Murphy et al v. Foster/Premier, Inc. et al

Filing 57

MEMORANDUM Opinion and Order. Signed by the Honorable Manish S. Shah on 7/16/2018: Defendants' motions to dismiss 11 and 25 are granted. The complaint is dismissed without prejudice, and a status hearing is set for August 8, 2018 at 9:30 a.m. to discuss whether to stay further proceedings in light of the appeals in Horist and Friedman. [For further detail see attached order.] Notices mailed. (psm, )

Case: 1:17-cv-08114 Document #: 57 Filed: 07/16/18 Page 1 of 13 PageID #:454

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JOHN MURPHY, CECIL MATHEW, and
NIRUPA MATHEW,
Plaintiffs,

No. 17 CV 8114

v.

Judge Manish S. Shah

FOSTER PREMIER, INC., HOMEWISE
SERVICE CORP., INC., and NEXTLEVEL
ASSOC. SOLUTIONS, INC.,
Defendants.*
MEMORANDUM OPINION AND ORDER
Illinois law regulates resales of condos and similar buildings and ensures
that prospective buyers have access to certain documents. Building associations are
required to make these documents available to prospective purchasers—either
directly or through the unit seller, depending on the type of building. The
associations managing plaintiffs’ buildings delegated their property-management
duties to defendant Foster Premier. Foster Premier, in turn, hired defendant
HomeWise to provide unit sellers with the disclosure documents. When plaintiffs
John Murphy and Cecil and Nirupa Mathew decided to sell their units, they visited
Foster Premier’s website to obtain the necessary documents. Foster Premier’s
website immediately redirected them to HomeWise’s website, where plaintiffs paid

The notice of removal that generated the caption used by the clerk’s office spelled
plaintiffs’ last name “Matthew,” but plaintiffs’ complaint and filings spell it “Mathew.” The
caption also refers to defendant Foster/Premier, Inc., but that defendant refers to itself as
Foster Premier, Inc.

*

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for electronic copies of the documents. Plaintiffs brought this lawsuit, alleging that
the fees HomeWise charged were excessive and in violation of Illinois statutory and
common law. Defendants move to dismiss. For the reasons stated below, their
motions are granted.
I.

Legal Standards
To survive a motion to dismiss under Federal Rule of Civil Procedure

12(b)(6), a complaint must contain factual allegations that plausibly suggest a right
to relief. Ashcroft v. Iqbal, 556 U.S. 662, 677–78 (2009). The court must construe all
factual allegations as true and draw all reasonable inferences in the plaintiff's
favor, but the court need not accept legal conclusions or conclusory allegations. Id.
at 678–79.
II.

Background
Plaintiff John Murphy owned a condo unit and plaintiffs Cecil and Nirupa

Mathew owned a unit in a common interest community.1 [1-1] ¶¶ 11, 15.2 Defendant
Foster Premier, a property-management company, agreed to manage the building
associations’ operations and take over the associations’ disclosure obligations. Id.
¶ 16. Foster Premier then contracted with defendant HomeWise to supply required
documents to unit sellers. Id. ¶ 17. A drop-down menu on Foster Premier’s website
Plaintiffs accidentally alleged in ¶ 14 of the complaint that the Mathews owned a
condominium unit. They clarify in their response that the Mathews owned a unit in a
common interest community, which is consistent with other allegations in the complaint. A
common interest community is defined as “real estate other than a condominium or
cooperative with respect to which any person by virtue of his or her ownership of a partial
interest or a unit therein is obligated to pay for the maintenance, improvement, [etc.] . . .
which is administered by an association.” 765 ILCS 160/1-5.
1

2

Bracketed numbers refer to entries on the district court docket.

