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Markou v. Equestrien Estates Homeowners Association

United States District Court, N.D. Illinois, Eastern Division

June 18, 2018

JOHN MARKOU, EVMORFIA MARKOU, DEMETRI MARKOU, PATRICIA HATABURDA, and KEITH SCHUTH, Plaintiffs,
v.
EQUESTRIEN ESTATES HOMEOWNERS ASSOCIATION, STATE FARM, REMO TURANO, MARRY ANN BACHELOR, DANIEL NOONAN, CHARLES ENGLUND, JOHN BERNACCHI, GREG GILBERTSON, MARSHA HUNTER, JAMES SCHULTE, ARNSTEIN AND LEHR, O'HAGAN MEYER, ALLEN GOLDBERG, JENIFER H. CARCACCIOLO, DANIEL J. NOLAN, and LUKE P. SHERIDAN, Defendants.

          MEMORANDUM OPINION AND ORDER

          EDMOND E. CHANG, JUDGE

         The Plaintiffs in this case-all residents of the Equestrian Estates subdivision of Lemont, Illinois-ask the Court to invalidate their homeowners' association agreement and to award damages based on allegations that the agreement was obtained by fraud in violation of their civil rights.[1] See generally R. 65, Second Amended Complaint.[2] The problem is that the Plaintiffs (or their associates) already asked for similar relief in state court, and lost. The Defendants spotted this problem, and collectively moved to dismiss. R. 85, Mot. Dismiss. The motion is granted. The Rooker-Feldman and claim-preclusion doctrines prevent the Plaintiffs from re-litigating their unsuccessful state court claims in federal court. And, even if these doctrines did not bar the Plaintiffs' claims, the Second Amended Complaint largely fails to state a claim upon which relief could be granted. So the Second Amended Complaint must be dismissed. Because the Plaintiffs have already had three tries at producing a viable complaint (each attempt producing a tangle of allegations and legal citations), further amendment will not be allowed. The dismissal is for lack of subject matter jurisdiction (and thus technically without prejudice) insofar as the complaint asks the Court to review the decision of the state court, and with prejudice as to all other claims. See Lennon v. City of Carmel, Ind., 865 F.3d 503, 509 (7th Cir. 2017).

         I. Background

         The 300-plus allegations in the Second Amended Complaint are not easy to understand. The complaint lacks any apparent chronological or thematic organization, and frequently mixes factual allegations with difficult-to-follow legal citations and argument. See, e.g., Second Am. Compl. ¶¶ 12-25, 40-45, 166-69, 262-65. The factual allegations are confusingly worded, making it at times difficult or impossible to understand what actual events are being described. See, e.g., id. ¶ 14 (“We claim Allan Goldberg uttered a forged instrument”), ¶ 27 (“We claimed in Patricia's affidavit from 2015 Tab F Exhibit U, page 2 sec 2, case number 11 CH 21124, shows Arnstein and Lehr's response in part to State Farm.”), ¶ 84 (“It was claimed in Evmorfia's affidavit, a contract was not disclosed to her.”). To make matters worse, the Plaintiffs appended hundreds of pages of supporting documentation to the complaint. This documentation comprised affidavits from the Plaintiffs and others (which contained their own factual allegations and legal arguments), and various documents purporting to prove the Plaintiffs' claims of fraud (often without context or explanation). But, as far as it is possible to discern the factual allegations, the Court takes them as true. See Erickson v. Pardus, 551 U.S. 89, 94 (2007).

         A. The Parties

         Before diving into the facts, it is worth giving a quick overview of the cast of characters. The Plaintiffs are all residents of the Equestrian Estates subdivision in Lemont, Illinois. See Second Am. Compl. Tab D ¶ 1, Tab E ¶ 1;[3] R. 92, Defs.' Br. Exh. K. Plaintiffs John and Evmorfia Markou are married, and Plaintiff Demetri Markou[4] is their son. Second Am. Compl. Tab C ¶¶ 2-3. All three reside at 6 Surrey Lane (also referred to as “6 Surrey Court”) in Lemont, Illinois. Id. ¶ 1, Tab D ¶ 1, Tab J ¶ 1 at 1. Plaintiff Patricia Hataburda lives at 75 Horseshoe Lane in Lemont, Illinois. See id. Tab A Exhs. O, Q. Patricia is married to Richard Hataburda (not a party to the present case), who also lives at 75 Horseshoe Lane. Id. ¶ 132, Tab A Exh. Q. Finally, Plaintiff Keith Schuth resides at 35 Horseshoe Lane in Lemont, Illinois. Id. Tab E.

