Case 2:24-cv-02282-MSN-atc Document 1 Filed 04/30/24 Page 1 of 12 PageID 1

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TENNESSEE
______________________________________________________________________________

SHELBY COUNTY, TENNESSEE, )

a Tennessee municipality, )
)
)
Plaintiff, )
) No.
v. )
)
ARCHON INFORMATION )
SYSTEMS, LLC, D/B/A )
CIVICSOURCE, ) JURY DEMANDED
)
)
)
Defendant. )

COMPLAINT

COMES NOW, the Plaintiff, SHELBY COUNTY, TENNESSEE (hereinafter

“Shelby County” or “Plaintiff”), by and through counsel of record, and files this

Complaint for Damages against Archon Information Systems, L.L.C., D/B/A Civic

Source (hereinafter “Defendant”), and for cause of action would show this Honorable

Court the following:

INTRODUCTION

This is an action for the return of funds owed to Shelby County, Tennessee by

Defendant. Shelby County, via its Chancery Court Clerk and Master and via its

Trustee, retained Defendant to facilitate an online auction of delinquent tax

properties in October 2023. Defendant facilitated the sale, sold properties for the
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benefit of Shelby County, but ever since that date has not returned the proceeds of

those sales to Shelby County. After continuous demands from Shelby County, and

after repeated assurances by Defendant that the funds would be repaid by dates-

certain that have since come and gone, Shelby County is now left with no choice but

to file suit against the Defendant to collect the funds owed.

PARTIES

1. Plaintiff is a Tennessee municipality.

2. Defendant Archon Information Systems, LLC (hereinafter “Archon”) is a

Delaware limited liability company, doing business in Orleans Parash, New

Orleans, Louisiana, and also does business as CivicSource.

3. Archon provides services for local municipalities via the collection and

management of taxes.

4. Archon does business as and/or via CivicSource and CivicSource.com as an

electronic property auctioning service.

JURISDICTION AND VENUE

5. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332 as the

matter in controversy in this civil action exceeds the sum or value of $75,000

and is between citizens/entities of Tennessee and Louisiana.

6. Venue is proper in the Western District of Tennessee pursuant to 28 U.S.C. §

1391 as this is the judicial district in which a substantial part of the events or

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omissions giving rise to the claims occurred, and a substantial part of property

that is the subject of this action is situated in this judicial district.

FACTS

7. Shelby County Government collects property taxes from properties located in

Shelby County, Tennessee. When properties are found to be delinquent, after

appropriate procedural steps are taken, the Shelby County Chancery Court

Clerk and Master, in conjunction with the Shelby County Trustee, facilitates

a sale of those delinquent properties (hereinafter “tax sales”) in order to

recuperate as much of the delinquent tax debts as possible for the benefit of

Shelby County and its citizens.

8. In 2015, Shelby County contracted with Defendant Archon Information

Systems, L.L.C. d/b/a CivicSource (hereinafter “CivicSource”), which provides

an online auction venue for municipalities to auction delinquent tax properties.

9. Under the terms of this contract, CivicSource would facilitate online auctions

for Shelby County at times when Shelby County was in a position to sell

delinquent tax properties. In exchange for this service, CivicSource would be

entitled to an agreed-upon monetary fee (paid per parcel sold at the auction),

to be paid to CivicSource by Shelby County.

10. That contract has been informally continued between CivicSource and Shelby

County each year since 2015, and Shelby County has continued to rely on

CivicSource and to pay CivicSource an agreed-upon fee for its online auction

services of delinquent tax sales since 2015.

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11. On September 5, 2023, on the motion of the Shelby County Trustee, the Shelby

County Chancery Court Part III entered a Decree confirming the Report of the

Shelby County Clerk and Master and Ordering Sale for Tax Sale # 2001

(hereinafter “TS2001”).

12. As had been done in the past, Shelby County relied on CivicSource to facilitate

an online auction of the properties to be sold in TS2001.

13. On October 24, 2023, the electronic auction for TS2001 opened on

CivicSource.com.

14. However, on or about October 24 and October 25, 2023, staff for the Shelby

County Chancery Court discovered that inaccurate tax delinquency data had

been provided regarding thirty-six (36) properties previously believed to owe

City of Memphis taxes. Thus, those thirty-six (36) properties were not

appropriately the subject of a tax sale.

15. On or about October 25, 2023, the Shelby County Trustee filed a Notice of

Voluntary Dismissal regarding the thirty-six (36) properties.

16. The same day, Chancery Court staff alerted CivicSource Director of Operations

Garrett Staples of the issue, and specifically about the need for the removal of

the thirty-six (36) properties from the electronic auction once a new Chancery

Court Order was entered.

