New Jersey homeowners who allegedly paid higher costs to redeem tax-sale certificates due to collusion by bidders at municipal auctions have won a partial settlement of their federal class-action suit.
U.S. District Judge Michael Shipp on Aug. 13 approved the pact with six individual defendants and related entities who agreed to contribute cash totaling $955,000 and to give discounts on certificates still in their possession.
In New Jersey, municipalities sell liens for property-tax arrears at auctions. The rate of interest buyers can charge the property owner starts at 18 percent and is driven down with subsequent bids.
According to the suit, the defendants frequented the auctions and would agree beforehand which liens each would bid on, often resulting in sales at 18 percent interest instead of lower rates.
The certified class consists of owners of New Jersey real property between Jan. 1, 1998, and Feb. 28, 2009, who had certificates purchased by one of the defendants at auction for an interest rate above zero percent.
They claimed violations of the Sherman Act, 15 U.S.C. 1, the New Jersey Antitrust Act, N.J.S.A. 56:9-3, and the New Jersey Tax Lien Law, N.J.S.A. 54:5.
The defendants that entered into the settlement are contributing cash along with discounts on certificates held on properties belonging to class members, in the following amounts:
• Robert Rothman, a solo attorney in Englewood — $200,000 and 10 percent.
• David Butler, David Farber and their company, CCTS of Cherry Hill — $115,000 and 10 percent.
• Fountain of Life Center (a church), Life Center Academy, Mercer SME, Susan Esposito and Rev. David Boudwin — $250,000 and 15 percent.
• Richard Pisciotta Jr., of Long Beach Township — $100,000 and 12 percent.
• William Collins, of Medford, doing business as Independent Investment — $170,000 and 10 percent.
• Isadore May, of Margate, doing business as Garden State Investment — $120,000 and 10 percent discount.
Rothman, Butler, Farber, Pisciotta, Collins and May have pleaded guilty to criminal charges brought by the U.S. Department of Justice's Antitrust Division and they await sentencing.
The class action remains pending against five companies that allegedly received first choice of the liens in each auction: Plymouth Park Tax Services (a subsidiary of J.P. Morgan Chase & Co.), Royal Bancshares of Narberth, Pa., M.D. Sass Investor Services of New York, American Tax Funding of Jupiter, Fla., and Bank Atlantic Bancorp, a subsidiary of BB&T Corp. of Winston-Salem, N.C.
Those parties have filed motions to dismiss, on which Shipp has yet to rule.
Jason Zweig, whose New York firm Hagens Berman Sobol Shapiro is one of two designated class counsel in the case, says requests for a discovery hearing in the case placed on hold pending outcome of the defense motion.
Zweig calls the first settlements "an excellent recovery," not only for the payments and discounts the defendants are paying but also for the light they shine on how the collusion took place.
"I certainly hope there will be some improvement on the transparency of the auctions and making sure the auctions are done in an ethical way," he says. "To be candid, however, I have heard continuing stores of improper activities at the auctions and it's quite troubling to hear. Hopefully people will eventually learn to follow the rules and I'm hopeful this case helps the process along."