Bank of Camden v. Village of West Dunee et al

Filing 39

MEMORANDUM Opinion and Order: For the reasons stated above, the Village's motion to dismiss 13 is granted. If the Bank has some other theory as to how the Village is violating a requirement of the SSA Act or the Ordinance, it may seek leave to file an amended complaint on or before September 6, 2013. As it stands, the Bank has not stated a plausible claim that the Village is violating the SSA Act or the Ordinance. Signed by the Honorable Thomas M. Durkin on 8/12/2013:(srn, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Bank of Camden, a Tennessee banking
association,

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Plaintiff,
v.
Village of West Dundee, an Illinois
municipal corporation, et al.,
Defendants.

No. 12 C 6699
Judge Thomas M. Durkin

MEMORANDUM OPINION AND ORDER
Bank of Camden (the “Bank”) brought this lawsuit against the Village of
West Dundee (the “Village”) and Springhill Gateway, LLC (“Springhill”)1 alleging
that the Village is disproportionately distributing funds from a special service area
in violation of the Special Service Area Tax Law (the “SSA Act”), 35 ILCS 200/27-5
et seq., and a local ordinance enacted thereunder. Presently before the Court is the
Village’s motion to dismiss the Bank’s complaint for failure to state a claim. R. 13.
For the following reasons, the Village’s motion is granted.

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The Bank actually sued two entities named Springhill Gateway, LLC, one an
Illinois limited liability company and the other a Delaware limited liability
company. The Court refers to both entities collectively as “Springhill.” On November
26, 2012, the Court (Pallmeyer, J.) entered a default judgment against Springhill.
R. 24. The Bank was supposed to file an affidavit to prove up the amount of its
judgment on or before April 2, 2013. R. 36. To date, it has not done so.
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Background 2
This case involves the renovation of Spring Hill Gateway Shopping Center
(“Shopping Center”), which is located in the Village. In 2007, Springhill owned the
entire Shopping Center and asked the Village to provide public assistance to fund
renovations. In 2008, the Village set up a Tax Increment Financing District in order
to provide Springhill with $4 million in initial funding for renovations. By 2009,
that money was running out. Springhill then asked the Village to establish some
other mechanism to provide additional funding for renovations.
This time, the Village decided to establish a “special service area” pursuant to
the SSA Act. The SSA Act generally allows a municipality to levy additional
property taxes in a specific geographic area for the purpose of providing special
services not otherwise available to the entire municipality. On December 7, 2009,
the Village created a special service area under Village Ordinance 09-27 in the
principal amount of $1.5 million. The special service area was revised and formally
approved as Village Ordinance 10-15 on June 7, 2010 (the “Ordinance”). The Village
issued special service area bonds to raise the $1.5 million that would be used for
renovations, and then imposed additional property taxes on the Shopping Center
through 2029 that would be used to pay off the bonds.
The Shopping Center contains approximately 180,000 square feet of retail
space. In July 2012, the Bank became the fee simple owner of 60,000 square feet of

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The following background is taken from the allegations in the Bank’s complaint,
which the Court accepts as true for purposes of a motion to dismiss.
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that space (the “East Property”). Springhill continues to own the remaining 120,000
square feet of space (the “West Property”).
After acquiring the East Property, the Bank became concerned that the
proceeds of the bonds were being spent mainly to renovate the West Property. So
far, $866,422 of the $1.5 million in proceeds from the bonds has been spent. Of that,
$850,167 benefitted the West Property while only $16,255 benefitted the East
Property. Meanwhile, the Bank or any subsequent owner of the East Property must
continue paying its share of the additional property taxes through 2029.
The Bank filed suit against the Village and Springhill, alleging that the
sharp disparity in disbursements between the East and West Properties violates the
SSA Act and the Ordinance.
Standard of Review
A Rule 12(b)(6) motion challenges the sufficiency of the complaint. See, e.g.,
Hallinan v. Fraternal Order of Police of Chicago Lodge No. 7, 570 F.3d 811, 820 (7th
Cir. 2009). A complaint must include “a short and plain statement of the claim
showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Under notice
pleading standards, a complaint “must be enough to raise a right to relief above the
speculative level,” Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007), and “must
contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly,
550 U.S. at 570). “In evaluating the sufficiency of the complaint, [courts] view it in
the light most favorable to the plaintiff, taking as true all well-pleaded factual
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allegations and making all possible inferences from the allegations in the plaintiff's
favor.” AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). Moreover,
“[d]ocuments attached to a motion to dismiss are considered part of the pleadings if
they are referred to in the plaintiff’s complaint and are central to his claim.”
Menominee Indian Tribe v. Thompson, 161 F.3d 449, 456 (7th Cir.1998).
Analysis
I.

Jurisdiction
The Bank invoked diversity jurisdiction to file this case in federal court.

Diversity jurisdiction only exists if the amount in controversy exceeds $75,000,
exclusive of interest and costs. 28 U.S.C. § 1332(a). In its motion to dismiss, the
Village argues that the Bank has not adequately alleged that the amount in
controversy in this case exceeds $75,000.
To establish diversity jurisdiction, a plaintiff “need demonstrate no more
than a good faith, minimally reasonable belief that the suit might result in a
judgment in excess of [$75,000].” Normand v. Orkin Exterminating Co., 193 F.3d
908, 910 (7th Cir. 1999); see also Neuma, Inc. v. AMP, Inc., 259 F.3d 864, 881 (7th
Cir. 2001). “[U]nless recovery of an amount exceeding the jurisdictional minimum is
legally impossible, the case belongs in federal court.” Back Doctors Ltd. v. Metro.
Prop. & Cas. Ins. Co., 637 F.3d 827, 830 (7th Cir. 2011).
This test is easily met here. This case involves a dispute over $1.5 million in
proceeds from special service area bonds, $866,422 of which has already been
disbursed. The Bank alleges that although its East Property occupies a third of the
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total square footage of retail space in the Shopping Center, the East Property has
received only $16,255 (less than two percent) of the disbursements. If those
disbursements were issued in proportion to square footage, as the Bank apparently
advocates, then the East Property should have received $288,807 of the $866,422
spent to date. In other words, the shortfall at issue may be as high as $272,552.
Moreover, the Bank also seeks relief for the remaining, undisbursed $633,578. The
Bank has therefore established a minimally reasonable belief that the amount in
controversy exceeds $75,000 and that this Court has jurisdiction to hear this case.
II.