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labeled “closing documents” automatically forwarded users to HomeWise’s website,
where users could pay to download disclosure documents. Id. ¶¶ 18, 27, 35.
In 2015, Murphy contracted to sell his condo unit, and in October, he
requested disclosure documents from HomeWise. Id. ¶¶ 23, 25. HomeWise charged
him $335 ($250 for the initial “22.1 and Paid Assessment Letter Bundle,” a $5
“Convenience Fee,” and an additional $80 for a “Paid Assessment Letter Update”
provided a month and half later). Id. ¶ 27. The Mathews contracted to sell their
property in 2017, and also requested disclosure documents from HomeWise. Id.
¶¶ 31, 33. The Mathews paid $350 for their documents ($320 for a “22.1 and Paid
Assessment Letter Bundle,” $5 for a “Convenience Fee,” and $25 for a “Transfer
Fee”). Id. ¶ 35. Plaintiffs had no other reasonably practical means of accessing the
documents, and they could not have sold their units without the documents. Id.
¶¶ 26, 28, 34, 36.
III.

Analysis
Plaintiffs allege that defendants charged excessive fees for providing

disclosure documents in violation of the Condominium Property Act, the Common
Interest Community Association Act, and the Illinois Consumer Fraud Act.
Plaintiffs also bring claims for aiding and abetting breach of fiduciary duty,
inducing breach of fiduciary duty, civil conspiracy, and unjust enrichment.3

Plaintiffs filed their putative class action in Illinois state court, and defendants removed,
invoking original jurisdiction pursuant to the Class Action Fairness Act. CAFA confers
original jurisdiction where “(1) the aggregate amount in controversy exceeds $5,000,000; (2)
any member of the plaintiff class is a citizen of a state different from any defendant
(“minimal diversity”); (3) the primary defendants are not states, state officials, or other
government entities . . . and (4) the number of members of the plaintiff class is 100 or
3

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A.

The Condo Act and the Common Interest Community Act

The Condo Act provides that an owner selling his unit “shall obtain from the
Board of Managers and shall make available for inspection to the prospective
purchaser, upon demand,” various disclosure documents. 765 ILCS 605/22.1. “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.” Id. The Common Interest Community Act is
slightly different in that it provides that for the resale of any unit, “the board shall
make available for inspection to the prospective purchaser, upon demand,” certain
disclosure documents. 765 ILCS 160/1-35. Like the Condo Act, the Common Interest
Community Act authorizes the board or the association to charge the unit seller a
“reasonable fee covering the direct out-of-pocket cost of copying and providing such
information.” Id. Plaintiffs, who represent both condo and common-interestcommunity sellers, bring claims under these acts alleging that defendants charged
more than a reasonable fee to cover the direct out-of-pocket costs associated with
providing the disclosure documents.

more.” Hart v. FedEx Ground Package Sys., 457 F.3d 675, 679 (7th Cir. 2006) (citing 28
U.S.C. §§ 1332(d)(2), (d)(5)). Plaintiffs allege actual individual damages of roughly $300 and
assert that Foster Premier manages over 20,000 units in and around Chicago. [1-1] ¶¶ 27,
35, 72. Given these allegations and the fact plaintiffs also seek punitive damages, the
amount in controversy plausibly exceeds $5,000,000, and the number of individuals in the
class plausibly exceeds 100. The minimal-diversity requirement is also satisfied—both
named plaintiffs are citizens of Illinois and defendant HomeWise is a citizen of California.
Id. ¶¶ 10–11, 13–14, 17. Federal courts sitting in diversity apply the substantive law of the
forum state, so Illinois law applies. See Piltch v. Ford Motor Co., 778 F.3d 628, 631–32 (7th
Cir. 2015) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938)).

