Illinois Construction Lawyer & Attorney : Foran Glennon Palandech & Ponzi Law Firm : Chicago IL

Malec v. City of Belleville (5^th Dist., Doc. No. 05-07-0456) is a case worth noting.  The City of Belleville adopted a group of ordinances in 2006 that provided for the formation of a tax-increment-financing district (TIF) pursuant to the TIF Act.  The city also adopted an ordinance creating a business district, approved a redevelopment plan, tax increment allocation financing for the Developers, a tax within the created business district and authorized the use of general sales tax revenues to reimburse the Developers for project development costs.  A complaint filed by the plaintiff alleges that these ordinances were to help finance a Wal-Mart, Lowe's, housing development and some other businesses.

Plaintiff, a taxpayer, brought suit challenging the city's enactment of the taxes under the TIF Act.  The district court dismissed the plaintiff's claim, finding that he lacked standing to bring his action as a taxpayer.  The 5^th District reversed and found that if the actions of the city in creating the TIF and business district did affect the general revenue of the city, then a taxpayer would have standing.  The court also held that the taxpayer could challenge the creation of the TIF through claiming that the areas that had been created did not meet the criteria of being "blighted" as the Act required (under the act "blighted" is a term of art that requires a area meet a myriad of factors in order to qualify for the TIF districting).  See 74.4-3(a) of the Act.  The argument was that the areas would have developed as business districts on their own, and as such, the creation of the special districts to generate revenue that would be paid to the developers affected the general revenue of the city because the city would have generated the revenue for itself and would therefore have no need to pay developers to do it.  (No mention of the timing was made, i.e., whether an argument that a development district would create business in a matter of a year as opposed to a naturally occurring district developing over, say, ten years).

While the case is not a blow to the creation of the districts for development, it does lend individuals another form of suit which could be used to slow down any form of development relying on TIF funding and is a case we'll keep an eye on.

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In Stewart v. Gino's East, et al. (N.D. IL, Doc. No. 07 C 6340), the defendants, restaurants that accept credit cards for payment, were sued under the Fair and Accurate Credit Transactions Act (FACTA) in a class action alleging they violated the FACTA by not removing the expiration dates of credit cards from their customer's receipts.  One of the defendants brought a third-party action against a company that installed the software and hardware used for the credit card transaction for breach of contract.  The third-party complaint attaches the contract.  It is a short agreement entitled "Construction Contract" and appears to be a standard contract used by the defendants for the contractor installing the equipment and allows the architect final approval on the remediation of unsatisfactory work.

The third-party complaint alleges that the description of the services provided in the contract meant that the contractor would assure that the software and hardware were in compliance with all applicable laws, including FACTA.  The contractor brought a motion to dismiss and argued that nothing in the contract obligated it to make sure the system was in compliance with FACTA and pointed to provisions of the contract arguing that they were not ambiguous and precluded a complaint against the contractor. 

The court found that the provisions pointed to by the contractor were silent about the system or hardware complying with FACTA (after all, it reads like a contract for the installation of the machines):

• "You do hereby warrant, that all material and equipment supplied for this job shall be new and free from faults and defects, and standard written equipment warranties shall be included and delivered to owner and also included is an one year warranty (from completion of the contract work) on all workmanship and materials."

The court went on to hold that other provisions could be interpreted to mean that compliance with FACTA was included in the contract:

• [the contractor] is "authorized to furnish all labor and equipment to do the POS set up for the building"

• "[t]he work is intended to be complete and fully useable as a finished product or system."
  
• "that all material and equipment supplied for this job shall be new and free from faults and defects."

Finding that these contractual provisions might be interpreted to require the system, as installed, would be compliant with FACTA.  The court denied the motion to dismiss, pointing out that these ambiguities created a question requiring future litigation.

Now, obviously, the court, and we, don't have all the facts about the nature of the agreement, but if it was just an agreement for the work on the installation of the equipment, then the ambiguities have created an issue and possible liability in a situation where absolutely none was intended.  Again, it might seem like a pain to have lawyers reviewing your agreements and helping negotiate even something as small as this contract must have seemed, but there is a reason such a big deal is made over contractual language.

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Illinois farmers are a tough bunch.  So it's not surprising that as a pro se defendant and appellant, farmer Peter Schultz, was instrumental in allowing the court to deliver one of the nine cases in existence dealing with the Illinois Drainage Act (70 ILCS 605/1 et seq.) 

