Freed v. Thomas (2020)

Citation: 976 F.3d 729 (6th Cir. 2020) · Court: U.S. Court of Appeals for the Sixth Circuit, No. 18-2312 · Argued: May 9, 2019 · Decided: Sept. 30, 2020 · Panel: Siler, Gibbons, Larsen (per the panel opinion)

The decision that cleared the procedural path to federal court for Michigan “home equity theft” takings claims, holding that neither the Tax Injunction Act nor the doctrine of comity bars a former owner from suing in federal court to recover the surplus equity kept by a county after a tax-foreclosure sale. It was decided on jurisdictional grounds only; the merits later resolved in the owners’ favor after tyler-v-hennepin-county.

Facts

Donald Freed owed $735.43 in property taxes on a home valued at about $97,000. With administrative expenses, costs, and interest, the amount grew to $1,109.06. Under Michigan's General Property Tax Act (GPTA), the State and Gratiot County foreclosed and sold the property at public auction to a third party for $42,000. Freed received nothing — he lost his home and all of its equity. He sued under 42 U.S.C. § 1983, alleging an uncompensated taking under the Fifth Amendment and an excessive fine under the Eighth Amendment.

The district court, though calling the scheme “unconscionable,” sua sponte dismissed the suit for lack of subject-matter jurisdiction, reasoning that the Tax Injunction Act (TIA) and principles of comity barred a federal court from hearing it.

Holding

“We do not address the merits of Freed’s claims. We hold only that neither the Tax Injunction Act … nor the related doctrine of comity forestall Freed’s suit from proceeding in federal court.”

The Sixth Circuit reversed and remanded. Neither the TIA nor comity deprived the federal court of jurisdiction, because Freed was not trying to avoid paying taxes or to enjoin tax collection — he sought only the surplus equity remaining after his tax debt was satisfied.

Reasoning

• The TIA does not bar a suit for surplus equity. The Act prevents federal courts from enjoining, suspending, or restraining the assessment, levy, or collection of state taxes. Freed’s claim targets funds in excess of the ~$1,100 tax debt. Sale proceeds above the tax owed “are not taxes or tax proceeds”; recovering them neither stops collection nor removes any tax money from the State’s coffers.
• Comity does not require abstention. The comity doctrine counsels federal abstention from interfering with state tax administration, but Freed’s suit does not interfere with assessment or collection — it seeks return of surplus property after collection is complete.
• Wayside Church dictum is not binding. The panel construed the contrary TIA / comity discussion in Wayside Church v. Van Buren County, 847 F.3d 812 (6th Cir. 2017), as persuasive dictum rather than holding, freeing it to decide the jurisdictional question afresh.

Practical impact

• Freed removed the jurisdictional gatekeeping that had funneled equity-theft claims into hostile state forums. It is the procedural companion to the substantive rule of tyler-v-hennepin-county: Tyler establishes the right to surplus; Freed establishes that the federal courthouse door is open to enforce it under § 1983.
• For surplus-recovery operators and counsel in the Sixth Circuit (Michigan, Ohio, Kentucky, Tennessee), Freed supports a federal § 1983 / inverse-condemnation theory for retained surplus without first exhausting state tax remedies. See surplus-funds and third-party-recovery-rules.
• On remand and in subsequent proceedings, Freed’s takings claim was vindicated following Tyler; the 2020 opinion itself decided only jurisdiction.

Good-law status

Still good law. The 2020 jurisdictional holding (TIA and comity do not bar the suit) has not been overruled and is reinforced by Tyler v. Hennepin County, 598 U.S. 631 (2023), which confirmed the underlying takings theory. Later Sixth Circuit proceedings in the same litigation address remedy and damages, not the 2020 jurisdictional ruling.

Related authorities

• tyler-v-hennepin-county — Supreme Court confirmation that retaining surplus is an unconstitutional taking.
• united-states-v-lawton-1884 — surplus belongs to the owner as a constitutional matter.
• nelson-v-new-york-city-1956 — no taking where a surplus-recovery procedure exists and is not used (distinguished by Tyler).

Applies in →

Binding in the Sixth Circuit: michigan, ohio, kentucky, tennessee. Persuasive elsewhere on the TIA / comity question for federal surplus takings suits.

Legal information, not legal advice. This page summarizes a court decision for educational purposes and does not create an attorney-client relationship. Verify against the primary opinion and consult a licensed attorney in the relevant jurisdiction before acting. Last verified 2026-06-02.