FYI: Privacy 2021 > Review of State and Federal Data Privacy Legislation

Despite the national and global events that took center stage in 2021, the upward trend in data privacy legislation at the state level continued and with the addition of the amendments to the Safeguards Rule, 2022 brings new compliance challenges for many businesses and financial institutions.

 

According to the National Conference of State Legislatures, "[a]t least 38 states introduced more than 160 consumer privacy-related bills in 2021 (compared to 30 states in 2020 and 25 in 2019)."  Many of these bills were limited in scope, relating to, for example, biometric, genetic and geolocation data, data brokers, internet service providers, and more.

 

Our 2021 Review of State and Federal Data Privacy Legislation addresses:

 

-  Comprehensive Consumer Data Privacy Legislation, By the Numbers

-  New State Privacy Laws – Virginia and Colorado

-  Gramm-Leach-Bliley Act Safeguards Rule

-  What's In Store for 2022?

 

Our full article is available at:  Link to Article

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

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FYI: Bankruptcy 2021 > A Decline in Filings, Supreme Court Weighs In, Congress Looks at Student Loans

Our 2021 annual year-end review of consumer bankruptcy law developments provides some insight as to what we saw in 2021 and where we may be headed in 2022:

 

-  Bankruptcy Filings Down in 2021

-  Activity in the Courts Impacts the Bankruptcy Landscape

-  Congress Takes a Closer Look at Discharge of Student Loans and Medical Debt

 

Our full article is available at:  Link to Article

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

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FYI: 2021 Retrospective: Reg F, Ramirez, Hunstein, Amended Safeguards Rule, and Various State Laws

Our 2021 annual year-end review of consumer credit law developments begins with discussion of key court rulings and significant federal and state laws and regulations affecting the consumer financial services industry:

 

-  Regulation of the Year:  Regulation F

-  Game Changer of the Year:  TransUnion LLC v. Ramirez

-  Disrupter of the Year:  Hunstein v. Preferred Collection and Management Services, Inc.

-  Dark Horse of the Year:  FTC Amends Safeguards Rule

-  Various State Law Developments

 

Our full article is available at:  Link to Article

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

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FYI: Cal App Ct (1st Dist) Rejects Bank's Effort to Disqualify Arbitrator as Untimely

The California Court of Appeals, First Appellate District, recently reversed a lower court's orders denying a bank account holder's petition to confirm an arbitration award and an order granting a bank's petition to vacate the award, and remanded with instructions to enter an order confirming the award.

 

The trial court had vacated the arbitration award based on the bank's notice of disqualification as to the arbitrator.  However, on appeal, the First District held that California procedural rules required the bank to seek the arbitrator's disqualification within 15 days of discovering the facts requiring disqualification, and because the bank did not do so, the bank forfeited the right to demand disqualification.

 

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

 

The appeal arose out of arbitration between bank ("Bank") and a holder of an account with Bank ("Account Holder") after Account Holder initiated legal proceedings against Bank. The matter was submitted to mediator and arbitrator ("Arbitrator"), employed by JAMS, who had previously arbitrated causes in which parties were represented by the lawyers representing both Plaintiff and Bank.

 

In January 2018, Arbitrator timely served a disclosure statement pursuant to section 1281.9 which requires an arbitrator to disclose "all matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial."  Cal. Code Civ. Proc. § 1281.9(a).

 

The statute includes matters listed in six categories, and here the relevant categories were: "(1) The existence of any ground specified in Section 170.1 for disqualification of a judge…(2) Any matters required to be disclosed by the ethics standards….(3)…[and] (4) The names of the parties to all prior or pending noncollective bargaining cases in which the proposed neutral arbitrator served or is serving as a neutral arbitrator, and the results of each case arbitrated to conclusion, including [specified details]." Id.

 

Included in Arbitrator's disclosure statement were the cases involving the parties and their lawyers, including two arbitrations involving Account Holder's lawyers. The disclosure also stated that "[e]ach JAMS neutral, including me, has an economic interest in the overall financial success of JAMS," and "because of the size and nature of JAMS, each side should assume that one or more of the other neutrals who practice with JAMS has participated in…[a] dispute resolution proceeding with the parties, counsel, or insurers in this case and may do so [again]."

 

Neither party objected to the disclosure statement. After spending months litigating the merits of the case before Arbitrator and after the matter was under submission, Arbitrator served an amended disclosure that included additional matters involving Bank's lawyers, Hernandez and Dent-a-Med, disclosing that in May 2018, Arbitrator issued an award in Hernandez, in favor of the client of Account Holder's lawyer in an unspecified amount. No further information was required and no notice of disqualification was served.