17. On October 26, 2023, at the request of the Shelby County Trustee, the Shelby

County Chancery Court entered a Second Amended and Supplemental Decree

Ordering Sale, and an Order of Voluntary Dismissal as to the thirty-six (36)

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properties, removing those properties from the group of properties to be sold at

auction pending resolution of the City of Memphis’s tax calculation issues.

18. Later, on October 26, 2023, Chancery Court staff forwarded a copy of the

Court’s Order to Garrett Staples and directed him to remove the thirty-six (36)

properties from the sale and from the auction, directed him to refuse to take

any bids on them, and directed him to return any bid funds already produced

by bidders to those bidders.

19. Mr. Staples was also asked when Shelby County could expect the return of the

tax proceeds for the correctly-calculated delinquent tax properties that were

sold during the TS2001 auction.

20. The sale proceeds for the correctly-calculated delinquent tax properties sold

via CivicSource.com totaled $1,233,818.03.

21. It was also later determined that four (4) of the thirty-six (36) properties not

to be sold were also sold in the auction for the respective amounts of

$45,590.98; $50,308.37; $78,913.82; and $91,456.37.

22. On November 16, 2023, Chancery Court personnel emailed Mr. Staples and

requested an update as to the results of the sale and an expected arrival of the

funds from the auction. CivicSource was also to refund the respective amounts

owed for the four (4) properties that should not have been put up for auction.

23. On November 20, 2023, Mr. Staples responded to the November 16, 2023

request and advised that he would inquire with CivicSource’s accounting

department regarding the funds due to Plaintiff.

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24. On or about November 29 and/or November 30, 2023, Chancery Court

personnel contacted CivicSource Chief Operating Officer Dan Rebeor to

request an update on the auction funds. Mr. Rebeor responded, stating that

CivicSource would provide the results of the sale on December 1, 2023, and

that wire instructions for the funds would follow.

25. On December 1, 2023, although Mr. Staples did produce the results of the sale,

he advised that COO Rebeor was needed in order to verify the status of the

wire transfer of the funds, but that Mr. Rebeor is out with an illness.

26. After more requests by Chancery Court personnel and Trustee personnel over

the next several days, on or about December 12 and /or 13, 2023, Mr. Rebeor

advised the Trustee that checks to Shelby County and all bidders entitled to

refunds had been mailed via FedEx.

27. On December 13, 2023, the Trustee received a check via FedEx for the tax sale

amounts. The Trustee forwarded the check to the Chancery Court Clerk and

Master. The check was from CivicSource and made payable to Shelby County,

was for the amount of $1,233,818, and in the memo line stated “10/24/23 Tax

Sale Proceeds.”

28. However, on December 18, 2023, CivicSource Chief Operating Officer Bryan

Barrios emailed the Trustee and stated, in part:

Ms. Newman
I am writing in regard to the funds due to Shelby County from the sale
conducted in late October, which I was briefed on earlier today.

The funds due the County are $1,233,818.03 and a check in this amount
was sent last week. Unfortunately, due to an accounting error, the funds

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were not placed in the proper clearing account before the check was
presented. Our bank brought the mistake to our attention this morning,
and we placed a stop payment on the check. Our accounting team is
working with our bank to rectify this matter, and as such, we anticipate
transmitting payment mid-week, but no later than week’s end.

Along with a billion dollars remitted to other collectors, we’ve collected

and remitted nearly $63M to Shelby County since 2016, and this will be
no different. Please accept my sincere apology. Most assuredly, this is
the first, only and last time anything like this has or will ever occur (as
I am quite crossed at the moment) . . . .

29. Contrary to his assertion that payment would be transmitted by no later than

week’s end, no payment was transmitted.

30. Upon information and belief, the checks for the bidders to whom refunds were

owed were also either not issued, or those bidders were issued refund checks

that were then also placed on stop payment.

31. Over the next several weeks, personnel from the Trustee’s Office and Chancery

Court continued to contact Mr. Barrios and CivicSource regarding the funds,

but the funds were not transmitted.

32. As of the date of this filing, neither Archon nor CivicSource has transmitted to

Shelby County Government the funds owed to Shelby County in the amount of

$1,233,818.03.

33. As of the date of this filing, neither Archon nor CivicSource has transmitted

to Shelby County Government the refunds owed for the four (4)

inadvertently-sold properties with fund values of $45,590.98; $50,308.37;

$78,913.82; and $91,456.37.

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34. Upon information and belief, as of the date of this filing, neither Archon nor

CivicSource has transmitted the refunds owed for the four (4) inadvertently-

sold properties with fund values of $ 45,590.98; $50,308.37; $78,913.82; and

$91,456.37 to the bidders of those properties, either.

