When California brothers Gary and Jay Solnit started a limited liability company (LLC) to help their mother invest in real estate, they didn’t expect it would lead them to a legal battle with the State of Arkansas over a missing letter and $1.5 million in stolen equity.
In 2016, the brothers purchased a plot of land containing a Dollar General store in Paragould, Arkansas, through their company, BAS, LLC. The company mistakenly fell behind on property taxes in 2017 and 2018, accruing a tax debt just under $10,000.
The State made two attempts to contact the brothers about the tax deficiency, but both failed. Because the brothers never received notice, they couldn’t stop the State from taking their property and auctioning it off to satisfy the debt.
The title deed for the Arkansas property listed BAS’ mailing address as Gary’s temporary address in Tarzana, California. Although Gary contacted the title company to update the document to BAS’ actual business office, the mailing address was not corrected. The State of Arkansas sent notice to this incorrect address through certified mail, requesting a return receipt to confirm delivery. The Solnits never received the notice, and the State never received a return receipt. Then, when the State sent notice of the tax delinquency to the Paragould property, that notice was returned to the government as undelivered.
Even though both notices failed to reach the Solnits, the Arkansas Commissioner of State Lands took the property in 2021. In 2022, it sold the property to a third party for about $27,000. Even though the sale proceeds were more than double the tax deficiency, and even though the property was worth $1.5 million, the government pocketed the entire sum.
The brothers filed a lawsuit in state court, arguing that the taking and subsequent sale violated the Constitution’s guarantees of due process and just compensation. The State claimed that it had sovereign immunity and could not be held liable for violating the Solnits’ rights. After the Arkansas Supreme Court sided with the State, the brothers filed an appeal with the United States Supreme Court.
But sovereign immunity is not the silver bullet the State of Arkansas claims. Under decades of legal precedent, the government’s constitutional obligations to citizens qualify as “waivers” of sovereign immunity, meaning citizens do not have to wait for the government to give them permission to sue over a violation of their constitutional rights. These “waivers” include the government’s obligation to pay you when they take your property.
Represented at no cost by Pacific Legal Foundation, the Solnits’ petition challenges the State’s seizure of their property and argues that states are not exempt from the Constitution’s requirement that the government provide due process and just compensation for taking private property.
What’s At Stake?
- Sovereign immunity does not empower the government to ignore its constitutional responsibilities, including its responsibility to pay just compensation for taking private property.
- When using tax foreclosure proceedings to take property, the government must pay just compensation for the property’s equity.