This act is important to anyone developing a parcel of land and many contractors.  It establishes the Drainage Districts in the State and also governs taxation and contracting and bidding on projects with the Districts.  It provides the process by which determinations regarding drainage from one parcel to the next are made, along with establishing a procedure for adjudicating issues involving drainage.

In Halpin v. Schultz, Doc. No. 3-06-0767 (3^rd Dist.) the appellate court was faced with a trial court's decision granting Mr. Schultz' neighbors the right to enter onto his land and install new drainage tiles.  The neighboring farm wanted to extend their drainage tiles beyond their property, connect them to Schultz' and thereby, arguably, change the course of drainage on their property.  Schultz argued that the tiles between the property were never connected, and shouldn't be connected.  This is important given that, in addition to excess water, many toxins from pesticides and sewage from livestock also end up in being transported through these types of tiles and can effect the quality of groundwater in the area and the growth of crops.

At trial, the plaintiffs did not introduce any evidence comporting with the Drainage Act's requirements that a dominant landowner seeking to extend and replace tiles on a subservient landowners property show that the tiles would then drain at an exit point off the property of the subservient landowner.  In other words, if the neighbors wanted to drain in the direction of Schultz' property, they were required to show that they would be draining "through" Schultz' property and that the water would exit into a proper ditch or culvert beyond Schultz' property.  They failed to introduce any evidence to that effect and the appellate court reversed the trial court's decision outright.

Additionally, the court noted the severe constitutional implications involved in letting one private land owner assert rights with regard to another individual's lands. 

• "The law does not favor the expropriation of private property for the public good without just compensation.  Even less attractive is the expropriation of private property for the private benefit of an adjoining property owner."

The judgment of the trial court was reversed.

Justice Holdridge dissented asserting that a different standard of review should be applied and framed the issue of this case, not as one addressing the interpretation of the Drainage Act, but of one regarding the trial court's determination of the evidence in competing testimony and felt that the trial judge did not create reversible error in his determination regarding the course of the natural drainage of the properties at issue.

Holdridge saw this case as a question of whether certain new improvements on portions of the neighbors land, namely the creation of a two-acre pond and the development of a housing division on a portion of the property had created a new "natural" flow of water where water that may previously not have traveled over Shultz' land.  However, addressing these questions under the act would require more time and effort than the plaintiffs may want to put into this matter.  And, without an attorney, perhaps Shultz was unequipped to properly raise these issues.

Developments, ponds, and farms aside, the act of construction on open land can raise a host of issues that, if not properly considered at the time of construction, can lead to a mess of litigation, which can be a headache, unless, of course, you know how to farm.

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We've blogged at length about HB 2094 and the reintroduction of the Structural Work Act.  The action deadline for the bill has been extended to May 9.  It is likely, now that the fervor has died down that the bill is being held as a playing chip between differing factions in the House for getting some other legislation passed. 

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Illinois is certainly no stranger to the Condo Craze, a quick Google search for blogs on the topic in Illinois should put to rest any notions to the contrary.   There are plenty of interesting and responsible resources on the topic... and the law regarding the issues involved in condominium matters continues to grow.

A case touching on those matters and construction and development as well as architecture is the feature today.  Kirkpatrick v. Strosberg, Doc. Nos. 2-06-0724 and 02-06-0731 consolidated (April 16, 2008, 2^nd Dist.)

The plaintiffs were individuals who contracted to purchase luxury condominium units in Glen Ellyn.  The developer built the units and the plaintiff's moved in.

Some of the measurements of the completed luxury units did not turn out to comport exactly with the finished condos.  For example, depending upon the method in which one measures the square footage of the units, the units did not meet the advertised square footage, additionally, because alterations were necessary towards the end of the project, the ceilings on the top floor units measured eight feet, six inches and not nine feet as advertised in the original brochures.  One of the unit owners spent extra money having his bathroom reconfigured after the initial plans failed to put the pipes in the right places, and another owner measured his cabinetry installation in accordance with the nine foot specs and not the eight feet, six inch specifications.

The owners sued the developer for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, common-law fraud, and breach of contract.