         The Plaintiffs have sued a number of different defendants. (Many of these defendants' names are misspelled in the Second Amended Complaint and the case caption, so the spelling of the defendants' names is taken from the Defendants' brief. See Defs.' Br. at 1.) The first group of defendants is associated with the Equestrian Estates Homeowners Association (“the HOA” for short). These include the HOA itself and a group of individuals who appear to be current or former HOA board members: Greg Gilbertson, Remo Turano, Mary Ann Bachelor, Daniel Noonan, Marsha Hunter, Charles Englund, James Schulte, and John Bernacchi. See id. State Farm Fire and Casualty Company, the HOA's insurer, is also a defendant. Id.; see also Second Am. Compl. at p. 2-3.[5] The Plaintiffs also sued State Farm's former law firm, O'Hagan Meyer, and two O'Hagan Meyer attorneys, Daniel Nolan and Luke Sheridan. Defs.' Br. at 1; see Second Am. Compl. at p. 3-4. Finally, the HOA's law firm, Arnstein & Lehr, LLP, and two Arnstein attorneys, Allan Goldberg and Jenifer Caracciolo, are also named as defendants. Defs.' Br. at 1; see Second Am. Compl. at p. 1-2, ¶ 2.

         B. Adoption of the Amended Declaration

         The major thrust of the Second Amended Complaint is that the Equestrian Estates Homeowners Association improperly amended its governing declaration to the Plaintiffs' detriment. See Second Am. Compl. at p. 1-3. According to the Plaintiffs, the HOA and its associates engaged in all kinds of shady conduct to secure approval of the Amended Declaration. For example, in order to get the homeowner signatures needed to approve the amendment, HOA members allegedly lied to homeowners about what they were signing. See, e.g., id. ¶¶ 67, 91-92, 277. Evmorfia Markou was told that the card she was signing was “for a gift” when it was actually a consent to modify the HOA declaration. Id. ¶¶ 82, 84. Keith Schuth was similarly deceived. HOA board member James Schulte allegedly got Keith drunk and got him to sign a consent card by telling Keith that it was “to have his information on file.” Id. ¶¶ 97-98. The complaint also alleges that Evmorfia Markou was “coerced” to sign John Markou's name without his knowledge or consent, but does not explain the nature of the coercion. Id. ¶ 85. There are also allegations that some signatures were forged, but without many details. See id. ¶¶ 78, 92.

         The Plaintiffs also argue that the adoption of the Amended Declaration was procedurally improper. It is difficult to fully understand these allegations, but the gist is that the Original Declaration governing Equestrian Estates[6] set out certain procedures for amendments, which were not followed during the adoption of the Amended Declaration. The complaint alleges that, per the Original Declaration, no amendment was allowed to take effect unless homeowners were given 90 days' written notice of the proposed change. Id. ¶ 55. At that point, the “committee” had a year to get the then-owners of two-thirds of the lots to sign a “fully disclosed dated notarized contract/instrument with verifiable witnesses.” Id. (emphasis omitted). Instead of following these procedures, Defendants Mary Ann Bachelor and James Schulte falsely certified that the homeowners received 90 days' notice and that the required percentage of homeowners had voluntarily consented to the amendment. See id. ¶¶ 64-66, 69. The HOA's lawyer, Defendant Allan Goldberg of Arnstein & Lehr, was the “princip[al] author” of the improper Amended Declaration, id. at p. 1, and allegedly knew that the Amended Declaration was not consistent with the Original Declaration, id. ¶ 10.

         C. State Court Litigation

         In 2011, litigation commenced over the Amended Declaration. The Second Amended Complaint is not especially clear on what happened, when it happened, or who was involved. But the Defendants included certain pleadings and opinions from the various state court cases surrounding the Declaration in the exhibits to their brief. The Court takes judicial notice of these state court documents because they are a matter of public record. See, e.g., Milwaukee Police Ass'n v. Flynn, 863 F.3d 636, 640 (7th Cir. 2017) (citation omitted). It is also fair to consider these documents because they are incorporated by reference in the Second Amended Complaint. Id. These pleadings and opinions provide a clearer picture of what happened in the various state court cases.

         1. The 2011 Chancery Litigation and the 2011 Law Litigation

         In 2011, Patricia Hataburda brought a lawsuit in Cook County Chancery Court, Patricia Hataburda v. Equestrian Estates Homeowners Association, 11 CH 09468. Hataburda sought a judgment that the Amended Declaration was “a nullity and unenforceable” for more or less the same reasons outlined in the Second Amended Complaint, plus some additional arguments. See Defs.' Br. Exh. B, 2011 Chancery Complaint ¶¶ 4, 10-18, 28-30, 54(A). That same year, Hataburda filed another lawsuit, this time in the Law Division, captioned Patricia Hataburda v. Daniel Noonan, 11-L-65043. This lawsuit alleged that then-HOA board member Daniel Noonan had breached his fiduciary duties by failing to disclose 2011 Chancery litigation to HOA members, and claimed malicious prosecution based on a forcible entry and detainer action filed against Patricia Hataburda. Defs.' Br. Exh. D, 2011 Law Complaint ¶¶ 2, 7, 36. Eventually, Patricia Hataburda entered into a settlement agreement releasing her claims in both cases. Defs.' Br. Exh. C, Patricia Hataburda Settlement Agreement.