 

Less than a month later, Arbitrator issued an interim award in Account Holder's favor, ruling he was entitled to $133,000 in damages, as well as attorney fees and costs. After Account Holder filed his fees motion and Bank filed its opposition, Bank's attorneys learned that before the settlement in Hernandez, Arbitrator had entered an interim award of attorney's fees and costs in favor of the claimant represented by Account Holder's lawyers. They also learned that a party in Dent-A-Med had petitioned the federal court to vacate the award on the basis that the Arbitrator failed to disclose the interim award in Hernandez. Bank did not file a notice of disqualification or raise the nondisclosure matters in its opposition to Account Holder's fees motion.

 

In February 2020, a final award reiterating the interim award was issued on the merits. Account Holder filed a petition to confirm the final award and bank opposed and filed a petition to vacate based on Arbitrator's failure to disclose the interim award in Hernandez, the delay in reporting his issuance of an award to Account Holder's attorney's client in Dent-A-Med and delay in disclosing an ownership interest in JAMS.

 

The trial court ruled in favor of Bank holding that, even though section 1281.9 requires a party to serve notice of disqualification within 15 days after a proposed arbitrator serves an initial disclosure statement, an exception applies when the arbitrator makes "a material omission or material misrepresentation in his or her disclosure." Account Holder appealed the decision.

 

The Court of Appeals reviewed the question of whether Bank forfeited any right to disqualification by failing to timely raise Arbitrator's failure to make complete any accurate disclosures. See Honeycutt v. JPMorgan Chase Bank, N.A., (2018) 25 Cal. App. 5th 909, 921.  The Appellate Court assumed, without deciding, that the trial court had correctly ruled that Arbitrator was obligated to disclose in the initial disclosure the interim award in Hernandez and that the description of the arbitration as "settled prior to final award," without mention of the interim award was a material omission and did not put Bank on inquiry notice.

 

The First District relied on prior rulings in determining that Cal. Code Civ. Proc. §§ 1281.9 and 1281.91 establish a timeline for arbitrators to disclose potential grounds for disqualification and for parties to promptly seek disqualification or forfeit their right to do so.

 

Specifically, the Appellate Court referred to prior decisions holding that "a party who knowingly participates in the arbitration process without disclosing a ground for declaring it invalid is properly cast into the outer darkness of forfeiture." (Cummings v. Future Nissan (2005) 128 Cal. App. 4th 321, 329.), and further, that a party who "learns of a basis to disqualify an arbitrator cannot "wait and see how the arbitration turn[s]out before raising the[] issue[],"which would allow the party to "play games" with the arbitration and "not raise the issue" "until [they] los[e]." (Honeycutt v. JPMorgan Chase, supra, 25 Cal. App. 5th at pp.926, 927.)

 

The First District further relied on the language of section 1281.91 which provides ""[t]he right of a party to disqualify a proposed neutral arbitrator pursuant to this section shall be [forfeited] if the party fails to serve the notice pursuant to the times set for in this section, unless the [arbitrator] makes a material omission or material misrepresentation in his or her disclosure."  Subdivision (c) adds, "[e]xcept as provided in subdivision(d), in no event may a notice of disqualification be given after a hearing of any contested issue of fact relating to the merits of the claim or after any ruling by the arbitrator regarding any contested matter."

 

In addition, the Appellate Court looked to Ethics Standard 10 which states that an arbitrator is disqualified if "[a] party becomes aware that an arbitrator has made a material omission or material misrepresentation in his or her disclosure and, within 15 days after becoming aware of the omission or misrepresentation and within the time specified in... section 1281.91(c), the party serves a notice of disqualification that clearly describes the material omission or material misrepresentation and how and when the party became aware of [it]." (Ethics Standards, std.10(a)(4)).

 

Bank, relying on section 1281.91(c), argued that by the time they learned of the interim award, it was too late to file a notice of disqualification, as the hearing was underway and the merits of the dispute already decided. 

 

However, the Appellate Court took this reading of the statute to be incorrect, as this would mean that a party who learned of a basis for disqualification after the arbitration hearing had begun, would have no recourse or they would be required to await the outcome of the arbitration, and if unfavorable, raise the ground for disqualification for the first time in a petition to vacate.

 

The Appellate C continued, that as this reading would be nonsensical and unfair, the statute includes subdivision (d) which provides "[i]f any ground specified in Section 170.1 exists, a neutral arbitrator shall disqualify himself or herself upon the demand of any party made before the conclusion of the arbitration proceeding."

 

The First District assumed that Arbitrator's failure to disclose the interim fee was a ground included in section 170.1. Section 170.1 which applies by reference to arbitrators, states that a judge is disqualified if, among other things, "[f]or any reason, ... [a]person aware of the facts might reasonably entertain a doubt that the judge would be able to be impartial." (§170.1, subd. (a)(6)(A)(iii)).

 

Thus, the Appellate Court held, that to obtain Arbitrator's disqualification, Bank was required to "object 'at the earliest practicable opportunity after discovery of the facts constituting the ground for disqualification.'" (Alperv. Rotella, supra, 63 Cal. App. 5th at p. 1152), and in compliance with the obligations under the ethics standard 10(a)(4) to serve a notice of disqualification "within 15 days after becoming aware of the omission or misrepresentation" in the arbitrator's disclosure statement.  As Bank failed to do so, the First District held, it forfeited the right to demand disqualification once it subsequently learned of Arbitrator's adverse fee award.

