Class Action Lawsuit Demands That Wayne County Pay More Than $120 Million in Surplus Profits to Residents Who Lost Their Homes Through Tax Foreclosure
A consortium of Detroit-area law firms, including Sommers Schwartz, is pursuing millions of dollars for homeowners forced to relinquish their properties in tax foreclosure proceedings. Despite two Michigan Supreme Court rulings against it, Wayne County has used stall tactics and denied Freedom of Information Act requests in a years-long battle to avoid repaying thousands of residents.
Sommers Schwartz’s Jason Thompson is one of the attorneys leading the class action, which claims Wayne County pocketed surplus pockets when the plaintiffs’ tax-foreclosed homes were sold at auction. At the direction of Wayne County Executive Warren Evans and Wayne County Treasurer Eric Sabree, the county is holding on to an estimated $120+ million that the Michigan State Supreme Court has twice ruled does not belong to municipal governments, calling it a “theft.”
An Unlawful, Unconstitutional Taking
In the landmark 2020 Michigan Supreme Court Case, Rafaeli v. Oakland County, the Michigan Supreme Court voted 7-0 in a decision finding that local governments cannot retain surplus proceeds from the sale of a home that had been foreclosed upon for failure to pay property taxes. To do so, the Court ruled, was deemed “unlawful” and unconstitutional taking without just compensation under the Michigan Constitution. The United States Court of Appeals for the Sixth Circuit followed in 2022, and by 2023, the Supreme Court of the United States unanimously declared the practice unconstitutional in an identical case arising out of Hennepin County, Minnesota.
The Michigan Supreme Court then addressed whether owners of tax-foreclosed property taken before the 2020 Rafaeli decision could pursue a claim against the counties to recover surplus proceeds. On July 29, 2024, in another 7-0 decision, the Michigan Supreme Court ruled that the 2020 decision must be applied retroactively, giving complete constitutional protection to an even larger group of citizens.
Michigan counties, including Oakland County (where the Rafaeli case originated), began settling class action lawsuits to return the surplus funds to citizens. Oakland County created a $38 million fund to repay surplus proceeds and began the repayment process in the summer of 2023. In another settlement, nearly all the counties on the west side of Michigan have agreed to return surplus funds to their citizens.
Where’s the Money, Wayne County?
In the meantime, four years after the first Michigan State Supreme Court ruling and the subsequent class action lawsuit demanding repayment, Wayne County has dug in its heels, with County Executive Evans and Treasurer Sabree remaining defiant and refusing to return to constituents the more than $120 million in ill-gotten funds.
If you lost your Wayne County home through tax foreclosure and believe you are owed surplus proceeds from the auction sale of your property, please contact us today for a free consultation to discuss your participation in the class action lawsuit.
Below are media reports about the class action suit.
Jason Thompson is a nationally board certified trial attorney and co-chairs Sommers Schwartz’s Complex Litigation Department. He has a formidable breadth of litigation experience, including class action and multidistrict litigation (MDL), and practices nationwide in both state and federal courts.
