Cook County Record

Monday, October 14, 2019

Would-be developers of North Loop hotel sue law firm Schain Banks, demand $120M over sunk Pittsfield tower deal

Lawsuits

By Scott Holland | Jun 5, 2019


The Pittsfield tower, 55 E. Washington St., rises in the background above these Michigan Avenue high rises. | Ken Lund from Reno, Nevada, USA [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)]

CHICAGO — The would-be developers of a hotel in a North Loop skyscraper have sued their former attorneys seeking up to $120 million in damages because they allegedly advised another client on how to defeat the proposed hotel development.

Brian Scheinblum, owner of Chicago Hotel Partners, filed a complaint in Cook County Circuit Court May 29 against the firm of Schain Banks Kenny & Schwartz. According to the complaint, Scheinblum retained the firm in 2015 to help with the legal work related to his company's plans to install a hotel in the Pittsfield Building, 55. E. Washington St. At the time, Scheinblum and Pittsfield Hotel Holdings sued other ownership entities, Pittsfield Development and Pittsfield Residential II, ultimately resulting in a settlement that led to Pittsfield Hotel Holdings acquiring the rights to floors 2-9 in the tower for the planned hotel.

According to the complaint, the quit claim deeds related to those floors were recorded by Cook County on June 4, 2015. The city issued the related hotel building permits in December. Chicago Hotel Partners removed all income-generating tenants from those floors and began extensive demolition to prepare for renovation. 

However, at the same time, Scheinblum said Anthony Casaccio, an attorney with the Schain Banks firm, started advising businessman Adam David Lynd, who was looking to buy an ownership stake in the Pittsfield tower, on how to stop Chicago Hotel Partners “from developing and building their intended hotel at the Pittsfield Building.”

Scheinblum said he dealt primarily with attorneys Marty Schwartz and Tyler Manic at Schain Banks, but had retained the entire firm to assist with his hotel project. He further said Schwartz and Casaccio still work for the firm, and alleged the firm's agreement to provide legal representation to Lynd violated the Illinois Rules of Professional Conduct.

Scheinblum alleged Casaccio advised Lynd on how to get the “building downzoned so that the planned hotel could never be developed or operated,” a scheme he said was detailed in an email dated Dec. 28, 2015.

Scheinblum said Casaccio, in the email, said the hotel use was permitted under the then-current DX-16 zoning classification and advised reaching out to Alderman Brendan Reilly to discuss a possible discrepancy in how many dwelling units the city recognized. Scheinblum further said Lynd was trying to buy a chunk of the building, and although he couldn’t get a stake in floors 2-9 for himself, “he was able to convince the alderman to downzone the building and thwart the plaintiffs from developing their hotel.”

The City Council adopted an ordinance changing the zoning in March 2016, which “effectively stopped the ongoing development of a hotel on floors 2-9 dead in its tracks,” Scheinblum alleged, further saying Reilly rebuffed his attempts at setting up a meeting to discuss reversing the “sudden change in zoning.”

Scheinblum said Lynd gave Reilly a campaign donation and essentially followed a blueprint Cassacio allegedly established for reaching the desired goal. He, along with Pittsfield Hotel Holdings, Pittsfield Development and Pittsfield Residential II now have a pending lawsuit against the city of Chicago in federal court. That suit alleges the push to change the zoning followed a failed attempt by Lynd's company, Adam David Partners I LLC, to buy the building for $36 million. On March 12, U.S. District Judge Charles P. Kocoras rejected City Hall’s attempt to dismiss the complaint, finding the city’s zoning action could be considered an illegal property taking.

As a result of the zoning change, Scheinblum said, “all financing dried up … all reputable hotel flagships declined to be associated with the planned hotel.” Pittsfield Development filed for Chapter 11 bankruptcy protection on March 26, 2017. All the interests of the Pittsfield entities, including the potential hotel floors, were sold by Aug. 25, 2017.

The complaint seeks at least $30 million in compensatory damages, plus punitive damages worth at least three times the final compensatory award.

Representing Scheinblum and Chicago Hotel Partners in the matter is attorney Charles Aaron Silverman, of Skokie.

Representatives of the Schain Banks firm did not reply to a request for comment emailed by The Cook County Record.

Jonathan Bilyk contributed to this report. 

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Circuit Court of Cook County Schain Banks

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