 

The First District thus held that because Bank failed to seek Arbitrator's disqualification within 15 days of discovering the facts requiring disqualification and prior to Arbitrator deciding the pending fee motion, Bank forfeited the right to demand disqualification.

 

The Appellate Court therefore reversed the order vacating the award and denying Plaintiff's petition to confirm the award, and remanded the matter with directions to issue orders denying the Bank's petition and granting Plaintiff's petition to confirm the award.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

Our updates and webinar presentations are available on the internet, in searchable format, at:

 

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FYI: Ill App Ct (5th Dist) Rejects Borrower's Challenges to Creditor's Evidence at Trial

The Appellate Court of Illinois, Fifth District, recently affirmed a trial court's judgment against a borrower on a credit card debt because it ruled that there were no errors in the admission of evidence, there was no evidence of judicial bias, and the judgment was not against the manifest weight of the evidence.

 

The Appellate Court also held that the borrower's second notice of appeal was timely filed because a motion to vacate the judgment tolled the deadline for filing the notice of appeal and the first notice of appeal was ineffective because the motion to vacate was pending, making the defendant's motion to voluntarily dismiss her first appeal a nullity.

 

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

 

A bank filed a complaint against a borrower alleging that the borrower failed to pay her credit card debt as required by the credit card agreement. An employee for the bank testified that at the time the borrower opened the credit account, a copy of the customer agreement was mailed to her at her address.

 

The employee also testified that the borrower's daughter was listed as an authorized user on the borrower's account, and a card was issued to both her and the borrower. Additionally, the employee stated that, based on the bank's business records, the borrower never requested that the daughter be removed as an authorized user.

 

The employee then testified that, at one point, the borrower contacted the bank indicating that she believed there was fraud on the account. However, records indicate that the claim for fraud was denied because the borrower never provided the information required to investigate her fraud claim.

 

The borrower's daughter testified on the borrower's behalf and disputed several charges on the account. However, the trial court held that the borrower was bound by the customer agreement and that the daughter's testimony was disingenuous. Accordingly, the trial court entered judgment in favor of the bank in the amount of the credit card debt, plus court costs.

 

The borrower initially filed a pro se notice of appeal from the judgment, but while the appeal was pending, the bank filed a motion in the trial court to vacate the judgment and to set the matter on the trial court's status call because the bank's counsel had been informed that the borrower was again claiming fraud on the account.

 

Before the motion to vacate was ruled on, the borrower filed a motion to voluntarily dismiss her appeal, stating that the bank "has vacated the judgment against me." The Fifth District granted the borrower's motion to voluntarily dismiss the appeal.

 

However, the borrower then filed a new notice of appeal, asking that the Fifth District reverse the judgment finding her "guilty of the charges." The bank, in turn, filed a motion to dismiss this appeal, arguing that the judgment was not appealable and that the borrower's second appeal did not revive the issues presented in the first appeal. For these reasons, the bank argued that the Fifth District lacked jurisdiction over the defendant's appeal.

 

However, the Fifth District held that the bank's argument failed to recognize that, at the time the borrower requested to voluntarily dismiss her appeal, the notice of appeal had been rendered ineffective due to the bank's filing of a motion to vacate the judgment. Ill. S. Ct. R. 303(a)(2). Accordingly, when the borrower filed a motion to voluntarily dismiss her first appeal, mistakenly believing the judgment had been vacated, there was no effective appeal to voluntarily dismiss. Thus, the Court found that it had jurisdiction to review the judgment based on the borrower's second notice of appeal, which was timely filed within 30 days of the trial court docketing that the bank had abandoned its motion to vacate the judgment. See Ill. S. Ct. R. 303(a)(1).

 

Additionally, the Fifth District found that the second notice of appeal was sufficient to confer its jurisdiction over the judgment because the defendant's prayer for relief clearly requested that the Court reverse the judgment. See Burtell v. First Charter Service Corp., 76 Ill. 2d 427, 433-34 (1979). Therefore, the Court denied the bank's motion to dismiss the second notice of appeal.

 

The borrower first argued on appeal that the trial court erred in allowing the bank's employee to testify "as an expert witness."  However, the Fifth District noted that the borrower did not object to the testimony at trial. In a nonjury civil case, an issue not presented to the trial court is waived. People v. A Parcel of Property Commonly Known as 1945 North 31st Street, Decatur, Macon County, Illinois, 217 Ill. 2d 481, 503-04 (2005).

 

Waiver aside, the Fifth District also observed that the bank did not call the employee as an expert witness, but rather, as a lay witness to provide information necessary to authenticate the customer agreement and account statements that were admitted into evidence. See Timothy Whelan Law Associates, Ltd. v. Kruppe, 409 Ill. App. 3d 359, 366 (2011). For these reasons, the Court found no error in the admission of the testimony.

