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IN THE CIRCUIT COURT OF COOK COUNTY ILLINOISCOUNTY DEPARTMENT
LAW DIVISION
UNGARETTI & HARRIS LLP, an Illinois )limited liability
partnership,Plaintiff,
V. : - - ~ . , _ ~ , , ::.RONALD J. GIDWITZ, an individual,
RALPHW. GIDWITZ, an individual, JAMES G.GIDWITZ, an individual,
PETER E.GIDWITZ, an individual, THOMAS R.GIDWITZ, an individual,
NANCY GIDWITZ,an individual, FAMILY TRUST CREATED
))))))))))))))))))))))))))))))
No. _ \'-
UNDER THE ALAN GIDWITZDECLARATION OF TRUST OF OCTOBER6, 1997,
BETSY R. GIDWITZ, an individual,THE BURNHAM COMPANIES, a
jointventure, BURNHAM MANAGEMENTCOMPANY, an illinois corporation,
NEWWEST, an Illinois limited partnership, NEWBLUFF, an Illinois
limited partnership,BURNHAM RESIDENTIAL VENTURE IL.P., an illinois
limited partnership;BURNHAM RESIDENTIAL VENTURE ICORP., an Illinois
corporation; BURNHAMRESIDENTIAL VENTURE VII L.P., anIllinois
limited partnership; and BURNHAMRESIDENTIAL VENTURE VII CORP.,
anIllinois corporation.
Defendants.
COMPLAINT
-:;
Plaintiff, UNGARETTI & HARRIS LLP ( U&H ), by and
through its counsel, PowerRogers & Smith PC, for its Complaint
against Defendants, RONALD J. GIDWITZ, anindividual, RALPH W.
GIDWITZ, an individual, JAMES G. GIDWITZ, an individual, PETER
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E. GIDWITZ, an individual, THOMAS R. GIDWITZ, an individual,
NANCY GIDWITZ, anindividual, FAMILY TRUST CREATED UNDER THE ALAN
GIDWITZ DECLARATION OFTRUST OF OCTOBER 6 1997 ( Alan Gidwitz Trust
), BETSY R. GIDWITZ, an individual,HERBERT J HALPERIN, an
individual, THE BURNHAM COMPANIES, a joint venture,BURNHAM
MANAGEMENT COMPANY, an Illinois corporation, NEW WEST, an
Illinoislimited partnership, NEW BLUFF, an Illinois limited
partnership, BURNHAM RESIDENTIALVENTURE I L.P . Illinois limited
partnership; BURNHAM RESIDENTIAL VENTURE ICORP., an Illinois
corporation; BURNHAM RESIDENTIAL VENTURE VII L.P . an
Illinoislimited partnership; and BURNHAM RESIDENTIAL VENTURE VII
CORP., an Illinoiscorporation (herein after referred to as The
Burnham Companies ), pleading hypothetically andin the alternative,
states as follows:
INTRODUCTION
1. This is an action by the law firm o Ungaretti & Harris to
recover fees and costsincurred by the firm in its representation o
certain members o the Gidwitz family and entitiesthey own and
control. U&H has represented the Gidwitz entities in a wide
array o mattersrelating to a low income housing development in
Joliet, Illinois known as Evergreen Terrace.
2. U&H is currently owed $6,365,915 in unpaid fees plus
interest. t seeks torecover for breach o contract, breach o
contract implied in fact, accounts stated and quantummeruit. The
firm also seeks damages for the Gidwitz family's unjust enrichment
and fraudulenttransfers.
THE P RTIES
3. Ungaretti & Harris LLP ( U &H ) is a limited
liability partnership organized under
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the laws o the State o Illinois. U H is a law firm with
principal offices in Chicago, Illinois.4 The Burnham Companies is a
joint venture with principal offices located m
Chicago, Illinois. At all relevant times the joint venture
partners in The Burnham Companieswere the Defendants Ronald J
Gidwitz, Ralph W Gidwitz, James G Gidwitz, Peter E Gidwitz,Thomas R
Gidwitz, Nancy Gidwitz, Alan Gidwitz (now deceased) and his
successor the AlanGidwitz Trust and Betsy R Gidwitz.
5 Ronald J Gidwitz is an individual resident o Chicago,
Illinois. Ronald J Gidwitzis the controlling force and joint
venture partner o The Burnham Companies. He is personallyliable for
the debts o the joint venture including the sums owed to U H.
6 Ralph W Gidwitz is an individual resident o Pacific Palisades,
California. RalphW Gidwitz is a joint venture partner o The Burnham
Companies. He is personally liable for thedebts o the joint venture
including the sums owed to U H.
7 James G Gidwitz is an individual resident o Chicago, Illinois.
James G Gidwitzis a joint venture partner o The Burnham Companies.
