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Frosh letter could help foes of PG ban on out-of-state tax sale bidders

A 2017 letter from Maryland’s attorney general to the governor could undermine the state’s defense of the constitutionality of a law requiring bidders on tax-delinquent Prince George’s County properties to be county residents.

In the advisory letter, Attorney General Brian E. Frosh told Gov. Larry Hogan of the “significant risk” that the then-legislative proposal would violate the federal Constitution’s prohibition on statutory discrimination against residents of other states.

Attorneys for a would-be out-of-state buyer of property in Prince George’s County have seized on the letter, telling a federal appeals court it belies the state’s argument that excluding non-Maryland bidders at tax-sale auctions is constitutionally justified because local buyers have a stronger interest in revitalizing the county’s neighborhoods.

The state pressed its revitalization argument successfully in U.S. District Court and has reiterated it in papers filed with the 4th U.S. Circuit Court of Appeals in response to the claim by attorneys Brian T. Gallagher and N. Tucker Meneely that the law is unconstitutional.

In their 4th Circuit reply to the state, Gallagher and Meneely stated on Dec. 31 that Frosh’s letter revealed that the state’s asserted justification for the law was “merely hypothesizing” by the attorney general.

In his letter to Hogan, Frosh wrote that a constitutional justification for excluding out-of-state bidders “could be to improve neighborhoods, promote homeownership, and reduce blight caused by vacant and abandoned properties” through local ownership.

Gallagher and Meneely, pressing the appeal of would-be purchaser and Illinois resident Geoffrey Polk, told the 4th Circuit that the attorney general essentially conceded in the letter that the asserted justification was lacking a sound basis.

“(I)t is unclear how the bill relates to these interests, given that the percentage of properties sold at tax sales is already quite high,” Frosh wrote to Hogan.

“Moreover, there is not a requirement that purchasers of property at the limited auction actually live in the homes purchased,” Frosh added. “Thus, differentiating between properties in Prince George’s County, and between those allowed to participate in the limited auction and those who cannot, risks be(ing) viewed negatively by a reviewing court as creating an improper preference.”

Frosh’s letter was among the litigation-related documents Frosh and Polk’s attorneys submitted to the 4th Circuit in a joint appendix.

Frosh’s advisory letter to Hogan, dated April 28, 2017, concluded that, “despite the foregoing concerns, because a reviewing court would give the state a great deal of discretion to determine whether classifications are rationally related to a legitimate governmental interest, we cannot conclude that (the bill) is clearly unconstitutional on its face.”

The bill became law without the governor’s signature on May 27, 2017, and went into effect on July 1, 2017.

The law permits Prince George’s County to hold a “limited” tax sale auction for its county residents as well as for military veterans and federal and county employees. The statute also contains an anti-straw-purchaser provision barring a county resident, veteran or county employee from successfully bidding on the property and assigning the sale certificate to a nonresident.

Properties not sold at the limited auction are available to be bid on by all would-be purchasers, regardless of their residency, at a general auction.

Polk challenged the law’s constitutionality in Prince George’s County Circuit Court in August 2019 after being barred from participating in a limited auction the previous May.

He was joined in the lawsuit by fellow plaintiff Chris Brusznicki, a veteran who had a winning bid at a limited auction but was barred from assigning the certificate to Thornton Mellon LLC, a non-Prince George’s County firm. Thornton Mellon is also a plaintiff.

The county and state had the case moved to U.S. District Court based on the federal constitutional issue at stake.

U.S. District Judge Peter J. Messitte ruled in May that the law governing tax-sale auctions of property in Prince George’s does not violate the constitutional provision guaranteeing state residents the same “privileges and immunities” enjoyed by residents of other states. Messitte, who sits in the Greenbelt federal courthouse, said the statute’s discrimination against non-Marylanders was trumped by the state’s “substantial interest” in combating community blight by favoring investment in local property by local residents.

The plaintiffs subsequently appealed to the 4th Circuit.

Neither Meneely, an attorney for the plaintiffs, nor Frosh’s office would comment on the case.

Meneely and his co-counsel, Gallagher, are with Council, Baradel, Kosmerl & Nolan PA in Annapolis.

The 4th Circuit has not stated when it will rule in the appeal, Chris Brusznicki et al. v. Prince George’s County et al., No. 21-1621.