Stoller et al v. Walworth County et al

Filing 7

ORDER signed by Judge J.P. Stadtmueller on 3/30/2018: DISMISSING Plaintiffs' federal law claims (Docket #1 at 19-27) for failure to state a claim; DECLINING to exercise supplemental jurisdiction over and DISMISSING without prejudice Plaintiffs ' state law claims (Docket #1 at 27-39); DISMISSING CASE; DENYING as moot 2 Plaintiffs' Motion for Leave to Proceed Without Prepayment of the Filing Fee; DENYING as moot 3 Plaintiffs' Motion to File Electronically; and DENYING as moot 6 Plaintiffs' Motion to Appoint Counsel. See Order. (cc: all counsel, via mail to Michael Stoller and Christopher Stoller) (jm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
MICHAEL STOLLER and
CHRISTOPHER STOLLER,
Plaintiffs,
Case No. 17-CV-1349-JPS

v.
WALWORTH COUNTY, VALERIE
ETZEL, RANDY TIMMS, WILLIAM
NOREM, TIM BRELLENTHIN, PAUL
YVARRA, CHARLENE STAPLES,
KATHY INGERSOLL, DAVID WEBER,
DANIEL G. KILKENNY, SUSAN M.
PRUESSING, KENNETH H. MONROE,
NANCY RUSSELL, and JOHN DOE,

ORDER

Defendants.

I.

INTRODUCTION
The plaintiffs, Michael and Christopher Stoller, filed a pro se

complaint alleging that the defendants, Walworth County and various
public officials in that county, have engaged in a “devious scheme” to
“unlawfully sell tax delinquent real estate” for a profit. (Docket #1 at 1). This
matter comes before the Court on the plaintiffs’ petition to proceed in forma
pauperis. (Docket #2).
Notwithstanding the payment of any filing fee, the Court must
dismiss an action filed in forma pauperis if the Court determines that the
plaintiff’s allegation of poverty is untrue, see 28 U.S.C. § 1915(e)(2)(A), or if
the action is “frivolous or malicious,” fails to state a claim upon which relief

may be granted, or seeks monetary relief from a defendant who is immune
from such relief, see 28 U.S.C. § 1915(e)(2)(B).
As explained below, the plaintiffs’ complaint fails to state a claim
and will therefore be dismissed pursuant to Section 1915(e)(2)(B).
II.

STANDARD OF REVIEW
A claim is legally frivolous when it lacks an arguable basis either in

law or in fact. Denton v. Hernandez, 504 U.S. 25, 31 (1992); Neitzke v. Williams,
490 U.S. 319, 325 (1989); Hutchinson ex rel. Baker v. Spink, 126 F.3d 895, 900
(7th Cir. 1997). The court may, therefore, dismiss a claim as frivolous where
it is based on an indisputably meritless legal theory or where the factual
contentions are clearly baseless. Neitzke, 490 U.S. at 327. “Malicious,”
although sometimes treated as a synonym for “frivolous,” “is more usefully
construed as intended to harass.” Lindell v. McCallum, 352 F.3d 1107, 1109–
10 (7th Cir. 2003) (citations omitted).
To state a cognizable claim under the federal notice pleading system,
the plaintiff is required to provide a “short and plain statement of the claim
showing that [he] is entitled to relief[.]” Fed. R. Civ. P. 8(a)(2). It is not
necessary for the plaintiff to plead specific facts, and his statement need
only “give the defendant fair notice of what the…claim is and the grounds
upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). However, a complaint that
offers “labels and conclusions” or a “formulaic recitation of the elements of
a cause of action will not do.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Twombly, 550 U.S. at 555). To state a claim, a complaint must
contain sufficient factual matter that, accepted as true, “is plausible on its
face.” Id. (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw the
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reasonable inference that the defendant is liable for the misconduct
alleged.” Id. (citing Twombly, 550 U.S. at 556). The complaint allegations
“must be enough to raise a right to relief above the speculative level.”
Twombly, 550 U.S. at 555 (citation omitted).
In considering whether a complaint states a claim, courts should
follow the principles set forth in Twombly by, first, “identifying pleadings
that, because they are no more than conclusions, are not entitled to the
assumption of truth.” Iqbal, 556 U.S. at 679. Legal conclusions must be
supported by factual allegations. Id. If there are well-pleaded factual
allegations, the court must, second, “assume their veracity and then
determine whether they plausibly give rise to an entitlement to relief.” Id.
III.