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The statutes do not expressly provide a private right of action; plaintiffs
argue that there is an implied one. In determining if a private right of action may
be implied from a statute, a court considers whether: the plaintiff is a member of
the class for whose benefit the statute was enacted, the plaintiff’s injury is one the
statute was designed to prevent, a private cause of action is consistent with the
underlying purpose of the statute, and implying a private right of action is
necessary to provide an adequate remedy for violations of the statute. Fisher v.
Lexington Health Care, Inc., 188 Ill.2d 455, 460 (1999). In assessing whether to
imply a private right of action, courts must read the statute as a whole, not just the
isolated provision. Id. at 462–63. The purpose of the Condo Act is to govern the
affairs of Illinois condo associations by establishing procedures for the creation,
sale, and operation of condos and regulating the duties of the board of managers,
condo associations, and unit owners. Royal Glen Condo. Ass’n v. S.T. Neswold &
Assocs., 2014 IL App (2d) 131311, ¶ 22. The purpose of 22.1 of the Condo Act,
specifically, is to ensure that prospective purchasers are fully informed before
buying a condo. See Nikolopulos v. Balourdos, 245 Ill.App.3d 71, 77 (1st Dist. 1993);
D’Attomo v. Baumbeck, 2015 IL App (2d) 140865, ¶ 37.
Though Illinois courts have not addressed the issue of whether to imply a
private right of action for condo sellers, they have held that § 22.1 meets all of the
requirements to imply a private right of action for prospective purchasers. Id. The
purpose of § 22.1 is to ensure prospective buyers have access to disclosure
documents before purchasing a condo. And understanding the legislature’s

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motivations for enacting § 22.1 helps to determine whether a private right of action
is necessary to effectuate the purpose of the Act as a whole.
The Act seeks to streamline and regulate the different parties and processes
related to condo operations. Plaintiffs, as condo owners and sellers, therefore fall
within a class for whose benefit the statute was enacted. But the particular injury
suffered here is not one that the statute was designed to prevent. The goal of § 22.1
was to increase disclosure. And though the legislature clarified that an association
could charge reasonable costs for providing those documents, excessive fees is not
the injury the Act was designed to prevent. Limiting costs may be consistent with
the purpose of the Act, but it is not what motivated the legislature. Moreover,
implying a private right of action is not necessary to provide an adequate remedy to
the objectionable behavior. Plaintiffs could have raised the issue with the board and
made clear that they objected to the board’s delegation of this responsibility to
Foster Premier. Plaintiffs could also pursue other legal remedies against the
associations themselves for breach of any duty owed to the plaintiffs. Finally,
plaintiffs could have passed on some of the costs of obtaining the documents to the
purchaser, who benefitted from the sellers’ prompt disclosures. There is no implied
private right of action in the Condo Act under these circumstances.4

Other courts have reached the same conclusion. Horist v. Sudler & Co., 17-cv-8113, 2018
WL 1920113 (N.D. Ill. Apr. 24, 2018); Ahrendt v. Condocerts.com, Inc., 17-cv-8418, 2018 WL
2193140 (N.D. Ill. May 14, 2018). A pending appeal in state court, Friedman v. Lieberman
Mgmt. Servs., Inc., 2016 CH 15920 (Cook Cty.), and the appeal in Horist present the issue
to appellate courts. Since the decisions of those appellate courts may affect my analysis
here, the dismissal of these counts is without prejudice.
4

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Plaintiffs point to no additional features of the similar Common Interest
Community Act that would justify a different outcome. And under the Common
Interest Community Act, even assuming plaintiffs had a private right of action,
they have not adequately alleged a violation. Unlike the Condo Act, the Common
Interest Community Act requires that the board, not the seller, make disclosure
documents available to prospective purchasers. 765 ILCS 160/1-35(d). Plaintiffs
assert that they purchased the documents themselves, which is not contemplated by
the Act. As a result, plaintiffs have failed to state a claim under either the Condo
Act or the Common Interest Community Act.
B.

Illinois Consumer Fraud Act

To state an ICFA claim a plaintiff must allege (1) a deceptive or unfair
practice occurred; (2) the defendant intended for the plaintiff to rely on the
deception or unfair practice; (3) the act occurred in the course of conduct involving
trade or commerce; (4) the plaintiff sustained actual damages; and (5) those
damages were proximately caused by the defendant’s wrongful conduct. Phila.
Indem. Ins. Co. v. Chi. Title Ins. Co., 771 F.3d 391, 402 (7th Cir. 2014). Here
plaintiffs allege that defendants’ practice of overcharging for disclosure documents
is unfair. An unconscionably high price, without more, is generally insufficient to
establish unfairness. Robinson v. Toyota Motor Credit Corp., 201 Ill.2d 403, 418
(2002). Instead, courts consider whether the practice: (1) offends public policy; (2) is
immoral, unethical, oppressive, or unscrupulous; or (3) causes substantial injury to
consumers. Id. at 417–18. A practice need not satisfy all three prongs to be deemed