There was a bench-trial on the matter and the trial court made findings in favor of the plaintiffs for the breach of contract claims, the common-law fraud and the consumer fraud claims involving the ceiling heights, but not the square footage issues.  The court also found that due to the nature of the contracts and the evidence presented by the plaintiffs there was damage, but the plaintiffs' evidence was insufficient and thus awarded only nominal damages of $100 each.  For the plaintiff with the bathroom plans, the court found fault at 50% with the plaintiff's architect, who was the plaintiff's agent, and at 50% with the developer, and thus reduced the damage award of $31,730 by half.  The court found the cabinet plaintiff's claims were barred by language in a rider to the contract by which the seller eschewed liability for improvements made by the buyer:

• "Seller shall not be required to review Buyer's architectural plans for the Buyer's improvements, and Seller shall not oversee Buyer's work on the premises. Seller makes no warranty whatsoever to Buyer that the premises and its components are complete or compatible with the Buyer's improvements. Buyers understand that all dimensions on the Seller's plans and specifications are approximate and subject to modification for actual field conditions. Field measurement is required to conform dimensions prior to ordering materials."

The trial court also awarded $83,000 to the plaintiffs in attorneys fees and $300,000 in punitive damages.

The appellate court upheld the trial court's determination that the square footage of the units, when measured properly, was not contradicted by any of the plaintiffs' evidence.  The court also upheld the $100 damage award finding that the plaintiffs' expert appraiser had taken cost approximations regarding damages from housing prices as they existed seven years after the actual date of sale for the units.

The court's statement of the black-letter law regarding the proper calculation of damages in a dispute over the breach of contract for the sale of real estate is familiar:

• "Damages, in a breach of contract for the sale of real estate, are calculated by the difference between the fair market value of the real estate on the day of the breach and the sale price contracted for by the purchasers."

The appellate then upheld the nominal damages award, finding again that there was no credible evidence on the matter given the appraiser's failure to estimate from the time of the sale and not the market value at the time of the case.  The court struck the $300,000 in punitive damages, citing a 1^st District opinion holding that nominal damages cannot provide a basis for awarding punitive damages.  The court also upheld the trial court's determination that the plaintiff and the defendants were 50% mutually responsible for the cost of the repair to the bathroom; affirmed the cabinetry decision; and awarded the attorneys fees.

Of additional note to appellate practitioners is the court's enforcement of Rule 341(e)(7) granting the defendants' motion to strike portions of the plaintiffs' reply brief, where the brief raised arguments in the reply that were not raised in their initial brief.

For designers: the court stood by the Architect's method of measuring the square footage of the condominiums as the distance from the outside wall to half of the demising wall rather than the plaintiffs' appraiser's "paint-to-paint" method of measuring from the inside wall to the inside wall.

The actual relief in this case would likely have been substantial had the appraiser computed comparable sales in accordance with the proper measure for damages.

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The Moorman Doctrine has been applied to those providing professional services since Anderson Electric, Inc., v. Ledbetter Erection Corp. 115 Ill. 2d 146 (1986).

The Doctrine has several exceptions but often forces parties to a contract for services to seek redress for damages they have incurred by suing on the terms of the contract rather than in tort.  The Moorman decision has long been a tool of attorneys representing construction clients for limiting the issues and available remedies of different parties to construction disputes.

In designing a building or performing work under contract on a structure, the doctrine often operates in limiting the manner in which a professional can be sued unless some error has resulted in damage to other property or personal injury or property damage resulting from a sudden and calamitous or dangerous occurrence.

In Loman v. Freeman, (Doc. No. 104289, April 17, 2008), the Illinois Supreme Court had occasion to visit the "sudden or dangerous" exception to the doctrine in the scintillating context of veterinary medicine... and, sadly, decided against addressing the merits of the topic in favor of a procedural rule that bars consideration of arguments not adequately defined or argued in the briefs.  In Loman, the plaintiffs' race-horse required surgery.  Plaintiffs claimed they only authorized the vet to perform two procedures, and that a third procedure performed by the vet, was unauthorized and did irreparable damage to the horse, rendering it unfit for racing.  Plaintiffs sued on two theories, one in negligence claiming that the vet performed unauthorized surgery on the animal, and secondly on a count of conversion, claiming that the unauthorized surgery amounted to an unauthorized assumption of the right to possession or ownership of the horse.  We are concerned only with the first claim in negligence.

The defendants claimed that the Moorman Doctrine applied and that the plaintiffs were barred from bringing suit in negligence.  The district court agreed and dismissed the plaintiffs' case, the appellate court reversed the matter stating that the unauthorized surgery amounted to a sudden and dangerous occurrence under the Moorman Doctrine's exception; the defendants appealed to the Illinois Supreme Court.

The Supreme Court noted that the application of the "sudden and dangerous" exception to the conduct of the professional and not to the failure of a product contracted for was an awkward one, also pointing out that the application of the exception to veterinary surgery under this sort of theory could lead to the absurd result that veterinary surgery would fall under the exception, but veterinary practices resulting in, for example, misdiagnosis, would not.  The Court then went on to state that it would not consider the issue since it was not adequately briefed.