COMPLAINT ALLEGATIONS
Mindful of its responsibility to construe pro se pleadings liberally, see

Marshall v. Knight, 445 F.3d 965, 969 (7th Cir. 2006), the Court will endeavor
to describe the facts alleged in the plaintiffs’ Complaint and identify any
plausible claims based thereon.
The plaintiffs both live in Cook County, Illinois, but own property in
Walworth County, Wisconsin. (Docket #1 at 6, 16). The thrust of the
plaintiffs’ Complaint is that Walworth County and the named county
officials have engaged in a practice whereby they sell tax-delinquent
property based on “sham” appraisals, as opposed to “legitimate” appraisals
that meet the standards of the Uniform Standards of Professional Appraisal
Practice, in order to “recover inflated market values, in direct competition
with private real estate sellers.” Id. at 4.
This became relevant to the plaintiffs in August 2017 when they
received a letter from defendant Valerie Etzel (“Etzel”), the Walworth
County treasurer, informing them that Walworth County took possession
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of a tax-delinquent parcel of land bordering the plaintiffs’ property. Id. at
16. According to the plaintiffs, the parcel is “unbuildable” and therefore
only has value to the plaintiffs as adjacent landowners. Id. The plaintiffs
believe the value of the parcel is $2,500, though they do not say how they
arrived at that figure. Id. The county appraised the parcel at $11,400. Id. The
delinquent real estate taxes on the parcel were about $2,700. Id. The
plaintiffs made a bid on the parcel for $2,500. Id. at 17. Walworth County
rejected the bid on the ground that it was below the appraised value. Id.
According to the plaintiffs, the appraisal for this parcel, as well as every
other property listed on the 2017 Walworth County tax foreclosure list, was
a “sham.” Id. at 17–18.
On these allegations, the plaintiffs seek to bring several claims: (1)
violation of the Racketeer Influenced and Corrupt Organizations Act, 18
U.S.C. §§ 1961–1968 (“RICO”), (2) conspiracy to violate RICO, (3) unfair
competition, (4) unjust enrichment, (5) committing a violation against
elderly and disabled persons in violation of Wis. Stat. § 100.264, (6) making
fraudulent representations in violation of Wis. Stat. § 100.18, (7) breach of
fiduciary duty, and (8) “conspiracy, aiding and abetting.” Id. at 19–39.
In support of their RICO claims, the plaintiffs allege that the
defendants operated as an enterprise to affect interstate commerce through
a “scheme to fraudulently, systematically and uniformly produce [] phony,
manipulated or inflated ‘appraisals’ of properties, which were performed
with indifference towards the appraisals’ accuracy, current market value,
in connection with the advertising and sale of its delinquent properties[.]”
Id. at 20. The pattern of racketeering, they say, involved predicate acts of
fraud conducted by mail and wire. Id. at 19–20.

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The named defendants are Walworth County and members of the
Walworth County Board of Supervisors. Id. at 6-12. The plaintiffs also seek
to sue John Doe defendants who are Walworth County employees, agents,
or attorneys who aided and abetted the defendants. Id. at 12. Apart from
Etzel, the county treasurer, sending a notice of the sale of the parcel adjacent
to the plaintiffs’ property, the plaintiffs do not allege any specific conduct
or acts undertaken by the named defendants.
IV.

ANALYSIS
The Court’s analysis begins (and, as discussed below, largely ends)