 

Second, the borrower argued that the trial court erred by "coming into the courtroom with preconceived ideas because of an unrelated case." Because the borrower did not raise the issue of judicial bias in the trial court, the Fifth District concluded that this argument was also waived. See A Parcel of Property Commonly Known as 1945 North 31st Street, Decatur, Macon County, Illinois, 217 Ill. 2d at 503-04.

 

Even without waiver, the Fifth District reasoned that a trial judge is presumed to be impartial, and the burden of overcoming this presumption rests on the party making the charge of prejudice. Eychaner v. Gross, 202 Ill. 2d 228, 280 (2002). As such, the party making the charge of prejudice must present evidence of prejudicial trial conduct and evidence of the judge's personal bias. Id. Here, the Court held that the borrower presented neither. Accordingly, it did not reverse the trial court's ruling based on judicial bias.

 

Lastly, the borrower argued that the trial court erred in not recognizing that there were fraudulent charges on the bank's billing statements and finding the borrower's daughter's testimony to be "disingenuous." The Fifth District pointed out that the trial court, when sitting as the trier of fact in a bench trial, makes findings of fact and weighs all the evidence in reaching a conclusion. Staes & Scallan, P.C. v. Orlich, 2012 IL App (1st) 112974, ¶ 35. When a party challenges the trial court's ruling after a bench trial, the appellate court defers to the trial court's factual findings unless they are against the manifest weight of the evidence. Id.

 

Here, the Fifth District concluded that the trial court's judgment was not against the manifest weight of the evidence. The borrower's claims of fraud hinged on the credibility of her daughter  in denying she made the charges at issue, and the Court held that it was within the trial court's province to determine her credibility. See id.

 

Accordingly, the Fifth District affirmed the trial court's judgment.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

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FYI: Ill App Ct (1st Dist) Allows Private Right of Action Against HOAs for Charging Excessive Fees

In a ruling that is favorable to "real estate owned" (REO) owners dealing with exorbitant fees charged by condominium and home owners associations, the Appellate Court of Illinois, First District, recently held that the Illinois Condominium Property Act provides an implied cause of action against a condominium property manager, as well as the condominium association or its board of directors, based on allegations that the property manager charged excessive fees for the production of information required to be disclosed under the statute.

 

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

 

Section 22.1 of the Condominium Property Act requires unit owners to provide nine categories of documents and information concerning the condominium and its unit owners' association to prospective purchasers. Id. The principal officer or "such other officer as specifically designated" must provide the requested information within 30 days of the request and may charge a "reasonable fee covering the direct out-of-pocket cost of providing such information and copying" to the unit seller for providing the information. Id. § 22.1(b)-(c).

 

In this case, a property management company (Agent) was designated to provide the documents and information required by Section 22.1(a). When the plaintiff condominium unit sellers (Sellers) entered into a contract with prospective purchasers, they notified Agent of their intent to sell their unit and were provided with a standard form to request documents. The form listed various categories of documents each with a price next to it. The total fee for the documents requested by Sellers was $245.

 

Sellers alleged that this was not a "reasonable fee covering the direct out-of-pocket cost of providing such information." § 22.1(c). Sellers further argued as they were unable to obtain the information and documents from anyone other than Agent, they were "beholden" to Agent and had no choice but to pay the fee. Sellers alleged Agents actions to have violated the Illinois Condominium Property Act and the Illinois Consumer Fraud and Deceptive Practices Act.

 

Agent moved to dismiss arguing that no implied private right of action existed in favor of Sellers under Section 22.1 because the purpose of the section is to protect prospective purchasers, not sellers; that section 22.1(c) did not govern the fees property management companies providing services to condominiums could charge, as its unambiguous language mentioned only what may be charged for providing information; and that Sellers failed to state a cause of action for a violation of the Illinois Consumer Fraud and Deceptive Practices Act.

 

The trial court denied the motion to dismiss and held that an implied cause of action in favor of Seller existed under section 22.1.

 

The trial court found that the Illinois Condominium Property Act contains protections for buyers and sellers, as "[t]oday's buyer becomes tomorrow's seller." The trial court further stated Section 22.1 imposed "substantial obligations on sellers to secure the provision of certain documents from management, but in turn offer[ed] them a shred of protection against price-gouging." Finally, the trial court noted that a unit seller was by definition a unit owner and that other implied statutory causes of action had been recognized in favor of unit owners.

 

The trial court next rejected the reasoning in Horist v. Sudler & Co., 941 F.3d 274, 279-80 (7thh Cir. 2019), in which the federal court of appeals concluded that the purpose of Section 22.1 was for the protection of purchasers only.

 

The trial court reasoned that the federal appellate court had read the decisions it relied on too narrowly as "permitting no other purpose to be read in to the statute" than protecting the purchasers and that the court of appeals decision was likely based on hesitancy of federal courts to recognize "novel state law claims," which the court found this claim to be.