In his dissent, Justice Freeman pointed out something we often see in economic loss cases --confusion -- with half the opinion of the majority referred to the count as one in negligence, and half the opinion referred to a "contractual" relationship between the parties.  In providing assistance Justice Freeman pointed to the possibility that the court could reclassify the action as a contractual issue of bailment and proceeded to discuss the law of bailments and their contractual nature along with the bailment theory's ability to provide negligence-theory based relief in the contractual setting.  The issue is particularly interesting in that Justice Freeman argued that under a bailment scenario, a professional contracting to perform services is held to "exercise the proper degree of care and diligence about the work" (Slip Op. at 22) and notes that "generally, the bailee will be liable for losses that are proximately the result of the bailee's own negligence."

"Under the bailment, the bailee has a duty to exercise the skill or knowledge pertaining to the "nature of the business... Bailees will be liable for losses that result from their negligence or, more precisely, for their failure to exercise the skill or knowledge pertaining to the nature of their business."  (Slip Op. 23-24).

Justice Freeman went on to state that addressing the claim at issue under the bailments theory would arguably resolve every issue in the case.

Unfortunately, the Court decided not to address the "sudden and calamitous" issue.  Additionally, failing to fully flesh out the dicta concerning applying the exception to the acts of a person and not to something happening with the product will doubtlessly need to be addressed at some point.

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John Parnass over at Washington Construction Law, an excellent Washington State Construction Law resource, is reporting on this article from the Law Blog of the Wall Street Journal.  The Donald is suing his attorneys over the fees they billed in representing him in a construction matter.

Great quotes from Trump regarding the underlying dispute and legal case over the breach of the earth-moving contract in the construction of a Golf Course:

"I have a Ph.D. in legal fees. I know when fees are fair and when they are not."

"Ninety percent of the conversations I had ... were about legal fees, not the case,"

"We won the case because I'm a great witness."

Whether or not they've got their own TV Show, clients should work with attorneys to establish a beneficial fee structure and ensure that they're getting value for their money.

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Just a quick update.  The good people over at the Michigan Construction Law Update have posted this entry regarding a recently published "Contractor's Guide to Michigan Construction Law."  Several of the authors for the guide are also authors for the MI Construction Law Update.  The guide is available for download from the Associated General Contractors of Michigan's website here.

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As we continue to follow HB 2094, we are pleased to present the 1907 edition of the Structural Work Act.  We'd like to thank our friends over at the Cook County Law Library for having an in-tact copy of the 1908 Code.  The spine of the book can be seen to the left.

As you can see, not much is different between the HB 2094 proposed act and the 1907 version.  Except the penalties.  It used to be that the penalty for violation could cost an architect $25 to $200, now it would be a "petty offense."

In one of the cases that established the "good faith" exception to the exclusionary rule exercised for 4^th Amendment violations (United States v. Leon, 468 US 897 (1985)), Justice Blackmun delivered a concurring opinion addressing decisions based on  empirical data and offered some guidance regarding how the law should approach its own determinations when they are premised on empirical evidence:

    "As the Court's opinion in this case makes clear, the Court has narrowed the scope of the exclusionary rule because of an empirical judgment that the rule has little appreciable effect in cases where officers act in objectively reasonable reliance on search warrants. Because I share the view that the exclusionary rule is not a constitutionally compelled corollary of the Fourth Amendment itself, I see no way to avoid making an empirical judgment of this sort, and I am satisfied that the Court has made the correct one on the information before it. Like all courts, we face institutional limitations on our ability to gather information about "legislative facts," and the exclusionary rule itself has exacerbated the shortage of hard data concerning the behavior of police officers in the absence of such a rule. Nonetheless, we cannot escape the responsibility to decide the question before us, however imperfect our information may be, and I am prepared to join the Court on the information now at hand.
    "What must be stressed, however, is that any empirical judgment about the effect of the exclusionary rule in a particular class of cases necessarily is a provisional one. By their very nature, the assumptions on which we proceed today cannot be cast in stone. To the contrary, they now will be tested in the real world of state and federal law enforcement, and this Court will attend to the results. If it should emerge from experience that, contrary to our expectations, the good-faith exception to the exclusionary rule results in a material change in police compliance with the Fourth Amendment, we shall have to reconsider what we have undertaken here. The logic of a decision that rests on untested predictions about police conduct demands no less."