with the plaintiffs’ attempt to allege a civil RICO claim.
Congress enacted RICO “in an effort to combat organized, long-term
criminal activity.” Jennings v. Auto Meter Prod., Inc., 495 F.3d 466, 472 (7th
Cir. 2007). RICO makes it a crime to invest income derived from a pattern
of racketeering activity in an enterprise “which is engaged in, or the
activities of which affect, interstate or foreign commerce,” 18 U.S.C.
§ 1962(a); to acquire or maintain an interest in an enterprise through a
pattern of racketeering activity, § 1962(b); to conduct an enterprise’s affairs
through a pattern of racketeering activity, § 1962(c); and to conspire to
violate any of the other three prohibitions, § 1962(d). “Racketeering
activity” is defined to include a host of state and federal offenses, called
“predicate acts,” including mail and wire fraud. See 18 U.S.C. § 1961(1); see
also Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 481–82 (1985).
RICO also provides a civil cause of action for “[a]ny person injured
in his business or property by reason of a violation” of the prohibitions in
Section 1962. Id. § 1964(c). To proceed on a civil RICO cause of action under
Section 1964(c), a plaintiff must plead “(1) an injury in its business or
property (2) by reason of (3) the defendants’ violation of section 1962.”
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DeGuelle v. Camilli, 664 F.3d 192, 198 (7th Cir. 2011). The civil RICO
provision has a limited reach and was “never intended to allow plaintiffs
to turn garden-variety state law fraud claims into federal RICO actions.”
Jennings, 495 F.3d at 472. The plaintiffs’ attempt to state a civil RICO claim
fails for several reasons.
First, none of the predicate acts the plaintiffs allege—including fraud
conducted by mail, see 18 U.S.C. § 1341, and wire, see 18 U.S.C. § 1343—
resulted in direct injury to the plaintiffs. The plaintiffs do not allege that
their “business or property” was affected by the defendants’ creation of
“sham” appraisals for tax-delinquent property in Walworth County. The
property the plaintiffs own in Walworth County was not tax-delinquent,
and therefore was not subject to the sham-appraisal scheme the plaintiffs
allege. At best, the plaintiffs have alleged harm to their prospect of buying
additional property near theirs; but they do not allege that it is their
business to buy and sell property in Walworth County. Indeed, the
plaintiffs do not claim to be in the real estate business whatsoever.
Second, even if the plaintiffs could show some injury to their
business or property, they have not sufficiently alleged predicate acts of
fraud. Corley v. Rosewood Care Ctr., Inc. of Peoria, 388 F.3d 990, 1005 (7th Cir.
2004) (a civil RICO plaintiff must show that he was injured “by reason of”
a violation of section 1962(c)). To state their RICO claim, which they say is
premised on predicate acts of mail and wire fraud, the plaintiffs must allege
the elements of mail or wire fraud: (1) the defendants’ participation in a
scheme to defraud; (2) the defendants’ intent to defraud; and (3) the
defendants’ use of the mail or interstate wire in furtherance of the scheme
to defraud. See United States v. Britton, 289 F.3d 976, 981 (7th Cir. 2002)
(elements of mail fraud); United States v. Turner, 551 F.3d 657, 664 (7th Cir.
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2008) (elements of wire fraud). The words “to defraud” mean “wronging
one in his property rights by dishonest methods or schemes” and “usually
signify the deprivation of something of value by trick, deceit, chicane or
overreaching.” Corley, 388 F.3d at 1005 (quotation omitted).
The plaintiffs are adamant that Walworth County is wrong to
appraise tax-delinquent properties in a way that does not meet the
standards of the Uniform Standards of Professional Appraisal Practice. But
they concede that the sale by a county of tax-delinquent real estate is
governed by Wisconsin Statutes section 75.69, see (Docket #1 at 2, 17), which
does not require that counties follow the standards of the Uniform
Standards of Professional Appraisal Practice. Section 75.69 provides that
“no tax delinquent real estate acquired by a county may be sold unless the
sale and appraised value of such real estate has first been advertised by
publication of a class 3 notice” and “[a]ny county may accept the bid most
advantageous to it but, at the first attempt to sell the property, every bid
less than the appraised value of the property shall be rejected.” Wis. Stat. §
75.69(1). “Appraised value” in that section is “the value determined, at the
discretion of the county board, by the county board, a committee
designated by the county board, or a certified appraiser[.]” Id.
The plaintiffs have not alleged that the defendants’ appraisals are in
contravention of the law governing such appraisals. Instead, they point to
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989
(“FIRREA”), which provides that federal financial institutions regulatory
agencies “shall prescribe appropriate standards for the performance of real
estate appraisals in connection with federally related transactions under the
jurisdiction of each such agency” and those rules shall require that
“appraisals [] be subject to appropriate review for compliance with the
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Uniform Standards of Professional Appraisal Practice.” 12 U.S.C. § 3339.
This is of no help to the plaintiffs, because FIRREA applies to lending
transactions with real property collateral that, among other things, involve
the FDIC, National Credit Union Administration, Federal Reserve System,
Office of the Comptroller of the Currency, Office of Thrift Supervision,
or financial institutions regulated by these agencies. See 12 U.S.C.A. § 3350.
In short, FIRREA’s requirements do not apply to Walworth County’s sale
of tax-delinquent property as alleged in the Complaint. The plaintiffs
clearly do not like the way Walworth County obtains its appraisals, but they
have not alleged that Walworth County obtains them fraudulently.
Third, the plaintiffs have not alleged fraud with sufficient
particularity. Allegations of fraud in a civil RICO complaint are subject to
the heightened pleading standard of Federal Rule of Civil Procedure 9(b),
which requires a plaintiff to plead all averments of fraud with particularity.
See Goren v. New Vision Int'l, Inc., 156 F.3d 721, 726 (7th Cir. 1998). In other
words, the complaint must describe the “who, what, when, where, and
how” of the alleged fraud. Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 569
(7th Cir. 2012). Here, the plaintiffs have made a bald assertion about the
defendants’ manufacture of false appraisals, but they say nothing about
who specifically is involved in the sham appraisal process, how the sham
appraisals are created, or any other particular details. Again, it is clear the
plaintiffs believe Walworth County somehow arrived at an inflated
appraisal for the tax-delinquent property the plaintiffs wanted to buy, but
they allege little more than that. The plaintiffs have not met their burden to
plead the underlying fraud with particularity.
For all of these reasons, the plaintiffs have failed to state a civil RICO
claim. Then, because the plaintiffs failed to allege a violation of section
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1962(c), their RICO conspiracy claim under section 1962(d), based on the
same allegations, must fail as well. Stachon v. United Consumers Club, Inc.,
229 F.3d 673, 677 (7th Cir. 2000). Both RICO claims will be dismissed.
Having dismissed both of the plaintiffs’ federal claims, the Court will
decline to exercise supplemental jurisdiction over the plaintiffs’ state law
claims. 28 U.S.C. § 1367(c)(3).
V.

