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Board of Managers of Eleventh Street Loftominium Association v. Wabash Loftominium

August 27, 2007

BOARD OF MANAGERS OF ELEVENTH STREET LOFTOMINIUM ASSOCIATION, PLAINTIFF-APPELLANT,
v.
WABASH LOFTOMINIUM, L.L.C., STEVEN E. GOULETAS, ANTHONY R. DIBENEDETTO, JAMES SCHWARK, NICHOLAS V. GOULETAS, AND NICHOLAS S. GOULETAS, DEFENDANTS-APPELLEES.
BOARD OF DIRECTORS OF THE GOLD COAST GALLERIA CONDOMINIUM ASSOCIATION, PLAINTIFF-APPELLANT,
v.
GALLERIA RESIDENTIAL, L.L.C., NICHOLAS V. GOULETAS, DESIREE GOUELTAS, BOB FORD, AND STEVEN E. GOULETAS, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County Nos. 04-L-04699 and 02-L-02788 Honorable Jennifer Duncan-Brice and Dennis J. Burke, Judges Presiding.

The opinion of the court was delivered by: Presiding Justice McBRIDE

Published opinion

This is a consolidated, interlocutory appeal brought by plaintiff Board of Directors of the Gold Coast Galleria Condominium Association and plaintiff Board of Managers of Eleventh Street Loftominium Association from trial court orders disqualifying their attorney, the Chicago law firm of Arnstein & Lehr LLP ("Arnstein").

The first plaintiff's lawsuit concerns a Chicago residential building located at 111 West Maple Street which was converted into 331 residential condominium units in 1998 (No. 02-L-02788, the "Gold Coast Galleria") . The second plaintiff's lawsuit concerns a Chicago warehouse and offices located at 1020 South Wabash Avenue which were converted into 48 residential condominium lofts in 2000 (No. 04-L-04699, the "Loftominium"). The plaintiffs allege their respective property developer and associated individuals turned over unrepaired common elements and inadequate capital reserves. The suits were filed by attorney David Sugar while he was affiliated with the Chicago law firm Michael Best & Friedrich LLP. When Sugar joined Arnstein, the firm was routinely granted leave to substitute as plaintiffs' counsel. The defendants, however, moved to disqualify Sugar's new firm, contending Arnstein was already representing corporations that were or are managed by the individual defendants and that the common representation created a conflict of interest for Arnstein prohibited by Rule 1.7 of the Rules of Professional Conduct. 134 Ill. 2d R. 1.7. Rule 1.7 regulates an attorney's ability to undertake representation adverse to a present client, by providing, "A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless: (1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and (2) each client consents after disclosure." 134 Ill. 2d R. 1.7. After briefing and oral arguments, Judge Jennifer Duncan-Brice found that a conflict existed in the Loftominum action and that Arnstein's failure to disclose it and obtain the prior consent of the defendants was a violation of Rule 1.7. 134 Ill. 2d R. 1.7. Judge Dennis J. Burke subsequently reached the same conclusions with respect to the Gold Coast Galleria action.

We granted the plaintiffs' petitions for leave to appeal under Supreme Court Rule 306(a)(7). 210 Ill. 2d R. 306(a)(7). The arguments for reversal include: (1) corporations are distinct for purposes of conflict of interest analysis, (2) because the representation Arnstein provided to the various non-defendant corporations was complete and unrelated to the two actions which attorney Sugar brought to the firm, Arnstein's conduct is permissible under the rule regarding former clients, Rule 1.9 (134 Ill. 2d R. 1.9), and (3) the defendants waived the right to complain of conflict. We review the trial court rulings for an abuse of discretion. Schwartz v. Cortelloni, 177 Ill. 2d 166, 176, 685 N.E.2d 871, 876 (1997). An abuse of discretion occurs where no reasonable person would agree with the view adopted by the trial court. Schwartz, 177 Ill. 2d at 176, 685 N.E.2d at 876.

A preliminary consideration is a motion taken with the case. The defendants argue the petition for leave to appeal that was filed in the Loftominium action includes a Statement of Facts section which should be stricken because it is not the neutral recitation of relevant facts mandated by Supreme Court Rule 341(h)(6) and is instead "mischaracterization," "argument[,] and comment calculated to confuse *** and prejudice this Court." 210 Ill. 2d R. 341(h)(6) (formerly Rule 341(e)(6) (188 Ill. 2d R. 341(e)(6) and indicating the opening brief's statement of facts "shall contain the facts necessary to an understanding of the case, stated accurately and fairly without argument"). We agree that most of the Statement of Facts is argumentative and confusing. Entire paragraphs are devoted to criticizing and misstating the defendants' arguments for disqualification and the procedural history of the case is not made clear. Furthermore, the Statement of Facts does not convey a complete picture of the proceedings. For instance, it does not disclose that the defendants purport to have notified Arnstein of the conflict issue as early as April 4, 2005, and that Arnstein contended this notification was not effective because it was made in a different lawsuit involving slightly different defendants (Arnstein represented the plaintiff in a case that was dismissed, No. 02-L-14549, Board of Managers of the Elm at Clark Condominium Association v. 1122 North Clark, L.L.C, Steven E. Gouletas, Anthony R. DiBenedetto, James Schwark, and Nicholas V. Gouletas). Also omitted are the facts necessary to understanding the plaintiffs' waiver argument. For these reasons, we grant the motion to strike. Hamilton v. Conley, 356 Ill. App. 3d 1048, 1052, 827 N.E.2d 949, 954 (2005).