 

Finally, the trial court found that the claim could be brought against Agent as Landau v. Landau, 409 Ill. 556, 564 (1951) recognized that an agent may be held responsible for breaching a duty owed by a principal where the agent "'takes some active part in violating some duty the principal owes to a third person.'" 

 

Thus, the trial court denied the motion to dismiss. Agent then filed a motion seeking to have the trial court certify the above-mentioned question of law to the state appellate court.  The motion was granted, and this appeal ensued.

 

The state Appellate Court first looked to the plain language of the statute, stating implication of a private right of action is appropriate if four factors are met: "(1)  the plaintiffs are members of the class for whose benefit the statute was enacted, (2) the plaintiffs' 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) implying a private right of action is necessary to provide an adequate remedy for violations of the statute." Metzger v. DaRosa, 209 Ill.2d. 30, 36 (2004).

 

The Appellate Court found that the plain language of the statute required them to reject Agent's argument that the purpose of the statute was only for the benefit or protection of potential purchasers.

 

Although the primary purpose of the statute may be to protect potential purchasers, the Appellate Court reasoned, the statute also has the purpose of benefiting condominium unit owners who wish to sell their units. A unit owner who wants to sell their unit would be significantly hindered if they had no legal method to acquire the information from the party in possession of it to provide to a potential buyer.

 

As such, the Appellate Court found Section 22.1 to protect unit owners who want to sell by ensuring that they have a statutory mechanism to obtain the information from the association to provide in connection with a sale.

 

The Appellate Court continued, finding that Section 22.1(c) was designed to prevent disputes between unit owners and associations or boards regarding fees and to protect all parties in the process by specifying that an association may charge for copying and providing documents and providing general parameters of what the amount of that charge may be. The Appellate Court noted that the specification that only a direct out-of-pocket expense may be charged was especially indicative of the legislatures intent to protect sellers needing to obtain the information.

 

After determining that Sellers were among the class of people the statute was designed to protect, the Appellate Court moved on to the second prong, finding that Sellers alleged injury that the Agent charged an "excessive and unreasonable fee" of $245.00 was an injury that the statute was designed to protect against.

 

The Appellate Court, relying on the above reasoning, also determined a private right of action was consistent with the underlying purpose of Section 22.1 and that without an implied private right of action in favor of a seller, the prohibition on charging excessive fees would be ineffective.

 

Having found the necessary elements met to imply a private right of action in favor of a seller who is charged an excessive or unreasonable fee to receive required documents or information, the Appellate Court turned to the question of agency.

 

The Appellate Court stated that the plain language of Section 22.1 contained no mentioned of agents acting on behalf of unit owners' associations or boards of directors, but that the Illinois Condominium Association Act separately grants the board of managers the ability to "engage the services of a manger or managing agent." Id. at §18(a)(5).

 

The Appellate Court agreed with the trial court's reasoning regarding agency and saw no reason why this would not be one of the services for which the board of managers may engage a managing agent under 18(a)(5).

 

The Appellate Court further held "[w]here a property manager, as part of the services for which it is engaged as an agent by a condominium association, is delegated and agrees to perform the duties of an association or board of managers under section 22.1, it cannot be delegated or agree to perform those duties as agent in a way that the association or board would be prohibited from doing as principal." The Agent, having agreed to act as agent for the owner's association, could be held liable if it took an active part in violating statutory duty that its principal owes to a third party. Landau. 409 Ill. At 564.

 

Thus, the Appellate Court found that the Illinois Condominium Property Act provided an implied cause of action in favor of a condominium unit seller against a property manager, as well as the condominium association or its board of directors, based on allegations of excessive fees charged for the production of information required to be disclosed to a prospective buyer under that statute.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

Our updates and webinar presentations are available on the internet, in searchable format, at:

 

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and

 

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and

 

Webinars

  

 

 

 

FYI: 7th Cir Rejects Borrower's Attempt to Appeal Remand Order and Related Fee Award

The U.S. Court of Appeals for the Seventh Circuit recently affirmed the dismissal of several actions by a borrower against a mortgagee, and in so ruling also held that it did not have jurisdiction to review the lower court's remand order, and that the borrower had waived his right to challenge an award of attorney fees and costs in connection with the remand.

 

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

 

The dispute encompassed three lawsuits: (1) a bankruptcy proceeding where the borrower (Mortgagor) challenged Mortgagee's debt and security interest; (2) Mortgagee's foreclosure action against the Mortgagor; and (3) Mortgagor's separate lawsuit against Mortgagee alleging unfair debt collection practices.

 

In 2005, Mortgagor executed a mortgage loan secured by his residence, and later defaulted. After defaulting, Mortgagor entered bankruptcy. Mortgagee filed a proof of claim as to its loan secured by Mortgagor's residence.

