Sunday, November 5, 2023

FYI: Ill App Ct (1st Dist) Upholds Dismissal of Putative Class Action for Lack of Standing

The Appellate Court of Illinois, First Judicial District, recently affirmed the dismissal of a putative class action for lack of standing because the named plaintiffs suffered no injury in fact to a legally cognizable interest.


In so ruling, the First District acknowledged that, in Illinois, a plaintiff need not allege actual injury from a violation a statute in order to have standing to sue under the statute, and need not prove actual damages if the plaintiff suffered the injury sought to be redressed by the statute. 


Nevertheless, the Appellate Court held that providing the required disclosure at issue here would in essence force the defendant to perform a "useless act," because the required disclosure related to matters that did not apply under the circumstances alleged.


A copy of the opinion is available at:  Link to Opinion


Tenants entered into rental agreements with a landlord and were not required to pay a security deposit. The rental agreements included a general summary of the tenants' rights and obligations but did not include a summary of rights regarding security deposits or their relevant interest rates.


One of the tenants filed a class action complaint on behalf of himself and others similarly situated, alleging that the landlord failed to attach the summaries required by Chicago's Residential Landlord and Tenant Ordinance (RTLO), Chicago Municipal Code § 5-12- 170, including both the general summary and the summary regarding the security deposit interest rates. The tenant then filed an amended class action complaint to add additional plaintiffs.


The landlord moved to dismiss, arguing that the tenants failed to state a claim for an RLTO violation because the leases contained the RLTO summary, which had an express section entitled "SECURITY DEPOSITS AND PREPAID RENT {MUN. CODE CH. 5-12-080 AND 5-12-081}." In response, the tenants argued that the RLTO requires landlords to include the general RLTO summary and security deposit summary with all rental agreements, even if no security deposit is required.


The trial court dismissed the tenants' complaint for lack of standing because it concluded the tenants suffered no injury. The tenants timely appealed.


On appeal, the tenants argued that the language of the RLTO does not require tenants to allege actual damages beyond the violation of the statute and, thus, the violation alone confers standing. In response, the landlord argued that the RLTO general summary was attached to the leases, as required, and the only additional information not included was the separate security deposit summary regarding the interest rates. The landlord contended that, because the tenants were not required to pay a security deposit, the failure to attach the security deposit summary was immaterial.


The RLTO requires the Commissioner of the Chicago Department of Planning and Development to prepare a summary of the Chicago Municipal Code "describing the respective rights, obligations, and remedies of landlords and tenants" and then distribute the summary for public inspection and copying. Chicago Municipal Code § 5-12-170. The Commissioner must also prepare a separate summary of landlords' and tenants' respective rights, obligations, and remedies concerning security deposits, as well as the applicable interest rate to be paid thereon, and then disseminate the summary through radio and television outlets broadcasting in Chicago. Id. Based on these requirements, section 5-12-170 imposes an additional duty on landlords to attach "[a] copy of such summary *** to each written rental agreement." Id. Landlords must include both the general RLTO summary and the security deposit summary. Kopnick v. JL Woode Management Co., LLC, 2017 IL App (1st) 152054, ¶ 28.


Although the RLTO is to be "liberally construed and applied to promote its purposes and policies," Chicago Municipal Code § 5-12-010, the First District determined that reading it as broadly as the tenants urged strains the text and purpose of the ordinance. Specifically, the Court reasoned that holding a defendant liable for statutory damages ($100 per violation) for failing to provide a summary regarding security deposit interest rates with a rental agreement that does not require a security deposit would in essence require a defendant to perform a "useless act." Sylva, LLC v. Baldwin Court Condominium Ass'n, 2018 IL App (1st) 170520, ¶ 22.


Furthermore, under Illinois law, in order to establish standing, a plaintiff must "demonstrate some injury in fact to a legally cognizable interest." Flynn v. Ryan, 199 Ill. 2d 430, 436 (2002). The First District concluded that the tenants could never allege an injury here because they never paid security deposits. The landlord's failure to provide the interest rate information could in no way harm the tenants.


Accordingly, the First Judicial District held that permitting a party to prevail on a claim absent an injury allows a "regulation designed as a shield to be used as a sword." PNC Bank, National Ass'n v. Wilson, 2017 IL App (2d) 151189, ¶ 26. Thus, the Court affirmed the trial court's dismissal of the complaint for lack of standing.



Ralph T. Wutscher
Maurice Wutscher LLP
20 N. Clark Street, Suite 3300
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874


Admitted to practice law in Illinois




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