Minnesota lawmakers poised to approve $109M settlement in wake of SCOTUS ruling in local case

Minnesota lawmakers poised to approve $109M settlement in wake of SCOTUS ruling in local case

Minnesota lawmakers poised to approve $109M settlement in wake of SCOTUS ruling in local case

Last year, the nation’s highest court unanimously sided with a Minnesota woman in her property rights battle against Hennepin County. Now, the state is poised to pay $109 million to settle similar cases.

Geraldine Tyler moved from her condo and stopped paying taxes on it back in 2010. After penalties, interest, and other costs, her tax debt climbed to $15,000, so, to collect that debt, the county foreclosed on Tyler’s condo and sold it for $40,000.

While Tyler’s attorneys argued that she should’ve gotten the $25,000 difference from the sale and her debt, Minnesota law didn’t give her any right to that money. Then, last May, the U.S. Supreme Court ruled 9-0 that Minnesota’s law on property forfeiture surpluses was illegal, which 5 EYEWITNESS NEWS reported was likely to have a big impact.

Two class-action lawsuits were filed in the state after the ruling, which struck down a law that had been in place for nearly 90 years.

Since the ruling, Minnesota Solicitor General Liz Kramer said the state has been focused on a two-pronged approach.

“We need to have a constitutional statute that all counties can follow and we need to compensate people,” Kramer said.

She’s one of the many people involved in the cases and said she and her office have been in regular contact with Gov. Tim Walz and state lawmakers about those cases.

On Friday afternoon, Walz and DFL leaders announced their agreement on a supplemental budget framework, which included money to satisfy the compensation prong: $109 million. Since this is a supplemental budget year, that accounts for nearly 23% of the $477.5 million budget deal, a large chunk that notably wasn’t included in the governor’s supplemental budget proposal he’d unveiled just four days earlier.

While Kramer said she couldn’t speak on why the settlement funding was included in the budget framework deal and not Walz’s proposal, she’s encouraged that it’s part of the agreement and hopes lawmakers approve the bill for the settlement fund.

According to Kramer, a binding term sheet was signed late last month in the two class-action cases, which are now waiting for the Legislature. If lawmakers approve the bill to pay out $109 million, counties could start notifying people who are eligible for the money. If they don’t, the cases are back at square one.

Kramer says the deal would compensate Minnesotans affected by the property forfeiture law over the past seven years, which she says is around 6,000 properties. Those eligible would get around 90% of their property’s surplus value.

While taxpayers being on the hook for $109 million won’t sit well with many — if any — Minnesotans, Kramer noted that number could be much higher if the settlement isn’t approved because the current deal allowed the state to shave some money off the total. This is because plaintiffs will get their money sooner and won’t have to go through years of litigation.

While it’s unclear how many properties were impacted by the law during the nearly 90 years it was on the books, Kramer says the cost from individual cases could’ve possibly topped $1 billion, factoring in interest.

“One key reason we don’t have that (exact number of properties impacted by the property forfeiture practice) is there’s no one central state-based system that tracks this,” Kramer said, noting the counties had to comb through their data to even determine how many properties would be eligible for the proposed settlement.

As for the counties where those properties were seized and sold, Kramer noted they were just following the law, which had stood up until the Supreme Court’s ruling. She also noted that the practice wasn’t a big money-making program like it may seem, adding that many counties actually lost money on it because properties are often left in such rough shape when they’re seized.

Additionally, once counties sold the properties, they could only keep around 40%, having to give the rest to other groups outlined by the law, such as townships and school districts.

Now, if the settlement is approved, “they’ll actually have to contribute to it,” Kramer said of the counties.

She noted that counties have built up an inventory of seized properties over the past few years. As part of the deal, they’ll have to sell those properties and give the surpluses from those sales to the state, which projects to be between $25 million and $28 million, according to Kramer.

As long as lawmakers approve the settlement, Kramer says Minnesotans who are eligible for a share of the $109 million could be notified and start getting their money 12 to 15 months from now. As for those cases older than seven years, they’d likely be out of luck.

Then there’s the other prong: actually fixing the law.

Sen. Warren Limmer (R-Maple Grove) introduced a bill to update the law, which stalled in the DFL-controlled Legislature last session, but DFL lawmakers have brought forward a new bill this year to make the state law constitutional and require surpluses to be returned to claimants.

The bill’s author, Rep. Sandra Feist (DFL-New Brighton), says some of the finer points — like how soon surpluses have to be returned and what the process is when a homeowner can’t be located — are still being ironed out.

“There are many legislators who are really interested in getting this right,” Feist said, noting that lawmakers are working across the aisle on the fix.

Like the settlement legislation, that remains in committee at the Capitol.

In a statement surrounding the work underway with state leaders, a representative for Hennepin County sent the following:

“We have been working closely with the Solicitor General and Rep. Feist on this issue. We agree that this is a good resolution for all of Minnesota.”