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MISSION HILLS CONDOMINIUM ASS'N M-1 v. CORLEY

August 22, 1983

MISSION HILLS CONDOMINIUM ASSOCIATION M-1, MISSION HILLS CONDOMINIUM ASSOCIATION M-2, MISSION HILLS CONDOMINIUM ASSOCIATION M-3 AND MISSION HILLS CONDOMINIUM ASSOCIATION M-4, PLAINTIFFS,
v.
EUGENE R. CORLEY, INDIVIDUALLY AND D/B/A EUGENE R. CORLEY BUILDERS, THE CORLEY COMPANIES, INC., AN ILLINOIS CORPORATION, CORLEY, INC. (PREVIOUSLY KNOWN AS CORLEY MANAGEMENT CORP.), AN ILLINOIS CORPORATION, AND PHOENIX MUTUAL LIFE INSURANCE CO., A FOREIGN CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: William T. Hart, District Judge.

  MEMORANDUM OPINION AND ORDER

The plaintiffs to this action are Mission Hills Condominium Association M-1, Mission Hills Condominium Association M-2, Mission Hills Condominium Association M-3 and Mission Hills Condominium Association M-4 ("Associations"), and they have sued on behalf of their members who purchased condominium units in the Mission Hills Country Club Village ("Development"). The defendants are Eugene R. Corley, individually and d/b/a Eugene R. Corley Builders, The Corley Companies, Inc., Corley, Inc., ("Corley"), and Phoenix Mutual Life Insurance Co. ("Phoenix"). Jurisdiction over the plaintiffs' two federal claims is conferred by 28 U.S.C. § 1337, and the plaintiffs ask the Court to assert pendent jurisdiction over their twelve state law claims.

Presently before the Court is defendants' motion to dismiss the amended complaint. For the reasons set forth below, defendants' motion to dismiss is granted in part and denied in part. Also before the Court is the petition of six individuals, owners of units in the Development, to intervene as plaintiffs. That motion is granted.

FACTS

On a motion to dismiss, the court must accept as true the allegations pied by the plaintiffs. The amended complaint and briefs filed relative to the instant motion reveal the following. The Development is a residential development located in North-field, Illinois. Constructed and developed by Corley and Phoenix, the Development comprises approximately thirteen condominium properties, a private country club and other various amenities.

On or about August 8, 1973, a Blanket Declaration governing the Development was recorded. The Declaration, the legal instrument by which condominium property is created, imposed certain obligations and requirements with respect to the ownership and operation of the Development. Pursuant to the Development's Blanket Declaration, Corley and Phoenix retained three votes in the Mission Hills Homeowners Association ("Homeowners Association") for every unsold condominium unit. Approximately one year later, the Homeowners Association's By-laws were amended, giving Corley and Phoenix the authority to continue to administer the Homeowners Association and to disregard any vote of the unit owners until 60 days after the last condominium unit was sold. In their capacity as administrators of the Homeowners Association, Corley and Phoenix have entered into management, maintenance, and other property-related service contracts, for work on the Development's common areas, with business entities affiliated with either Corley or Phoenix. The services include snow removal, general maintenance, and landscaping. These service contracts were worth approximately $2 million in the four years preceding this action.

On March 24, 1982, the plaintiff Associations (they claim to represent the interests of all unit owners in four of the Development's thirteen condominium properties) filed an amended complaint. In their fourteen count amended complaint, plaintiffs charge that defendants' conduct violates Section 1 of the Sherman Act, 15 U.S.C. § 1, the Illinois Antitrust Act, Ill.Rev.Stat. ch. 38 § 60-1 et seq., the Illinois Condominium Property Act, Ill.Rev.Stat. ch. 30, § 301, et seq., and the common law of Illinois.

First, plaintiffs charge that as a result of controlling the Homeowners Association, Corley and Phoenix are able to require unit owners to accept property-related services from entities controlled by Corley and Phoenix. They claim that but for the defendants' actions, the plaintiffs could purchase these services from various other independent and more competent concerns on more favorable terms. They state that the defendants have conspired to reject lower bids from potential competitors, and that the plaintiffs have paid $750,000 more to defendants than plaintiffs would have paid to others. Plaintiffs allege that this constitutes an illegal tying arrangement violative of federal and Illinois antitrust laws (Counts I-IV).

Second, plaintiffs allege that provisions of the Declaration and By-laws, giving Corley and Phoenix allegedly total authority over the administration of the Homeowners Association, are unconscionable and therefore invalid (Count V). In this connection, plaintiffs further allege that defendants' continued control over the Homeowners Association and defendants' behavior violate the Illinois Condominium Property Act (Counts VI, X, XIV). Third, plaintiffs charge that during the course of their administration of the Homeowners Association, Corley and Phoenix have breached various common law duties owed to the unit owners, and in the process have committed fraud and conversion (Counts VII-IX, XI-XIII).