         The Second Amended Complaint alleges that this settlement agreement was obtained through underhanded conduct by the HOA, its board members, Hataburda's then-attorney Thomas Murphy, and the judge in the case. The Plaintiffs allege that when the Hataburdas arrived at the courthouse to try to negotiate a settlement, two Arnstein & Lehr attorneys, Defendant Jenifer Caracciolo[7] and Mary Cannon Veed (not a defendant in this case) were meeting with the judge in the jury room. Id. ¶ 132. Several HOA members were also present in the jury room, including Defendants Daniel Noonan, Greg Gilbertson, and Marsha Hunter. Id. ¶ 133. The Hataburdas' attorney was called into the room, but the Hataburdas were told to stay outside. Id. ¶ 134. When the Hataburdas were finally allowed into the room, they were told that they had to sign the settlement agreement or pay Arnstein & Lehr's court costs. Id. ¶ 136. Someone (the complaint does not say who) told the Hataburdas “you can't win against such a prestigious law firm.” Id. ¶ 136 (emphasis omitted). The judge and Veed then “grilled” the Hataburdas, and the judge told them that the HOA was “mandatory” and that they were members “like it or not.” Id. ¶ 138 (emphasis omitted). During this conversation, Murphy was silent and unhelpful. Id. ¶ 137. The Plaintiffs allege that the HOA bribed Murphy to “take a DIVE” and not object to this “aggressive coercion.” Id. ¶ 148 (capitalization in the original). Patricia eventually signed the settlement agreement, but her husband refused. Id. ¶¶ 139, 141.

         Patricia regretted her decision, and sent the presiding judge a letter titled “Agreement under Duress.” Id. ¶ 161; see also Second Am. Compl. Tab A Exh. N. In this letter, Patricia explained that she felt that she had signed the agreement under duress and asked to “continue my lawsuit.” Second Am. Compl. Tab A Exh. N. One of the judge's staff attorneys responded, stating that they had received the letter, but that they would not read it due to concerns over improper ex parte communication. Id. Tab A Exh. O. The letter recommended that Patricia speak to her attorney to resolve her issues, and also advised her that she could file appropriate motions before the judge with notice to the other side. Id. Patricia's attorney was copied on the letter. Id.

         2. The State Farm Declaratory Judgment Litigation

         Also in 2011, State Farm, the HOA's insurer filed an action in Cook County Chancery Court seeking a declaratory judgment that State Farm was not responsible for the costs of the Hataburda litigation. See Defs.' Br. Exh. E, State Farm Complaint. This case was captioned State Farm Fire & Casualty Co. v. Equestrian Estates Homeowners Association and Patricia Hataburda, 11 CH 21124. The state court held that State Farm had a duty to insure the HOA for the Hataburda lawsuit. Defs.' Br. Exh. F, State Farm Opinion.

         The plaintiffs in this federal case were only peripherally involved in the State Farm litigation (Patricia Hataburda was a nominal defendant; the rest were not parties at all). The Second Amended complaint contains, however, a number of allegations related to the State Farm litigation. The Plaintiffs argue that the State Farm Declaratory Judgment Litigation demonstrates State Farm's knowledge of the fraud underlying the Amended Declaration, because the basis of State Farm's complaint was that it did not have a duty to insure fraud. Second Am. Compl. at p. 2. This appears to be a misreading of State Farm's lawsuit, which asserted only that Patricia's allegations fell outside the scope of State Farm's coverage. See generally Mot. Defs.' Br. Exh. E, State Farm Complaint. State Farm did not argue that the Amended Declaration itself was fraudulent. Id.

         The Plaintiffs also allege that Arnstein & Lehr attorneys falsely claimed during the State Farm declaratory judgment litigation that the Equestrian Estates Association did not own a common area. Second Am. Compl. at p. 2-3, Tab A Exh. L at 2. The Second Amended Complaint does not explain what impact this false statement had on the State Farm litigation or on the Plaintiffs.

