Channon v. Westward Mgmt., Inc.
| Decision Date | 07 December 2021 |
| Docket Number | 1-21-0176 |
| Parties | Harry CHANNON and Dawn Channon, Individually and on Behalf of All Others Similarly Situated, Plaintiffs-Appellees, v. WESTWARD MANAGEMENT, INC., an Illinois corporation, Defendant-Appellant. |
| Court | United States Appellate Court of Illinois |
Melinda S. Kollross, Brian J. Riordan, James M. Weck, and Paul V. Esposito, of Clausen Miller P.C., of Chicago, for appellant.
Terrie C. Sullivan, Jeffrey C. Blumenthal, and Michael D. Richman, of Jeffrey C. Blumenthal Chtrd., of Northbrook, Karnig S. Kerkonian and Elizabeth Al-Dajani, of Kerkonian Dajani LLP, of Evanston, and Richard A. Greenswag, of Greenswag & Associates, P.C., of Northfield, for appellees.
¶ 1 The plaintiffs, Harry Channon and Dawn Channon, have filed a class action complaint against the defendant, Westward Management, Inc., the property management agent retained by the board of managers of the condominium unit owners’ association for the building in which the plaintiffs formerly owned a condominium unit. The plaintiffs allege that, when they sold their condominium unit in 2016, the defendant charged excessive and unreasonable fees to provide them with the documents and other information that the plaintiffs were required to provide to the prospective purchasers of their unit in connection with the sale. Relevant to this appeal, the plaintiffs allege that the defendant's actions violated section 22.1 of the Condominium Property Act. 765 ILCS 605/22.1 (West 2016). The trial court denied the defendant's motion to dismiss the complaint but certified a question of law to this court, which we allowed. The certified question asks whether section 22.1 of the Condominium Property Act (id. ) provides an implied cause of action in favor of a condominium unit seller against a property manager, as agent of a condominium association or board of directors, based on allegations that the property manager charged excessive fees for the production of information required to be disclosed to a prospective buyer under that statute. For the following reasons, we hold that such an implied cause of action exists under the statute.
¶ 3 When the owner of a condominium unit (other than the developer) sells that unit, section 22.1 of the Condominium Property Act requires the owner to obtain from the board of managers of the condominium unit owners’ association—and make available to the prospective purchaser—nine categories of documents and information concerning the condominium and its unit owners’ association. Id. Generally speaking, these items include governance documents of the unit owners’ association, as well as statements concerning any liens, anticipated capital expenditures, the status and amount of funds held in reserve and any portion earmarked for specific projects, the association's financial condition, the status of any pending lawsuits or judgments in which the association is a party, the insurance coverage provided for unit owners, the compliance with condominium instruments of the prior unit owner's improvements or alterations, and the identity and mailing address of the association's principal officer or the other officer or agent designated to receive notices. Id. § 22.1(a)(1)-(9). Section 22.1(b) requires "[t]he principal officer of the unit owner's association or such other officer as is specifically designated" to furnish this information within 30 days of a request. Id. § 22.1(b). Section 22.1(c) provides in pertinent part 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." Id. § 22.1(c).
¶ 4 The plaintiffs’ class action complaint alleges that the defendant violated section 22.1(c) by charging more than a "reasonable fee covering the direct out-of-pocket cost" of providing the plaintiffs with the information that they were required under section 22.1(a) to obtain and provide to the prospective purchasers when selling their condominium unit. The plaintiffs allege that, in February 2016, they decided to sell the unit that they owned in a condominium property located on North Kenmore Avenue in Chicago. They entered into a contract with prospective purchasers, which was a standard form contract requiring the plaintiffs to obtain and provide the prospective purchasers with the various documents and information set forth in section 22.1(a). The defendant was the management agent retained by the board of managers of the Kenmore Club Condominium Association (Kenmore Club Board or Kenmore Club Association, respectively), which is the unit owners’ association for the building in which plaintiffs owned their condominium unit.
