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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In Bjork v. Draper (Doc. No. 2-06-1145, 2^nd Dist), neighbors of a house located in the Lake Forest Historic District, included in the National Register of Historic Places, brought suit against the house owners to enforce the terms of a "Conservation Easement" (an easement agreement that creates a type of land preservation agreement that is enforceable between parties normally granted pursuant to the Illinois Real Property Conservation Rights Act) which the neighbors felt the home owners were violating with alterations to their home and subsequent amendments to the easement entered into between the home owners and the Lake Forest Open Lands Association which was the conservation entity that had been granted the easement.

The terms of the easement included a right for the amendment of the easement as well as a statement that the purpose of the easement was to assure that the property would be "retained forever predominately in its scenic and open space condition, as lawn and landscaped grounds."

The trial court heard the neighbors' claims regarding interpretation of the easement, the amendments that the owners and the Association had entered into, and determined that a portion of the landscaping improvements that the owners had made pursuant to a third amendment were in violation of the easement.  The court also determined that the two prior amendments to the easement, allowing the owners to expand their driveway and to construct an addition to their home, were valid.

The neighbors appealed the decision of the trial court and the appellate court found that all the amendments violated the easement's statement of purpose regardless of the provisions in the easement allowing for amendment.  The court then remanded the decision to the circuit court for a determination in line with its opinion regarding exactly which improvements, if any, the owners would be forced to remove from their property.

Dealing with these types of regulations in a construction context is always challenging, but usually negotiating construction terms around conservation easements can be handled in a manner that can increase the historic value and preservation of the structures.  Here, the opinion reveals that the owners took steps to comply with the easement, hired an attorney and negotiated with the Association, it was the neighbors who brought the suit.  These facts are not inconsequential and show why the court in remanding the case, emphasized that the trial court could eventually determine that none of the improvements would need to be removed.

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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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    Here's a Seventh Circuit decision (Foskett v. Great Wolf Resorts, et al.) full of information regarding claim accrual for negligent design, indemnification, and the theory of risk allocation.  Two parties had entered into an asset purchase agreement with mutual indemnification clauses.  Buyer and Seller had agreed to a sunset provision in Seller's indemnification provision.  A claim accrued after the sunset provision and, on appeal, the court enforced the provision.

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    In an eminent domain case, Marseilles Hydro Power, LLC v. Marseilles Land and Water Co., arising under the Federal Power Act, and involving the interesting issue of deed construction and proper drafting, the Seventh Circuit has laid out some interesting points regarding deed construction premised on prior recordings and conveyances, along with an affirmation of the eminent domain standards applicable to the Federal Power Act.

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There's certainly a difference between "registration" and "licensure"...

We've come across quite a few architects and engineers who seem to forget that a professional design firm needs to be registered.  It's an extra step, in addition to the professional's individual licensure and registration that's required in Illinois.  But what exactly is the impact of forgetting to register?

Here's an interesting case from the Central District of Illinois, pointing out that a contract will not be voided, and a developer's claim for restitution will not stand even if a professional forgets to register the design firm.  In Brethren v. OSM (C.D. Ill. 06-3161) the court points out that even though a firm may forget to register, the work was still done by a licensed professional and as such, there is no claim. 

Now, if the professional performing the work was unlicensed, certainly the restitution claim would be able to go forward.  The only real teeth the registration law has to compel the registration of the firm comes from the statute authorizing penalties for such a failure to register, 225 ILCS 305/21.  Work by a licensed architect is still work by a licensed architect.

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Two new bills have been introduced to change the Condominium Property Act.

• HB 5037 - Will allow municipalities the ability to appoint receivers for distressed condominium properties and eventually have the properties sold.  Of interest is the definition of  "distressed condominium property":

"Distressed condominium property" means a parcel containing condominium units which are operated in a manner or have conditions which may constitute a danger, blight, or nuisance to the surrounding community or to the general public, including but not limited to one or more of the  following conditions:  

(A) the building is substantially unoccupied, or  has serious violations of any applicable local building code;  

(B) 60% or more of the condominium units are in foreclosure or are units against which a judgment of foreclosure was entered within the last 18 months;

(C) there has been a recording of more condominium units on the parcel than physically exist;

(D) any of the essential utilities to the parcel or condominium units is either terminated or threatened with termination;

(E) there is a delinquency on the property taxes for at least 60% of the condominium units; or

(F) the board of managers has not met within the last 12 months or is otherwise not functioning."

While the act gives the receiver the power to enter into a sales contract for the property with court approval, it appears to be silent regarding any applicable standards for pricing the sale, or achieving any form of FMV.   

• HB 5189 - In a possible response to a fluctuating real estate market, the bill would amend the act to statutorily provide that owners can rent up to 20% of the properties and that no condo board can enact rules to the contrary. 

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    These pesky forum selection clauses keep popping up, but in this interesting twist, the court is now enforcing them when they're not part of the original contract or negotiations with someone, but arrive after work has been started on the back of a purchase order.  In Compass Environmental, Inc. v. Polu Kai Services, LLC, it was Polu Kai's fault for not objecting to or raising an issue about the forum selection clause printed on the back of a purchase order.  But, even if they had, what were they to do when they had already started work on the project?  Would it be an actionable repudiation if Polu Kai had just walked, four days into its job, after it received its purchase order and didn't like the terms printed on the back... terms which weren't negotiated between the parties beforehand and now appear to be deemed accepted unless action is taken?

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    For those interested in timing requirements on their mechaninc's liens and those having had the arduous experience of title searches or property transfers recorded but not appearing of record during the process, the Illinois House Bill 4698 may come as a welcome relief.  HB 4698 proposes a change to the Conveyances Act and the Counties Code, which, if enacted would require, not only that deeds be filed within 7 days of execution, but would also require that any party with an interest in the property be notified of the deed as well.

    Previously, the recorders office only sent notice to the previous owner of record.  Now, with recorders sending notice to any "party with a record of interest in the property," could the recorders' notices be relied on in filing the lien claims and naming parties?  Will a recorder's determination of a "party with recorded interest", or the failure to notify a recorded party of interest be actionable?

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