If the Supreme Court of the United States can recognize that empirical evidence can lead to the need to reconsider its own rules then, when:

"It is the intent of the General Assembly that this Act is to be liberally construed to effectuate its beneficial purpose of protecting persons engaging in occupations of working in and about construction, repairing, alteration, or removal of buildings, bridges, viaducts, and other structures. This liberal interpretation exists so as to provide workers with a safe place to work and to afford relief to injured workers."

a state legislature drafting a law designed for a purpose (Worker Safety) should also revisit its law with empirical evidence and determine if the standards set out in that law can accomplish that goal.  The point is exacerbated by the fact that Structural Work Act was in effect from 1907 to 1995.  There should be plenty of data out there to determine if the standards and rules set forth by this statute should be updated.

The real question then is, have methods, means and ability of contractors and construction trades to provide for safety changed such that the standards should be augmented?  Is it sound law that the physical requirements of structures under the act should just read as they did in 1907, given that the industry has advanced?  What about OSHA requirments? 

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There's an interesting article in April's Architectural Record by Alec Applebaum concerning owner's rep work and the possibility of expanding the role of the designer to create new forms of business for an architect's firm.

Anybody undertaking a design-build arrangement will need to be familiar with rules about general contractors, safety and understand the significant liability risks associated with such a role.  In addition, undertaking owner's rep work could implicate a host of fiduciary responsibilities not considered.  Serious consideration regarding the qualifications and ability that is required to take on any expanded role is important.

We've had plenty of previous discussions about the types of liability a general contractor can face.  We have also been following a piece of legislation in the Illinois House of Representatives that would likely change the face of §414 liability cases.  In following these types of cases under Illinois law in the construction industry we have seen courts rule both ways when considering whether or not a GC undertook to control the work of its subcontractors.  

Now we have another...  In Calderon v. Residential Homes of America, et al. No. 1-07-1470 (2008) we've been given another piece of information concerning what amounts to control under the §414.  In Calderon, the plaintiff was roofing and injured himself while carrying shingles up a ladder to a roofing job.  The defendant was the GC and had a contract that instructed its subs to review a manual regarding safety that was kept in the GC's office and had a site superintendent who went around the job daily to ensure work progress.  The testimony during depositions revealed that the GC's superintendent was not aware that the shingles were transported by ladder rather than by crane or conveyor, and that the superintendent was not instructing the subs regarding how to perform their work, but was reviewing the site for progress.  The court upheld the trial court's grant of summary judgment and found that the facts (which can be read here in the opinion) did not amount to "control" sufficient to establish liability under the §414 exceptions.

There are plenty of minutia to consider when assuming a new role.  Jumping into any unfamiliar type of business arrangement means assuming new risks that you should be prepared for.

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In American Multi-Cinema, Inc., v. MCL REC, LLC, et al. (N.D. of Illinois, Doc. No. 06 C 0063)  a lessee, AMC, filed for a declaratory judgment seeking a determination regarding its lease.  They want to know if the lease requires them to pay for the hot and cold water that runs in their portion of the building. (That's right... don't feel bad about having this dispute with your landlord every time the water bill arrives, apparently it doesn't matter if you're renting a garage space in Port Byron, or if you're running one of the nicest theaters in downtown Chicago, it's important to know who's paying for the water).

Under protest, AMC paid the balance of the water bill to its previous landlord prior to the sale of the property to a new landlord and then filed an action seeking a declaration regarding the duties imposed by its lease against the old landlord and brought in the new landlord after the sale was complete.  The two landlords then filed claims against each other regarding whether or not either of them owed money, indemnification, or a defense to each other concerning AMC's declaratory action.  They based these claims on their own sale agreement.  The end result of AMC's action will determine who foots the bill for the hot and cold water; AMC, or the current landlord.

The original landlord brought a motion for summary judgment on the cross-claim of the second landlord and the court rendered this opinion.  The court granted the original landlord's motion for summary judgment, in part with regard to the indemnification clause in the sale agreement, but held that there was a question of fact regarding when and what the parties knew about AMC's disputes and contentions over the water bill before, during, and after the sale.

As a practice pointer, make sure the due diligence is in order before you sign off on that asset purchase agreement.  Additionally, see the court's footnote 1, reminding the parties that under the Northern District's local rules, tabs and indexes of the exhibits (local rule 5.2(c)) need to be filed.  R. David Donoghue over at the Chicago IP Litigation Blog has also commented on the failure of many counsel to fully follow the lesser-known federal rules.

