Reversing the decisions of the Circuit and Appellate courts, the Illinois Supreme Court entered an opinion holding that section 22.1 of the Illinois Condominium Act does not imply a private right of action in favor of condominium-unit sellers.

In its Opinion (Channon v. Westward Management, Inc., 2022 IL 128040), the Supreme Court explained that both lower courts erred when they affirmatively answered the question of whether such private right of action was implied in section 22.1.

Section 22.1 of the Condo Act (765 ILCS 605/22.1) requires condo-unit sellers to obtain specific disclosure documents from the Association or its agent prior to a sale and to provide those documents to potential buyers upon request. The Association, in turn, is entitled to reimbursement for the Association’s “direct out-of-pocket” costs associated with the provision of the documents.

Background

The plaintiffs alleged that in the course of selling their condo units, the defendant management company (Westward) charged them $245, a purportedly unreasonable and excessive amount. Westward moved to dismiss, arguing that section 22.1 does not imply a private right of action for condo-unit sellers. The Circuit Court rejected that argument and certified the issue for appeal.

The First District affirmed, holding that while section 22.1’s “primary purpose” may be to protect condo buyers, the “plain language” of section 22.1 also benefits sellers and, thus, section 22.1 did imply a private right of action in favor of sellers. 2021 IL App (1st) 210176, ¶21.

Indeed, the First District held that the Channon plaintiffs satisfied the four-part test used to determine whether a private right of action is implied in a statute, as set forth in Metzger v. DaRosa. 209 Ill. 2d 30, 34 (2004).

After the First District’s December 7, 2021, opinion, a litany of similar class-action lawsuits were filed on behalf of condo-unit sellers, using Channon as a blueprint. Many of those cases, however, were stayed after the Supreme Court granted Westward’s petition for leave to appeal on March 30, 2022.

Analysis

The Supreme Court rejected the First District’s application of the Metzger factors, with the first factor (i.e., whether the plaintiffs are members of the class the statute was intended to benefit) proving dispositive.

The Justices explained that they agreed with the First District’s concession that section 22.1’s “primary purpose” is to protect buyers, but that the lower court failed to appreciate the “judicial gloss” the Supreme Court has long applied to the first Metzger factor: who does the statute primarily seek to benefit?

To answer that question, the Court drew from prior case law and section 22.1’s legislative history, and explained that section 22.1 “is primarily to benefit potential unit buyers,” not sellers. Id. at ¶27 (emphasis added). Accordingly, the Supreme Court reversed and remanded for further proceedings.

As noted, the First District’s 2021 opinion opened the gates to condo-unit seller class actions filed under section 22.1. Now, however, with the Supreme Court having spoken on the issue, defense counsel in those cases will likely seek dismissal based on this Opinion.