for summary judgment stage that Freed’s Fifth
Amendment rights were violated, and it held that Freed was owed the difference between the
foreclosure sale amount and his debt, plus interest. This holding squares with Tyler. Freed
asserts though that he is entitled to an additional $56,800 because the purported fair market value
of the property was $98,800 and the property sold for only $42,000. However, neither this court
nor the Supreme Court has ever held that a plaintiff whose property is foreclosed and sold at a
public auction for failure to pay taxes is entitled to recoup the fair market value of the property.
Cf. United States v. Davis, 815 F.3d 253, 260 (6th Cir. 2016) (holding that the government does
not violate the Fifth Amendment by selling a property at a public auction, even if the property
sells for less than its fair market value).             Furthermore, the best evidence of a foreclosed
property’s value is the property’s sales price, not what it was worth before the foreclosure. 1 See
BFP v. Resol. Tr. Corp., 511 U.S. 531, 548–49 (1994).

         The Michigan Supreme Court, in addressing this exact issue, held that awarding the fair
market value of a property instead of the price obtained at a public tax foreclosure sale “would
run contrary to the general principle that just compensation is measured by the value of the
property taken” and would “not only . . . [take] money away from the public” but would also
allow plaintiffs to “benefit from their tax delinquency.”                  Rafaeli, LLC v. Oakland County,
952 N.W.2d 434, 465–66 (Mich. 2020). Freed is entitled to the amount of the sale above his

         1
           Freed stated at oral argument that although the property was sold at a public auction, the procedures used
by the county restricted who could bid on the property and in what manner, and this caused the property to sell for
less than it was worth. But Freed did not make this argument before the district court or in his opening brief, and it
is therefore waived. Amezola-Garcia v. Lynch, 846 F.3d 135, 139 n.1 (6th Cir. 2016) (“[A]rguments not raised in a
party’s opening brief are deemed waived.”).
 Nos. 21-1248/1288/1339                Freed v. Thomas, et al.                             Page 5

debt and no more. See Hall v. Meisner, 51 F.4th 185, 194 (6th Cir. 2022) (explaining the
longstanding principle that following a public sale, a debtor is “entitled to any surplus proceeds
from the sale, which represented the value of the equitable title thus extinguished” (citing Resol.
Tr. Corp., 511 U.S. at 541)). This is precisely what the district court held, and Freed’s Fifth
Amendment takings argument is therefore meritless.

                                                b.

       Freed’s Eighth Amendment argument fares no better.            He argues that Defendants
“destroy[ed] [his] equity far in excess of the tax delinquency” in violation of the Eighth
Amendment.

       The Eighth Amendment protects “against excessive fines [and] guards against abuses of
[the] government’s punitive or criminal-law-enforcement authority.” Timbs v. Indiana, 139 S.
Ct. 682, 686 (2019).     However, in Hall, we affirmed the district court’s dismissal of the
plaintiffs’ Eighth Amendment Excessive Fines claim on the ground that the GPTA is not
punitive. See Hall, 51 F.4th at 196–97 (adopting district court’s reasoning as the panel’s own);
Hall v. Meisner, No. 20-12230, 2021 WL 2042298, at *14 (E.D. Mich. May 21, 2021)
(concluding that the GPTA is not punitive); see also Rafaeli, 952 N.W.2d at 447 (holding that
the GPTA “is not punitive in nature” because “[i]ts aim is to encourage the timely payment of
property taxes and to return tax-delinquent properties to their tax-generating status, not
necessarily to punish property owners for failing to pay their property taxes”). The Supreme
Court did not reach the merits of the Eighth Amendment claim in Tyler. See 598 U.S. at 647–48.
But see id. at 648–50 (Gorsuch, J., concurring). Accordingly, our holding in Hall remains
binding. See Salmi v. Sec’y of Health & Hum. Servs., 774 F.2d 685, 689 (6th Cir. 1985) (A prior
published “decision remains controlling authority unless an inconsistent decision of the United
States Supreme Court requires modification of the decision or this Court sitting en banc
overrules the prior decision.” (citation omitted)). Therefore, Freed’s arguments that he is owed
the fair market value of the property under either the Fifth Amendment or the Eighth
Amendment fail, and we affirm.
 Nos. 21-1248/1288/1339                      Freed v. Thomas, et al.                                     Page 6

                                                        2.

        The district court granted qualified immunity to Thomas in her individual capacity
because it found that she “did not violate a right that was ‘clearly established at the time of
defendant[’s] alleged misconduct.’”2 To overcome Thomas’s claim of qualified immunity, Freed
“must show that (1) the [officials] violated one of [his] constitutional rights and (2) that right was
clearly established.” Howell v. NaphCare, Inc., 67 F.4th 302, 317 (6th Cir. 2023) (citation
omitted). The clearly established prong is the only one at issue here. “For a right to be clearly
established, the contours of the right must be sufficiently clear that a reasonable official would
understand that what he is doing violates that right.” Id. at 317–18 (citation omitted).

        At the time the lawsuit was filed, the contested provisions of the GPTA had been
enforced as written for nearly two decades, and “[s]tate statutes, like federal ones, are entitled to
the presumption of constitutionality until their invalidity is judicially declared.”                      Davies
Warehouse Co. v. Bowles, 321 U.S. 144, 153 (1944). The Michigan Supreme Court held that
Michigan’s retention of surplus proceeds was an unconstitutional taking several years after Freed
filed this lawsuit. See Rafaeli, 952 N.W.2d at 466. And “the Supreme Court has never denied
qualified immunity to a public official who enforced a properly enacted statute that no court had
invalidated.” Citizens in Charge, Inc. v. Husted, 810 F.3d 437, 441 (6th Cir. 2016).

