Michael Bilandic Building By TonyTheTiger [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)], from Wikimedia Commons
While condo associations are not extensions of the government, they still must respect the First Amendment rights of condo owners, and must disclose evidence to those accused of violating association rules before assessing fines, a divided state appeals panel has ruled.
However, a dissenting justice warned the ruling had the potential to bog the courts down in near endless streams of intra-condo association squabbles.
On June 14, a three-justice panel of the Illinois First District Appellate Court overturned 2-1 the ruling of Cook County Judge Thomas R. Allen, finding the judge had improperly granted judgment to the 111 East Chestnut Condominium Association in its legal tussle with condo unit owner Michael Boucher.
Justice P. Scott Neville, who the next day was sworn into a new seat on the Illinois state Supreme Court, replacing retired Justice Charles Freeman, authored the opinion for the appellate panel. Justice Aurelia Pucinski concurred in the decision.
Justice P. Scott Neville Illinoiscourts.gov
Justice Mary Anne Mason dissented.
The matter had landed in Cook County court in 2013, after the 111 E. Chestnut Association, which manages more than 440 condo units over more than 50 floors of a high rise just off Chicago’s Magnificent Mile, slapped fines of $500 for allegedly violating association rules by shouting at and directing obscenities at condo building staff. Specifically, court documents said, Boucher was fined for violations of association rules which prohibit “obnoxious or offensive activity from being carried on in any unit or in the common elements.”
According to the dissent authored by Justice Mason, Boucher allegedly had developed a reputation for offensive and rude behavior within his condo building. The complaint indicates his treatment of a female African American employee led to legal complaints filed against the association by that employee.
The dissent also asserts Boucher would routinely use coarse and profane language when dealing with building staff and association board members, among others.
The dissent indicates the behavior allegedly came to a head in an incident on an elevator, when Boucher allegedly furiously berated the same African American female employee, attempting to forbid her from riding the elevator with him, because she was a “fucking employee.”
Following that incident, which was captured on video, a complaint was filed against Boucher, resulting in a fine for $250. Boucher was also allegedly fined an additional $250 for an encounter in which he allegedly used profanity and berated other employees for refusing to take cash to pay to replace a lost elevator key fob, when association policy permits payment only by check or a charge to the association membership account.
However, during the hearings over the incidents, Boucher’s lawyer asked the association board to produce for Boucher’s review a copy of the video of the incidents, or other evidence to back up the charges.
While the association board repeatedly asserted it had reviewed video, or had other evidence to justify imposing the fines, the board refused to share the evidence with Boucher.
After paying the fines, Boucher filed suit, asserting the association board had not fined him only for the alleged incidents, but had done so to retaliate for other complaints Boucher had leveled about the building and the association, and mistreatment he believed he had received from the association.
He further alleged the board had violated its fiduciary duty to him, as a condo unit owner, in refusing to disclose the video and other evidence before imposing the fines.
In dissent, Justice Mason backed Judge Allen, finding the association was shielded in the action by the so-called business judgment rule, which holds a corporation’s leadership is presumed to act in good faith, based on available information, and with the interests of all other members or shareholders at heart. This, Mason said, means the association was justified in rebuffing Boucher’s requests to see the evidence, saying Boucher had ample opportunity to defend himself, and his “long history of offensive and insulting conduct and the failure of previous warnings to dissuade his bullying behavior … shields the Board’s action from further examination.”
“Circumstances like these are precisely why the Board’s decisions are protected by the business judgment rule,” Mason wrote. “Further, courts afford discretion to condominium boards in interpreting and enforcing an association’s declaration.
“Other than his conclusory allegation that the Board was motivated to charge him based on his complaints about management of the building rather than his offensive conduct, Boucher offers no reason for us to overlook or second guess the Board’s business judgment in determining that he should be fined.”
Neville and Pucinski, however, saw the situation differently.
They rejected Judge Allen’s findings rejecting Boucher’s claims the condo association had violated his First Amendment rights by retaliating against him for complaints about the association he had vocalized, simply because the condo association wasn’t a “state actor” subject to such constitutional rights claims under Illinois law.
Noting legal precedent has held condo associations are largely barred from prohibiting unit owners from practicing their religion in the building, Justice Neville wrote the law – which directs condo associations to respect the First Amendment rights of unit owners - similarly should be interpreted to prohibit associations from abridging owners’ rights to free speech. And that, he said, should mean owners can sue over such alleged violations.
“Boucher alleged that the association and its directors fined him because he expressed his opinions criticizing the board’s management of the condominium,” Neville wrote. “We hold that he has adequately stated a cause of action…”
Similarly, the majority in this case found the board violated its responsibilities to Boucher when it refused to allow him to view the evidence.
While the association argued it had met its duties by allowing Boucher to tell his side of the story at a hearing before the board, the justices said they believed the association had actually fallen short. By refusing to provide Boucher with the evidence, the board essentially “(deprived) themselves of readily available information as to how Boucher would respond to the evidence.”
For this reason, Neville and Pucinski said, the association’s invocation of the business judgment rule should fail, as the board had intentionally not collected all of the available information before rendering a decision.
The majority also responded directly to Mason’s dissent, saying she was too hasty in using the business judgment rule to set aside Boucher’s constitutional concerns. They said such a finding would place an “impossible burden” on plaintiffs to anticipate every possible defense, and “would entirely defeat the admirable goal of the (Illinois Condominium Act) - to discourage the directors of condominiums from abusing their positions of extreme trust in ways that deprive residents of their right to express opinions, their right to assemble peaceably, and their right to practice their religions.”
They also chided Mason for brushing over the association board’s “fiduciary duty to disclose” all of the evidence against Boucher in this case.
“The dissent would have the court override the fiduciary duty to disclose, to reward the defendants for treating plaintiff as an adversary even before he filed the lawsuit - while they maintained control over the expenditure of his funds for the building, while they retained authority to restrict his behavior in and around his home, and while they had unrestricted access to his home,” Neville wrote.
“… The fiduciary must not resort to adversarial posturing in the context of the fiduciary relationship.”
In her dissent, Mason further warned the majority’s position on the case would inevitably draw the courts into squabbles within condo associations, leaving the courts with time “for little else” and saddling condo associations with more legal bills.
“This is not a case in which the Board’s interpretation of the declaration or its rules and regulations has resulted in infringement of a unit owner’s constitutional rights,” Mason wrote. “The fines against Boucher did not prevent him from complaining to anyone about issues in the building and Boucher did not present any evidence to the trial court that the fines had dissuaded him from doing so. If Boucher’s complaint is sufficient to state a claim for retaliatory conduct by the Board, then all a problem unit owner need do is allege that the real reason he is being fined is not because he has, in fact, violated the association’s declaration or rules, but because he is a complainer, i.e., because he exercised his first amendment rights.
“We should hesitate to recognize such spurious claims as they burden associations with costly litigation, which must be borne by all unit owners.”
In response, however, the majority discounted that contention.
“The legislature wrote the Act in a way that discourages abuse of the position of extreme trust that all members of condominium boards hold,” Neville wrote. “The dissent would rewrite the Act to undo the legislature’s work and instead leave unpunishable breaches of fiduciary duty and other abuses of power by board members. The business judgment rule protects the business judgments made by board members.
“But board members have fiduciary duties of honesty and full disclosure to all residents and owners of the condominiums they manage - even if the residents or owners are consistently rude, arrogant, and obnoxious.”
According to Cook County court records, Boucher is represented in the case by attorney Norman Lerum, of Chicago.
The 111 E. Chestnut Association is represented by attorneys with the firm of Kovitz Shifrin & Nesbit, of Chicago.