MOTION TO PROCEED IN FORMA PAUPERIS
At this stage of the litigation, the Court would ordinarily also

consider whether the plaintiffs are entitled to proceed without prepayment
of the filing fee, or in forma pauperis, based on a showing that they cannot
afford to pay the fee. 28 U.S.C. §§ 1915(e)(2) (Dismissal of an action filed in
forma pauperis is appropriate if the Court finds either that “the allegation of
poverty is untrue” or the action is “frivolous or malicious,” fails to state a
claim upon which relief may be granted, or seeks monetary relief from a
defendant who is immune from such relief).
The plaintiffs have not equipped the Court with the necessary
information to determine whether they have the ability to pay the filing fee.
Their motion includes averments about Michael Stoller’s income and assets,
but not about Christopher Stoller’s. (Docket #2). It is signed only by Michael
Stoller. Id. at 2.
Because dismissal is appropriate for failure to state a claim, 28 U.S.C.
§ 1915(e)(2)(B)(ii), the Court need not decide whether the plaintiffs’
allegation of poverty is untrue. The action will be dismissed and the motion
to proceed in forma pauperis will be denied as moot.
VI.

CONCLUSION
For the reasons stated above, the plaintiffs’ complaint fails to state a

RICO claim upon which relief may be granted, and such federal claims
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must, therefore, be dismissed. 28 U.S.C. § 1915(e)(2)(B)(ii). Additionally, the
Court declines to exercise supplemental jurisdiction over the plaintiffs’
state law claims. 28 U.S.C. § 1367(c)(3). Finally, the plaintiffs’ motions to
proceed without prepayment of the filing fee, to file electronically, and to
have counsel appointed for them will be denied as moot.
Accordingly,
IT IS ORDERED that plaintiffs’ complaint fails to state a claim for
violation of RICO or conspiracy to violate RICO (Docket #1 at 19-27) and
such federal law claims be and the same are hereby DISMISSED;
IT IS FURTHER ORDERED that the Court, pursuant to 28 U.S.C. §
1367(c)(3), declines to exercise supplemental jurisdiction over the state law
claims raised in plaintiffs’ complaint (Docket #1 at 27-39) and such state law
claims be and the same are hereby DISMISSED without prejudice;
IT IS FURTHER ORDERED that this action be and the same is
hereby DISMISSED;
IT IS FURTHER ORDERED that the plaintiffs’ motion for leave to
proceed without prepayment of the filing fee (Docket #2) be and the same
is hereby DENIED as moot;
IT IS FURTHER ORDERED that the plaintiffs’ motion to file
electronically (Docket #3) be and the same is hereby DENIED as moot; and
IT IS FURTHER ORDERED that the plaintiffs’ motion for
appointment of counsel (Docket #6) be and the same is hereby DENIED as
moot.
The Clerk of Court is directed to enter judgment accordingly.

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Dated at Milwaukee, Wisconsin, this 30th day of March, 2018.
BY THE COURT:

J.P. Stadtmueller
U.S. District Judge

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