Illinois: Condo settles dispute over $500 fine, pays owner $125,000

Concluding more than seven years of litigation, one of Chicago’s Magnificent Mile condo associations has agreed to pay a $125,000 settlement fee to one of its former owners.

The six-figure settlement, finalized in December 2020, does not include a confidentiality agreement. It ends a lengthy dispute between 111 East Chestnut Condominium Association and former owner and resident Michael Boucher. Boucher sued his condo association in 2013, claiming the HOA board was unjustified in imposing a $500 fine against him for alleged “obnoxious behavior.”

Background story

Michael Boucher is well-know in the Chicago area as a former owner of several successful restaurants in Illinois and Michigan. Today he’s retired from the hospitality industry, but he owns several Chicago condos as investment properties.

Boucher knows how to manage property and run a business.

So it’s not surprising that, prior to his dispute with his condo association, Boucher served as Secretary on the board for a few years. During that time he hired the current management company at 111 East Chestnut, Sudler Property Management.

At the time, he never imagined he’d be filing a lawsuit against his condo association.

After his term on the condo board at 111 East Chestnut, Boucher grew dissatisfied with some of the staff and management decisions at the luxury Gold Coast condominium tower.

A Chicago native, Boucher has been politely described by some of his neighbors as outspoken. In a 2017 Chicago Tribune article summarizing internal conflict at 111 East Chestnut, a current board member refers to Boucher as “crude” and his behavior as “obnoxious.”

According to the condo association, Boucher was fined $500 in 2013, for using insulting and vulgar language while criticizing some staff members about the quality of their services. Like many condo associations, 111 East Chestnut has a rule against “offensive or obnoxious activity.” It’s a vague rule that HOA sometimes use as the basis for imposing a fine.

Boucher, who is well-known for his former career in the hospitality industry in Chicago, denied the condo association’s allegations against him. He argued that the sanctions against him were retaliatory in nature, designed to shut down his criticism of the condo board’s management decisions.

Boucher has repeatedly denied those claims. And, notably, the condo association has never provided proof of Boucher’s alleged offensive behavior.

In fact, before the condo association’s rule violation hearing with Boucher, he requested evidence of his supposed “obnoxious” behavior. Curiously, the board refused to provide such evidence, making it impossible for the owner to explain or defend his actions at the hearing. At the time, Boucher likened the internal condo association hearing to a kangaroo court.

Despite lack of evidence, the condo board decided Boucher was guilty of violating condo rules, so they imposed a $500 fine against him.

Boucher chose to stand up for his right to free speech, guaranteed under the First Amendment of the U.S. and state Constitutions. He paid the $500 HOA fine under protest, then filed a lawsuit against his condo association and its board members.

Little did he realize it would take seven years to reach a settlement with his condo association.

Legal history

Depositions in the protracted litigation, according to court records, include allegations that Boucher called a female door attendant a “cocky bitch” and that he once exposed his scrotum during a meeting with the board.

Boucher argued that the condo board abused its powers, and that the $500 fine and unfair hearing process was designed to humiliate and intimidate the homeowner, and to silence his complaints.

In 2017, a Circuit Court ruled in favor of 111 East Chestnut Condominium Association. Boucher appealed.

The Appellate Court reversed the Circuit Court ruling in favor of Boucher in June of 2018.

One of two attorneys for 111 East Chestnut Condominium Association, Diane Silverberg, appealed to the case to the Illinois Supreme Court. She argued that a condo association is a private organization, not a government or state actor. Therefore, her clients had no duty to uphold First Amendment rights of owners, including the right to free speech.

The controversial legal petition raised plenty of eyebrows in the legal community in Chicago and Illinois.

Not surprisingly, Silverberg’s petition on behalf of 111 East Chestnut Condo Association was denied, sending the Boucher case back to trial court early 2019.

The wheels of legal justice move slowly.

Since the Appellate Court ruling in 2018, Boucher’s case has been delayed by countless motions, depositions, and hearings. Court dates have been rescheduled several times.

In 2019, Diane Silverberg requested a delay in court dates due to health problems.

Then in early 2020, the Covid-19 outbreak shut down the courts, further delaying the judicial process. In autumn of 2020, Boucher’s attorney, Norman Lerum, tested positive and became ill with COVID-19. More delays.

The last recorded tentative Boucher trial date was December 2020. However, according to Lerum, the trial would have likely been delayed until January 2021, then conducted using Zoom technology. Lerum believes a Zoom trial would not have served his client’s best interest. And an in-person trial would likely not be possible until late 2021, at the earliest.