He is personally liable for the debts o thejoint venture including
the sums owned U H.
8 Peter E Gidwitz is an individual resident o Chicago, Illinois.
Peter E Gidwitz isa joint venture partner o The Burnham Companies.
He is personally liable for the debts o thejoint venture including
the sums owed to U H.
9 Thomas R Gidwitz is an individual resident o South Dartmouth,
Massachusetts.Thomas R Gidwitz is a joint venture partner o The
Burnham Companies. He is personallyliable for the debts o the joint
venture including the sums owed U H.
10 Nancy Gidwitz is an individual resident o Chicago, Illinois.
Nancy Gidwitz is a
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joint venture partner of The Burnham Companies. She is
personally liable for the debts of thejoint venture including the
sums owed U H.
11 Betsy Gidwitz is an individual resident of Chicago, Illinois.
Betsy Gidwitz is ajoint venture partner of The Burnham Companies.
She is personally liable for the debts of thejoint venture
including the sums owed U H.
12 Alan Gidwitz Trust is a trust created by Alan Gidwitz, who
was formerly anindividual resident of Illinois but is now deceased.
Before his decease, Alan Gidwitz was a jointventure partner of The
Burnham Companies. As his successor, the Trust is liable for the
debts ofthe joint venture including the sums owed U H. Joyce
Gidwitz is the Trustee of the AlanGidwitz Trust.
13 Herbert J Halperin is a resident of Boynton Beach, Florida
and was an executiveofficer of various Gidwitz entities serving at
the pleasure of the Gidwitz family.
14 New West and New Bluff are Illinois limited partnerships.
They hold the beneficialinterest in two Illinois land trusts that
hold title to the two Evergreen Terrace parcels at issue inthis
case. They are, in effect, shell entities that are not capable of
independent operations withoutthe control, direction and resources
of the Gidwitz family and The Burnham Companies jointventure.
15 Burnham Residential Venture I L.P. and Burnham Residential
Venture I Corp. arethe general partners of New West. They are owned
and controlled by Defendants RonaldGidwitz and Ralph Gidwitz.
Burnham Residential Venture VII L P and Burnham ResidentialVenture
VII Corp. are the general partners of ew Bluff. They are also owned
and controlled byDefendants Ronald Gidwitz and Ralph Gidwitz. Each
of these general partners are conduits for
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the exercise o the Gidwitz family's control ofEvergreen
Terrace.16 Burnham Management Company is a corporation organized
under the laws o the
State o Illinois. The principal place o business o Burnham
Management Company is inChicago, Illinois. t is wholly owned in
equal parts by the members o the Gidwitz familydescribed above. t
was and continues to be the management company for Evergreen
Terrace.
JURISDICTION17 Jurisdiction and venue are proper in Cook County;
the parties reside and/or do
business in Cook County; the acts giving rise to this action
occurred in Cook County.BACKGROUND FACTS
A The Operations o the Gidwitz Family18 The Defendant members o
the Gidwitz family described above ( Core Family
Members ) are wealthy descendants o Gerald and Joseph Gidwitz,
successful businessmen whobequeathed significant wealth to their
descendants.
19 The Gidwitz family coordinated the management and operation o
their wealthand business interests through a centralized family
business office with employees and advisorsto assist the Core
Family Members in making coordinated business decisions. n many
cases,Core Family Members jointly acquired interests or made
investments in the same businessenterprises.
20. One o the business strategies o the Gidwitz family has been
to invest in, acquire,own and operate real estate. This has been
accomplished through various related entities, manyo which include
the name Burnham as part o the entity name. One o the entities used
by theGidwitz family for its real estate investment activities is
The Burnham Companies.
21 The Burnham Companies is not organized as a corporation, a
limited partnership5
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or a limited liability company under the laws of the State of
Illinois or any other jurisdiction.Instead, it is organized and
functions as a joint venture comprised ofth Core Family
Members.
22 The Burnham Companies joint venture seeks to limit any
exposure for its actionsand those of the Core Family Members by
operating through a host of shell entities includingcorporations,
limited liability companies and limited partnerships.B The Gidwitz
Ownership o vergreen Terrace
23 The fee dispute at issue here arises out of work performed by
U&H in support ofthe ownership and operation of a low income
housing project commonly known as EvergreenTerrace. Evergreen
Terrace consists of two parcels which provide housing to
approximately 350very low income families. t relies heavily on
subsidized rents. Title to the two EvergreenTerrace parcels is held
by two Illinois land trusts, the beneficial owners of which are New
Westand New Bluff who, along with their general partners, are shell
entities. The Defendant BurnhamManagement Company provided property
management services to Evergreen Terrace.
24 Since the early 1980s, HUD has provided credit enhancement
and financialsubsidies to New West and New Bluff in order to
support Evergreen Terrace as rental housing forlow-income tenants.