¶ 5 Among the duties designated to the defendant as management agent was the duty to provide a selling unit owner with the documents and information required by section 22.1(a). Knowing that the defendant had been assigned this duty by the Kenmore Club Association, the plaintiffs notified the defendant of their intent to sell their unit. The defendant provided them with a standard form with which to request documents. The form listed various categories of documents, along with a price next to each category of document. The plaintiffs submitted the form to the defendant, requesting to be provided with (1) a paid-assessment letter at a cost of $150, (2) a year-to-date income statement and budget at a cost of $20, (3) a "Condo Questionnaire/Disclosure Statement/22.1 (each)" at a cost of $75, and (4) insurance contact information at a cost of $0. The plaintiffs also submitted a form authorizing the defendant to charge their credit card in the amount of $245 for providing these documents. The defendant then provided the requested documents, and the plaintiffs’ credit card was charged $245. The plaintiffs allege that the $245 fee charged by the defendant for providing the documents required by section 22.1(a) is not a "reasonable fee covering the direct out-of-pocket cost of providing such information," as required by section 22.1(c). See id. Instead, they allege, it is an "excessive and unreasonable fee" that does not reflect the defendant's direct out-of-pocket costs for providing this information. They allege that they cannot reasonably obtain the documents and information necessary to sell their unit from any source other than the defendant, and thus they were "beholden" to the defendant and had no choice but to pay the excessive and unreasonable fee it requested to receive the documents. They allege that the defendant's actions violate section 22.1 of the Condominium Property Act (id. § 22.1), as well as the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) ( 815 ILCS 505/1 et seq. (West 2016)).
¶ 6 The defendant filed a motion to dismiss the plaintiffs’ complaint. It argued that no implied private right of action existed in favor of a condominium seller under section 22.1 because the purpose of that statute is to protect prospective purchasers of condominium units, not unit sellers. It also argued that section 22.1(c) did not govern the fees that property management companies providing services to condominiums could charge, as its unambiguous language mentions only what condominium associations or their boards of managers may charge for providing information. Finally, it argued that the plaintiffs had failed to plead a cause of action in second count under the Consumer Fraud Act.
¶ 7 In a written order, the trial court denied the defendant's motion to dismiss and determined that an implied cause of action existed in favor of condominium sellers under section 22.1. In doing so, it noted that prior case law had recognized an implied cause of action under the statute in favor of buyers (see Nikolopulos v. Balourdos , 245 Ill. App. 3d 71, 77, 185 Ill.Dec. 278, 614 N.E.2d 412 (1993) ; D'Attomo v. Baumbeck , 2015 IL App (2d) 140865, ¶ 39, 394 Ill.Dec. 601, 36 N.E.3d 892), but that neither of those cases had addressed the question of whether an implied cause of action could also exist in favor of sellers. It next considered the purpose of the Condominium Property Act ( 765 ILCS 605/1 et seq. (West 2016)) and of section 22.1 specifically. It noted that the Condominium Property Act contained protections for both buyers and sellers alike, as "[t]oday's buyer becomes tomorrow's seller." It found that section 22.1 reflected this reality by imposing "substantial obligations on sellers to secure the provision of certain documents from management, but in turn offers them a shred of protection against price-gouging." It also noted that a condominium seller was by definition a unit owner and that other implied statutory causes of action had been recognized in favor of unit owners, citing Boucher v. 111 East Chestnut Condominium Ass'n , 2018 IL App (1st) 162233, ¶¶ 20-21, 427 Ill.Dec. 186, 117 N.E.3d 1123 (). Based on its determination that condominium sellers were within the class of persons that section 22.1 was designed to protect, the trial court concluded that implying a cause of action against the imposition of unreasonable fees would be consistent with the statute's purposes, that the charging of an unreasonable fee was the type of injury that section 22.1(c) was designed to prevent, and that establishing a cause of action is the only method to enforce the statutory requirement.
¶ 8 Next, the trial court rejected the reasoning of Horist v. Sudler & Co. , 941 F.3d 274, 279-80 (7th Cir. 2019), in which the federal court of appeals, relying on Nikolopulos and D'Attomo ,...
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