        The only support on which Freed relies to argue that Thomas’s conduct violated a clearly
established right is United States v. Lawton, 110 U.S. 146 (1884). However, Lawton pertained to
a statute requiring that surplus proceeds from a tax sale “be paid to the owner of the property.”
United States v. Taylor, 104 U.S. 216, 218 (1881). The GPTA, on the other hand, did not
provide that surplus proceeds would be returned to the owner. Rafaeli, 952 N.W.2d at 452–53.
Freed has failed to demonstrate that Lawton, which was premised on a statutory right to recover
surplus proceeds, sufficiently put Thomas on notice that her administration of the GPTA was

         2
          The district court also granted qualified immunity to Thomas in her official capacity because “the claims
against defendant Thomas [are] duplicative of those against the county.”
 Nos. 21-1248/1288/1339                         Freed v. Thomas, et al.                                          Page 7

unconstitutional.3 Therefore, the district court did not err by granting qualified immunity to
Thomas, and we affirm.

                                                            3.

         Following the district court’s opinion and order holding that Freed’s Fifth Amendment
rights had been violated, Freed filed a motion for attorney’s fees which the court denied without
prejudice. Freed argues that the court “should have render[ed] a timely and normal decision on
the motion.”

         The court’s order denying Freed’s attorney’s fees motion, however, is not appealable
because it is “not a ‘final decision’ under 28 U.S.C. § 1291.” JPMorgan Chase Bank, N.A. v.
Winget, 920 F.3d 1103, 1104, 1107 (6th Cir. 2019) (holding that a district court’s order on
attorney’s fees made “where the post-judgment proceedings are ongoing,” is not a final,
appealable order). We therefore dismiss Freed’s attorney’s fees appeal for lack of jurisdiction. 4

                                                            B.

         In its cross-appeal, the County argues that the district court erred in holding that it was
liable for Freed’s constitutional claims under § 1983 pursuant to Monell v. Department of Social
Services, 436 U.S. 658, 690 (1978). In municipal liability cases under § 1983, “the question [is]

         3
          Although Lawton notes that withholding surplus from an owner when the owner is statutorily entitled to it
would violate the Fifth Amendment, the Court held that “this case was governed by the rulings of this court in U.S.
v. Taylor.” 110 U.S. at 149. In Taylor, the Supreme Court held that the appellee was entitled to surplus proceeds
because the government statutorily required it, not because it would be unconstitutional to withhold the surplus
proceeds. 104 U.S. at 218, 222. And Freed cannot rely on the Supreme Court’s recent opinion in Tyler for qualified
immunity purposes because the events in this case occurred well before Tyler was decided. District of Columbia v.
Wesby, 583 U.S. 48, 63 (2018) (“To be clearly established, a legal principle must have a sufficiently clear
foundation in then-existing precedent.”).
         4
            Freed also asks us to remand this matter to the district court with instructions to enter judgment against the
state because the district court failed to explicitly name Michigan as a party in the judgment. Michigan joined this
case solely for the purpose of defending the constitutionality of the statute and participated in all stages of the
litigation; the district court correctly permitted intervention, pursuant to 28 U.S.C. § 2403(b), which provides that
“[t]he State shall, subject to the applicable provisions of law, have all the rights of a party and be subject to all
liabilities of a party as to court costs to the extent necessary for a proper presentation of the facts and law relating to
the question of constitutionality.” (emphasis added). And the district court did not err by omitting Michigan from
the judgment. See Tennessee v. Garner, 471 U.S. 1, 22 (1985) (“The State is a party only by virtue of 28 U.S.C.
§ 2403(b) and is not subject to liability.”).
 Nos. 21-1248/1288/1339               Freed v. Thomas, et al.                              Page 8

whether there is a direct causal link between a municipal [or county] policy or custom and the
alleged constitutional deprivation.” City of Canton v. Harris, 489 U.S. 378, 385 (1989).

       The policy at issue here is the prohibition on refunding surplus proceeds to property
owners under MCL § 211.78, which Defendants acknowledge was unconstitutional. That leaves
the question of whether the County was responsible for the constitutional violation.

       The County argues that it was merely following a state statute when it foreclosed on
Freed’s home and thus it cannot be said that the County had a custom or policy that led to the
unconstitutional taking. We disagree. The statute here provides that “foreclosure of forfeited
property by a county is voluntary.” MCL § 211.78(6). And as the district court correctly points
out, the County, through its treasurer, repeatedly “chose to act as the foreclosing governmental
unit and . . . retained the proceeds of [Freed’s] foreclosure sale.” The County’s decision to
voluntarily and repeatedly serve as the foreclosing governmental unit and retain the proceeds
was a policy decision with a “direct causal link” to the constitutional violation in this case.
Harris, 489 U.S. at 385; see also DePiero v. City of Macedonia, 180 F.3d 770, 787 (6th Cir.
1999) (finding municipal liability where a state statute authorized but did not require a city to
take a certain action); Garner v. Memphis Police Dep’t, 8 F.3d 358, 364 (6th Cir. 1993)
(recognizing that a municipality may be subject to Monell liability where it makes a deliberate
choice beyond what a statute requires). We hold that the district court did not err in finding the
County liable.

       AFFIRMED.