Key Points

  • Michigan's class-action tolling rule ran continuously through the Wayside Church class action's dismissal and reopening, preserving the homeowners' claims.
  • Federal courts cannot substitute federal law when no state case is directly on point in Section 1983 actions.
  • Whether tolling applies to an unnamed defendant-class member depends on Michigan's notice requirement.
  • The case returns to district court to determine whether Allegan County had notice of the lawsuit before being named in 2023.
  • The ruling follows the Sixth Circuit's August decision in Perry v. St. Joseph County involving similar claims against a different Michigan county.

The Sixth Circuit vacated the dismissal of takings claims brought by Michigan homeowners who lost their properties to tax foreclosure, holding that state tolling rules kept their federal lawsuit timely despite an 11-year gap between foreclosure and filing.

A three-judge panel reversed the Western District of Michigan's ruling that the homeowners' Section 1983 claims were time-barred, finding the district court erred by applying federal law when Michigan rules governed the tolling question. The case returns to the lower court to determine whether Allegan County had sufficient notice of the class action to trigger tolling in the first place.

The decision, written by Judge Thapar and joined by Judges Moore and Hermandorfer, follows the Sixth Circuit's August ruling in Perry v. St. Joseph County and arrives amid several similar cases filed by former members of the Wayside Church class action against Michigan counties.

The underlying dispute centers on Michigan's former practice of allowing counties to keep surplus proceeds from tax foreclosure sales. Denise Thompson faced a $3,000 tax debt, but Allegan County "didn't just take what she owed," Judge Thapar wrote. "Instead, it foreclosed on her home, sold it, and kept the entire $23,500 in proceeds—turning Thompson's small debt into a large profit for the County."

Thompson and Gary and Josette Day, whose homes were foreclosed in 2013 and 2014, were unnamed members of a plaintiff class in Wayside Church v. County of Van Buren, a 2014 class action against a defendant class of Michigan counties. Allegan County was an unnamed defendant in that litigation.

The Wayside case was filed in December 2014 and dismissed in November 2015. The district court reopened it in March 2019 based on intervening precedent. Thompson and the Days opted out of the class settlement in July 2023 and filed individual suits against Allegan County in March 2024.

Allegan County argued the three-year statute of limitations had expired. Thompson and the Days countered that their membership in the Wayside class action tolled the clock for 8.5 of the 11 years between foreclosure and their individual lawsuit.

The district court sided with the county on two grounds: that the 3.5-year gap between Wayside's dismissal and reopening broke the tolling period, and that tolling could not apply until Allegan County was named as a defendant rather than remaining an unnamed class member. The county was not named until January 2023.

The Sixth Circuit rejected both conclusions. On the first question, the panel pointed to Michigan Court Rule 3.501(F)(3), which provides that when a dismissal "is superseded by a further order of the trial court," the statute of limitations "shall be deemed to have been tolled continuously from the commencement of the action."

The 2015 dismissal would have restarted the clock, Judge Thapar wrote, "[b]ut the district court's 2019 reopening of the lawsuit (a 'further order of the trial court') 'superseded' the dismissal." The tolling therefore ran continuously for 8.5 years from Wayside's filing to when the plaintiffs opted out.

On the second question—whether tolling applied to claims against an unnamed defendant-class member—the panel found the district court erred by defaulting to federal law when no Michigan case addressed the issue directly. "But when there's no state case on point, that doesn't mean federal courts can substitute in federal law," Judge Thapar wrote.

That principle carries particular force in Section 1983 cases, the panel noted, because Congress requires courts to apply state law when federal law is silent. The Michigan Supreme Court has held that tolling can apply to a class described in a complaint even if Michigan courts could not actually certify that class, the opinion observed.

Under Michigan caselaw, class-action tolling requires that defendants have "notice of the class member's claim and the number and generic identities of the potential plaintiffs," the panel wrote, citing the Michigan Supreme Court's decision in Cowles v. Bank West. The defendant need not know every party's name "as long as [it's] generally aware of the claims and parties it would face."

The Sixth Circuit predicted Michigan courts would apply the same notice rule to members of a putative defendant class. But no defendant class was certified in Wayside, and the plaintiffs eventually amended their complaint to name each county individually. Whether Allegan County had notice before it was named in 2023 is "both unclear and potentially dispositive," Judge Thapar wrote.

The panel followed the course charted in its August Perry decision, vacating and remanding for the district court to determine the notice question. On remand, the parties can brief whether Allegan County had notice under Michigan's rule and identify relevant exhibits or records.

Sherry Cunningham, one of the original plaintiffs, was dismissed from the appeal. The case is Cunningham v. Allegan County, No. 26-1060.