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Upstate New York, Central Vermont Property Owners Win Legal Victory in Tax Foreclosure Cases

Oct. 12, 2006

Upstate New York, Central Vermont Property Owners Win Legal Victory in Tax Foreclosure Cases

Second Circuit Rules That Owners May Bring Constitutional Challenges in Federal Court; Landmark U.S.Supreme Court Case Applies

WASHINGTON, D.C. – Several property owners in upstate New York and central Vermont who went to federal court claiming that local governments violated their right to constitutional due process by taking their property in tax foreclosures without first giving them adequate notice have won a significant victory Wednesday in the U.S. Court of Appeals for the Second Circuit. The lower courts had thrown out the cases, ruling that the Tax Injunction Act – an obscure 1937 law designed to prevent big corporations from bringing drawn-out challenges to local taxes in federal courts – completely barred their suits.

In a two-part decision, a three-judge panel on Wednesday ruled that: (1) the Tax Injunction Act does not prevent property owners from bringing their constitutional claims in federal court, even though the disputed actions involved local taxing authorities; and (2) a landmark 2006 U.S. Supreme Court ruling, Jones v. Flowers, should be applied to determine whether the taxing agencies tried hard enough to notify the property owners that their property was about to be seized and sold. The Second Circuit sent all four cases back to lower courts for further action.

Public Citizen represented the Arkansas homeowner who won Jones v. Flowers, and Public Citizen filed an amicus brief supporting the property owners in the Second Circuit case. The Second Circuit’s decision adopted much of Public Citizen’s reasoning in the brief.

“This is a particularly significant ruling because if it had gone the other way, it would have limited the application of the Supreme Court’s decision,” said Michael Kirkpatrick, the Public Citizen attorney who argued Jones v. Flowers.

“This decision is not only a tremendous victory for property owners, but also an important reaffirmation of every citizen’s right to bring constitutional challenges in the federal courts,” said Deepak Gupta, another Public Citizen attorney who worked on the case.

The decision consolidated four cases. In each one, property owners who had fallen delinquent on their property taxes claimed that they were not given adequate notice of foreclosure. In one case, the property was sold. The properties are in Clinton County, N.Y., and Mendon, Vt.