Defendants have filed a motion to dismiss the entire amended complaint. In support of their motion, defendants argue that plaintiffs, as associations, lack standing to bring Counts I-IV. Second, defendants argue that Counts I-IV of the amended complaint fail to state claims under the antitrust laws, and that Counts VI and XIV fail to state claims under the Illinois Condominium Property Act. Third, defendants argue that the Declaration and By-laws are valid and enforceable contracts and are not unconscionable (Count V). Finally, defendants argue that since the amended complaint fails to state claims cognizable under federal law, the Court should dismiss the entire amended complaint (including the pendent claims) for lack of subject matter jurisdiction.

STANDING

Counts I, II, III and IV of the amended complaint allege violations of federal and Illinois antitrust laws. Specifically, Count I seeks to recover treble damages, in the amount of $2,250,000, pursuant to Section 4 of the Clayton Act, 15 U.S.C. § 15, for defendants' alleged violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Count II, incorporating by reference the allegations of Count I and brought under Section 16 of the Clayton Act, 15 U.S.C. § 26, seeks to enjoin defendants from exercising any control over the Homeowners Association and taking any action for which the unit owners would incur a cost. Count III seeks to recover treble damages for defendants' alleged violations of the Illinois Antitrust Act, Ill.Rev.Stat. ch. 38, §§ 60-1 et seq., and Count IV, incorporating by reference the allegations of Counts II and III, also seeks injunctive relief.

Defendants move to dismiss all four counts on the ground that plaintiffs, as associations, lack standing to bring these claims. Asserting that these counts allege violations of antitrust laws arising from purchase agreements to which plaintiffs were not parties, defendants argue that plaintiffs have not been injured by defendants' conduct. Furthermore, defendants argue that plaintiffs should not be granted representative standing because plaintiffs have failed to satisfy the necessary requirements for such. Defendants claim that representative standing is inappropriate in the instant action due to a conflict of interest between the plaintiff associations and their members regarding the decision to bring the instant action.

The Supreme Court has recognized that an association has standing to bring suit on behalf of its members when: (1) its members would have standing to sue in their own right; (2) the interests it seeks to protect are germane to the association's purpose; and (3) neither the claim asserted or relief sought requires the individual participation of the members in the lawsuit. Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 343, 97 S.Ct. 2434, 2441, 53 L.Ed.2d 383 (1977). Furthermore, the Court specifically has found that associations may seek injunctive relief because "it can reasonably be supposed that the remedy, if granted, will inure to the benefit of those members of the association actually injured." Warth v. Seldin, 422 U.S. 490, 511, 95 S.Ct. 2197, 2211, 45 L.Ed.2d 343 (1975).

Relying upon these Supreme Court decisions, courts have upheld associational standing in federal antitrust actions seeking injunctive relief pursuant to Section 16 of the Clayton Act, 15 U.S.C. § 26. Associated General Contractors of North Dakota v. Otter Tail Power Company, 611 F.2d 684, 690 (8th Cir. 1979); National Office Machine Dealers Association v. Monroe, The Calculator Co., 484 F. Supp. 1306, 1307 (N.D.111. 1980). Section 16 states, in pertinent part, that "[a]ny person, firm, corporation, or association shall be entitled to sue for and have injunctive relief . . . against threatened loss or damage by a violation of the antitrust laws . . ." (emphasis added). In recognizing associational standing in Section 16 cases, the courts have emphasized the absence of statutory language evincing an intent to restrict standing beyond the limitations established in Article III of the Constitution.

This Court concurs with the decisions reached by these courts and concludes that an association's right to bring a claim under Section 16 shall be scrutinized the same as in any other action brought by an association on behalf of its members. Applying the criteria set forth in Hunt, supra, the Court finds that plaintiffs have standing to seek injunctive relief against defendants for alleged antitrust violations. First, the individual members of the associations would have standing to bring this action since the injury claimed is to the members' condominium property. Second, given that plaintiffs are seeking to protect their members' property and to prevent their members from paying assessments derived from allegedly noncompetitive fees, the interests plaintiffs seek to protect are germane to the associations' purposes. Third, neither the relief requested nor the claim asserted require the participation of the association members. Plaintiffs allege that defendants have engaged in conduct resulting in an illegal tying arrangement. Proof of these allegations would not require member participation.

Defendants cite two Fifth Circuit cases holding that condominium associations lack standing to bring antitrust claims on behalf of their members. Buckley Towers Condominium, Inc. v. Buchwald, 533 F.2d 934 (5th Cir. 1976), cert. denied, 429 U.S. 1121, 97 S.Ct. 1157, 51 L.Ed.2d 571 (1977); Chatham Condominium Ass'ns. v. Century Village, Inc., 597 F.2d 1002 (5th Cir. 1979). Buckley preceded Hunt v. Washington State Apple, supra, the leading Supreme Court case on associational standing. ...


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