On September 29, 2021, the Illinois Supreme Court denied Plaintiffs’ Petition for Leave to Appeal. Previously, the Illinois Appellate Court affirmed the Circuit Court of Cook County’s decision granting summary judgment for the Defendant on all claims in a highly contested class action lawsuit. Plaintiffs were seeking damages in excess of $25 Million against a Chicagoland Senior Living Community for alleged fraud, breach of contract, and breach of the Illinois Security Deposit Interest Act and the Security Deposit Return Act.
In a case of first impression in Illinois, Plaintiffs claimed that a landlord tenant relationship existed between the Senior Living Community and its residents, and that residential entrance fees paid by the class were unlawfully withheld from former unit owners. Plaintiffs argued that the entrance fees should have been considered security deposits under Illinois law to trigger various damages penalties. Additionally, Plaintiffs contended that the Residency and Services Agreement signed by residents should be considered a lease to trigger liability under the Interest and Return Acts. Such findings would have had a quite devastating ripple effect for Senior Living Communities across the state and county.
The O’Hagan Meyer defense team of Kevin O’Hagan, Jamie Filipovic, Elizabeth Bartolucci, and Shane Bradwell successfully countered Plaintiffs’ arguments and maintained that Defendant strictly adhered to the terms of its disputed contracts with residents, and that the relationship between the Senior Living Community and the Plaintiffs could not be considered a typical leasor-leasee arrangement because of the distinct services that Defendant provided to its residents and the ability of class members to change residential units or leave the Community with short notice. Both the Circuit Court and Appellate Court sided with the Defendant’s position.
In its opinion, the Appellate Court determined that despite having “certain aspects normally associated with leases”, the Agreement was not a lease because: (1) it allowed residents to change units on request; (2) the term of the residency was indefinite; (3) there was no rental price specified; (4) the Agreement required a monthly services fee that covered personal care and assisted living services; and (5) a resident could terminate the Agreement at any time with notice. The Appellate Court also noted that the Agreement was a continuing care residency agreement, and the Defendant more closely resembled a life care facility based on the many services it provided residents.
Consequently, the Appellate Court ruled that the Agreement created much more than a simple landlord-tenant relationship between the parties, and therefore, it was not a lease. Furthermore, the Appellate Court rejected Plaintiffs’ argument that the entrance fee was a security deposit and highlighted that the fee was not held to secure the payment of rent or as compensation for damage to property. Instead, per the Agreement, the entrance fee was held to cover the resident’s continued residency and the various services provided by Defendant during such occupancy, regardless of whether the resident was able to pay the monthly services fee. Lastly, the Appellate Court affirmed the trial court’s decision that there was no evidence of fraud or breach of contract.
The Appellate Court’s opinion can be read here.