Horist et al v. Sudler and Company et al
Filing
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MEMORANDUM Opinion and Order Signed by the Honorable Robert W. Gettleman on 4/24/2018: Defendant NextLevel Association Solutions, Inc. d/b/a HomeWiseDocs.com's motion to dismiss 11 and defendant Sudler and Company d/b/a Sudler Property Mana gement's motion to dismiss 24 are granted. Civil Case terminated. Status hearing set for 5/3/2018 is stricken. Defendants' motion 38 to consolidate cases and plaintiffs' motion 35 to supplement are denied as moot. Mailed notice (cn)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
KEITH HORIST, JOSHUA EYMAN and
LORI EYMAN,
Plaintiff
v.
SUDLER AND COMPANY, d/b/a SUDLER
PROPERTY MANAGEMENT, HOMEWISE
SERVICE CORP., INC., and NEXTLEVEL
ASSOCIATION SOLUTIONS, INC.,
Defendant.
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Case No. 17 C 8113
Judge Robert W. Gettleman
MEMORANDUM OPINION AND ORDER
Plaintiffs Keith Horist, and Joshua and Lori Eyman, brought a five count putative class
action complaint against defendants Sudler and Company d/b/a Sudler Property Management
(“Sudler”), and HomeWise Service Corp., Inc., and Nextlevel Association Solutions, Inc. (jointly
as (“HomeWise”), alleging: (1) violations of the Illinois Consumer Fraud and Deceptive
Practices Act (“ICFA”), 815 ILCS 505/1 (Count I); (2) violations of the Illinois Condominium
Property Act, 765 ILCS 605/1 et seq. (“Condo Act”) (Count II); (3) adding and
abetting/inducement to breach fiduciary duty (Count III); (4) common law conspiracy (Count IV);
and (5) unjust enrichment (Count V). HomeWise removed the case to this court under the Class
Action Fairness Act, 28 U.S.C. § 1332(d). Sudler and HomeWise have filed separate motions to
dismiss pursuant to Fed. R. Civ. P. 12(b)(6). For the reasons stated below, those motions are
granted.
BACKGROUND
Plaintiff Horist owned a condominium unit at 400 East Ohio Street, Chicago, Illinois and
was a member of the 400 East Ohio Association. Plaintiffs Joshua and Lori Eyman owned a
condominium unit at 1515 S. Prairie Avenue, Chicago Illinois and were members of the (808)
Prairie House at Central Stations Association (the “Prairie House Association”).
Defendant Sudler is a property management company that was engaged by both the 404
East Ohio Association and the Prairie House Association to manage their operations. According
to the complaint, HomeWise contracts with property managers to provide, via the internet,
electronic copies of documents that sellers of condominium units are required by § 22.1 of the
Condo Act to provide to prospective purchasers. The complaint alleges that Sudler’s website has
a drop-down menu “for its associations’ homeowners who need ‘selling information,’” and
regardless of the association selected, Sudler’s site forwards the person seeking selling
information directly to the HomeWise internet site.
During 2017, both Horist and the Eymans contracted to sell their units. Claiming they had
no other option, each had to obtain their selling information from HomeWise. Horist paid $240,
consisting of $155 for a paid assessment letter, $80 for a § 22.1 resale certificate and a $5
convenience fee. The Eymans paid $365, consisting of $150 for a paid assessment letter, $205 for
a § 22.1 “resale disclosure package with Assoc. docs.” and a $5 convenience fee.
According to plaintiffs, HomeWise retained what plaintiffs describe as a minimal
“click-fee” and then “kicked back” the rest of its fee to Sudler. Plaintiffs claim that the
Associations indirectly benefit from this practice because it helps reduce Sudler’s management
fee.
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DISCUSSION
Sudler and HomeWise have each moved to dismiss the complaint for failure to state a
claim under Fed. R. Civ. P. 12(b)(6). Such a motion challenges the sufficiency of the complaint,
not its merits. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). The court
accepts as true all well-pleaded factual allegations and draws all reasonable inferences in
plaintiff’s favor. Sprint Spectrum, L.P. v. City of Carmel, Indiana, 361 F.3d 998, 1001 (7th Cir.
2004). The complaint must allege sufficient facts, that if true, would raise a right to relief above
the speculative level, showing that the claim is plausible on its face. Bell Atlantic Corp. v.
Twombly, 550 U.S. 549, 555 (2007). To be plausible on its face, the complaint must plead facts
sufficient for the court to draw the reasonable inference that the defendant is liable for the alleged
misconduct. Ashcroft v. Iqbal, 556 U.S. at 678 (2009).
I.