Combatting litigation fatigue, both parties decided to engage in a pre-trial settlement conference in November 2020, which resulted in the cash settlement in favor of Michael Boucher.

As part of that settlement, Boucher agreed to drop lawsuits against individual directors, and settled directly with the condo association.

Former condo owner not ‘made whole’ by the settlement

On the surface, it seems crazy that a dispute over a $500 fine could result in a payout of $125,000. But after seven years of litigation, Boucher had racked up nearly $162,000 in legal fees.

Plus, the dispute was so bitter that, after filing suit, Boucher was forced to quickly sell his unit for less than market value. He relocated to another city in order to escape the unavoidable hostilities at 111 East Chestnut.

In a phone interview with IAC, Norman Lerum explained that he reduced his legal fees, so that his client could recover his real damages, including moving costs.

However, neither the Plaintiff nor his attorney have been ‘made whole’ by the $125,000 settlement.

IAC also spoke with Michael Boucher by telephone. Looking back over the past 7 years of litigaton, he explains, “I never realized it would take this long. This is how people become frustrated.” Boucher add, “It was a long journey, and I’m glad it’s over.”

Condo Association’s full costs unknown

As for the litigation’s effect on 111 East Chestnut, Boucher estimates the condo association must have spent at least $400,000 in legal costs to defend their seven board members, who were represented by two different law firms.

According to an email IAC received from Attorney Lerum, “There certainly was disagreement among the board members” at 111 East Chestnut. Lerum confirmed that four of the board members, including then President Anthony Milazzo, were represented by Diane Silverberg of Kovitz – Shifrin law firm.

Three other board members were represented by Marshall Seeder, from the Tressler, Ltd. law firm of Chicago. Lerum added that, at deposition, there were contradictory testimonies among defendant board members of 111 East Chestnut, some of which supported Boucher’s case.

Milazzo is no longer board President, but still serves on the condo board.

The condo association is currently managed by Sudler Property Management, which merged with mega-management giant Associa during the course of litigation. The $125,000 settlement was paid by the association’s insurer, RSUI.

Typically, a condo association insurance provider raises its premiums and increases its deductible — often to at least $100,000 — following litigation of this nature. It’s not uncommon for an insurer to drop a condo association’s coverage, forcing condo owners to pay for last-resort directors and officer’s insurance for high risk clients.

IAC was unable to verify the current status of insurance coverage at 111 East Chestnut.

Legal Significance of Boucher case

Lerum says Boucher is a landmark case that affects the rights of more than 1 million condo owners in Illinois. He emphasizes important outcomes that set legal precedent.

Statutory right to First Amendment protections

The Boucher case upholds first amendment rights, including free speech, as spelled out by Illinois Statute. Specifically, Lerum refers to the Illinois Condominium Act, section 18.4h, which states that a condo association cannot enact or enforce rules and restrictions that infringe on First Amendment Rights.

In Boucher, The Appellate court ruled that a condo association cannot penalize a member for criticizing the board’s decisions, by labeling those complaints as ‘obnoxious behavior’ punishable by a fine.

Breach of fiduciary duty — board has duty to disclose. 

Section 19 of Illinois Condo Act requires a condo association to meet certain disclosure requirements. That includes the duty to produce requested official records upon written demand of an owner or owner’s representative.

In Boucher’s case, the condo board refused to produce a copy of minutes for his rule violation hearing. The association argued they did not have written minutes of the meeting conducted with Boucher.

But Lerum attended that hearing, and he knew it was recorded by video. Lerum argued that the video recording served as the minutes, and that the condo association was obligated to produce a copy. The condo board refused.

However, the Appellate court ruled that the condo board violated statute when it denied access to a recording of Boucher’s hearing in lieu of minutes. 

In other words, an Illinois condo owner is entitled to due process, which includes the right to review evidence and face one’s accusers. The board’s willful refusal to disclose amounts to a statutory breach of fiduciary duty, according to the Boucher Appellate Opinion.

Need for legal fee shifting in favor of condo owners

Lerum points out that the Boucher case once again highlights the need for a fairness provision in condo act. Specifically, state law must be amended to include a fee shifting clause in favor of a condo unit owner, if a unit owner can prove the association has breached its fiduciary duty. 

Current state law allows a condo association to recoup its legal fees when it prevails in a lawsuit against a unit owner. But a unit owner cannot fully recover their reasonable legal fees when a court rules in favor of the condo unit owner.

It’s a double standard that favors the interests of corporations (condo and homeowners associations) and the legal industry that serves them, rather than giving consumers (property owners) a level playing field in the state’s courts.

That prevents many unit owners from seeking the justice they deserve.

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