Federal Court Dismisses Challenge to Village’s Tax Lien Sale

Plaintiffs, the preliminary executor of the Estate of Margaret Ottavino and A. Ottavino Property Corporation commenced a federal action in the District Court for the Eastern District of New York, challenging the seizure and sale of real property that had been in their family for more than eighty (80) years.  Plaintiffs alleged that the Village of Westbury obtained a tax lien against Plaintiffs’ real property due to the failure to pay taxes and that the Village subsequently sold the real property at a tax sale auction pursuant to an unconstitutional application of the New York State Real Property Tax Law and the Village Code.

As set forth in the Amended Complaint, Plaintiffs alleged that that tax sale was invalid because they did not receive notification of the real estate tax due to the Village in 2013, due to a mailing error.  While Plaintiffs made a late payment of these taxes in 2017, the Village returned this payment and sold the property at auction to BR Madison LLC, which subsequently sold the real property to Nassau Property Investors LLC.

Berkman Henoch, on behalf of the BR Madison and Nassau Property Investors LLC moved to dismiss the Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and argued, among other things, that the action in Federal District Court was barred by the doctrines of Rooker-Feldman and issue/claim preclusion, because the same property and issues had been adjudicated in two prior state-court proceedings in Nassau County, which were affirmed on appeal.

The United States District Court for the Eastern District of New York (Cogan, J.) granted BR Madison’s and Nassau Property Investors’ motion to dismiss in its entirety.  In reaching its decision, the District Court determined that although the Rooker-Feldman doctrine did not itself deprive the Court of jurisdiction, Plaintiffs’ claims were nevertheless precluded under New York’s claim preclusion principles.

Judge Cogan explained, “plaintiffs here seek the same relief – ‘restoration’ of the deed to the property . . . and a declaration that the laws relied upon by defendants are unconstitutional.  Clearly, then, the Estate of Margaret Ottavino is in privity with [plaintiffs in the state court cases] because the Estate of Margaret Ottavino’s interest and the interest of [the state court plaintiffs] are the same and the Estate of Margaret Ottavino is a successor to the interest in the subject property formerly held by Mary Ottavino.   Although plaintiffs assert ‘different theories’ for the claims plaintiffs asserted in the state court actions, both federal and state court actions arise ‘out of the same transaction or series of transactions,’ because they all arise out of defendants’ sale of the subject property . . . “[P]ublic policy dictates that there be an end of the litigation; that those who have contested an issue shall be bound by the result of the contest, and that matters once tried shall be considered forever settled as between the parties . . . Plaintiffs should have asserted their constitutional arguments when the opportunity to do so first became available to them in state court.  Because they did not, they are now barred by claim preclusion from asserting those arguments in this Court.”

BR Madison LLC and Nassau Property Investors LLC were represented by Donna A. Napolitano, Esq. and Nicholas S. Tuffarelli, Esq. – members of Berkman Henoch’s Litigation Department.

Link to: Copy of District Court’s Memorandum Decision and Order dismissing the Amended Complaint