HUD's credit enhancement consisted of mortgage insurance pursuant
to theNational Housing Act for construction and permanent mortgage
loans for Evergreen Terrace.HUD's financial subsidies were provided
as housing assistance payments to New West and NewBluff on behalf
of low-income persons and families residing at Evergreen Terrace
pursuant toSection 8 of the United States Housing Act of 1937.
Those housing assistance payments weremade pursuant to Housing
Assistance Payments Contracts ( HAP Contracts ) to which New
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West and New Bluff were parties.25 Although the beneficial
interest in the Evergreen Terrace properties was held
in the names o New West and New Bluff the properties were in
fact controlled by theCore Family Members. Thus the general
partners o New West are Burnham ResidentialVenture I Corp. and
Burnham Residential Venture I L P which Ronald and Ralph
Gidwitztogether own and control. Similarly the general partners o
New Bluff are BurnhamResidential Venture VII Corp. and Burnham
Residential Venture VII L.P. which Ronald andRalph Gidwitz also own
and control. Other Core Family Members own limited
partnershipinvestment interests in New West and New Bluff and/or
exercise their control and influencethrough their control o The
Burnham Management Company. All do business as part andparcel o the
joint venture known as The Burnham Companies.
26 The Gidwitz family sold limited partnership interests in New
West and NewBluff to third party investors as a tax shelter
investment. The limited partners investors agreedto make capital
contributions in exchange for a percentage o profits losses and
cashdistributions. The limited partners investors had no management
rights in New West or NewBluff Nor did they have any obligation to
make additional capital contributions.
27 The Core Family Members d/b/a The Burnham Companies agreed to
ownoperate manage and control a housing development known as
Evergreen Terrace.
28 The Core Family Members and The Burnham Companies agreed to
worktogether with a joint interest in the Evergreen Terrace low
income housing development bycontributing money property and other
resources for profit.
29 The Core Family Members and The Burnham Companies maintained
controlover the Evergreen Terrace low income housing
development.
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30. The Core Family Members agreed to and did share the profits
and losses in theEvergreen Terrace low income housing development.C
The Burnham Companies Engagement o U H
31. In order to establish a national program for preservation of
HUD-assistedlow- income multifamily housing, Congress enacted the
Multifamily Assisted HousingReform and Affordability Act, P A
105-65, as amended ( MAHRA ). MARRA gaveHUD authority to
restructure the HUD-insured mortgage debt, and restructure and
extendthe HAP Contracts, for HUD-assisted low-income multifamily
housing under a programreferred to as Mark-to-Market ( M2M ). In
exchange for the M2M debt restructuringand HAP Contract extension,
the property owner was required to agree to continue theproperty as
low-income housing for thirty years. The Core Family Members and
TheBurnham Companies elected to participate in the M2M program for
Evergreen Terrace.
32 The City of Joliet ( Joliet ) vigorously opposed the efforts
of New West and
New Bluff to proceed under the M2M program. Joliet claimed that
Evergreen Terrace wasfunctionally obsolete, a magnet for crime, a
blight on the Joliet community and shouldbe demolished. Joliet
opposed the efforts ofNew West and New Bluff to proceed under
theM2M program because the successful completion of the M2M process
would have requiredthat Evergreen Terrace remain low-income housing
for thirty additional years. Jolietdeclared The Burnham Companies
the Gidwitz family, and Ronald Gidwitz, inparticular, to be
slumlords and absentee owners concerned only with bleeding profits
fromthe property at the expense of the low income residents of
Evergreen Terrace and itssurrounding community.
33. The actions by Joliet to oppose the M2M restructuring for
EvergreenTerrace caused substantial delays in the M2M process. In
addition, Joliet threatened eminent
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domain proceedings as part of a very public campaign against
Evergreen Terrace.34. n response, the Core Family Members and The
Burnham Companies
concluded that they needed legal counsel to mount an effective
challenge to Joliet's oppositionto Evergreen Terrace. n early 2005,
The Burnham Companies engaged U&H to opposeJoliet's efforts
including assisting with the M2M process and litigating claims
against theCity. The Burnham Companies joint venture and U&H
entered into an engagement letterdated March 17, 2005. The
engagement letter was executed by Herbert J. Halperin as
presidentof he Burnham Companies.
35. The U&H engagement letter (attached as Exhibit A)
included thefollowing relevant provisions:(a) The Burnham Companies
engaged U&H to represent The BurnhamCompanies in Fair Housing
Act and civil rights litigation against Jolietand certain of its
officials arising from their efforts to deny affordablehousing to
the tenants of, and prevent HUD from closing on therefinancing of,
[Evergreen Terrace].(b) U&H shall receive [U&H's] ordinary
hourly rates for lawyers and other
time chargers .. .. Our rates are, of course, reset from time to
time,generally in October of each year .. .. We request that our
statements bepaid within thirty days of receipt.(c) The Statement
of Policy on Fees, Costs and Charges attached to theU H Engagement
Letter provides that [ f]ull payment is due uponreceipt of the
statement.
