Goldberg v. 401 N. Wabash Venture LLC

• Decision Date: 16 October 2012
• Docket Number: Case No. 09 C 6455.
• Citation: 904 F.Supp.2d 820
• Parties: Jacqueline GOLDBERG, Plaintiff, v. 401 NORTH WABASH VENTURE LLC and Trump Chicago Managing Member LLC, Defendants.
• Court: U.S. District Court — Northern District of Illinois

904 F.Supp.2d 820

Jacqueline GOLDBERG, Plaintiff,

v.401 NORTH WABASH VENTURE LLC and Trump Chicago Managing Member LLC, Defendants.

Case No. 09 C 6455.

United States District Court,

N.D. Illinois,

Eastern Division.

Oct. 16, 2012.

Shelly Byron Kulwin, Jeffrey R. Kulwin, Kulwin, Masciopinto & Kulwin, LLP, Chicago, IL, for Plaintiff.

Stephen Novack, Devra Rachel Hirshfeld, John F. Shonkwiler, Rebekah Hava Parker, Novack and Macey LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Judge:

This action arises out of a dispute over the sale of two hotel condominium units in the Trump International Hotel and Tower in Chicago, Illinois. The Plaintiff, Jacqueline Goldberg, alleges that the Defendants—401 North Wabash Venture LLC and Trump Chicago Managing Member LLC—“lured her into signing” agreements to purchase two units by “misrepresent[ing]” that the units included ownership of certain “Trump-branded luxury hotel property and business operations [that] would generate over $5 million in revenue; an ownership interest [that Defendants] stripped unilaterally from [unit] buyers and reclaimed for themselves right before the hotel opened.” (R. 138, Pl.'s Resp. at 1.)

In her Amended Complaint, Ms. Goldberg asserts claims under the Illinois Condominium Property Act, the Illinois Consumer Fraud and Deceptive Business Practices Act, and the Federal Interstate Land Sales Full Disclosure Act against both Defendants, and a single claim for breach of contract against Defendant 401 North Wabash Venture LLC. Defendant 401 North Wabash Venture LLC in turn asserts two counterclaims for breach of contract against Ms. Goldberg.

Before the Court is Defendants' motion for summary judgment on all of these claims. For the reasons explained below, the motion is granted in part, and denied in part.

BACKGROUND

I. The Parties

Plaintiff Jacqueline Goldberg, a citizen of Illinois, “is a certified public accountant, certified financial planner and experienced real estate investor who has invested over $10 million in cash in various rental properties.” (R. 115 & 133, Stmnt. of Undisputed Facts ¹ ¶ 3.) In 2006, Plaintiff entered into agreements with Defendant 401 North Wabash Venture LLC (“Wabash LLC”) to purchase two hotel condominium units—or HCUs—in the Trump International Hotel and Tower in Chicago, Illinois (“Trump Tower”). ( Id. ¶ 4.) There are “approximately 339 HCUs within Trump Tower,” fifty-five percent of which have been sold since 2003. (R. 133 & 162, Stmnt. of Add'l Undisputed Facts ² ¶ 78.)

Defendant Wabash LLC, a limited liability company, is the developer of the Trump Tower. (R. 115 & 133, Stmnt. of Undisputed Facts ¶ 1.) Non-party 401 Mezz Venture LLC is the sole member of Defendant Wabash LLC. ( Id.) 401 Mezz Venture LLC “is a limited liability company with its members comprised of three [other] limited liability companies: [Defendant] Trump Chicago Managing Member LLC; Trump Chicago Member LLC; and TIHT Chicago Member Acquisition LLC.” ( Id.) “The sole member of each of these three limited liability companies is Donald Trump, a citizen of [ ] New York.” ( Id.) All of these entities are affiliated with the Trump Organization, which is the “umbrella organization” for Mr. Trump's “real estate developments and other corporate affiliates.” (R. 133 & 162, Stmnt. of Add'l Undisputed Facts ¶¶ 1–3 (internal quotation marks omitted).) The Trump Organization, through its affiliates, “directly develops, builds and manages residential, hotel and commercial real estate projects, and separately licenses its brand name to projects built by other developers.” ( Id ¶ 3.)

II. The Condominium Form of Ownership

“A condominium is an interest in real estate created by statute that gives each owner an interest in an individual unit as well as an undivided interest in common elements. Administration and operation of the condominium are vested in the condominium association, which is comprised of all unit owners.” Bd. of Directors of 175 E. Del. Pl. Homeowners Ass'n v. Hinojosa, 287 Ill.App.3d 886, 889, 223 Ill.Dec. 222, 679 N.E.2d 407 (Ill.App.Ct.1997) ( “Condominiums are creatures of statute”); see also Seaphus v. Lilly, 691 F.Supp. 127, 134 (N.D.Ill.1988); (R. 158–1, Expert Report of Mr. Robert Levin (“Levin Report”) at 7 (“A condominium is a form of real estate ownership [that] provides owners with an undivided percentage interest in portions of the condominium property held in common with other owners, and an exclusive interest in an area within the condominium property.”).) In Illinois, the operative statute is the Illinois Condominium Property Act (the “Illinois Condo Act”). See765 ILCS 605/1 et seq.

