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Goldberg v. 401 North Wabash Venture LLC

United States Court of Appeals, Seventh Circuit

June 10, 2014

JACQUELINE GOLDBERG, Plaintiff-Appellant,

 Argued April 14, 2014

Page 457

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 09 C 6455 -- Amy J. St. Eve, Judge.

For JACQUELINE GOLDBERG, Plaintiff - Appellant: Shelly B. Kulwin, Attorney, Jeffrey R. Kulwin, KULWIN, MASCIOPINTO & KULWIN, Chicago, IL; Alexandra K. Block, Attorney, Diane F. Klotnia, Attorney, Michael L. Shakman, Attorney, MILLER, SHAKMAN & BEEM LLP, Chicago, IL.

For 401 N. WABASH VENTURE, L.L.C., a Delaware Limited Liability Company, TRUMP CHICAGO MANAGING MEMBER, LLC, a Delaware limited Liability Company, Defendants - Appellees: Stephen Novack, Attorney, Rebekah H. Parker, Attorney, John F. Shonkwiler, Attorney, NOVACK & MACEY LLP, Chicago, IL.

Before WOOD, Chief Judge, and POSNER and FLAUM, Circuit Judges.


Page 458

Posner, Circuit Judge

Trump International Hotel and Tower Chicago (we'll call it " Trump Tower Chicago" for short) is a 92-story building in downtown Chicago, completed in 2009. It contains 486 residential condominium units, 339 hotel condominium units (occupying floors 14 and 17 through 27 of the building)--the focus of the appeal--plus retail space, a health club, ballrooms,

Page 459

meeting rooms, restaurants, bars, a hair salon, and other facilities commonly found in conventional hotels. Some of these facilities, along with structural features such as the roof and the elevators, are what are called " common elements." All common elements are shared facilities. The condominium units are not common elements; they are owned individually, rather than by the building's owners or by the condominium association, which is to say the units' owners collectively. When the owner of a hotel condominium unit is not occupying the unit, the building management can rent it to a visitor, and the rental income is divided with the owner, with the owner's share of the income being credited against his annual maintenance fee.

The developers and owners of Trump Tower Chicago--the defendants in this lawsuit-are entities ultimately controlled by Donald Trump. For simplicity we'll ignore the labyrinth of corporate forms and pretend there is a single defendant called TrumpOrg. The plaintiff is a wealthy and financially sophisticated Chicago businesswoman--a certified public accountant and certified financial planner--who in 2006 signed an agreement to buy two hotel condominium units in Trump Tower Chicago from TrumpOrg for some $2.2 million. (To simplify exposition, we'll pretend there was one agreement, covering both units.) Goldberg wasn't interested in staying in either of the units herself. She had bought them as an investment, hoping their value would increase and also that her income from the rental of the units by the management of the condo hotel (the condo hotel is a component of Trump Tower Chicago, which also as we noted contains a residential complex) would reduce her annual maintenance costs. She already owned other condominium units--including a residential condominium unit in Trump Tower Chicago--also as investments rather than as places in which she might live or stay. Although she was 80 years old when she signed the purchase agreement, there is no suggestion that she was mentally impaired. She was 87 when she testified at the trial of this case, and there was no indication of any impairment then either.

The purchase agreement, in what the parties call the " change clause," gave TrumpOrg " the right, in its sole and absolute discretion, to modify the Condominium Documents." These are documents that among other things specify the rights in the common elements that the purchaser acquires under the agreement along with the hotel condominium unit itself--" provided that Seller shall notify Purchaser or obtain the Purchaser's approval of any changes in the Condominium Documents ... when and if such notice or approval is required by law." After reviewing the purchase agreement with her attorney, the plaintiff asked TrumpOrg to give her the right to terminate the agreement and get her deposit back if she disapproved of any changes that TrumpOrg made in the agreement. TrumpOrg refused. The plaintiff signed the agreement anyway, even though TrumpOrg had already made three changes, one of which modified common elements by adding meeting rooms and ballrooms to, but removing the health club from, the common elements.

The year after she signed the agreement, TrumpOrg made another set of changes (the " Fourth Amendment," as the parties term it), which greatly curtailed the owners' rights in the hotel facilities. The plaintiff was furious. She testified that she thought she'd been conned. She refused to close; that is, she refused to pay the balance of what she owed for the two units that she had agreed to buy, and take title to them. TrumpOrg did not seek to compel her to close, as by suing

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her for breach of contract and seeking specific performance as a remedy. But neither did it return her down payment, some $516,000. After protracted fruitless negotiations, in January 2010 TrumpOrg canceled the purchase agreement and claimed the earnest money as liquidated damages, but left it in an escrow account in Deutsche Bank. There it remains, pending the outcome of this litigation, which the plaintiff had instituted in an Illinois state court in 2009. The suit sought damages not limited to the $516,000, but in the millions of dollars, under a variety of Illinois laws and also the Federal Interstate Land Sales Full Disclosure Act, 15 U.S.C. § § 1701 et seq .; but the claim under that Act has been abandoned on appeal, so we'll ignore it. Her Illinois claims are based on the Illinois common law of contracts; the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505; the Illinois Condominium Property Act, 765 ILCS 605; and the Illinois Securities Law of 1953, 815 ILCS 5.

The parties being of diverse citizenship, the defendant was able to remove the case to the federal district court in Chicago and did so. Lengthy pretrial proceedings ensued, in the course of which the district judge granted summary judgment for the defendant on the securities-law claim, and (after the summary judgment ruling, but shortly before trial) dismissed the claim of " unfair" conduct because the plaintiff had " not sufficiently alleged or pursued during discovery an 'unfair practice' claim." (The consumer-fraud act, which tracks the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1), punishes " unfair" as well as " deceptive" acts or practices. 815 ILCS 505/2.) Her other claims were tried--the deceptive practice consumer-fraud act and federal Land Act claims to a jury, the breach of contract and Condo Act claims to the judge. The jury returned a verdict for the defendant on the fraud and Land Act claims, and the judge rendered judgment for the defendant on the breach of contract and Condo Act claims. Thus the plaintiff obtained no relief, precipitating this appeal.

When as in this case some issues are to be tried by a jury and some by the judge, the jury trial is conducted first and the jury's findings (unless invalidated) are binding in the bench trial. E.g., Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 356 U.S. 525, 537-38, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958); In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1303 (7th Cir. 1995). So we begin with the trial of the claim of deception, as that was the only claim (apart from the now-abandoned federal Land Act claim) tried by the jury. The plaintiff's theory was bait and switch: that TrumpOrg had promised to prospective purchasers of the hotel condominium units--in marketing materials, in " Property Reports" (formal documents given to buyers along with the purchase agreements and other condominium documents), and in the original draft of the purchase agreements--common-element rights in the ...

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