Alleged Violations of the SSA Act and the Ordinance
In its complaint, the Bank seeks a declaration that the Village is violating the

SSA Act and the Ordinance because the special service area taxes imposed on the
Bank’s East Property do not bear a rational relationship to the benefits provided to
the East Property. In its motion to dismiss, the Village argues that the Bank has
not identified any actual provision of the SSA Act or the Ordinance that the Village
is allegedly violating, and that as a result, the Bank does not state any plausible
claim for relief.
The Bank’s complaint and its response to the Village’s motion to dismiss are
each somewhat vague on this critical question—which requirements of the SSA Act
or the Ordinance are actually at issue? The Bank’s only reference to a specific
requirement of either the SSA Act or the Ordinance is in paragraph 4 of its

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complaint, where it quotes a portion of 35 ILCS 200/27-75. 3 The Bank appears to
read Section 27-75 as always requiring “that a rational relationship must exist
between the amount of tax levied and the special benefit rendered.” R. 37 at 3.
Section 27-75 is not so broad. Section 27-75 actually provides two discrete
methods for a municipality to apportion taxes in a special service area. The first and
third paragraphs of Section 27-75 state that “[i]f a property tax is levied, the tax
shall be extended . . . in the special service area . . . based on equalized assessed
values.” 35 ILCS 200/27-75. Such a tax can take the form of either “an ad valorem
tax based on the whole equalized assessed value of the property,” or, in some
instances, an ad valorem tax based on “the equalized assessed value of the land in a
special service area, without regard to improvements.” Id. 4 The second paragraph of
Section 27-75 then states:
In lieu of or in addition to an ad valorem property tax, a
special tax may be levied and extended within the special
service area on any other basis that provides a rational
relationship between the amount of the tax levied against
each lot, block, tract and parcel of land in the special
service area and the special service block rendered.
Id.
Read as a whole, Section 27-75 does not impose a general requirement that
there be a rational relationship between the amount of tax levied on a particular
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Even then, the Bank omitted any citation identifying the quoted language as
coming from 35 ILCS 200/27-75. This apparently created some confusion in the
parties’ briefing as to which SSA Act provision is at issue.
An ad valorem tax is a tax “proportional to the value of the thing taxed.” Black’s
Law Dictionary (9th ed. 2009).

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property in a special service area and the special benefit rendered to that property.
Rather, Section 27-75 requires that taxes must be apportioned within a special
service area either “based on equalized assessed values” or “any other basis that
provides a rational relationship between the amount of the tax levied against each
lot, block, tract and parcel of land in the special service area and the special service
benefit rendered.” 35 ILCS 200/27-75. In other words, the SSA Act presumes that
ad valorem taxes based on equalized assessed values are rational; the “rational
relationship” test comes into play if a municipality relies on some “other” basis for
apportioning taxes. See e.g., Cnty. of Will v. Vill. of Rockdale, 589 N.E.2d 1017,
1017-18 (Ill. App. Ct. 1992) (applying Section 27-75’s rational relationship test
where a special tax to pay for water main improvements “was not based on assessed
values of the real property” but “was based on the percentage of front footage of
each parcel to the total front footage of the streets in the special service area”).
The problem for the Bank is that the Ordinance in this case apportions taxes
based on equalized assessed values. R. 14-1, Ordinance § 2 (“the applicable special
service area taxes (subject to allocation, determination, levy and extension on an ad
valorem basis against each lot, block, tract and parcel of land in the Area) shall be
and are hereby authorized . . .”). Because the taxes are allocated on an ad valorem
basis, the “rational relationship” test that expressly applies only to taxes “in lieu of
or in addition to an ad valorem property tax” does not come into play. As a result,

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the Bank’s “rational relationship” theory does not provide a plausible claim that the
Village is violating the SSA Act or the Ordinance. 5
Conclusion
For the reasons stated above, the Village’s motion to dismiss is granted. If the
Bank has some other theory as to how the Village is violating a requirement of the
SSA Act or the Ordinance, it may seek leave to file an amended complaint on or
before September 6, 2013. As it stands, the Bank has not stated a plausible claim
that the Village is violating the SSA Act or the Ordinance.

ENTERED:
______________________________
Thomas M. Durkin
United States District Judge
Dated: August 12, 2013

The Village also argues that the Bank’s claims are foreclosed by Grais v. City of
Chicago, 601 N.E.2d 745 (1992). According to the Village, Grais rejected an
argument that “uniformity in taxation relative to the benefits of the [special service
area] is required.” R. 14 at 4. In Grais, the Illinois Supreme Court held that the
creation of special service areas does not violate the uniformity clause of article IX,
section 4(a) of the Illinois Constitution. Grais, 601 N.E.2d at 751. The Bank does not
claim that the Village is violating the uniformity clause of article IX, section 4(a) of
the Illinois Constitution. Grais therefore has little relevance here.
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