Since December 2012, Hausfeld and co-counsel have negotiated settlements with all 20 defendants or defendant groups, who have agreed to pay a combined $9.585 million in cash, along with substantial discounts for still-outstanding TSCs. All settlements have received final approval from the district court. A lone objector appealed, but the Third Circuit affirmed the district court’s decision in September 2018.
Defendants are a group of investors and investment companies that exploited a bidding process under which municipalities in New Jersey auction off delinquent property tax obligations of property owners. Pursuant to New Jersey State law, the property owners’ tax obligation is sold to the bidder who agrees to accept the lowest interest rate on the debt. The bidding at the auction opens at 18 percent interest and is then bid down by each subsequent bidder. The winning bidder receives a TSC, which indicates that they have a lien on the property.
TSCs entitle their holder to several benefits, including a first priority lien on the property, penalties ranging from two to six percent, interest on the delinquent tax obligation and the right to collect the delinquent tax obligation. The TSC also entitles its holder to foreclose on the property after a certain period of time should the lien not be redeemed by the property owner. Auctions for TSCs are intended to be competitive, with bidders aggressively reducing the amount of interest they are willing to accept in order to obtain a property’s TSC. Rather than engage in a competitive bidding process for TSCs, however, Defendants and their co-conspirators secretly rigged the bids at TSC auctions throughout the State of New Jersey in order to guarantee that the interest rate would stay artificially high, thus securing excessive returns on their TSC investments.
Because of the unlawful conspiracy, potential class members owed Defendants an inflated amount in order to clear their properties of the liens, and keep their home or other property from falling into the possession of one of the defendants. Defendants’ actions often inflated the amount to such a degree that foreclosure proceedings on the property could not be avoided.
On October 22, 2012, Hausfeld was named interim co-lead counsel, along with Hagens Berman Sobol Shapiro, LLP. Lite, DePalma, Greenberg, LLC was named interim liaison counsel. Hausfeld along with co-counsel, filed a first amended consolidated amended master class action complaint on January 6, 2014.