36. U&H actively (and successfully) assisted The Burnham
Companies with theEvergreen Terrace M2M restructuring.
Additionally, in March 2005, U&H filed a lawsuitagainst Joliet
in United States District Court for the Northern District of
Illinois as New Westv City o Joliet et al. Case No. 05 C 1743 (the
Fair Housing Lawsuit ). New Bluff laterjoined with New West as a
co-plaintiff in the Fair Housing Lawsuit. New West and New
Bluffalleged, among other things, that the actions by Joliet and
certain of its public officials
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violated the Fair Housing Act and civil rights laws.37 After the
initial filing o the Fair Housing Lawsuit in March 2005,
multiple
additional lawsuits were filed with respect to Evergreen
Terrace.(a) Joliet filed a lawsuit in Circuit Court o Will County,
Illinois as City oJoliet
v. Mid-City National Bank o Chicago as Successor Trustee et al.
CaseNo. 05 ED 39 pursuant to which Joliet seeks to acquire
EvergreenTerrace by exercise o powers o eminent domain. The eminent
domainlawsuit was removed to federal court and is now pending in
United StatesDistrict Court for the Northern District o Illinois as
Case No. 05 C 6746.(b) Joliet filed a lawsuit in the Circuit Court
o Will County, Illinois as City
o Joliet v. Mid-City National Bank o Chicago as Successor
TrusteeunderTrust Agreement dated May 9 1980 and known as Trust No.
1252 CaseNo. 2005 OV 4533, pursuant to which Joliet alleged that
EvergreenTerrace I was in violation o Joliet s building code.
(c) Joliet filed a lawsuit in the Circuit Court o Will County,
Illinois as Cityo Joliet v. Mid-City National Bank et al. Case No.
05 CH 1800,pursuant to which Joliet sought repair or demolition o
Evergreen TerraceI
(d) Joliet filed a lawsuit in the Circuit Court o Will County,
Illinois as Cityo Joliet v. Mid-City National Bank o Chicago as
Successor Trusteeet al. Case No. 2005 OV 5695, pursuant to which
Joliet alleged thatEvergreen Terrace II was in violation o Joliet s
building code.
(e) Joliet filed a lawsuit in the Circuit Court o Will County,
Illinois as Cityo Joliet v. New West et al. Case No 05 L 246,
seeking payments fromNew West and Burnham Management Company for
amounts allegedlyowed to it for certain security services allegedly
provided by Joliet forEvergreen Terrace.
(t) Certain tenants o Evergreen Terrace filed a lawsuit in the
United StatesDistrict Court for the Northern District o Illinois as
Davis et al. v. Cityo Joliet et al. Case No 07 C 07214, alleging
that Joliet was in violationo the Fair Housing Act and federal
civil rights laws because o its actionsin relation to Evergreen
Terrace.
(g) The United States filed a lawsuit in the United States
District Court forthe Northern District o Illinois as United States
v. City o Joliet CaseNo. 11 C 5305, pursuant to which the United
States alleged that Jolietwas in violation o the Fair Housing Act
and federal civil rights laws10
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because of its actions in relation to Evergreen Terrace.38. n
addition, in approximately 2010 HUD suspended federal grants to
Joliet
under HUD's Community Development Block Grant and HOME programs
because ofJoliet's actions in relation to Evergreen Terrace.
39. As a result of the proliferation oflawsuits relating to
Evergreen Terrace as wellas controversies relating to HUD's
suspension of federal grants to Joliet, the scope ofU H's
engagement was expanded by The Burnham Companies to include
therepresentation of the interests ofThe Burnham Companies and its
related persons and entitiesin all of the foregoinglawsuits and
federal grant program matters. This was an array ofwork that
required asubstantial investment of time and personnel by U H.D.
Propping up the Shells: Gidwjtz nsider Loans to New West and New
Bluff
40. When New West and New Bluff filed the Fair Housing Lawsuit
against Jolietin March 2005, The Burnham Companies and the Core
Family Members knew that NewWest and New Bluff had no funds of
their own to pay the legal fees and expenses anticipatedto be
incurred for the Fair Housing Lawsuit. Further, The Burnham
Companies and the CoreFamily Members knew that the limited
partners/investors had no obligation to make anyadditional capital
contributions to pay those anticipated legal fees and expenses.
41. In addition, once the closings of the M2M restructuring
transactions werecompleted, New West and New Bluff were required by
HUD to advance substantial fundsfor M2M transaction costs and
project rehabilitation. At the time of the closing of theM2M
transactions in November 2006, New West and New Bluff did not have
funds topay such assessments.
