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Dremco, Inc v. Elizabeth A. Cosgrove Diver

May 3, 2013


The opinion of the court was delivered by: Judge Thomas M. Durkin



This case involves an ordinary state law dispute between a real estate developer and the purchasers of eight units in a townhome development over control of the homeowners' association. In March 2011, the developer, Dremco, Inc., sued the association and the homeowners in state court seeking declaratory and injunctive relief concerning the parties' rights under the operative legal documents. That lawsuit is ongoing. For reasons it has not fully explained, in October 2012, Dremco decided to open a second front in this dispute by also suing the homeowners in federal court. In its complaint, Dremco alleges that the homeowners are engaged in an ongoing criminal enterprise and seeks relief under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq. Two of the homeowners moved to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6). R. 15. The remaining homeowners have since joined the motion. R. 18. For the reasons explained below, the homeowners' motion to dismiss is granted.


Maple Woods Estates is a townhome subdivision located in Glen Ellyn, Illinois. The subdivision contains six lots and an outlot. On November 17, 2008, the original developer, Maple Woods Estates, LLC, executed and recorded in DuPage County a Declaration of Covenants, Conditions, Easements and Restrictions for Maple Woods Estates (the "Declaration"). Pursuant to the Declaration, Maple Woods Estates was intended to be developed as a 5.65-acre townhouse community together with driveways, walks, paths, a playground, open spaces, and other common areas. From November 2008 through December 2009, the original developer developed Lots 3 and 6 with eight townhome units and sold the units to the defendants here, Elizabeth Cosgrove Diver, Karen Russo, Sadia and Asim Ansari, Tanuja and Mahesh Bijlani, Stephen and Georganna Daley, Sharon Hamilton, Lillian and Roy Koch, and Deborah and Mark Witkowski.

On December 22, 2009, the original developer, through a trust, conveyed the remaining Lots 1, 2, 4, and 5 and the outlot to Dremco. Dremco alleges that as part of this transaction, the original developer intended to and did in fact assign all of its rights under the Declaration to Dremco. Dremco further alleges that under the Declaration, (i) it has the right to appoint all members of the homeowners' association board of directors until all units in Maple Woods Estates are conveyed to bona fide purchasers (which has not yet occurred), and (ii) it is not yet required to turn the common areas over to the homeowners' association.

Suffice it to say, Dremco and the existing homeowners did not get along. Dremco alleges that the homeowners improperly took control of the homeowners' association and violated the terms of the Declaration by: (i) changing the names and registered agent for the association with the Illinois Secretary of State; (ii) executing and recording an amendment to the Declaration, without Dremco's consent; (iii) electing a board of directors for the association; (iv) levying and collecting assessments through the association without providing Dremco an accounting; and (v) attempting to levy assessments on Dremco.

On March 3, 2011, Dremco sued the homeowners and the association in the Circuit Court of DuPage County.*fn1 Dremco's state court lawsuit seeks a declaratory judgment that the actions of the homeowners and their association are null and void and that Dremco has all of the rights of the original developer under the Declaration. It also seeks injunctive relief preventing the association's board of directors from holding further meetings and collecting assessments, and ordering the board of directors to provide an accounting of all assessments and other payments collected from the homeowners. The state court case spawned counterclaims and third-party claims, written discovery has been exchanged, and the parties are now in the middle of scheduling and taking depositions.

On October 30, 2012, Dremco filed this second case against the same group of homeowners, this time in federal court. The underlying factual allegations are taken nearly verbatim from Dremco's state court complaint. After walking through the relevant Declaration provisions, Dremco tacks on a three-paragraph RICO claim alleging that the homeowners violated 18 U.S.C. § 1962(c). In the first paragraph, Dremco alleges that the homeowners' association is an "enterprise" within the meaning of 18 U.S.C. § 1961(4). Compl. ¶ 42. In the second paragraph, Dremco alleges that the homeowners are all members of the association and engaged in a pattern of racketeering activity as follows:

(a) The Homeowners committed multiple acts constituting mail fraud in violation of 18 U.S.C. § 1341 by mailing notices purporting to adopt budgets and to levy assessments in the name of the Association;

(b) The Homeowners have committed multiple acts constituting wire fraud in violation of 18 U.S.C. § 1343 by communicating with Dremco, its lenders and business associates and others, by telephone and e-mail, in the name of the Association;

(c) The Homeowners have filed documents with the Office of the Secretary of State and other public offices which falsely purport to be filed in the name of the Association;

(d) The Ad Hoc Board has purported to levy assessments and has mailed notices to Dremco and others in violation of 18 U.S.C. § 1341; and

(e) The Ad Hoc Board purported to adopt and record a Certificate of Amendment of the Declaration in the Office of the Recorder of Deeds of DuPage County in violation of Section 17.07 of the ...

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