Condo Act
Section 22.1(a) of the Condo Act provides that when an individual unit owner resells the
unit, the unit “owner shall obtain from the Board of Managers and shall make available for
inspection to the prospective purchaser upon demand,” certain listed documents: (1) a copy of the
declaration, bylaws, other condominium instruments and any rules and regulations; (2) a statement
of any liens and a statement of the account of the unit including unpaid assessments and charges
due; (3) any capital expenditures anticipated by the association within the next two years; (4) the
status and amount of any reserves or replacement fund and any portion earmarked for specified
projects; (5) a statement of the association’s financial condition for the last fiscal year; (6) the
status of any pending suits or judgments in which the association is a party; (7) a statement of
insurance coverage provided to unit owners; (8) a statement that any improvement or alterations to
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the unit made by the seller are in good faith believed to be in compliance with the condominium
instruments; and (9) the identity and mailing address of the associations principal officer or of any
other officer or agent specifically designated to receive notice. These documents are commonly
referred to as the “Disclosure Documents” or § 22.1 disclosures.
The Condo Act further provides that “the principal officer of [the association] or such other
officer as is specifically designated shall furnish the above information when requested to do so in
writing and within thirty days of the request.” 765 ILCS 605/22.1(b). Finally, subsection (c)
provides that “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).
Plaintiffs argue that defendants have turned this process into a “profit center,” by causing
the associations managed by Sudler to stop providing disclosure documents, thereby effectively
requiring unit sellers to utilize HomeWise. HomeWise then charges hundreds of dollars for
providing the documents when the actual cost to do so is nominal because they are typically
provided in portable document file (“PDF”) format, and in large part are identical from seller to
seller within the same association. Therefore, according to plaintiffs, there is little to no “direct
out-of-pocket cost” to provide the documents, and defendants’ charges violate § 22.1(c).
Defendants identify a number of problems with this argument, the first of which is that the
complaint does not contain any factual allegation that defendants somehow caused the association
to stop providing disclosure documents. Nor is there any allegation that the associations refuse to
provide such documents upon request or, for that matter, if requested, directs the requester to
Sudler or HomeWise thereby abdicating their responsibilities under the Act. The closest the
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complaint comes is to allege that the association hired Sudler to manage the property, including to
provide disclosure documents, and that Sudler hired HomeWise to provide those documents
electronically. Consequently, the complaint fails to allege any facts to support plaintiffs’
argument that defendants caused the associations to stop providing documents if actually
requested in writing, or that defendants caused the associations to require plaintiffs to pay
excessive fees to defendants.
The bigger problem for plaintiffs, however, is that the Condo Act, and specifically § 22.1,
does not provide a private right of action for its enforcement. Consequently, to state a claim for
damages for violation of § 22.1(c), plaintiffs must establish an implied right of action in their
favor. They cannot.
In Illinois, “the absence of statutory language expressly authorizing a right of action does
not preclude a private cause of action under a statute.” D’Attomo v. Baumbeck, 2015 IL App.
(2nd 140865 ¶ 35 (2nd Dist.) 2015 (citing Sawyer Realty Group, Inc. v. Jarvis Corp., 89 Ill.2d 379,
386 (1982) (holding that when a statute is enacted to protect a particular class of individuals, courts
may imply a private cause of action for a violation of that statute although no express remedy has
been provided.)). The determination of whether § 22.1(c) provides a private right of action to
plaintiff requires application of a four part test. Id. ¶ 37 (citing Nikolopulos v. Balourdos, 225
Ill.App.3d 71, 77 (1st Dist. 1993). Under that test, an implied right of action exists if: (1) the
plaintiff is within the class of persons the statute is designed to protect; (2) implying a cause of
action is consistent with the underlying purpose of the statute; (3) the plaintiff’s injury is one the
statute is designed to prevent; and (4) implying a cause of action is necessary to effectuate the
purpose of the statue. Nikolopulos, 245 Ill.App.3d at 77.
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In Nikolopulos, application of these factors led the court to hold that an implied right of
action existed under § 22.1 of the Condo Act for a buyer to terminate a sales contract “within a
reasonable time after being furnished information revealing previously undisclosed material
expense.” Id. Application of the Nikolopulos court’s reasoning, applied to the instant case,
dooms plaintiffs’ claim.