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42. In order to provide New West and New Bluff with funds to pay
legal feesand expenses relating to the Evergreen Terrace lawsuits,
and to pay rehabilitation andother costs related to the M2M
transactions for Evergreen Terrace, the Core Family Members(joint
venture partners in The Burnham Companies) extended certain insider
interest-bearingloans ( Gidwitz Insider Loans ) to New West and New
Bluff, as follows:
(a) Each of the eight Core Family Members individually agreed to
advancefunds in equal shares (one-eighth each) as needed to provide
the requiredfunds to New West and New Bluff.(b) Ralph Gidwitz (one
of the Core Family Members) acted as nominee forthe other seven
Core Family Members with respect to such funding.(c) Those other
seven Core Family Members advanced their respective fundsto Ralph
Gidwitz as nominee, and Ralph Gidwitz in tur advanced thosefunds,
plus the funds representing his own one-eighth share, as
interestbearing loans to the general partners of New West and New
Bluff(Burnham Residential Venture I L.P. and Burnham Residential
Venture VIIL.P., respectively).(d) Those general partners in tur
advanced such loan proceeds as interestbearing loans to New West
and New Bluff, respectively.(e) New West and New Bluff used the
proceeds of those loans to pay legalfees and expenses, M2M
transaction costs, Evergreen Terracerehabilitation costs and other
costs, as needed.(f) The loan and repayment terms that applied to
Ralph Gidwitz's loans tothe general partners (as to which he acted
as nominee for the other sevenCore Family Members) were identical
to the loan and repayment terms thatapplied to the general
partners' loans to New West and New Bluff.(g) As such, the eight
Core Family Members provided all such loan funds to
New West and New Bluff, with Ralph Gidwitz and the general
partnersof New West and New Bluff acting solely as pass-through
entities withrespect to such loans from the Core Family Members to
ew West and NewBluff.
43. In addition to the foregoing loans, Burnham Management
Company madeinterest-bearing loans and credits to New West and New
Bluff for operating deficits incurred
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at Evergreen Terrace.44. As of November 2006, the total amount
of principal and interest on the
Gidwitz Insider Loans made to New West and New Bluff was in
excess of 7.5 million.45. The Gidwitz Insider Loans were adjusted
from time to time as a result of
a) additional advances made by the Core Family Members, (b)
accruals of interest on theoutstanding principal balances, and c)
payments of principal and interest made out ofoperational proceeds.
The total amount of principal and interest due on the Gidwitz
InsiderLoans as of September 28,2012 was 10.08 million.
46. The Core Family Members authorized substantial payments to
themselves ofprincipal and interest as New West and New Bluff
continued to make periodic paymentsof principal and interest out of
Evergreen Terrace proceeds to reduce Gidwitz Insider Loansat the
expense ofU&H.E Management Fees Paid to Burnham Management
Company
47. Additionally, annual management fees were authorized by
members ofthCore Family Members and The Burnham Companies to be
paid to Burnham ManagementCompany. The aggregate management fee
paid to Burnham Management Company and itsinsider owners during the
five years preceding the filing of this Complaint was
approximately
1,355,000.00.F The Burnham Companies Refuse to Pay U H
48. From 2005 through 2011, The Burnham Companies paid, or
caused otherentities controlled by the Core Family Members to pay,
all or substantially all of U&H'sinvoices. Payments were
arranged to bring U&H's invoices substantially current by
theend of each of U&H's fiscal years (which end on September
30) from 2005 to 2011. t was
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understood by all that The Burnham Companies joint venture and
the Core Family Memberswere responsible for such payments. This was
consistent with the engagement letter executedby the president o
The Burnham Companies and the parties' practice.
49. The most critical (and urgent) litigation for which U H was
retained wasthe eminent domain lawsuit brought by Joliet. Although
the eminent domain proceeding wasconsolidated with FHA lawsuits,
the court set the eminent domain case for trial separately.But
while the eminent domain case was to be tried separately, all o the
cases pending in theNorthern District o Illinois were consolidated
for discovery purposes and the court imposedan expediteddiscovery
schedule for all matters. Thus, as the parties prepared for a
September, 2012 trialin the eminent domain lawsuit, more than 50
depositions were taken and defended,dozens o witnesses interviewed
and prepared for trial; expert reports were drafted anddefended;
hundreds o exhibits were exchanged and evaluated. Dozens o
pre-trial motions
were argued. This was all done in a very compressed time
frame.50. On the eve o trial, on September 24, 2012, The Burnham
Companies paid,
or caused their affiliates to pay, a portion o the amounts
billed by U&H for legal servicesbut left unpaid approximately 1
million o legal fees and expenses. This payment wouldbe the last
made to U H by the Core Family Members or The Burnham Companies or
itsaffiliates with respect to Evergreen Terrace matters.
