Horist v. Sudler & Co., 18-2150

• Decision Date: 21 October 2019
• Docket Number: No. 18-2150,18-2150
• Citation: 941 F.3d 274
• Parties: Keith HORIST, Joshua Eyman, and Lori Eyman, Plaintiffs-Appellants, v. SUDLER AND COMPANY d/b/a Sudler Property Management and NextLevel Association Solutions, Inc., d/b/a HomeWiseDocs.com, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

941 F.3d 274

Keith HORIST, Joshua Eyman, and Lori Eyman, Plaintiffs-Appellants,

v.SUDLER AND COMPANY d/b/a Sudler Property Management and NextLevel Association Solutions, Inc., d/b/a HomeWiseDocs.com, Defendants-Appellees.

No. 18-2150

United States Court of Appeals, Seventh Circuit.

Argued April 11, 2019

Decided October 21, 2019

David J. Fish, Attorney, Fish Law Firm, Stephen Sotelo, Attorney, Homer Law Firm, P.C., Naperville, IL, Charles R. Watkins, Attorney, Guin, Stokes & Evans, LLC, Chicago, IL, for Plaintiffs-Appellants.

Edward P. Gibbons, Attorney, Arthur J. McColgan, Attorney, Scott Taylor Stirling, Attorney, Walker Wilcox Matousek LLP, Chicago, IL, for Defendant-Appellee Sudler and Company, doing business as Sudler Property Management.

Eleanor Hagan, Lauren Kuley, Attorney, Cincinnati, OH, Squire Patton Boggs (US) LLP, Philip M. Oliss, Attorney, Cleveland, OH, Jones Day, for Defendant-Appellee NextLevel Association Solutions, Incorporated, doing business as HomeWiseDocs.com.

J. Philip Calabrese, Attorney, Porter, Wright, Morris & Arthur, Cleveland, OH, for Amicus Curiae Community Associations Institute.

Before Sykes, Scudder, and St. Eve, Circuit Judges.

Sykes, Circuit Judge.

The Illinois Condominium Property Act requires an elaborate set of disclosures when a condominium unit is resold. The owner must give the prospective buyer a copy of the condominium declaration and bylaws, the condominium association’s rules, and an array of other documents bearing on the current financial status of the property. 765 ILL. COMP. STAT. 605/22.1(a). The association’s board must furnish the required documents within 30 days of the owner’s written request, id . § 605/22.1(b), and it may charge a reasonable fee for doing so, id. § 605/22.1(c). Another provision of the Act allows the association to retain a person or firm to manage the condominium property. Id. § 605/18(a)(5).

This lawsuit is a proposed class action against a Chicago property-management firm and its third-party vendor, an online service that assembles a downloadable electronic version of the required disclosure documents, giving unit owners quick and easy access to the material needed to complete a resale transaction. The vendor charges a fee for this service. The plaintiffs are condominium owners who purchased their disclosure documents from the online vendor and now complain that the fee is excessive in violation of the Condominium Act. They also bring claims under the Illinois consumer-fraud statute and three common-law theories: breach of fiduciary duty, unjust enrichment, and civil conspiracy. The district court dismissed the suit.

We affirm. The relevant provision of the Condominium Act does not provide a private right of action, and we see no basis in Illinois law to imply one for condominium owners. The statutory consumer-fraud claim is likewise defective; the Illinois courts have held that charging too much for goods or services is not, standing alone, an unfair practice under the statute. The common-law claims also fail. The complaint does not plead an actionable breach of fiduciary duty, and unjust enrichment and conspiracy are not independent causes of action under Illinois law.

I. Background

Keith Horist owned a condominium at 400 East Ohio Street in downtown Chicago and was a member of his building’s condominium association. Joshua and Lori Eyman owned a condominium at 1515 South Prairie Avenue, also in downtown Chicago, and they too were members of their condominium association. Both associations retained Sudler and Company, d/b/a Sudler Property Management, to manage their day-to-day operations.

In 2017 Horist and the Eymans put their units on the market and found willing buyers. The Illinois Condominium Property Act requires that "[i]n the event of any resale of a condominium unit by a unit owner[,] ... such owner shall obtain from the [association’s] Board of Managers and shall make available to the prospective purchaser, upon demand," a copy of the condominium instruments, the association’s rules, and a host of other documents reflecting the current financial status of the property.¹ § 605/22.1(a). These are commonly referred to as the "disclosure documents." Subsection (b) of the statute says that the association’s "principal officer" or another "specifically designated" officer "shall furnish" the required documents to the owner "when requested to do so in writing and within 30 days of the request." § 605/22.1(b). Subsection (c), in turn, provides that "the association or its Board of Managers" may charge the unit owner a "reasonable fee covering the direct out-of-pocket cost of providing such information and copying." § 605/22.1(c).