With respect to the necessary facts, we also note that the Loftominium and Gold Coast Galleria briefs include numerous comments about the evidentiary basis for Arnstein's disqualification, but the plaintiffs never provide reasoned argument, citation to supporting legal authority, or citation to the pages of the record on appeal indicating they presented actual argument in the trial court and thus preserved the issue for appeal. As an example, in its opening brief for the Loftominium action, the plaintiff states, "the relationship between [the parent corporation] and the condominium associations, upon which defendants' position completely depends, is unsupported by any evidentiary matter, and does not in fact exist." Instead of next citing authority on the evidentiary standard and applying it to the evidence presented, the plaintiff skips to whether a relationship exists between the current owner-elected condominium associations and the parent corporation. Similarly, in its opening brief about the Gold Coast Galleria disqualification, the plaintiff states "the trial court deprived plaintiff of its choice of counsel based upon unfounded factual assertions that defendants did not even attempt to support by affidavit, corporate records or any other evidentiary matter," yet the plaintiff provides no reasoned argument or legal authority indicating an affidavit or corporate records were necessary, and no citation to the record indicating the plaintiff provided reasoning and authority to the trial court. We will not address the merits of the plaintiffs' frequent but fleeting comments regarding the evidence. Issues not presented to or considered by the trial court are waived on appeal (In re Estate of Vallerius, 253 Ill. App. 3d 226, 229-30, 230, 624 N.E.2d 459, 462 (1993)), and appellate contentions which are not supported by legal reasoning, citation to authority and citation to the pertinent pages of record are waived on appeal and shall not be raised in a reply brief or a petition for rehearing. 188 Ill. 2d R. 341. We find that even if the issue was adequately presented in the trial court, it was not adequately presented in this forum. Thus, any question as to whether the evidence was sufficient has been waived and the facts are not in dispute. We derive the following, relevant facts primarily from the written opinion which Judge Duncan-Brice issued in the Loftominium action.

Arnstein provided legal assistance to a group of related corporations between 1999 and attorney Sugar's association with Arnstein in March 2005, as follows.

First, Ambelos Corporation (Ambelos), which is a holding company with numerous subsidiary and affiliated corporations which have developed residential condominium properties in Chicago, retained Arnstein on August 2, 2004, to represent the corporation before the collections division of the Internal Revenue Service. Nicholas S. Gouletas, who was named as a defendant in the Loftominium suit, is the sole shareholder of Ambelos and is Ambelos' president and only director. Steven E. Gouletas, who was named as a defendant in both the Gold Coast Galleria and the Loftominium suits, is the corporation's vice president. Anthony R. DiBenedetto, who was named as a defendant in the Loftominium suit, is the corporation's secretary. James Schwark, who was named as defendant in the Loftominium suit, is the corporation's treasurer.

Second, Chestnut Street Holdings, LLC (which is a member and the manager of 111 East Chestnut Consultants, Inc.), and 111 East Chestnut Garage Condominium Association were represented by Arnstein in 1999-2000 litigation with American Freehold where Sugar represented the party suing 111 East Chestnut Garage Condominium Association. In addition, the Chestnut corporations were represented by Arnstein in 2004 contract negotiations with Golf Construction. Nicholas S. Gouletas, Steven E. Gouletas, and Nicholas V. Gouletas were the corporation's directors, until the latter man resigned his post on February 12, 2004. Steven E. Gouletas is the president, Anthony DiBenedetto is the secretary, and James Schwark is the treasurer.

Third, the Sterling Private Residences Condominium Association was represented by Arnstein from December 1, 2004, until at least March 23, 2005, in litigation by unit owners, against unit owners, and on foreclosure actions. We note that according to the plaintiffs, Arnstein's representation of Sterling Private Residences dates even further back, to December 2003, and the firm considers the condominium association to be a current client. The corporate directors and officers include: defendant Nicholas S. Gouletas, director and treasurer; defendant Steven E. Gouletas, director and president; and defendant Nicholas V. Gouletas, who served as director and secretary until he resigned on February 12, 2004.

Fourth, Millennium Centre Condominium Association/The Residences at Millennium Centre were represented by Arnstein in 2004-to-2005 billing and collection matters, and Arnstein's invoices reflect representation spanning from December 18, 2003, to at least March 23, 2005. Moreover, according to the plaintiffs, Arnstein's representation of The Residences at Millennium Centre dates back to December 2003, and the condominium association is a current client. The corporate officers and directors include defendant Nicholas S. Gouletas, director and treasurer; defendant Steven E. Gouletas, director and president; and defendant Nicholas V. Gouletas, director and secretary, until he resigned from the posts on February 12, 2004.

Fifth, River City Condominium Association was represented by Arnstein from December 3, 2003 through at least March 31, 2005 in billing and collection matters. The plaintiffs admit that Arnstein's representation of this entity actually dates back as far as November 2002. The corporate officers and directors include defendant Nicholas S. Gouletas, director and treasurer; defendant Steven E. Gouletas, director and president; and defendant Nicholas V. Gouletas, director and secretary until he resigned on February 12, 2004.

Sixth, River City Marina Condominium Association was represented by Arnstein from November 11, 2002, through at least March 31, 2005, in billing and collection matters. The corporate officers and directors include defendant Nicholas S. Gouletas, director and treasurer; defendant Steven E. Gouletas, director and president; and ...


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