CAI's Community Association Law Reporter newsletter provides a brief review of key court decisions throughout the U.S. each month. These reviews give the reader an idea of the types of legal issues community associations face and how the courts rule on them. Cases deal with developer liability, powers of the association, use restrictions, covenant enforcement, assessment collection, and much more. Law Reporter is published electronically 12 times a year and delivered by e-mail to CAI members only.
©2019 Community Associations Institute
Keith Horist owned a unit in a condominium in Chicago. Joshua and Lori Eyman (collectively, the Eymans) owned a unit in a different Chicago condominium. Both owners were members of the condominium associations governing their respective condominiums. Both associations engaged Sudler and Company (Sudler) to manage their operations.
In 2017, Horist and the Eymans put their units up for sale and found buyers. The Illinois Condominium Property Act (act) requires selling owners to obtain the condominium governing documents, association financial information, and other disclosure information (disclosure documents) from their association's board of managers and make them available to the prospective purchaser.
The act obligates the association's principal officer or another specifically designated officer to furnish the required disclosure documents to the owner within 30 days of the owner's request. The act allows the association to charge the owner a reasonable fee covering the direct out-of-pocket cost of providing such information and copying.
Sudler contracted with HomeWiseDocs.com (HomeWise), an online document service that assembled the disclosure documents in an electronic format (electronic documents). Sudler's website provided a link to HomeWise's site so owners could easily click their way through and order downloadable electronic documents instantaneously. However, the convenience carried a cost. HomeWise charged Horist $240 for electronic documents, and the Eymans paid $365 for their electronic documents.
Horist and the Eymans (collectively, plaintiffs) sued Sudler and HomeWise (collectively, defendants), seeking to represent a proposed class of condominium unit owners who paid fees to HomeWise for disclosure documents. Among other claims, they alleged that the fees charged by HomeWise violated the act's reasonable fee limit and the Illinois Consumer Fraud and Deceptive Business Practices Act (consumer fraud statute). HomeWise removed the case to federal court.
The trial court found that the act's disclosure requirements provided no private right of action, either express or implied, for unit sellers. The trial court also found no viable claim for unfair trade practice in violation of the consumer fraud statute. It dismissed the case, and the plaintiffs appealed.
The appeals court noted that the plaintiffs did not sue their associations, only Sudler and HomeWise. The act did not expressly provide a remedy for enforcing its disclosure provisions. The Illinois courts will recognize an implied right of action only if four factors are met: (1) the plaintiff is within the class of persons the statute was enacted to benefit; (2) the plaintiff's injury is one the statute was designed to prevent; (3) a private right of action is consistent with the statute's underlying purpose; and (4) inferring a private right of action is necessary to provide an adequate remedy for statutory violations.
The Illinois Appellate Court had twice determined that the act's disclosure requirements were designed to protect unit purchasers. No Illinois court had determined that the disclosure requirements were intended for the benefit of the sellers, and the appeals court (a federal court) was not inclined to extend Illinois law in such manner. The act's disclosure requirements were plainly designed to protect unit purchasers against fraud (of the concealment variety) by unit sellers. Thus, as sellers, the plaintiffs were not within the class of persons the act's disclosure requirements were designed to protect, nor were their injuries the type the disclosure requirements were designed to prevent.
The consumer fraud statute was designed to protect consumers against fraud, unfair methods of competition, and other unfair and deceptive business practices. To prevail on a claim, a plaintiff must show that the defendant committed a deceptive or unfair act with the intent that others rely on the deception, that the act occurred in the course of trade or commerce, and that it caused actual damages.
The appeals court found no deception in this case. The plaintiffs claimed that the defendants could be liable for violating the consumer fraud statute because they acted on behalf of the associations to breach the associations' duties under the act. For the defendants, as agents for the associations, to have tort liability to a third party harmed by the agents' conduct, the defendants must have breached an independent duty owed to the third party.
Under the act, the associations, not the defendants, were responsible to the plaintiffs for providing the disclosure documents. The was no independent duty owed by the defendants to the plaintiffs. This left the consumer fraud claim resting on nothing more than a generic allegation that HomeWise charged too much for its services. However, the Illinois courts have held that charging an unconscionably high price generally is insufficient to establish a claim for unfairness.
Accordingly, the trial court's judgment was affirmed.
CAI filed an amicus brief in support of the association in this case. CAI files amicus curiae (friend of the court) briefs to inform courts about important legal and policy issues in cases relevant to community associations. If your association, municipality, or state is faced with a poorly formulated legal opinion, consider submitting a request for an amicus brief. Contact Phoebe E. Neseth, Esq., at firstname.lastname@example.org with any questions.
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