Sudler, the property manager for the two condominium associations, contracted with HomeWiseDocs.com, an online document service that assembles the required disclosure documents in portable document form ("PDF"), giving condominium owners almost instantaneous electronic access to the material needed to close a resale transaction.² Sudler’s website provides a link to HomeWise’s site so owners can easily click through and order a downloadable PDF of their disclosure documents. But this convenience carries a cost. HomeWise charged Horist $240 for a PDF of his disclosure documents. The Eymans paid $365 for a PDF of theirs.

Horist and the Eymans sued Sudler and HomeWise in Cook County Circuit Court seeking to represent a proposed class of condominium owners "who were charged by or paid a fee to HomeWise" for disclosure documents in connection with a condominium resale. The complaint raises five claims: (1) a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act; (2) a violation of the Condominium Act; (3) aiding and abetting a breach of fiduciary duty; (4) civil conspiracy; and (5) unjust enrichment. HomeWise removed the case to federal court under the Class Action Fairness Act, 28 U.S.C. § 1332(d). Sudler and HomeWise then filed separate motions to dismiss.

The judge granted the motions. Turning first to the claim under the Condominium Act, the judge held that section 22.1 provides no private right of action—express or implied—for unit sellers. He also ruled that the complaint did not state a viable claim that the PDF fee amounts to an unfair trade practice in violation of the consumer-fraud statute. The judge construed the three common-law claims as requiring an underlying violation of one of these statutes, so he dismissed them as well and entered final judgment for the defendants.

II. Discussion

We review a dismissal order de novo, construing the complaint in the light most favorable to the plaintiffs and accepting all well-pleaded factual allegations as true. Ochoa v. State Farm Life Ins. Co. , 910 F.3d 992, 993 (7th Cir. 2018). To survive a motion to dismiss, the allegations in the complaint "must plausibly suggest ... a right to relief, raising that possibility above a speculative level." EEOC v. Concentra Health Servs., Inc. , 496 F.3d 773, 776 (7th Cir. 2007) (quotation marks omitted).

A. Condominium Act Claim

The Condominium Act claim rests on allegations that HomeWise’s fee for an electronic copy of the required disclosure documents exceeds the "reasonable fee" that condominium associations are permitted to charge under section 22.1(c). We note for starters that the associations are not defendants; this suit is against the property-management firm and its third-party online document vendor. Our first question, however, is whether the plaintiffs have a right of action to enforce section 22.1. The statute doesn’t provide an express private remedy, so the plaintiffs advance an argument that a right of action exists by necessary implication.

Illinois courts will recognize an implied right of action only if (1) the plaintiff is within the class of members 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 underlying purpose of the statute; and (4) inferring a private right of action is necessary to provide an adequate remedy for statutory violations. Fisher v. Lexington Health Care, Inc ., 188 Ill.2d 455, 243 Ill.Dec. 46, 722 N.E.2d 1115, 1117 (1999). All four factors must be met before a court will recognize an implied remedy. Marque Medicos Fullerton, LLC v. Zurich Am. Ins. Co. , 416 Ill.Dec. 190, 83 N.E.3d 1027, 1042 (Ill. App. Ct. 2017). Not one of them is satisfied here.

Two decisions of the Illinois Appellate Court largely control the outcome. In Nikolopulos v. Balourdos , the court concluded that section 22.1 "was clearly designed to protect prospective purchasers of condominium units." 245 Ill.App.3d 71, 185 Ill.Dec. 278, 614 N.E.2d 412, 416 (1993) (emphasis added). More specifically, the court held that the statute’s purpose is "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. The court also determined that implying a right of action for condominium purchasers "is consistent with assuring that a prospective purchaser is fully informed and satisfied before he buys a condominium unit." Id. On this reasoning, the court recognized an implied right of action for prospective condominium purchasers to terminate a sales contract "within a reasonable time after being furnished information revealing previously undisclosed material expenses." Id. That is, the court authorized a condominium purchaser who is injured by a seller’s violation of the section 22.1 disclosure duty to sue for return of his earnest money plus interest. Id. 185 Ill.Dec. 278, 614 N.E.2d at 418.

By its terms, the implied remedy recognized in Nikolopulos covered condominium purchasers who discover a seller’s section 22.1 violation before closing. In D’Attomo v. Baumbeck , the court extended that holding and recognized an implied right of action for...