51. Following the September 24, 2012 payment, The Burnham
Companies andthe Core Family Members led U H to believe that not
only would the unpaid 1 millionreceivable be paid within the near
future, but that the U&H would be paid on a going forwardbasis.
On the eve o trial, no representative o the Core Family Members or
The Burnham
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Companies ever advised U H that its fees would not be paid
although it appears that TheBurnham Companies and the Core Family
Members never intended to pay U H's fees. neffect, U H was
wrongfully induced to undertake an extraordinarily complex trial
from whichit would be unable to extract itself unilaterally without
violating its ethical responsibilities.
52. The trial in the eminent domain lawsuit commenced on
September 27, 2012.t was, and continues to be, an extraordinary
affair: (a) the taking o evidence consumed 15
months and roughly 100 days o trial; (b) dozens o witnesses were
examined and crossexamined - some were on the stand for a week or
more; (c) expert witnesses were presented,crossed and argued over
extensively; (d) as the trial has progressed, an extensive
motionpractice continued; and (e) complex evidentiary disputes were
briefed and argued.
53. Representatives o The Burnham Companies and the Core Family
Memberswere in attendance at the trial for all but a few o the 100
days o trial work. Theserepresentatives have been highly
complimentary o U H and its trial team for the work they
performed. These representatives were also provided with daily
transcripts and the numerousexhibits submitted by all sides for the
court's review and consideration.
54. And yet, no fees for this extraordinary effort have been
forthcoming for any othe accrued amounts. Nothing has been paid for
the entire trial effort; U H has been paidnothing since September
2012.
55. During the course o the trial, no Core Family Member or
representative oThe Burnham Companies directed that U H cease its
efforts; indeed, representatives o theGidwitz family continued to
participate in strategic discussions and trial evaluations with
theexpectation that U H would continue to provide representation at
trial.
56. When it became evident that payment was not forthcoming, the
parties met
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on several occasions to attempt to resolve the impasse. This
effort did not succeed. OnSeptember 24, 2013 Ronald Gidwitz on
behalf o The Burnham Companies and the CoreFamily Members advised
U&H that: Please be advised that as o this time we decline
tomake any additional loans to New West and New Bluff o pay accrued
or anticipated attorneys'fees for the litigation. The September 24,
2013 letter is attached as Exhibit B
57. Consistent with its ethical obligations, U&H continued
to defend EvergreenTerrace at trial. But once the taking o evidence
was complete, U&H moved to withdrawover the objection o the
Core Family Members and The Burnham Companies.
58. On January 24,2014, Judge Norgle granted the U&H Motion
to Withdraw.
59. As o February 1, 2014, the total amount o outstanding legal
fees owed bythe Core Family Members and The Burnham Companies to
U&H was approximately$6,365,915.
COUNT I reach o Contract60. U&H realleges and incorporates
herein by reference Paragraph Nos. 1-59.
61. The U&H engagement letter constitutes a contract between
U&H and TheBurnham Companies, on its own behalf and on behalf o
its affiliates and partners withinterests in Evergreen Terrace
including Core Family Members. The contract provided forthe
rendering o legal services by U H in exchange for the payment o
fees by The BurnhamCompanies and Core Family Members.
62. U H has performed all o he obligations required o t under
the contract whichThe Burnham Companies accepted without protest or
objection.
63. The Defendants in this action, however, have breached the
contract by failingto pay, without justification, approximately
$6,365,915 in outstanding legal fees and
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expenses billed byU H on or before February 1 2014.64. As a
direct and proximate result of the Defendants' breach of contract,
U&H
has suffered damages of 6,365,915 in unpaid legal fees and
expenses as ofFebruary 1 2014.WHEREFORE, U&H prays for entry of
judgment in its favor and against The
Burnham Companies, the Core Family Members and all other
Defendants for compensatorydamages of6,365,915 plus prejudgment
interest at the rate permitted by Illinois law.
COUNT I I Breach o Contract Implied n Fact65. U&H realleges
and incorporates by reference herein Paragraph Nos. 1-59.66.
Throughout the time in question, the Defendant Core Family Members
and
The Burnham Companies repeatedly: (a) negotiated and executed
the engagement letter; (b)accepted U&H's representation of
their interests without objection; (c) assumedresponsibility for
the payment of invoices; and (d) directed and supervised the work
thatU&H performed- including the year-long trial for which
U&H has not been paid.
67. The conduct of the Core Family Members and The Burnham
Companiescreated a contract implied in fact. U&H has performed
all that was required of it under thiscontract. The Defendants have
breached this contract by their failure to pay 6,365,915 in feesand
costs.
