Supreme Court: Teamsters local isn't on hook for $2M HQ build, lease deal, because members didn't OK contract

By Scott Holland | Mar 22, 2019

Illinois Supreme Court   Vimeo livestream screenshot

The Illinois Supreme Court says a builder can't force a local chapter of the Teamsters to pay a $2 million judgment for breaching the contract under which the builder built and leased the union a new headquarters, because one of the union's officers executed the deal without the consent of the membership, voiding the contract with the builder.

Justice Anne Burke wrote the unanimous opinion issued March 21.

The root issue is a lawsuit 1550 MP Road LLC filed alleging Teamsters Local 700 breached a lease and purchase agreement for a property the company built for the union’s headquarters. Thomas Clair, secretary-treasurer and principal officer of Teamsters Local 726, signed off on the lease several months before the International Brotherhood of Teamsters voted to dissolve Local 726 and Local 714, and merge them into Local 700.

A Cook County Circuit Court judge found Local 700 was liable for the breach of contract under successor liability and under the Fraudulent Transfer Act, and found one official liable for tortious interference. The court awarded nearly $2 million in damages and more than $320,000 in court costs.

In an unsuccessful appeal to the Illinois First District Appellate Court, the union claimed the original contract was improperly executed and therefore void. Local 726’s bylaws stipulated two officials should’ve signed the contract, which also was subject to an approval vote by union membership. The union said although Local 726 officials were aware of the agreement, Clair executed it on his own. In a posttrial motion, the union also claimed the agreement did not comply with the Property of Unincorporated Associations Act.

“There is no dispute that Local 726 did not satisfy at least two of the statutory prerequisites for executing a lease and purchase agreement involving real property,” Burke wrote, further explaining that if “a party lacks the legal authority to form a contract, the resulting contract is void.”

The court looked specificallyat the Property of Unincorporated Associations Act. Although that law doesn’t “expressly state that the failure to comply with its provisions renders a contract unenforceable,” Burke wrote, the Supreme Court found no justification for determining Clair was authorized to execute the lease agreement.

“An unincorporated association’s members must receive notice of proposed real estate contracts and must have the opportunity to vote in favor of or against entering into such contracts,” Burke wrote. “This language clearly expresses a public policy to protect the individual members of an association from liability arising out of contracts entered into by its leadership.”

She further wrote the lower courts’ holdings suggested “the legislature intended to allow a union to bind its members to a real estate contract for more than $2 million without the members’ knowledge or consent. This interpretation is at odds with the clear statutory language.”

Although 1550 MP Road argued the union’s conduct effectively endorsed the lease, such as taking possession of the premises and paying rent for seven months and having Local 726’s executive board sign a consent resolution approving the lease after it was executed. Still, the Supreme Court said certain equitable doctrines don’t apply to a contract that was never valid.

The panel further said it didn’t need to address arguments about successor liability or a liquidated damages provision. It remanded the complaint to circuit court with instructions to vacate the judgment for 1550 MP Road and enter judgment in favor of the union.

According to Cook County court records, Local 700 was represented by the firm of Jacobs Burns Orlove & Hernandez, of Chicago, while the plaintiffs were represented by attorney Richard K. Hellerman, of Chicago.

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Organizations in this Story

Circuit Court of Cook County Illinois First District Appellate Court Illinois Supreme Court Jacobs Burns Orlove & Hernandez Richard K. Hellerman Teamsters Local 700

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