 

The Chapter 13 bankruptcy plan was approved in 2012 and incorporated an agreement between the parties that conditioned the automatic stay on Mortgagor making monthly mortgage payments to Mortgagee. Pursuant to the agreement, if Mortgagor defaulted on the payments to Mortgagee, the stay would lift and Mortgagee could foreclose on the residence. Mortgagor stopped making the mortgage loan payments in 2014, at which time Mortgagee withdrew its proof of claim and notified the bankruptcy court that the stay had terminated.

 

Mortgagor then filed an adversary proceeding challenging Mortgagee's debt and security interest. While the adversary proceeding was pending, Mortgagor completed the Chapter 13 plan and received a bankruptcy discharge. The adversary proceeding concluded in 2019, when the bankruptcy court granted Mortgagee's motion to dismiss, ruling the bankruptcy discharge did not cover the debt owed to Mortgagee. The court held the debt was either a long-term debt provided for under Section 1322(b)(5) of the Bankruptcy Code or was not a debt provided for by the confirmed Chapter 13 plan. Mortgagor did not appeal the bankruptcy court's ruling within the statutorily required time period.

 

After dismissal, Mortgagee filed a foreclosure action which Mortgagor attempted to remove to the bankruptcy court, arguing that Mortgagor was seeking a personal deficiency judgment against him, which contravened the bankruptcy discharge. Mortgagee moved to remand arguing there was no federal jurisdiction on the face of its foreclosure proceeding. The bankruptcy court instructed Mortgagor to respond to the remand motion and show why it had jurisdiction but Mortgagor failed to do so. As Mortgagor had no basis to assert federal question jurisdiction, the bankruptcy court found the removal unreasonable and awarded Mortgagor attorney fees and costs under 28 U.S.C § 1447(c).

 

Mortgagor appealed the remand order to the trial court, but the order was affirmed. Mortgagor then appealed to the Seventh Circuit and also sought review of the attorney fees and costs awarded to Mortgagee.

 

Finally, Mortgagor sued Mortgagee in federal trial court, alleging violations of the federal Fair Debt Collection Practices Act and the 2018 bankruptcy discharge injunction. Mortgagee moved to dismiss and the trial court granted dismissal as the bankruptcy court had held that the debt owed to Mortgagee was not subject to the 2018 discharge. Mortgagor appealed the dismissal of this lawsuit also.

 

On reviewing Mortgagor's claims, the Seventh Circuit first determined whether it had jurisdiction to review the remand order. Pursuant to 28 U.S.C. § 1447(c), "[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise." Further, 28. U.S.C. § 1452(b) states that a remand order issued "on any equitable ground" "is not reviewable by appeal or otherwise by the court of appeals…or by the Supreme Court of the United States." Thus, the ability to review the trial court's affirmance of the remand order was foreclosed by the two statutes.

 

Mortgagor relied on City of Waco v. United States Fidelity & Guaranty Co., 293 U.S. 130 (1934) in which the Supreme Court of the United States determined that although the remand was not appealable, the order of dismissal was reviewable because it preceded the remand order "in logic and in fact." Id. at 143. Mortgagor alleged that, because his appeal of the remand order contested the bankruptcy court's conclusion that his discharge did not cover the debt rather than disputing the court's holding that it lacked subject matter jurisdiction, it fit within Waco.

 

The Court of Appeals found this argument unpersuasive, as the Court has expressly stated that "Waco does not permit an appeal when there is no order separate from the unreviewable remand order." Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224, 236 (2007). The Seventh Circuit added that Mortgagor had every opportunity to timely appeal the court's conclusion that his bankruptcy discharge did not cover the debt owed to Mortgagee but chose not to do so.

 

Next, Mortgagor argued that the attorney fees and costs awarded to Mortgagee should be reversed because he had a reasonable basis to contest that his bankruptcy discharge covered the debt owed to Mortgagee. The Seventh Circuit found that Mortgagor had waived these arguments, as Mortgagor offered no argument before the trial court as to why the bankruptcy court's fees and costs award was improper. Further, the Appellate Court found that, because Mortgagor's argument against the fees and costs before their court differed from the challenge to the award in the trial court, he had waived his current argument.

 

Finally, Mortgagor challenged the dismissal of his suit against Mortgagee claiming violations under the federal Fair Debt Collections Practice Act, the Illinois Consumer Fraud and Deceptive Practices Act, and the 2018 bankruptcy discharge injunction. The Seventh Circuit found that all of Mortgagor's claims hinged on the question of whether the debt owed Mortgagee was covered under the bankruptcy discharge, which had already been resolved in the bankruptcy court action, which Mortgagor did not appeal. Thus, the Court held, the appeal was an impermissible collateral attack.

 

Mortgagor raised three arguments to avoid the Court's conclusion. First, Mortgagor argued that the bankruptcy court's dismissal of his adversary action was not a final order and therefore should not be given a preclusive effect. The Seventh Circuit quicky dispensed with this argument finding that the bankruptcy court dismissed the adversary proceeding, and "[a] final resolution of any adversary proceeding is appealable, as it is equivalent to a stand-alone lawsuit." Fifth Third Bank, Ind. v. Edgar Cnty. Bank & Tr., 482 F.3d 904, 905 (7th Cir. 2007).