CAUSES OF ACTION

COUNT I - BREACH OF CONTRACT/QUANTUM MERUIT

35. Paragraphs 1 through 34 of Plaintiff’s Complaint are hereby alleged and

incorporated as though fully set forth herein.

36. A valid and enforceable informal contract existed between Plaintiff and

Defendant, whereby Defendant would sell delinquent tax properties on behalf

of Plaintiff in exchange for a fee, and then transmit the proceeds from that sale

to Plaintiff.

37. Defendant breached the contract by selling those delinquent tax properties for

a fee to be paid to Defendant by Plaintiff, receiving those funds to which

Plaintiff was entitled in the amount of $1,233,818.03, and then not producing

those funds to Plaintiff.

38. Defendant admitted, via CEO Barrios, that Shelby County is entitled to the

return of these funds.

39. Defendant further breached the contract by receiving funds from the four (4)

bidders to whom properties should not have been sold in the respective

amounts of $45,590.98; $50,308.37; $78,913.82; and $91,456.37, but by not

returning those funds to those four (4) respective bidders nor transmitting

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those funds to Plaintiff so that Plaintiff can return them to those four (4)

respective bidders.

40. Plaintiff suffered, and continues to suffer, pecuniary harm as the result of

Defendant’s breach.

41. It would be unjust for Defendant to retain these funds, to which Plaintiff is

entitled.

COUNT II – UNJUST ENRICHMENT

42. Paragraphs 1 through 41 of Plaintiff’s Complaint are hereby alleged and

incorporated as though fully set forth herein.

43. Plaintiff conferred benefits upon Defendant by authorizing the sale by

Defendant of numerous Shelby County delinquent tax properties, each worth

monetary sums.

44. Defendant realized and appreciated these benefits by implementing that sale

and receiving monetary proceeds from bidders in the sale.

45. Defendant has retained these benefits, which are above and beyond the

reasonable and agreed-upon fee to which Defendant was entitled to be paid by

Plaintiff for Defendant’s services, and which are in fact benefits to which

Shelby County is entitled, and this retention is inequitable.

COUNT III – NEGLIGENCE

46. Paragraphs 1 through 45 of Plaintiff’s Complaint are hereby alleged and

incorporated as though fully set forth herein.

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47. Defendant received the funds from the tax sale and had a duty to protect and

preserve those funds to be transmitted to Plaintiff.

48. Defendant breached its duty of care as to those funds, and now cannot and/or

has not provide them to Plaintiff.

49. Defendant’s breach of this duty of care was the direct and proximate cause of

Plaintiff’s current lack of possession of those funds.

50. Alternatively, Defendant is liable under the doctrine of res ipsa loquitur for its

failure to preserve and/or account for the funds owed to Plaintiff.

COUNT IV – BREACH OF FIDUCIARY DUTY

51. Paragraphs 1 through 50 of Plaintiff’s Complaint are hereby alleged and

incorporated as though fully set forth herein.

52. Defendant engaged in a fiduciary relationship with Plaintiff by taking

responsibility for the sale of Plaintiff’s delinquent tax properties, of collecting

the payments for those sales, protecting and returning to Plaintiff those

payments.

53. Defendant breached its fiduciary duty to Plaintiff by failing to protect or return

to Plaintiff those payments.

54. Plaintiff has suffered, and continues to suffer, monetary injury as a result of

Defendant’s breach.

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DAMAGES
1. As a direct and proximate result of Defendant’s breach, Plaintiff seeks

general damages from the Defendant for the losses sustained by Plaintiff as a result

of the breach, including, but not limited to:

a. All funds owed to Shelby County ($1,233,818.03) and to refund bidders

(collectively $266,269.54) that Defendant received in relationship to

TS2001;

b. Any other damages to be proven at trial.

WHEREFORE, Plaintiff requests that the Court and/or a Jury, as appropriate, find:

1. That Defendant breached its obligations under the contract with

Plaintiff;

2. That Plaintiff reasonably and detrimentally relied upon Defendant’s

promises;

3. That Defendant was unjustly enriched to the detriment of Plaintiff;

4. That a constructive trust should be imposed for the benefit of Plaintiff

pending the return of all outstanding funds and other costs;

5. That costs of suit be awarded, including reasonable attorneys’ fees; and

6. Any that Plaintiff receive any other interest, expenses, and further relief

as the Court deems just and proper.

PLAINTIFF DEMANDS A JURY TRIAL.

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Respectfully submitted,

/s/ E. Lee Whitwell

E. Lee Whitwell (#33622)
Raven Chandler (#38975)
Shelby County Attorney’s Office
160 North Main Street, Suite 950
Memphis, TN 38103
(901) 222-2100
[email protected]
[email protected]

Attorneys for Plaintiff Shelby County

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