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Federal Lawsuit Over $28 Dismissed in Illinois
by Robert Franco | 2011/07/18 |

Nobody likes to pay fees and taxes, but few individuals would literally make a federal case out of $28 in recording fees.  Robert J. Devereaux, Jr. did, however.  When he recorded a deed with the county recorder he was required to pay a Rental Housing Support Program surcharge of $10, a Geographic Information System fee of $15, and a document storage fee of $3.  He paid the fees under protest and filed suit in federal court.

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The lawsuit was filed against the Cook County Recorder and Cook County by Devereaux individually and on behalf of all others similarly situated.  It alleged that federal due process and equal protection violations, as well as state law conversion claims.  Not surprisingly, Cook County moved to dismiss the complaint.

The defendants argued that the Tax Injunction Act barred the suit in federal court.  The Tax Injunction Act provides that "the district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." The Tax Injunction Act "does not limit any substantive rights to enjoin a state tax but requires only that they be enforced in a state court rather than a federal court." 

However, there was a difference of opinion as to whether the charges were actually taxes, or fees.  Because this issue was question of federal law, rather than state law, the court analyzed the charges.

To make this determination, the court should consider whether the charge is designed to generate revenue (a tax), or to "punish . . . rather than to generate revenue" or "to compensate for a service that the state provides to the persons or firms on whom or on which the exaction falls" (a fee). The structure and purpose of the charge are important considerations in distinguishing whether a charge is a tax or a fee.  If the fee is a reasonable estimate of the cost imposed by the person required to pay the fee, then it is a user fee and is within the municipality's regulatory power.  On the other hand, if a charge is calculated not just to recover a cost imposed on the municipality or its residents but to generate revenues that the municipality can use to offset unrelated costs or confer unrelated benefits, it is a tax, whatever its nominal designation."

The court found that the storage fee and GIS fee were properly characterized as fees.  Thus the Tax Injunction Act did not deprive the federal court of jurisdiction to hear the case.  However, the Rental Housing Support Program surcharge was a tax.  Because Devereaux had an efficient remedy in state court, the federal court did not have jurisdiction to hear the claim related to the surcharge.

Devereaux argued that the GIS and storage fees are converted into general revenue by the Recorder and treated as such, although not authorized by the statute under which the fees are collected. He claims that this conversion constitutes a taking without due process of law.

Unfortunately for Devereaux, the court found that "the alleged failure to comply with state law does not rise to the level of a constitutional violation."  This was something it appears Devereaux's lawyers should have known.

As this court found in Perkins v. County of Cook, a similar case filed by the same plaintiff's counsel, "[a] refusal by government authorities to properly follow procedures set forth by state statute, for the handling and expenditure of fees earmarked for a specific purpose, is properly characterized as a potential violation of state law, not an infringement of constitutional rights."

 Thus, the case was dismissed.


Categories: General Interest

876 words | 3785 views | 1 comments | log in or register to post a comment

Good going
   I like  guy that stands up and asserts his rights.  I'm glad that he exercised his right to bring his claims to court.  The action of the court seemed reasonable.  It does not preclude him refiling in a more appropriate venue or with additional points.  If he's willing to take the time to bring forth such a case, then I hope that he is eventually heard.  I'm neither in favor nor against him from what I hear thus far, and would like to have  more case coverage by the media so that the issues can be vetted publicly through our systems.  Nice.   
by William Pattison | 2011/07/21 | log in or register to post a reply
Source of Title Blog

Robert A. FrancoThe focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco



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