 

Next, Mortgagor argued that the bankruptcy court's analysis regarding the scope of the discharge was dicta. The Seventh Circuit found this a mischaracterization of the court's decision. The Appellate Court found that the bankruptcy court dismissed the proceeding because it had devolved into "a two-party dispute under state law" that "[did] not implicate bankruptcy rights." Thus, the conclusion was reached because Mortgagor's bankruptcy discharge did not implicate the debt owed Mortgagee and therefore, the court's analysis on the scope of the bankruptcy discharge was central to the court's decision.

 

Finally, Mortgagor argued he was denied adequate notice and an opportunity to respond to the bankruptcy discharge issue because Mortgagee did not file a motion or objection challenging his right to a discharge. The Seventh Circuit found Mortgagor had not basis to contend he did not have a constitutionally sufficient notice that the bankruptcy court could make findings or determinations on the scope of his bankruptcy discharge in the adversary proceedings as Mortgagor was the one who originally placed the scope of his discharge before the court. Further, if Mortgagor believed the decision in the bankruptcy court denied him due process, he had every right and opportunity to appeal the bankruptcy court's final order but he failed to do so.

 

Therefore, the Seventh Circuit dismissed the appeal of the remand order and affirmed the fees and costs award and the trial court's dismissal with prejudice of Mortgagor's suit against Mortgagee.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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FYI: Ill App Ct (1st Dist) Holds Claims Against Bank and Bank Officer for Fraud, Breach of Fiduciary Duty Were Time Barred

The Illinois Court of Appeals, First District, recently affirmed a trial court's ruling dismissing claims for fraud, breach of fiduciary duty, conversion, tortious interference as untimely and further affirmed the dismissal of claims for respondeat superior liability, prejudgment interest and attorney's fees on the basis that the substantive claims were untimely.

 

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

 

The appeal arises out of a November 2016 lawsuit filed by an individual ("Minority Owner") and an LLC ("Retailer"), against a bank ("Bank") and a vice president of the Bank ("Bank VP") for allegedly aiding the Majority Owner of Retailer in misappropriating millions of dollars from Retailer.

 

Minority Owner had instituted a prior lawsuit against Majority Owner in 2009, alleging essentially the same facts as alleged in this underlying 2016 lawsuit. In 2010, the trial court granted Minority Owner's motion to enjoin Majority Owner and his family against taking payments from Retailer under the "profit-sharing" plans that Majority had created.

 

In 2011, Minority Owner filed another motion for injunction prohibiting Majority Owner from using Retailer's funds to pay for his personal expenses. In Majority Owner's response, filed in March 2011, he acknowledged the payments alleged had occurred, but contended that they occurred prior to the 2010 inunction and were proper under the "profit-sharing" agreements.

 

Majority Owner further asserted that he spoke with Bank and it was determined that the best way to finance his purchase of a personal residence was for Majority Owner to borrow the purchase funds from Retailer and repay the loan at a higher interest rate than Retailer paid on its line of credit with Bank.

 

After a jury trial, an amount for compensatory and punitive damages was awarded to Minority Owner.

 

In 2018, the trial court entered a partial satisfaction and release of judgment, drafted by Minority Owner's attorney, stating that while the judgment had only been partially satisfied, employee released Majority Owner of the judgment entered on February 9, 2016.

 

Approximately 16 months prior to the release, Minority Owner and Retailer filed the underlying lawsuit against Bank and Bank VP, alleging that Bank and Bank VP allowed Majority Owner to use Retailer as his "personal piggy bank" resulting in Retailer's insolvency and sale of the majority of its assets to pay creditors.

 

Bank and Bank VP moved to dismiss alleging (1) that the claims were barred by the five-year statute of limitations, (2) Minority Owner and Retailer had failed to state claims for intentional interference and respondeat superior liability, and (3) the request for prejudgment interest and attorneys' fees was not supported by Illinois law.

 

The trial court denied the motion to the extent that it asserted that the claims were untimely but dismissed the claim for intentional interference with contract.

 

Bank and Bank VP then filed a motion for judgment on the pleadings arguing that Minority Owner and Retailer's claims for fraud and breach of fiduciary duty were barred by the five-year statute of limitations and that the release barred the claims because both the 2009 case and the underlying 2016 case sought to recover the same damages.

 

The trial court granted the defendants' motion finding that Minority Owner and Retailer were seeking to recover for the same loss at issue in the 2009 lawsuit. The trial court relied on Cherney v. Soldinger, 299 Ill. App. 3d 1066 (1998) in finding that Plaintiff's release of Majority Owner was "absolute and unconditional" and "released the judgment in its entirety," including "any other parties which might be responsible for the injury."

 

Minority Owner and Retailer appealed the order and filed a motion to reconsider the judgment arguing that the intent of the parties controlled whether Minority Owner had release Bank and Bank VP and Minority Owner had not contemplated releasing any other parties not named in the settlement agreement. The motion to reconsider was denied.

