An appeals panel has ruled that despite a developer's "despicable conduct," the owners of a Loop building failed to show they suffered damages necessary to press a claim against the developer, who falsely alleged in a suit the owners lied about their skyscraper's square footage.
The May 10 ruling was penned by Justice Terence Lavin, with concurrence from Justice James Fitzgerald Smith and Justice Nathaniel Howse, of Illinois First District Appellate Court. The decision was filed under Illinois Supreme Court Rule 23, which may limit its use as precedent.
The ruling favored Texas-based Adam David Partners 1 LLC (ADP) in an action brought in 2020 by 55 East Washington Development LLC. Adam David Lynd has headed ADP.
Terrence J. Lavin
| illinoiscourts.gov
In 2015, ADP agreed to pay $55 million to 55 East Washington for the Fornelli Tower, which is part of the 1927-built Pittsfield Building at 55 E. Washington St. on Jewelers Row. ADP planned to turn the Tower into a hotel. Washington said the Tower had 131,880-square-feet of rentable space.
However, ADP claimed it learned the Tower had only 115,331-square-feet, or 13 percent less than Washington said, according to court papers. ADP sued Washington, claiming the alleged fraud ruined the deal, because ADP could no longer adjust its business model, secure financing and reappraise the Tower within the time frame laid out in the purchase agreement. ADP said it asked Washington for four more months, but Washington demanded a $2.7 million deposit to even consider an extension. ADP said it refused to pay and litigation ensued in Cook County Circuit Court.
ADP also lodged a lis pendens against the building, which Washington claimed prevented it from selling the property.
In 2019, Judge Sophia Hall threw out ADP's suit, finding Washington had not misrepresented the square footage. Rather, ADP allegedly fabricated the footage discrepancy to gain time to obtain financing, Hall said. To help achieve this end, ADP filed a lis pendens to discourage anyone else in the meantime from buying the property, according to Hall. As a consequence, Hall sanctioned ADP's lawyers.
In 2020, Washington sued Lynd for malicious prosecution, but Judge Neil Cohen tossed the action, saying, among other things, the lis pendens did not cause unique damages beyond the usual time, cost and annoyance of defending against a suit. Such unique damages are required to justify a malicious prosecution suit, according to the judge.
Washington appealed.
Justice Lavin noted the bar is high for a malicious prosecution claim, and in the ADP case, the lis pendens was insufficient to prove the damages necessary for such a claim.
"It is well settled that malicious prosecution actions are disfavored. Courts permit all citizens to claim what they believe to be their right without fear of prosecution for heavy damages," Lavin observed.
As far as the damages allegedly caused by the lis pendens, Lavin pointed out Washington did not allege "it had an interested buyer that was put off by the lis pendens. Instead, Washington alleged that it kept Fornelli Tower off the market, a decision belonging solely to East Washington."
In addition, Lavin noted, "Washington’s damages were, or could have been, dealt with through contract, through its litigation against ADP for breach thereof or through its request for sanctions. While Washington seeks to hold Lynd personally liable, rather than ADP, the party to the contract, this does not convert ordinary damages into something more, regardless of Lynd’s despicable conduct."
Washington has been represented by the Chicago firm of Chapman Spingola.
Lynd has been defended by the Chicago-headquartered firm of Schiff, Hardin & Waite.