Last week, an Illinois Appellate Court denied several school districts’ attempt to vacate a settlement agreement between the taxpayers’ attorney and the Will County State’s Attorney’s Office in a tax rate objection case. The Court ruled that absent bad faith or fraud on the part of a state’s attorney’s office, intervening taxing bodies do not have the authority to impeach a settlement agreement between tax objectors and the state’s attorney, even if that settlement agreement is the result of the state’s attorney’s office using incorrect information in arriving at the settlement.

In Taxpayers v. Weber et al., rate objections were filed for the 2010 tax year that incorrectly alleged several school districts had violated Illinois law concerning excess accumulation of funds. First, the County Clerk failed to provide notice to taxing bodies (including school districts) of the filing of the complaint. Then, before the school districts could intervene, objectors and the Will County State’s Attorney’s Office entered into a settlement agreement. When various school districts within Will County eventually became aware of the objections and settlement, they intervened and asked the Court to vacate the settlement agreement.  They argued that they did not receive notice of the objections as required and that the State’s Attorney’s Office did not adequately represent them. The trial court granted the School Districts’ motion. Objectors appealed, arguing that the trial court did not have authority to vacate a settlement agreement on the grounds that a better result could have been reached.

The Appellate Court found in favor of the objectors, holding that the school districts did not establish grounds to vacate the settlement agreement. The Court pointed to Section 23-30 of the Property Tax Code, which provides that the state’s attorney is the sole agent for all taxing bodies (at least initially) for purposes of reaching a settlement agreement on tax rate objections. The Court also noted that a state’s attorney’s office is not required to notify or seek approval from taxing bodies with respect to a proposed settlement. Further, the Court held that taxing bodies cannot overturn a settlement agreement for any other reason short of fraud or bad faith.

After determining that no such bad faith or fraud existed, the Court acknowledged that the state’s attorney used incorrect financial information when reaching an agreement with the objectors. Nonetheless, the Court noted that this does not show evidence of inadequate representation and that adequate representation does not mean perfect representation.

In a dissenting opinion, Justice Carter found that the school districts satisfied their burden by establishing that the Will County State’s Attorney unknowingly used the wrong numbers in furtherance of settlement negotiations. Justice Carter noted the fact that since the figures substantially overstated the total amounts that were available in the challenged funds, the school districts’ allegations were truly a claim of inadequate representation rather than an effort to obtain a better result. Justice Carter also found that the County Clerk failing to notify the school districts further substantiated their claim, since the school districts’ filed their petition shortly after becoming aware of the tax objection case and subsequent settlement.  

This is an unfortunate opinion for taxing bodies. State’s attorney’s offices seldom have the manpower, resources, or financial information necessary to defend all the taxing agencies in a county against the rate objections that are filed.  As a result, school districts and other taxing agencies should make every effort to be involved in such litigation prior to any settlement negotiations in order to protect their financial interests.  

(Note: Our firm was not involved in this matter)