Supreme Court overturns Chancery Court ruling on attorney fees in property reassessment suit

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In a rare reversal of a Chancery Court decision, The Delaware Supreme Court overturned an award of nearly $1.5 million in attorney’s fees for the lawsuit that led to property tax reassessment in Delaware. The award had been appealed by the state’s three counties.

The decision, written by Justice Karen L. Valihura  said groups that filed the lawsuit leading to the reassessment could not prove that the benefits of the reassessment represented an exception to the “American Rule.” Over the centuries, exceptions to the rule have made their way into state statute books and even through federal legislation.

The rule, which came out of a U.S. Supreme Court decision in the late 1700s, requires those filing lawsuits to pay legal costs. The state’s high court did uphold the award of less than $75,000 for related expenses.

Valihura cited Delaware case law related to the application of the American Rule. Lawyers for plaintiffs had argued that the benefits to public education from the ruling outweighed the use of the rule.

However, contrary to popular belief, reassessments are designed to be revenue neutral, with some property owners paying more and others less.

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A coalition of groups filing the suit argued in Chancery Court stated that the lack of regular reassessments of properties produced inequities that hurt school district property tax revenues, especially in older lower income areas. Reassessments had not taken place in decades in the state.

As a result, fast-growing areas, such as Middletown or new development in Sussex County benefitted school districts, thanks to more recent assessments, plaintiffs argued.

Chancery Court ruled that the lack of reassessments in the three counties led to inequities The counties, while disagreeing with the finding, settled the case by launching property reassessments that are currently underway. Legislation now requires reassessments on a regular basis.

New Castle County Executive and candidate for governor Matt Meyer issued the following statement.

“We are proud that we just saved taxpayers $1.48 million, a substantial portion of which would have been paid to out of state New York lawyers. This decision, from Delaware’s highest court, means countless public funds will be at considerably less risk in future lawsuits against towns, cities, counties and local governments across Delaware.”

A copy of the ruling is below.

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