         3. The 2012 Chancery Litigation

         In 2012, a group of Equestrian Estates homeowners brought a case in Cook County Court alleging that the Amended Declaration was unlawful (case number 12 CH 19220). The original plaintiffs were Patricia Hataburda, Eve Markou, [8] Susan Hamdan, and Keith Schuth. Defs.' Br. Exh. G, 2012 Chancery Complaint. The complaint named the HOA as a defendant, along with several board members, some of whom are now defendants in the federal case. The plaintiffs later amended their complaint, substituting Richard Hataburda for Patricia Hataburda, and dropping all the defendants except the HOA, Remo Turano, Mary Ann Bachelor, and Daniel Noonan. See Mot. Dismiss Exh. H, 2012 Chancery Amended Complaint. The amended complaint was confusingly drafted, but generally alleged that the Amended Declaration was invalid. See generally id. The amended complaint in the 2012 Chancery Litigation made substantially the same factual allegations in support of this argument as the Second Amended Complaint does in the current federal case. Specifically, the amended complaint alleged that homeowners had been tricked or intimidated into signing signature cards, id. ¶ 11; the amendment had not been approved by the “then owners of two thirds of the Lots, ” id.; the HOA failed to provide the required notice, id.; and the defendants later falsely represented that the Amended Declaration was properly adopted, id. ¶ 12. It further alleged that the defendants had attempted to collect “unlawful assessments” based on the Second Amended Declaration, and that when the homeowners would not pay the assessments, the defendants filed liens and collection lawsuits against them. Id. ¶¶ 14-15.

         The defendants moved to dismiss the amended complaint. See Second Am. Compl. Tab P. The Cook County Circuit Court granted the motion and dismissed the amended complaint with prejudice. Defs.' Br. Exh. I, Appellate Court Opinion, No. 1-14-0431 at 1. In 2015, the Illinois Appellate Court issued a written order affirming the dismissal. Id.

         D. Other Allegations

         1. Debt Collection Efforts

         Apart from the factual allegations related to the adoption of the Amended Declaration and the resulting litigation, there are a number of allegations about the defendants' efforts to collect “unlawful debt, ” accompanied by citations to the Second Amended Complaint's attached exhibits. See, e.g., Second Am. Compl. ¶¶ 167, 176, 191, 216-226. Although the references to “unlawful debt” are vague on their own, the citations to the accompanying documents make clear that the plaintiffs are referring to efforts to enforce HOA rules and collect HOA fees. See Second Am. Compl. Tab O Exh. J (Hataburda HOA account statements); Tab A Exh. Y (John and Evmorfia Markou HOA account statements); Tab B Exh. I (letter to Markou family regarding HOA fines); Tab A Exh. Z, Tab E Exh. I (Schuth HOA account statements and eviction documents). The Plaintiffs characterize these debt collection efforts as “extortion.” See, e.g., Second Am. Compl. ¶¶ 167, 217, 284, 295.

         2. Defendants' Receipt of Evidence of Fraud

         Many of the allegations and exhibits in the Second Amended Complaint are dedicated to showing that various defendants were made aware of the supposed fraud surrounding the Amended Declaration. See, e.g., Second Am. Compl. Tab K, Tab N. For example, the complaint alleges that State Farm knew or should have known at the time of the declaratory judgment action that the Amended Declaration was fraudulent. Id. at p. 2-3. It also states that “notice was brought directly home to State Farm at the end of the appellate case of systemic fraud.” Id. at p. 3. Although these accusations are difficult to understand, it seems that in 2015 (around the time of the issuance of the Appellate Court opinion in the 2012 Chancery lawsuit), the Plaintiffs sent a number of affidavits with supporting documentation to State Farm and/or State Farm's attorneys at O'Hagan Meyer. See Second Am. Compl. ¶¶ 108-118. State Farm did not respond to these documents, and continued to insure the HOA. Id. ¶¶ 118, 125, p. 3. The Plaintiffs apparently sent similar documents to Arnstein & Lehr in 2015. See Id. ¶¶ 241-42. Arnstein & Lehr and the HOA continued to “assault” the plaintiffs with “bills of unlawful debt” even after receiving these documents. Id. ¶ 243.

         II. Legal Standard

         “A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). “[A] complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). These allegations “must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. The allegations that are entitled to the assumption of truth are those that are factual, rather than mere legal conclusions. Iqbal, 556 U.S. at 678-79.

         On the other hand, a Rule 12(b)(1) motion tests whether the Court has subject matter jurisdiction, Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009); Long v. ShoreBank Dev. Corp., 182 F.3d 548, 554 (7th Cir. 1999). When evaluating a motion to dismiss under Rule 12(b)(1), if there are no factual disputes, then the Court accepts the allegations in the complaint as true, and draws all reasonable inferences in the plaintiff's favor. See Bultasa Buddhist Temple of Chi. v. Nielsen, 878 F.3d 570, 573 (7th. Cir. 2017). That said, “a plaintiff faced with a 12(b)(1) motion to dismiss bears the ...


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