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unfair—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. at 418 (quoting Cheshire
Mortg. Servs., Inc. v. Montes, 223 Conn. 80, 106 (1992)).
A practice, even if not unlawful, may “offend[ ] public policy as established by
statutes, the common law or otherwise.” Ekl v. Knecht, 223 Ill.App.3d 234, 242 (2d
Dist. 1991). In other words, courts consider whether the practice “is at least within
the penumbra of some established concept of unfairness.” Id. In arguing that
defendants’ practice violates public policy, plaintiffs point to the same provisions in
the Condo Act and the Common Interest Community Act that allow associations to
recoup reasonable fees from sellers for producing disclosure documents. These
provisions, plaintiffs argue, demonstrate a policy of keeping fees low to ensure that
disclosure documents are easily accessible. That plaintiffs cannot state a claim
under these acts does not automatically mean they cannot demonstrate an offense
against public policy for the consumer-fraud-act analysis. But as discussed above,
the policy behind these statutes was to encourage disclosure to prospective
purchasers. Reasonableness is a range, not a point, and whether specific fees and
costs borne by the seller fall in or out of that range is not the public-policy interest
the legislature had in mind. Plaintiffs do not allege that the prospective purchasers
requested—either from plaintiffs or from the association—disclosure documents. As
a result, they have not alleged that the defendants’ actions violated the policy of
ensuring purchasers receive the documents upon request.5

Plaintiffs do allege that “it is a standard condition of closing to require the seller to
provide” disclosure documents. [1-1] ¶¶ 28, 36. But that does not mean that defendants’
5

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A practice is oppressive if plaintiffs “had no reasonable alternative.” See
People ex rel. Fahner v. Hedrich, 108 Ill.App.3d 83, 90 (2d Dist. 1982). Plaintiffs
assert that Foster Premier contracted with the associations to take over their
disclosure duties and that Foster Premier’s website automatically redirected sellers
seeking disclosure documents to HomeWise’s website. Plaintiffs also allege that
they had no reasonable alternative to obtain their documents. See [1-1] ¶¶ 26, 34.
Taking these allegations as true, plaintiffs have plausibly alleged that defendants’
practice was oppressive.
To be deemed unfair, the injury alleged must also be substantial, not be
outweighed by any countervailing benefit, and be an injury that the consumers
themselves could not have reasonably avoided. Siegel v. Shell Oil Co., 612 F.3d 932,
935 (7th Cir. 2010). Small personal injuries can still be substantial if they cause a
large loss to the public in the aggregate. People ex rel. Hartigan v. Stianos, 131
Ill.App.3d 575, 581 (2d Dist. 1985). Plaintiffs allege that they each suffered around
$300 in damages and that the class as a whole lost over $1.5 million. See [1] ¶ 21.
And for the reasons discussed above, plaintiffs have also adequately alleged that
they could not have reasonably avoided the injury. It is not clear from plaintiffs’
allegations, however, that their injury was not outweighed by a countervailing
benefit. Under the Condo and Common Interest Community Acts, property
associations have thirty days to turn over requested documents. See 765 ILCS
605/22.1(b); 765 ILCS 160/1-35. Defendants argue, and plaintiffs do not address,
actions offended the particular policy of ensuring access to purchasers who affirmatively
request the documents.

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that sellers pay more to HomeWise in exchange for getting the documents more
quickly—which can be necessary if a seller is looking to sell her home immediately.
While some aspects of this analysis cut in plaintiffs’ favor, considering all three of
the Robinson factors together, plaintiffs have not adequately alleged that
defendants’ practices were sufficiently unfair to support a consumer-fraud-act
claim.6
C.