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Just a quick update on HB 2094, which we talked about here.  The bill has now been amended to reflect that the chief sponsor is Representative Fritchey.  Rep. Fritchey is also the representative who sponsored the Contractor Prompt Payment Act that went into effect last year.  The Judiciary Committee has recommended that the bill be passed, and various state agencies are now filing their own notes asserting that the bill will have little impact on State and Agency spending.  Many Illinois Construction lawyers are following this bill.  A simple Google search for "HB 2094 Illinois" shows that construction attorneys from all sides and lobbying groups operating for different interests all have something to say.  Interestingly, we have yet to see many scientific reports concerning the bill's preamble regarding construction safety.  If our readers have the studies concerning construction safety and net increases after the original version of this bill was repealed in 1995 we would like to report on them.  Additionally, if anyone has any information concerning the actual 1907 act and its text, it would be interesting to see how this act differs from the 1907 standards.

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In Ambrosia Land Investments, LLC, v. Peabody Coal Company (7^th Circ., Doc. No. 07-1945) the Seventh Circuit tackled the fascinating question of whether or not the Illinois Construction Statute of Repose applied to a coal mine.  While we may not think this would be interesting to everyone, the construction statute of repose is actually a fun topic, and the 7^th Circuit did a great job of covering the topic.

Along with a poignant discussion of the relevant Illinois case law regarding the statute, the court held that a coal mine on a piece of property would constitute an "improvement to real property for statute of repose purposes."  The court went on to find that the former mine owner was being sued as an owner of the mine and not as a party engaging in construction-related activities, so the plaintiff's case for damages to its property from mine subsidence did not fall under the activities covered by the statute.

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In  West American Ins. Co., v. Trent Roofing, et al. (ILND, Doc. No. 06 C 1239) the evidence before the court was that the plaintiff's building burned when a roofer caught the place on fire with a torch.  The roofer performing the work was a man named Eller.  A man named Covelli had applied for permits in the name of a different entity called Trent Roofing.  Trent Roofing performed no work on the building.  No written contract existed between Trent Roofing and the plaintiff or any other party.  Trent also presented evidence that it never authorized Covelli to obtain permits under the Trent Roofing name.

The court found that no contractual duty existed between Trent and the plaintiff.

The interesting portion of the courts decision is at Slip Op. 5, where the court refutes the plaintiff's allegations that independent statutes such as OSHA regulations, the Illinois Roofing Industry act, and the City of Burbank's building and fire code, created some form of duty that Trent Roofing owed to the plaintiff.  Too often parties point to the existence of regulatory statutes, that give no right of private action to individuals, in an attempt to show that a duty exists or that some duty of care was breached.  Here, the court dismissed the claims that these statutes created a duty of care and granted Trent Roofing's Motion for Summary Judgment.

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In MD Electrical Contractors, Inc., v. Fred Abrams (Il. Sup. Ct. 2008; Doc. No. 104000)  the plaintiff had sued under the theory of quantum meruit, stating that it had no contract with the defendant for electrical work performed on the defendant's home.  The defendant claimed that the Home Repair and Remodeling Act prohibited a suit by the plaintiff.  The circuit court had reasoned that quantum meruit was a legal theory that implied a contract where none existed.  Since the Home Repair and Remodeling Act was against the contract, and the subcontactor fell under it, the court could not imply a contract where the act would forbid such a contract.  The Appellate Court had disagreed and remanded the decision.  And now, the Supreme Court's decision has squarely stated that the act does not apply to subcontractors.

• The Home Repair and Remodeling Act applies only to those who contract directly with the Home Owner.

The court refused to address the intriguing issue of whether or not a sub-contractor could have any recourse in quantum meruit, or outside the Mechanic's Lien Statute.

In a strong-toned dissent, Justice Freeman points out that the complaint was insufficient on its face to offer the factual issues that the court relied upon in determining this matter.  The complaint asserts that MD Electrical was a sub-contractor, but there is no evidence of that fact anywhere in the record.  The dissent goes on to argue that the court did not have to reach the issue of the Home Repair and Remodeling Act's application to sub-contractors and should not have done so.

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We've previously discussed the Illinois construction statute of repose (735 ILCS 5/13-214).  The benefits it conferred to design professionals and others by the statute's ten-year limitation cannot be underestimated. 

In Ryan v. Commonwealth Edison Company (Doc. No. 1-06-3309, 1^st Dist. Ill. App.) the Illinois first district appellate court has broken with itself and sided with the third district in asserting a "status/activity" distinction for claims that will be barred under the statute of repose.

