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Lake Forest Real Estate Investors, LLC v. The Village of Lincolnwood, Illinois

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

November 4, 2019

LAKE FOREST REAL ESTATE INVESTORS, LLC, Plaintiff,
v.
THE VILLAGE OF LINCOLNWOOD, ILLINOIS, and BARRY I. BASS, individually and as President of the Village of Lincolnwood, Defendant.

          MEMORANDUM OPINION

          CHARLES P. KOCORAS UNITED STATES DISTRICT JUDGE.

         Before the Court is Defendants Barry I. Bass (“Bass”) and the Village Lincolnwood, Illinois's (“Lincolnwood”) (collectively, “the Defendants”) motion to dismiss Plaintiff Lake Forest Real Estate Investors, LLC's (“LFRE”) amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the Court grants in part and denies in part the motion.

         BACKGROUND

         For purposes of this motion, the Court accepts as true the following facts from the amended complaint. Murphy v. Walker, 51 F.3d 714, 717 (7th Cir. 1995). All reasonable inferences are drawn in LFRE's favor. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008).

         The Purple Hotel Background

         Plaintiff LFRE is an Illinois limited liability company engaged in the business of real estate development and financing. Michael Sieman (“Sieman”) is LFRE's founder and Manager. Defendant Lincolnwood is an Illinois municipal corporation. Defendant Bass is currently the President of Lincolnwood and formerly served on its Board of Trustees.

         The facts of this case stem from LFRE's attempt to redevelop a parcel of real estate commonly known as the “Purple Hotel, ” which is located at 4500 West Touhy Avenue in Lincolnwood. Since its opening in the 1960s, the Purple Hotel has changed names and owners several times until the hotel closed its doors in 2007. The owner of the property at the time of closing was North Capital Group (“NCG”), which was managed by its principal Zvi Feiner (“Feiner”).

         On or about August 20, 2013, NCG and Lincolnwood entered into a Restated Pre-Development Agreement (“Pre-Development Agreement”) relative to the Purple Hotel, contemplating the demolition of the hotel and submission of an application for zoning and subdivision. The Pre-Development Agreement was extended three times, and the hotel was not demolished until 2015, leaving only the building foundations. The Pre-Development Agreement also provided that Lincolnwood waived or postponed certain post-demolition restoration requirements set forth in the Lincolnwood Municipal Code.

         LFRE's Initial Involvement in the Redevelopment

         NCG failed to submit the application for zoning and subdivision laid out in the Pre-Development Agreement, so at the urging of then Lincolnwood President Jerry Turry (“Turry”), LFRE began discussions with Lincolnwood representatives regarding the redevelopment of the property. In November 2016, LFRE commissioned architectural designs for the property and sought permission from NCG to make a formal presentation to Lincolnwood at a meeting of the Committee of the Whole. In January 2017, LFRE sent its initial design documents to Lincolnwood, who requested certain revisions and that LFRE make a presentation at a meeting of the Committee of the Whole in February 2017. However, LFRE had not received permission from the property owner to do so.

         In April 2017, Bass defeated Turry and was elected Lincolnwood President. In June 2017, LFRE representatives met with Bass, Lincolnwood Trustee Jesal Patel, Lincolnwood Manager Tim Wilberg, and Community Development Director Steve McNellis. The parties discussed how Lincolnwood wanted the approval process to proceed under the Lincolnwood Village Code Section 8.05 and 8.06. Under those sections, Lincolnwood affords applicants the right to access the zoning procedure, which is the mechanism to gain the approval required to proceed with their intended land use. Those sections include a mandatory “preapplication” conference with the Lincolnwood Board of Trustees before an application for a planned unit development may be filed. The parties also outlined an entitlement schedule for the project, with an eye toward a July 2018 groundbreaking.

         At a Board meeting on August 15, 2017, the Lincolnwood Board approved a concept plan for the property which was similar in scope, yet smaller in size, to that submitted by LFRE. Under Lincolnwood ordinances, approval of a concept plan is optional and does not replace the mandatory preapplication conference.

         Changed Ownership of the Purple Hotel Property

         Thereafter, Romspen Club Holdings (“Romspen”), the lender to the prior owner, obtained title to the property. In early November 2017, LFRE representatives met with Bass, advised him that LFRE signed a Letter of Intent for the purchase of the property, and shared the contents of the Letter of Intent with Bass. Later that month, Bass met with Romspen, but LFRE was not permitted to attend that meeting. At the meeting, Bass directed Romspen's Chief Financial Officer not to sell to any group that included Larry Kaiser (“Kaiser”), a broker who introduced LFRE to various individuals in Lincolnwood in connection with the project. Bass also inquired about the status of an offer made by Marvin Feiger, a friend and colleague of Bass.

         On November 30, 2017, Romspen and LFRE entered into a Purchase and Sale Agreement (“the Agreement”) for the property. Shortly thereafter, Lincolnwood asked LFRE for a copy of the Agreement, specifically requesting information regarding the timelines set forth in the Agreement. Due to confidentiality concerns, LFRE passed the request along to Romspen, who provided Lincolnwood with a redacted version of the Agreement. That document required LFRE to make an earnest money deposit of $300, 000, which became non-refundable upon the expiration of the Inspection Period on February 14, 2018. Closing was to take place within 45 days following the expiration of the Inspection Period. Failure to close in a timely fashion would result in the termination of the Agreement and a forfeiture of the earnest money deposit.

         In January 2018, LFRE was approached by Jeff Krol (“Krol”), a representative of developer CA Ventures, about a possible involvement in the residential aspect of the project. LFRE met with Krol and developer Phil Goldberg (“Goldberg”) regarding the possible collaboration. LFRE stated that they were not interested in involving CA Ventures, but Goldberg expressed a continued interest in the project. He met with LFRE two additional times and gained access to LFRE's offices to view the 3D models of the project. Ultimately, LFRE refused Goldberg's offer of involvement in the project. LFRE later learned that Goldberg is Bass's brother-in-law, and Bass asked Goldberg to “check up on” LFRE to find out its intentions.

         Lincolnwood's Obstruction of the Mandatory Preapplication Process

         On February 11, 2018, Lincolnwood scheduled a meeting with LFRE for February 20, 2018 to discuss the project and the anticipated approval process. Shortly before the meeting was to take place, Lincolnwood cancelled the meeting and refused to reschedule it.[1] LFRE subsequently requested meetings with Bass and other Lincolnwood representatives to complete the mandatory preapplication process, but those requests were either ignored or refused-despite LFRE's completion of the required materials.

         On February 20, 2018, the Lincolnwood Board of Trustees met and considered an ordinance authorizing negotiations for the purchase of the property, a necessary precondition to Lincolnwood's condemnation of the property using eminent domain. The Board also considered a resolution directing enforcement of the Village Code against the property and its owners, which would require removal of the building foundations and other non-urgent efforts that could be more economically performed during construction of future structures. If not part of the ultimate construction on the property, removal of the building foundations alone could add one million dollars to the project cost. During these discussions, Bass indicated that any communications or offers would be had only with the owner of the property, not the contract purchaser.

         LFRE's principal, Sieman, was permitted ten minutes to speak at the Board's meeting. He addressed LFRE's background, its vision for the property, and its willingness to work with Lincolnwood to achieve its desired objectives. He also cautioned of the delays and impediments that passage of the considered resolutions would present. Finally, Sieman advised the Board that Lincolnwood had ...


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