WHEREFORE, U&H requests that a judgment be entered against
the Core FamilyMembers and The Burnham Companies and related
entities for 6,365,915 plusprejudgment interest at the rate
permitted by Illinois law.
COUNT I I I ccountStated68. U&H realleges and incorporates
by reference herein Paragraph Nos 1-59 and
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66.
69. From time to time, the Defendants including the Core Family
Members,The Burnham Companies and New West and New Bluff were
provided with invoices thatcovered the entire 6,365,915 in fees and
costs now due and owing.
70. Although Ronald Gidwitz on behalf of Core Family Members and
TheBurnham Companies now takes the position that the Defendants
will not pay, no specificinvoice was ever objected to and no
specific amount ever challenged. Moreover, no specificreason for
not paying has ever been provided to U&H.
71. The Core Family Members, The Burnham Companies or any of its
relatedentities were aware of the amounts being incurred or the
volume of tasks the representationrequired. Representatives of the
Core Family Members, The Burnham Companies andNew West and New
Bluff were: (a) present in court on a regular basis for more than
ayear; (b) participated in strategic and tactical discussions with
U&H; c) reviewed trialexhibits; and (d) helped prepare
witnesses both for trial and for depositions. The Defendantsand
their representatives had a full and complete opportunity to review
U&H's invoices andyet did not object or question the accuracy
of the invoices.
72. As an account stated, the invoiced amounts are now due and
owing.
WHEREFORE, U&H requests that this Court enter a judgment for
6,365,915 asan account stated against the Core Family Members and
The Burnham Companies plusprejudgment interest at the rate
permitted by Illinois law.
OVNT IV Quantum Meruit73. U&H realleges and incorporates
herein by reference Paragraph Nos. 1-59, 66,
and 70 71.18
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74. The Core Family Members, The Burnham Companies and New West
andNew Bluff have been enriched by U H providing legal services to
or for the benefit of theDefendants. They have been provided
significant value as a result ofU H's services.
75. The enrichment of the Defendants has occurred at the expense
of U H;U H provided extensive legal services without receiving
payment.
76. The Defendants, who received invoices from U H without
objection, knewthat the services performed by U H were not intended
to be gratuitous.
WHEREFORE, U H prays for entry of judgment in its favor and
against theD ~ f e n d a n t s for restitution ofthe value oflegal
services rendered by U H for which paymenthas not been made, plus
prejudgment interest at the rate permitted by Illinois law.
OUNT Unjust Enrichment77. U H realleges and incorporates herein
by reference Paragraph Nos. 1-76.
78. By virtue of the attorney-client relationship, each of the
parties - the CoreFamily Members, The Burnham Companies, New West,
New Bluff and U H - owedone another fiduciary duties, including the
fiduciary duty of candor and honest dealing.
79. The Core Family Members and The Burnham Companies breached
thosefiduciary duties by inducing U H to undertake a massive effort
to try the eminentdomain proceeding when the Defendants had no
intention ofpaying U H's fees.
80. The Defendants have been unjustly enriched. As a result of
their deceptions,they have been provided with sophisticated trial
counsel for over a year without paying for it.
81. Equity and good conscience require that Defendants make
restitution to U Hfor the value of the legal services rendered by U
H for which payment has not been made.
WHEREFORE, U H prays for entry of judgment in its favor and
against the19
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Defendants, for damages equal to the benefit conferred on the
Defendants y U&H's legalservices for which the Defendants have
not paid, plus prejudgment interest at the ratepermitted y Illinois
law.
OUNT V Fraudulent Transfer82. U&H realleges and incorporates
y reference herein Paragraph Nos. 1-59.
83. U&H's right to payment of its fees and costs for servtce
related toEvergreen Terrace is a claim under the Illinois
Fraudulent Transfer Act.
84. Each of the Defendants is an insider and controlling person
with respect toNew West, New Bluff, Burnham Management Company and
The Burnham Companies.
85. New West and New Bluff and their general partners are
insolvent underSections 3(a) and 3(b) ofthe Fraudulent Transfer
Act.
86. Payments made by New West and New Bluff in payment or
repayment ofGidwitz Insider Loans were transfers under Section 2 1)
of the Fraudulent Transfer Act.These transfers included: (i)
payments to the Core Family Members in repayment of theiradvances
for the Gidwitz Insider Loans; and (ii) payments to Burnham
ManagementCompany to repay sums advanced for operating deficits at
Evergreen Terrace.
87. Payments y New West and New Bluff for management fees to
BurnhamManagement Company were also ''transfers under Section 2 1)
of he Fraudulent Transfer Act.
88. Transfers of funds made by New West and New Bluff for
payment of theGidwitz Insider Loans were fraudulent as to U&H.