The court was confronted with the issue of whether Com Ed's duty to maintain a transformer that exploded and injured the plaintiff was separate and apart from its installation work and therefore, not subject to the statute of repose.  The court found that Com Ed's status as an installer and any claims that arose from the installation might fall under the statute of repose, but made a determination that since Com Ed had a duty to maintain the equipment (derived from its capacity as the power supplier and not its status as the installer) the statute would not apply.

• Now that we have a definite split, we could see the Illinois Supreme Court address the "status/activity" distinction.  More importantly, because the court made the determination regarding Com Ed's duty in this case, we should be alert for more judicial determinations of ongoing duty.  Will the decision only apply to utility companies supplying services which necessitate a duty to maintain equipment?  Even apart from any undertaking to maintain structures/equipment after installation?  Even when the duty has been contracted or left in the hands of some other entity like a municipality?

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In Cincinnati Insurance Company v. Taylor Morley, Inc., (Doc. No. 06-cv-1035-MJR, S.D. Il, 2008) the Southern District of Illinois has issued a coverage opinion reaffirming the substantive Illinois law.   Construction defects alleged by a buyer against a builder and claims by buyers against a builder for diminished property values because of the builders failure to fulfill its contract and construct a "championship golf course" around which their homes were to have been built, are not afforded coverage under a CGL policy. 

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    It's not often that we get a 97 page opinion from an appellate court, even more rare is the occasion that any such opinion would be of interest to the industry.  This week, we were happy to find both in Cordeck Sales, Inc., v. Construction Systems, Inc., et al., (Doc. No. 1-06-3702, 1^st Dist).

    In Cordeck, a developer had gone belly-up on a multi-million dollar condo development.  Multiple mechanics liens were filed by the various entities involved in the construction for work performed, the lender filed a claim to foreclose its mortgage, and a receiver had been appointed to sell the individual units and collect the proceeds into a pot from which the resolved disputes would be compensated.  The opinion doesn't go too far in creating any substantively new nuances to the statute that Representative George Scully has called "a patchwork of quilts...of patches put on this quilt over the past hundred years" (Slip op. at 44).  Some clarifications and holdings are still important.  Of interest are:

• A reminder that the dates of the contracts are the attachment dates for the liens of contractors and subs.  They will be instrumental in establishing the priority of liens against third parties and other claimants.
• The date of recordation for a mortgage will establish the date of a mortgage for the determination of priority in the scheme of liens and claims against third parties.
• Construction Managers can have liens, even on contracts prior to the 2004 and 2006 amendments to the Act.
• Amendments to a recorded lien for amounts of work done over time past the date of the first recorded lien can still affect the assertions of rights against the owner, but may not have affect as to the right in priority or assertions against third parties.
• Fees earned on a project are not inherently "unalienable."

Of note to many practitioners:

• If a deponent is claiming a fifth-amendment right against self incrimination in answer to questions, the determination regarding the propriety of such an assertion will be made on a question by question basis in the trial court.

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In Trtanj v. The City of Granit City (Ill. App. Ct., 5^th District, No. 5-07-0002), the plaintiffs owned a house that was filled with sewage after a thunderstorm.  During the thunderstorm, three sewage lift stations that normally operated to transport sewage through the city's system were left without power.  The city took two to three hours in getting the sewage systems back online.  As a result of the rainfall and issues with a clay pipe connecting the plaintiffs' property to the city's system, water and sewage backed up into the plaintiff's home.  Prior to the motion for summary judgment brought by the city, the city's superintendent of water testified that it should only take 15 minutes to set up a temporary lift system and 15 minutes to get it operational.

The plaintiffs brought an action in 2002 and later amended their complaint in 2005 alleging negligence in the design, construction, operation and maintenance of the sewer system, that the backup was a temporary nuisance, and also brought an action in trespass against the city.  The city responded in a motion for summary judgment that the claims were barred under the statue of repose (735 ILCS 5/13-214), that the tort immunity act applied (745 ILCS 10/2-201) to protect the city from suit, and that it was not liable because the backup occurred during an extraordinary rainstorm.

The trial court granted the motion for summary judgment and the plaintiffs appealed.

The appellate court found that material issues of fact existed where the city had known about the outside water infiltration into the sewer system through the plaintiff's clay pipe; and where the city's own superintendent of streets had testified that it should only take 15 minutes to set up the temporary pumps, not the two to three hours that it did take.

In adjudicating the repose claim, the court said that the statute of repose applied only to the construction and improvements of real property.  Because the plaintiff had alleged that the design installation and construction of the sewer station was at fault, the court found that these allegations were barred by the statute of repose when the design, construction and installation had occurred more than ten years prior to the filing of the lawsuit. 