Aiding and Abetting and Inducement of Breach of Fiduciary
Duty

To state a claim for aiding and abetting a breach of fiduciary duty, a plaintiff
must allege that the defendant aided a party who performed a wrongful, injurycausing act, that the defendant was aware of its role at the time it provided the
assistance, and that the defendant knowingly and substantially assisted in the
violation. Time Savers, Inc. v. LaSalle Bank, N.A., 371 Ill.App.3d 759, 772 (2d Dist.
2007). To state a claim for inducement of breach against a third party, a plaintiff
must allege the defendant colluded with a fiduciary in committing a breach of its
duty, induced or participated in such breach, and obtained benefits therefrom. Paul
H. Schwendener, Inc. v. Jupiter Elec. Co., 358 Ill.App.3d 65, 74 (1st Dist. 2005).
Both claims require an underlying breach of fiduciary duty; so to prevail against
defendants, plaintiffs must allege that the associations breached their fiduciary
duties to plaintiffs.

Defendants also argue that plaintiffs’ ICFA claim is barred by the voluntary payment
doctrine. But Illinois courts have held that doctrine does not apply to consumer-fraud-act
claims. See Nava v. Sears, Roebuck and Co., 2013 IL App (1st) 122063 ¶ 24.
6

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Condo associations owe individual unit owners a fiduciary duty. 765 ILCS
605/18.4(a); Duffy v. Orlan Brook Condo. Owners’ Ass’n, 2012 IL App (1st) 113577,
¶ 22.7 But plaintiffs have not alleged facts indicating that the plaintiffs’ condo
association breached that duty. Plaintiffs allege that without the source of revenue
generated from the document-disclosure charges, Foster Premier would likely have
to charge the association more for its services. [1-1] ¶ 51. As a result, plaintiffs have
not alleged that the association was unfairly profiting at the expense of the unit
owners. Rather, as plaintiffs’ claim is currently plead, the associations made a
reasonable choice to delegate their responsibilities to a management agency. That
plaintiffs disagree with that choice is not enough to allege that it constituted a
breach of fiduciary duty. Because they have not alleged an underlying breach by the
association, plaintiffs have not stated claims against defendants for aiding and
abetting or inducement of that breach.
D.

Civil Conspiracy and Unjust Enrichment

Both the civil conspiracy and unjust enrichment claims are dependent on the
survival of plaintiffs’ other claims. The elements of civil conspiracy are: (1) a
combination of two or more persons, (2) for the purpose of accomplishing by some
concerted action either an unlawful purpose, or a lawful purpose through unlawful
means, (3) in furtherance of which one of the conspirators committed an overt
tortious or unlawful act. Fiala v. Bickford Sr. Living Group, LLC, 2015 IL App (2d)
150067, ¶ 62. Because plaintiffs have not adequately alleged that defendants
Plaintiffs do not point to any provision or other authority establishing that common
interest community associations owe a fiduciary duty to unit owners.
7

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committed an overt tortious or unlawful act, their claim for civil conspiracy is
dismissed.
Similarly, “if an unjust enrichment claim rests on the same improper conduct
alleged in another claim, then . . . unjust enrichment will stand or fall with the
related claim.” Cleary v. Philip Morris Inc., 656 F.3d 511, 517 (7th Cir. 2011).
Plaintiffs’ unjust enrichment claim is based on defendants’ retention of “fees
charged . . . in excess of the amount allowed by Illinois law and by aiding and
abetting and conspiring in the associations’ breach of fiduciary duties.” [1-1] ¶ 117.
Because plaintiffs failed to allege the underlying violations, they have not stated a
claim for unjust enrichment.
In sum, defendants’ motions to dismiss plaintiffs’ complaint are granted.
“Unless it is certain from the face of the complaint that any amendment would be
futile or otherwise unwarranted, the district court should grant leave to amend
after granting a motion to dismiss.” Barry Aviation Inc. v. Land O’Lakes Mun.
Airport Comm’n, 377 F.3d 682, 687 (7th Cir. 2004). The complaint is dismissed
without prejudice with leave to re-plead.

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IV.

Conclusion
Defendants’ motions to dismiss [11] and [25] are granted. The complaint is

dismissed without prejudice, and a status hearing is set for August 8, 2018 at 9:30
a.m. to discuss whether to stay further proceedings in light of the appeals in Horist
and Friedman.
ENTER:
___________________________
Manish S. Shah
United States District Judge
Date: July 16, 2018

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