This putative class action before the Seventh Circuit Court of Appeals presents the same legal issues involved in the pending Friedman v. Lieberman Management Services case in the Illinois appellate court, in which CAI – Illinois Chapter submitted an amicus curiae brief in support of the defendant property manager. Horist differs from Friedman in the sense that it pursues not only the property management company for an alleged violation of section 22.1 of the Illinois Condominium Property Act, 765 ILCS 605/1 et seq. (the “Condo Act"), but also the document services company involved in facilitating the transactions with condominium sellers to provide them with certain disclosure documents that sellers provide to prospective buyers.
Both the property management company, Sudler & Company (“Sudler"), and the document services company, NextLevel Association Solutions, Inc. doing business as HomeWiseDocs.com (“HomeWise"), achieved dismissal of the plaintiffs' complaint in the district court claiming plaintiffs failed to present any legally viable cause of action. Both defendants are members of CAI. Plaintiffs have now appealed to the Seventh Circuit, seeking reversal of the dismissal of their claims.
The Condo Act allows sellers of condominium units to obtain from their condominium association board certain documents and information regarding the condominium and make those documents “available for inspection to the prospective purchaser, upon demand." Section 22.1 requires that the association provide such information to a seller within 30 days of a written request. The statute enables the association to recoup its costs through language stating “[a] reasonable fee covering the direct out-of-pocket cost of providing such information and copying may be charged by the association or its Board of Managers to the unit seller for providing such information." 765 ILCS 605/22.1(c). The statute makes no reference to property management companies or document processing companies. Yet, plaintiffs in this case alleged that the statute prohibits both property management companies and document processing companies from charging any fees exceeding their own costs for providing disclosure documents ordered by the sellers directly from these companies. Plaintiffs alleged various causes of action based on this theory, including violation of the Condo Act, violation of the Illinois Consumer Fraud and Deceptive Practices Act, aiding and abetting/inducement to breach fiduciary duty, common law conspiracy, and unjust enrichment.
Consistent with the arguments of the CAI – Illinois Chapter in the Friedman case, these defendants argued to the trial court that the statute does not prohibit defendants from charging for their services in providing disclosure documents in their businesses; no cause of action can be implied from the subject provision of the Condo Act; and plaintiffs' proposed cause of action would impair the public policy of the Condo Act of expeditiously providing buyers disclosure information. Judge Robert Gettleman of the Northern District of Illinois agreed, issuing a Memorandum Opinion and Order on April 24, 2018, that dismissed all claims with prejudice. See Horist v. Sudler & Co., 17 C 8113, 2018 WL 1920113 (N.D. Ill. Apr. 24, 2018).
Judge Gettleman held that the subject language of section 22.1 did not provide a private cause of action, and no such cause of action could be implied given the statutory intent to provide full disclosure to buyers and to allow associations to recoup their costs.
Counsel for Sudler in this action also represents Lieberman Management Services, Inc. (“Lieberman") in a near-identical putative class action pending in state court. Following an adverse ruling by the trial court that found that section 22.1 did allow a cause of action against a management company, the trial court certified the issue for interlocutory appeal, and the Illinois First District Appellate Court accepted the appeal. Lieberman requested amicus support from CAI, and the CAI Board of Trustees approved the filing of an amicus brief in that case. A copy of that brief is included in this submission. The appellate court recently held oral arguments in that appeal, and a decision is expected in the next few months.
Status: 7th Circuit Opinion 10/29/2019
Brief Author: Gabriella Comstock, Esq. CCAL, of Keough Moody in Chicago and Phil Calabrese, Esq. of Porter Wright in Cleveland
CAI Amicus Review Panel: Mr. Robert Diamond, Esq., Chair of Amicus Committee, Mr. Edmund Allcock, Esq. (MA), Ms. Karyn Kennedy Branco, Esq. (NJ), Ms. Mary Howe ll, Esq. (CA), and Mr. Steve Sugarman, Esq. (PA)