Under the Illinois Condo Act, “[a] condominium comes into being by the recording of a declaration[, which] is prepared and recorded by either the developer or association.” Hinojosa, 287 Ill.App.3d at 889, 223 Ill.Dec. 222, 679 N.E.2d 407 (citing 765 ILCS 605/2(a) (defining the declaration as the “instrument by which the property is submitted to the provisions of [the] Act”)). The “primary function” of the declaration “is to provide a constitution for the condominium.... The declaration contains the property's legal description, defines the units and common elements, provides the percentage of ownership interests, establishes the rights and obligations of owners, and contains restrictions on the use of the property.” Hinojosa, 287 Ill.App.3d at 889, 223 Ill.Dec. 222, 679 N.E.2d 407 (emphasis added); see also Wolinsky v. Kadison, 114 Ill.App.3d 527, 70 Ill.Dec. 277, 449 N.E.2d 151 (Ill.App.Ct.1983) (“When a controversy arises as to the rights of a unit owner in a condominium, we must examine any relevant provisions in the condominium enabling statute, consider the declaration, and study the bylaws and attempt to reconcile the three.”).

In addition to the Illinois Condo Act, the Chicago Municipal Code governs condominium developments in Chicago. Under the Municipal Code, a condominium developer must prepare and record a “property report” that contains certain required disclosures. See Chi., Ill., Mun.Code ch. 13–72–020. As a general matter, the property report must contain “information [that] establishes the condominium association as a legal entity, defines the condominium units and common elements which are being established and offered for sale, provides information regarding the operation of the condominium interests, and includes a statement of the projected finances of the condominium.” (R. 158–1, Levin Report at 8.)

As relevant to the present case, some condominium developments are “situated in luxury hotels or vacation properties.” ( Id. at 3.) Condominiums of this type

are usually built, operated and managed by established hotel operators. Hotel condominium unit owners usually either use the unit for their own purposes, or rent it out as any other hotel room on the property. The rental of a hotel condominium unit generates revenue for the owner of the hotel condominium unit. Hotel condominium units are usually marketed, rented and managed through a rental program established and administered by the hotel operator and approved by the board. In such cases, the hotel operator manages the rentals of hotel condominium units pursuant to the terms of a rental agreement it executes with the owners who participate in the rental program.

( Id. at 13 (internal paragraph breaks omitted).) Just like in other types of condominium developments, HCU owners would obtain sole ownership of their specific unit, and also joint ownership—as a tenant in common with other HCU owners—of the “common elements” of the condominium. ( Id. at 7.)

III. Trump Tower ChicagoA. The Development

Trump Tower is a ninety-two story mixed-use building located at 401 North Wabash Avenue in Chicago, Illinois. (R. 48, Am. Compl. & R. 84, Am. Ans. ¶¶ 7–8.) An affiliate of the Trump Organization developed the Trump Tower “rather than license its name” to an unaffiliated developer. (R. 133 & 162, Stmnt. of Add'l Undisputed Facts ¶ 11.) The Trump developer began construction of Trump Tower in or around 2005 and completed the construction in or around 2009. The building “consists of private residences, hotel condominium units, a health club, spa, meeting rooms, ballrooms, a public parking garage, a parking garage for the private condominium residents, retail space, restaurants, and various other areas including a concierge desk, reception area, and lobby.” (R. 48, Am. Compl. & R. 84, Am. Ans. ¶ 8.) The hotel condominium units—or HCUs—“were not registered as securities.” (R. 133 & 162, Stmnt. of Add'l Undisputed Facts ¶ 26.)

In 1997, prior to the development of Trump Tower, “an affiliate of the Trump Organization opened a hotel condominium property in New York City” referred to as the “Trump Tower NYC.” ( Id. ¶ 9.) Trump Tower NYC “has a meeting room and a small health club,” which are common elements that the HCU condominium association owns and operates, and which generate revenue for the association. ( Id. ¶ 10.) The building has a rental program that permits HCU owners to rent out their units to hotel guests and earn income. ( Id. ¶ 71.) The “rental program, among other things: (a) provides for the allocation of rental opportunities among HCU owners by, among other ways, permitting the HCU owners to stay in the unit without affecting the propriety or allocation of the rental opportunities provided through the rental project; and (b) does not charge HCU owners a percentage fee for the rental of HCUs through the rental project.” ( Id.)

The parties agree that “certain information regarding the operation of Trump Tower NYC was used as a model by the individuals who were responsible for planning the hotel condominium at Trump Tower Chicago, including information regarding (a) the rental program; (b) the operating budget; and (c) the identification of common elements.” ( Id. ¶ 13; see also R. 133–2, Reiss Dep. at 111 (“very much our model”).)B....