The court went on to find that the statute did not protect the city from the claims that the maintenance and operation of the sewer system and the lift stations that occurred after their installation and within the ten year period were negligent.

The court cited a previous case, Prochnow v. Elpaso Golf Clib, Inc., 253 Ill. App. 3d 387, finding that while those claims that involved the design, construction, supervision, observation or management of the construction were exempt if the acts were outside of the ten year period, the persons responsible for possession or control and suppliers of the materials used in the maintenance and operation were subject to liability for reason of construction defects.

The court then went on to address the city's claim of immunity.  Holding that the statute protects only those acts of a municipality that are shown to be both an exercise of discretion and a policy determination, the court stated that acts which are ministerial are not protected.  After a discussion of the differences between policy determinations, acts of discretion, and ministerial acts, the court found that because the city's operation of the sewage system was subject to statutory and regulatory guidelines the actions were ministerial, and that there were material issues of fact concerning whether or not the city complied with those guidelines.  "Once a municipality decides to perform pubic work, the municipality must perform the public work with reasonable care and in a nonnegligent manner" (Slip Op. at 13).

The court also found that the determination of what might amount to an extraordinary sum of rainfall was not before the court and presented a question of fact for the jury.

The appellate court reversed the trial court's grant of summary judgment to the extent it was inconsistent with the appellate opinion.

Of note to design professionals and construction companies is the application of the ten year statute of repose.  Getting done with the work and getting out will start the clock running on the ten year period.  However, if follow up maintainance work is performed, that work is still potentially the subject of litigation. More importantly for many claimants is the willingness of the court to interpret the immunity statute and discern between policy, discretion, and ministerial acts.  It should not be overlooked that too often courts are willing to apply the immunity statute without adherence to the guidelines or undertaking the analysis to determine the exact nature of the act, perhaps inspections, construction, and maintenance can all be pled correctly to make certain the municipality has to explain its actions rather than simply pleading immunity.

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Here's a reminder from the Northern District of Illinois Bankruptcy Court.  In Vancil v. Tres Amigos (docket #06-71254) the owner of a property, Tres Amigos, was looking to extinguish liens filed by two subcontractors of Vancil.  Tres Amigos brought the action to extinguish the liens where the two subs had not properly served Tres Amigos with their 90 day notices under the Illinois Mechanic's Lien Act.

A problem arose when the Court noted the Tres Amigos had never made one of the subs a party to the action and that it failed to assert a claim against the other sub, which was a co-defendant.  The Court pointed out the Tres Amigos would likely have prevailed on its claim, had it not failed to properly plead actions for which relief could be granted against the subcontractors.

• The lesson learned here:  Make sure all your ducks are in a row before time, effort and money are spent asking the Court for relief that cannot be granted.

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    A case from the Northern District (Smith v. The Village of Norridge), involving actions brought by an individual against the police, a landlord shopping center and its tenant, emphasizes the significance of indemnity provisions in a contract.

   At issue are cross-claims filed by the landlord of the facility arguing that the tenant is required to indemnify the landlord under a paragraph of the lease which reads that the tenant must:

"[i]ndemnify and save Landlord ... harmless from and defend against any and all demands,claims, actions, damages, costs and expenses, including [costs and attorneys' fees] arising from the conduct or management of the business conducted by Tenant."

  The lease contained a similar provision requiring the tenant to procure insurance for such acts and that the insurance was required to cover the landlord as well.  The cross-claims are pled as breach of contract actions stating the because the contract contains the indemnity provisions, the tenant's failure to indemnify (and obtain insurance in the second claim) amounts to a breach of the contract.

  The court disagreed with the tenants' argument that the Illinois Landlord-Tenant Act (765 ILCS 705/1(a)), which provides:

"(a) Except as otherwise provided in subsection (b), every covenant, agreement, or understanding in or in connection with or collateral to any lease of real property, exempting the lessor from liability for damages for injuries to person or property caused by or resulting from the negligence of the lessor, his or her agents, servants or employees, in the operation or maintenance of the demised premises or the real property containing the demised premises shall be deemed to be void as against public policy and wholly unenforceable."

would bar this action.  The Court found that the provision would apply if the claim against the tenant had been one for indemnity for the negligent acts of the landlord.  However, the landlord pled an action for breach of contract, and the acts alleged as the root of the claims were intentional, so under two separate rationales, the ILTA did not apply.

 
  Accordingly, the court denied the tenant's motion to dismiss the cross claims.