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Second District Court of Appeal Upholds Nominal Judgment for Plaintiffs’ Failure to State Reasonable Basis for Damages

 

In a hard-fought Illinois consumer fraud lawsuit over deception by a condominium developer, the Second District Court of Appeal has upheld an award involving both nominal damages and punitive damages. In Kirkpatrick v. Strosberg, Nos. 2-06-0724 and 2-06-0731 (Ill. 2nd Aug. 8, 2008), four plaintiffs, led by John Kirkpatrick, sued a real estate developer over misrepresentations about the square footage and ceiling height of the luxury condominiums they purchased in Glen Ellyn, Ill.

Defendant Morningside Development Group is general partner of defendant Glen Astor Condominium Investors LP, a residential real estate developer. Defendant David Strosberg is Morningside’s president. Glen Astor entered into contracts with the plaintiffs for their purchase of luxury condos on the top floor of a development. Before purchasing the condos, the plaintiffs allege, they read sales materials promising nine-foot ceilings and specific amounts of square footage in the units. In three cases, floor plans specifying square footage were incorporated into their contracts. A rider to the contracts specified that dimensions are approximate and subject to adjustments due to the location of building components. During construction, the builder had to lower the ceilings by six inches because of the size of roof components. After buying the condos, the plaintiffs realized that both the square footage and the ceiling heights were smaller than promised.

At trial for the subsequent lawsuit, the court determined that the difference in square footage resulted from differences between how LeNoble and the plaintiffs’ own appraiser measured the square footage, but that LeNoble’s smaller measurements were appropriate and proper. Thus, the court struck down the square footage claims. Finally, it found for the plaintiffs on the breach of contract claims regarding the lowered ceiling. It found that there were actual damages, but that the plaintiffs’ expert appraiser had not given adequate information about damages. The breach of contract took place in 1997, the court said, but Philips gave a diminished value as of 2004 that was “nothing more than a guess without proper basis.” Thus, the court awarded nominal damages of $100 each on the breach of contract and Consumer Fraud Act claims regarding the ceilings. It also awarded $300,000 in punitive damages and $83,000 in attorney fees.

Both the plaintiffs and the defendants appealed, raising a total of 13 issues. The appeals court started with the square footage claims; the plaintiffs argued that the trial court was wrong to find against their common-law fraud and Consumer Fraud Act claims. The trial court heard conflicting evidence on how square footage was measured, and the appeals court saw no reason to question the trial court’s judgment in favor of LeNoble’s method. Thus, there was no false statement or deceptive act. Further, because of the contract rider specifying that dimensions were approximate, there was no breach of contract. Thus, it upheld the trial court’s decision on square footage.

The Second next considered the issue of damages for the lowered ceilings. The plaintiffs argued that the trial court should have used Phillips’ measurement of diminished value. In this case, the appeals court wrote, damages should be the difference between the actual sales price and the fair market value of the properties on the day of the breach. Philips offered an estimation of fair market value seven years after the breach, the court wrote, which the trial court found was speculative. This was not unreasonable or against the evidence, the appeals court wrote.

Meanwhile, the defendants argued that the trial court’s finding was wrong because the contracts didn’t specify a ceiling height. Nonetheless, the appeals court wrote, they used deceptive marketing materials to induce the plaintiffs to sign contracts, so the ruling on the breach of contract and Consumer Fraud Act claims stands. The defendants also argued that the contract rider barred the breach of contract claim as to the ceilings, as well as the square footage. The trial court found that this was an unreasonable alteration and not covered by the rider, the appeals court said, and it had no reason to think this was against the manifest weight of the evidence.

The defendants next argued that nominal damages were incorrect because the plaintiffs did not prove actual damages, an argument the Second District pointed out was expressly refuted by the trial court’s finding that damages had been proven. They also argued that punitive damages were incorrectly awarded because they were accompanied only by nominal damages. The appeals court looked to caselaw saying punitive damages supported by nominal damages are only appropriate under the Consumer Fraud Act when the defendant’s conduct is intentional. That was clearly established at trial, the court wrote, so the trial court did not abuse its discretion. It also ruled that the punitive damages award was not so grossly excessive as to be unconstitutional, noting that it passes all three tests set out by the U.S. Supreme Court in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996).

Finally, the court considered the defendants’ challenge to both the rewarding and amount of attorney fees. The defendants argued that the plaintiffs were not entitled to the fees because they were not the “prevailing party,” but the appeals court disagreed, noting that plaintiffs were awarded damages. Furthermore, the trial court found that the defendants repeatedly acted in bad faith. And in order to overturn the amount of attorney fees, the appeals court wrote, it would have to find that the trial court did not use sufficient evidence to determine the fees. It saw no reason to so find, so it upheld the attorney fees decision along with all of the trial court’s other decisions.

The Chicago and Oak Brook, Ill., law firm of DiTommaso Lubin Austermuehle concentrates in protecting the legal rights of consumers, real-estate, home and condomimium purchasers who have been misled or taken advantage of in financial and real-estate transactions. In addition to Chicago consumer fraud lawsuits over real estate contracts, our Illinois consumer fraud litigation attorneys handle lawsuits over real-estate fraud, billing fraud, fraud by auto dealers, deceptive advertising and many other common consumer pitfalls. Based in Illinois, our consumer fraud and real-estate and condomium fraud and breach of contract trial lawyers represent clients involving consumer frauds and real-estate disputes in the Chicago area including Wheaton, Naperville, Aurora, Rockford and Waikegan and in different parts of the United States. To set up a free, confidential consultation on your case, please contact us online or call us toll-free at 1-877-990-4990.