Dykema Authored Amicus Arguments Adopted in Unanimous U.S. Supreme Court Decision on Property Tax Foreclosures

Dykema, a leading national law firm, successfully represented a coalition of Michigan local government organizations in a unanimous U.S. Supreme Court decision affirming that the Constitution does not require states to compensate former property owners based on the fair market value of property sold through a tax foreclosure. In Pung v. Isabella County, the Court adopted arguments advanced in Dykema’s amicus curiae brief, preserving longstanding state and local property tax foreclosure and rejecting a constitutional rule that could have required sweeping changes to tax administration nationwide.

Dykema’s Appellate Team represented the Michigan Association of Counties (MAC), the Michigan Municipal League (MML), the Michigan Townships Association (MTA), and the Michigan Association of County Treasurers (MACT) as amici curiae in support of Isabella County, Michigan.

The Court unanimously held that the proper measure of “just compensation” under the Fifth Amendment is the amount realized through a fairly conducted tax foreclosure sale—not a property’s hypothetical fair market value—and rejected claims that the process violated the Eighth Amendment’s Excessive Fines Clause. The Court found that in a situation like Pung, where the property owner had years to take steps and avoid foreclosure, the auction sale price is “just” compensation under the Constitution. This ruling allows state and local governments to continue the established and fair practice of returning to former property interest holders any sales proceeds in excess of taxes owed.

In its amicus brief, Dykema’s Appellate Team argued that expanding the Court’s 2023 decision in Tyler v. Hennepin County into a nationwide fair market value requirement would improperly federalize state property tax systems, undermine legislative authority, generate extensive litigation, and disrupt the administrability and finality essential to state and local tax collection. The Court’s opinion adopted those core principles, concluding that neither history nor precedent supports imposing such a constitutional mandate and recognizing the significant financial burdens such a rule would place on state and local governments–along with taxpayers across the country, who pay their property taxes to fund schools, public safety, public health, roads, and local services.

“This decision provides important clarity for states and local governments that rely on established property tax systems to fund essential public services,” said Ted Seitz, a Member in Dykema’s Lansing office and counsel of record for the amici. “The Court recognized that Tyler protected a property owner’s right to surplus proceeds without creating a constitutional requirement to pay fair market value following a tax foreclosure sale. We’re proud to have helped present arguments that the Court ultimately adopted.”

The Court also recognized the practical consequences of the rule proposed by the petitioner, concluding that requiring governments to pay fair market value after every tax foreclosure sale could make tax sales impractical as a debt-collection mechanism and fundamentally alter longstanding state and local financial systems.

The decision marks another significant appellate achievement for Dykema’s nationally recognized Appellate and Critical Motions Practice, which regularly represents clients in high-stakes appeals and constitutional litigation before state supreme courts, federal courts of appeals, and the Supreme Court of the United States.

The Dykema team was led by Ted Seitz and Chantel L. Febus, with James Azadian, Andrew Hussey, Monika Harris, and David Ter-Petrosyan serving on the core team.

About the Amici

The amicus curiae brief was submitted by Dykema on behalf of the Michigan Association of Counties (MAC), the Michigan Municipal League (MML), the Michigan Townships Association (MTA), and the Michigan Association of County Treasurers (MACT) in support of Respondent Isabella County, Michigan, in the pending U.S. Supreme Court case Pung v. Isabella County.

MAC is a statewide nonprofit association that consists of 83 member Michigan Counties dedicated to representing the public policy interests of Michigan’s counties and their elected commissioners. MML is a nonprofit corporation composed of more than 520 member cities and villages, empowering local governments to effectively serve their constituents by developing unified policies on municipal issues. MTA is a nonprofit corporation consisting of more than 1,230 member townships that provides education, information, and guidance to township officials to promote the efficient and knowledgeable administration of township government services under state law, including the assessing and collecting of taxes. MACT is a nonprofit corporation with members including the elected treasurers of each of Michigan’s 83 counties, who are tasked with working with interest holders to avoid foreclosure for failure to pay property taxes.