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Urban 8 Fox Lake Corp. v. Nationwide Affordable Housing Fund 4, LLC

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

June 18, 2019

Urban 8 Fox Lake Corporation, Urban 8 Zion Corporation, Plaintiffs,
v.
Nationwide Affordable Housing Fund 4, LLC, SCDC, LLC, Wentwood Capital Advisors, LP, Defendants.

          MEMORANDUM OPINION AND ORDER

          Honorable Thomas M. Durkin United States District Judge

         Before the Court is plaintiffs Urban 8 Fox Lake Corporation and Urban 8 Zion Corporation's (“Plaintiffs”) motion for reassignment of a recently-filed case currently pending in the Northern District of Illinois before the Honorable Gary Feinerman, Urban 8 Danville Corporation and Urban 8 Macomb Corporation v. Nationwide Affordable Housing Fund, LLC, SCDC, LLC, and Wentwood Capital Advisors, L.P., No. 19 C 3171 (the “Macomb/Danville action”), as related to the above-captioned action (the “Fox Lake/Zion action”). R. 95.[1] For the following reasons, Plaintiffs' motion is granted, and the Macomb/Danville action is reassigned to the undersigned judge.

         Background[2]

         The original Fox Lake/Zion action.

         The Fox Lake/Zion action already before this Court involves two nearly identical limited partnership agreements concerning two low-income senior housing projects in Illinois. Pursuant to those agreements Plaintiffs, as general partners, were granted an option to purchase defendants Nationwide Affordable Housing Fund 4, LLC (“Nationwide”) and SCDC, LLC's (“SCDC”) interests, as limited partners, in the partnerships at the end of a 15-year compliance period governed by the low-income housing tax credit program. Prior to the end of that 15-year compliance period, Wentwood Capital Advisors, LP (“Wentwood”) had become the asset manager for the other two defendants (Nationwide, SCDC, and Wentwood collectively, “Defendants”). Plaintiffs timely exercised their option. A dispute arose between Wentwood and Plaintiffs, and the parties (including all three Defendants) entered into a settlement agreement which, among other things, required Defendants to “take all steps required to close on the purchase(s) [pursuant to the options] in a timely and expeditious manner, consistent with [the partnership agreements].” R. 4 ¶ 45. Nevertheless, Defendants refused to sell their interests.

         On September 6, 2018, Plaintiffs brought claims for breach and anticipatory breach of the partnership agreements against Nationwide and SCDC (Counts I and II); breach of the settlement agreement against all Defendants (Count III); violation of the good faith and fair dealing provision of 805 ILCS § 215/305 against Nationwide and SCDC (Count IV(2)); and tortious interference with the partnership agreements against Wentwood (Count V). Plaintiffs also sought a declaratory judgment against all Defendants under the partnership agreements and the settlement agreement (Count IV(1)). Defendants moved to dismiss portions of the complaint on October 5, 2018, R. 24, and the Court granted Defendants' motion with respect to Count IV(2) (violation of good faith and fair dealing provision) on December 10, 2018, R. 51. At a status conference on that same date, the parties represented to the Court that although Defendants had at that point offered to transfer their partnership interests to Plaintiffs, they had been unable to seriously discuss settlement because of a dispute over the proper interpretation of the “Sale Preparation Fee, ” a contract provision pertaining to the price to be paid for that transfer. Accordingly, the Court suggested that the parties brief a partial motion for summary judgment on that issue to short-circuit extensive discovery and potentially resolve the case.

         Thereafter, on January 11, 2019, Plaintiffs filed a motion for partial summary judgment for a declaratory judgment on the proper interpretation and application of the Sale Preparation Fee. R. 55. On April 16, 2019, the motion fully briefed and at the parties' request, this Court heard oral argument on Plaintiffs' motion. R. 87. In addition to their arguments on the merits, the parties explained at the hearing that they and their affiliates also are parties to other, similar partnership agreements concerning other low-income senior housing projects, and that those agreements also contain the Sale Preparation Fee. Then, in an off-the-record telephone conference on May 10, 2019 and after careful consideration of the parties' written and oral arguments, the Court explained to the parties how it would rule on Plaintiffs' partial summary judgment motion. But because of the parties' representations regarding similar language in similar agreements between them and/or their affiliates, the Court gave the parties two weeks to discuss potential settlement of the Fox Lake/Zion action prior to the Court issuing a written opinion to that effect. R. 92. The parties subsequently informed the Court that they were unable to reach settlement.

         The Danville/Macomb action.[3]

         Also on May 10, 2019, affiliates of Plaintiffs in the Fox Lake/Zion action filed the Danville/Macomb action against Defendants. The Danville/Macomb action concerns the parties' rights and obligations under partnership agreements that are virtually identical to the agreements in the Fox Lake/Zion action, but involve different low-income senior housing projects in Illinois. 19 C 3171, R. 1. Like the Fox Lake/Zion action, the claims in the Danville/Macomb action relate to the plaintiffs' rights to exercise their option to purchase Defendants' interests as limited partners, and Defendants' alleged refusal to facilitate those purchases. Importantly, as in the Fox Lake/Zion action, both agreements also concern the application and interpretation of the Sale Preparation Fee.

         The Ohio action.

         On May 8, 2019, two days before Plaintiffs' affiliates filed the Danville/Macomb action against Defendants, Defendants Nationwide and SCDC filed an action against Plaintiffs' affiliates in the Southern District of Ohio concerning the same partnership agreements at issue in the Danville/Macomb action, captioned Nationwide Affordable Housing Fund 4, LLC and SCDC, LLC v. Urban 8 Danville Corporation and Urban 8 Macomb Corporation, No. 19 C 1848 (S.D. Oh.) (the “Ohio action”). The Ohio action seeks a declaratory judgment that Plaintiffs' affiliates (defendants in the Ohio action) failed to timely exercise their options to purchase Nationwide and SCDC's interests in the partnership agreements at issue, or, in the alternative, for interpretation and application of the Sale Preparation Fee in line with arguments Defendants made in the Fox Lake/Zion action (and contrary to Plaintiffs' position and this Court's anticipated ruling). A motion to dismiss, or in the alternative, to transfer venue to the Northern District of Illinois, is currently pending in the Ohio action. In their briefs on the motion for reassignment, Plaintiffs contend that Defendants filed the Ohio action “in bad faith” for the purpose of “forum shopping, ” and the parties argue at length over whether this characterization is correct. But the Ohio action is not presently before the Court, and the Court thus declines to consider this issue.

         Analysis

         In the Northern District of Illinois, cases are assigned to judges at random. L.R. 40.1. A case may be reassigned to a court before which an earlier-filed, related case is pending to preserve judicial resources. L.R. 40.4. The party moving for reassignment bears the burden of showing the cases are related and that reassignment would promote efficient use of judicial resources. For a case to be eligible for reassignment, Local Rule 40.4 ...


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