 

Minority Owner and Retailer appealed the denial, and that appeal was consolidated with the appeal of the order granting judgment on the pleadings.

 

On appeal, Plaintiff contended that the trial court erred in granting judgment on the pleadings, in denying their motion to reconsider judgment on the pleadings, and in dismissing their claims for conversion, tortious interference with contract, and respondeat superior liability. 

 

The Appellate Court addressed each issue in turn.

 

As to the granting of judgment on the pleadings, the Appellate Court agreed that the applicable statute of limitations for the claims at issue was five years. Relying on the discovery rule, the Appellate Court found that Minority Owner must have known of the alleged wrong doing as early as February 9, 2009 when employee initiated his lawsuit against Majority Owner.

 

Plaintiffs argued that the running should have started when he learned of Bank and Bank VP's involvement but the Appellate Court rejected this argument, holding that the identity of the party who caused the injury is not a prerequisite to the running of the statute of limitations. Guarantee Trust Life Ins. Co. v. Kribbs, 2016 IL App (1st) 160672, ¶ 30.

 

Minority Owner and Retailer next argued that even if the five-year statute of limitations applied the statute was tolled for numerous reasons, all of which the Appellate Court rejected.

 

First, Minority Owner and Retailer argued fraudulent concealment tolled the statute of limitations. However, the Appellate Court held that this section applies only to the concealment of causes of action and not to concealment of the identity of the tortfeasors. Levine v. EBI, LLC, 2013 IL App (1st) 121049, ¶ 21. As Minority Owner and Retailer alleged only that the identities of Bank and Bank VP were hidden, this section did not apply.

 

Minority Owner and Retailer next argued that the statute of limitations was tolled by equitable estoppel which was also quickly rejected by the Appellate Court, which found that Bank and Bank VP had done nothing to prevent Minority Owner and Retailer from filing suit against them in 2011 when filings in the earlier lawsuit made clear Bank and Bank VP were involved.

 

Plaintiffs next asserted the continuing violation rule meant that the statute of limitations ran from the last continuing tort. The Appellate Court found that this rule did not apply as each distinct transaction by Bank was a distinct instance of misconduct.  The Court relied on prior rulings in holding that "the continuing violation rule does not apply to a series of discrete acts, each of which is independently actionable, even if those acts form an overall pattern of wrongdoing." Kidney Cancer Ass'n v. North Shore Bank and Trust Co., 373 Ill. App. 3d 396, 398 (2007).

 

Finally, Minority Owner and Retailer argued the statute was tolled by the adverse domination doctrine which tolls the statute of limitations for claims by a corporation against its officers during the time the corporation is controlled by those officers. Lease Resolution Corp. v. Larney, 308 Ill. App. 3d 80, 86 (1999). The presumption created by the doctrine that a corporation does not "know" of its own injuries when it is controlled by an officer causing those injuries may be rebutted by evidence that someone else knew of the wrongdoing and had motivation and ability to bring suit. Id. at 90.

 

The Appellate Court found Minority Owner had knowledge of Retailer's claims against Bank and Bank VP as early as 2009 and no later than March 2011, and had motivation to bring suit against them at that time and that Minority Owner had the ability to bring suit on behalf of Retailer at the relevant time relying on Section 40-1 of the Illinois Limited Liability Company Act, which governed Retailer.

 

The Illinois Limited Liability Company Act provides that "[n]o action shall be brought by a member *** in the right of a limited liability company to recover a judgment in its favor unless members or managers with authority to do so have refused to bring the action or unless an effort to cause those members or managers to bring the action is not likely to succeed." 805 ILCS 180/40-1 (West 2008).

 

The Appellate Court found it clear that Majority Owner, had he been asked, would not have initiated a suit on behalf of Retailer alleging that Bank and Bank VP helped Majority Owner expropriate millions form Retailer's bank accounts and thus, Minority Owner was entitled to bring suit on behalf of Retailer at that time.

 

Next, the Appellate Court reviewed the challenge of the trial court's dismissal of the claims for conversion, intentional interference with contract, respondeat superior liability and the requests for attorney's fees and prejudgment interest.

 

As to the claims for conversion and tortious interference, the Appellate Court found that the claims were barred by the applicable five-year statute of limitations for the same reasons that the fraud claims were barred.

 

The Appellate Court further found no basis to reverse the dismissal of the claims brought under the doctrine of respondeat superior and the requests for prejudgment interest and attorneys' fees as the substantive claims were untimely and thus, Minority Owner and Retailer could not obtain any money judgment to which prejudgment interest could apply and could not be successful litigants, and therefore, could not be entitled to attorney's fees.

 

Having found Minority Owner and Retailer's claims were barred by the statute of limitations, the Appellate Court did not address the grant of judgment on the pleadings regarding the release of judgment.

 

The Appellate Court thus affirmed the judgment of the trial court.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

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