First, Nikolopulos held that § 22.1 of the Act “was clearly designed to protect prospective
purchasers of condominium units.” Id. The section is designed “to prevent prospective
purchasers from buying a unit without being fully informed and satisfied with the financial
stability of the condominium as well as the management, rules and regulations which affect the
unit.” Id. Thus, it is evident that the statute is designed to protect the purchasers, not sellers like
plaintiffs. Indeed, § 22.1 contains no protection for sellers, only obligations. The language in
§22.1(c) on which plaintiffs rely, “a reasonable fee covering the direct out-of-pocket costs of
providing such information and copying may be charged by the association . . . to the unit seller for
providing such information,” is designed to relieve the association of the costs of providing the
necessary disclosures. It does not provide protection to the seller. Consequently, the court
concludes that plaintiffs are not among the class of persons the statute is designed to protect.
Nor would implying a cause of action in favor of plaintiff be consistent with the underlying
purpose of the statute, which is to protect prospective purchasers, and any injury that plaintiffs
might have incurred is not one the statute was designed to prevent. And, implying a private right
of action for plaintiffs to recover damages against defendants is simply not necessary to effectuate
the statute’s purpose of protecting prospective purchasers. Consequently, the court concludes
that plaintiff fails to state a claim under the Condo Act.
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II.
ICFA
Plaintiffs allege that defendants’ actions constitute a violation of the ICFA, which makes
unlawful any unfair method of competition and unfair or deceptive acts or practices, including use
of any deception, fraud or false pretense in the conduct of any trade or commerce. 805 ILCS
505/2. Plaintiffs claim that defendants engaged in an unfair trade practice by creating a scheme to
charge plaintiffs more than is allowed by § 22.1(c) of the Act.
To state an ICFA claim plaintiffs must allege that: (1) a deceptive act or unfair practice
occurred; (2) that defendants intended for plaintiff to rely on the deception; (3) the deception
occurred in the course of conduct involving trade or commerce; (4) plaintiffs sustained actual
damages; and (5) the damages were proximately caused by the defendants’ deception. Phil. Idem.
Ins. Co. v. Chicago Title Ins. Co., 771 F.3d 391, 402 (7th Cir. 2014).
To determine whether a practice is unfair under the ICFA, the court considers whether it
(1) violates public policy; (2) is immoral, unethical, oppressive, or unscrupulous; and (3) causes
substantial injury to consumers. Robinson v. Toyota Motor Credit Corp., 201 Ill.2d 403, 417
(2002) (citing Federal Trade Comm. v. Sperry & Hutchinson Co., 405 U.S. 233, 244 n.5 (1972).
Conduct does not need to satisfy all three prongs to be deemed unfair. Robinson, 201 Ill.2d at
418. “A practice may be unfair because of the degree to which it meets one of the criteria or
because to a lesser extent it meets all three.” Id.
Defendants’ conduct does not fall into either category (1) or (2). First, plaintiffs allege
that defendants’ scheme offends public policy because it violates the policy the legislature set out
in the Condo Act to protect sellers from excessive charges. As concluded above, however, the act
is designed to protect purchasers and the association, not sellers. Next, plaintiffs argue that
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defendants have “caused the association . . . to stop supplying disclosure documents as a means of
funneling sellers into the high-priced HomeWise system. As noted already, however, the
complaint contains no such factual allegation.
Second, although the plaintiffs allege generally that defendants’ conduct is oppressive
because plaintiffs have no reasonable alternative than to use HomeWise, that argument is based
entirely on their missing allegation that defendants have somehow caused the association to stop
providing the disclosure documents when properly asked. The complaint does not contain even
that general allegation, let alone any facts to support such a conclusion. Although plaintiffs do
not have to allege that they attempted to get their documents from their association, they must, but
have not, at least allege facts to plausibly suggest that the associations would not comply with their
obligations under the act if requested properly to do so. See Ramirez v. Smart Corp., 371 Ill.
App.3d 797, 802 (3rd Dist. 2007). Consequently, the court concludes that plaintiffs have failed to
allege an unfair practice or a violation of the ICFA.
III.
Counts III through V
In Count III, plaintiffs allege that defendants have aided or induced the associations to
violate their fiduciary duties owed to plaintiffs by allowing the defendants to overcharge them. In
Count IV, plaintiffs allege that defendants conspired to overcharge plaintiffs. Count V is a claim
for unjust enrichment. All three counts are predicated on plaintiffs’ alleging either a violation of
the Condo Act or the ICFA. Because the court has concluded that they have failed to allege those
violations, the court dismisses Counts III, IV, and V.
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CONCLUSION
For the reasons described above, defendant HomeWise’s motion to dismiss [Doc. 11] and
defendant Sudler’s motion to dismiss [24] are granted. 1
ENTER:
April 24, 2018
__________________________________________
Robert W. Gettleman
United States District Judge
1
The parties have raised several other issues, such as principal-agent liability and the voluntary
payment doctrine, which the court need not address given the ruling above.
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