They were made with actual intent tohinder, delay or defraud
U&H under Section 5(a)(l) and (b) of the Fraudulent Transfer
Actbecause:
(a) The transfers were made to insiders consisting of the Core
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Members and Burnham Management Company;(b) New West, New Bluff
and their respective general partners were insolventat the time the
transfers were made in paymento the Gidwitz Insider Loans;(c) All o
he Defendants in this action had actual knowledge that the
paymentsto insiders would leave New West and New Bluff with
insufficient fundsto pay the attorneys' fees and expenses payable
to U H;(d) All o the Defendants in this action had actual knowledge
thatadditional attorneys' fees and expenses would be incurred in
connectionwith the eminent domain lawsuit and other matters
relating to EvergreenTerrace, and they failed to establish any
reasonable reserves for payment
o such anticipated attorneys' fees and expenses.89 Transfers o
funds made by New West and New Bluff for payment o the
Gidwitz Insider Loans were fraudulent as to U H under Section
6(b) o the FraudulentTransfer Act because:
(a) U H's claims against New West, New Bluff and their
respectivegeneral partners arose before the transfers were made by
New West, NewBluff and their respective general partners;(b) The
transfers were made to insiders consisting o the Core Family
Members and Burnham Management Company;(c) The transfers were
made to the insiders on account o an antecedentdebt consisting o
the Gidwitz Insider Loans;(d) New West, New Bluff and their
respective general partners were insolventat the time the transfers
were made in payment o he Gidwitz Insider Loans;
and(e) All o the Defendants had reasonable cause to believe that
the debtorswere insolvent at the time those transfers were
made.
90. Transfers o funds made by New West and New Bluff to
BurnhamManagement Company in payment o management fees were
fraudulent as to U H underSection 6(b) o the Fraudulent Transfer
Act because:
(a) U H's claims against New West, New Bluff and their
respectivegeneral partners arose before the transfers were made by
New West andNew Bluff to Burnham Management Company on account o
property21
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78.
management fees;(b) The transfers were made to Burnham
Management Company, which is
an insider;
(c) The transfers were made to Burnham Management Company on
account ofan antecedent debt consisting of its rights to receive
property managementfees;
(d) New West, New luff and their respective general partners
were insolventat the time the transfers were made in payment of the
management fees; and
(e) Burnham Management Company had reasonable cause to believe
thatNew West and New luff were insolvent at the time those
managementfees were paid.
WHEREFORE, U H prays for entry of judgment in its favor and
against theDefendants as follows:
(a) For avoidance of all transfers made by New West and New luff
forpayment of Gidwitz Insider Loans, including those payments to
the CoreFamily Members and to Burnham Management Company;
(b) For avoidance of all transfers made by New West and New luff
toBurnham Management Company in payment of property management
feeswith respect to Evergreen Terrace;
(c) For attachment against the funds and assets of the
Defendants equal tothe amount of the transfers made to them that
are fraudulent as to U Hunder the Fraudulent Transfer Act;
(d) For preliminary and permanent InJUnctions against the
Defendantsagainst further disposition by the Defendants of the
assets transferred byor to them that are fraudulent as to U H under
the Fraudulent TransferAct; and
(e) For all compensatory damages, punitive damages, attorneys'
fees, costsand prejudgment interest at the rate permitted by
Illinois law.COUNT YII - Equitable Accountin l
91. U H realleges and incorporates by reference herein
Paragraphs Nos. 1-59, 73-
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92. The Core Family Members and The Burnham Companies have used
shellentities to avoid obligations and to obscure their ownership
interests. Moreover, RonaldGidwitz on behalf of the Core Family
Members and The Burnham Companies hasacknowledged that New West and
New luff and their general partners are not able to pay theinvoices
at issue.
93. n order to ensure a proper recovery of sums legitimately
owed, U&H seeksan accounting to determine which entities now
hold which recoverable assets and thenature of transfers between
and among Core Family Members, The Burnham Companiesand the other
Defendants.
94. As a matter of equity, it is proper for this Court to grant
such provisional relief.WHEREFORE, U&H prays for the entry of
an Order from this Court directing that anaccounting be completed
at Defendants' expense for each of the Defendant entities.
WHEREFORE, U&H prays for entry of judgment in its favor and
against HerbertJ Halperin for 6,365,915 in unpaid fees and costs
plus prejudgment interest at the ratepermitted by Illinois law.
Dated: 2014
Joseph A. Power, Jr.Power Rogers & Smith P.C.70 West Madison
Street, 55th FloorChicago, Illinois 60602312/236-9381Atty. No.
31444
POWER ROGERS & SMITH PC
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IN THE CIRCUIT COURT OF COOK COUNTY ILLINOISCOUNTY DEPARTMENT,
LAW DIVISION
UNGARETTI HARRIS, LLP, an Illinois LimitedLiability
Partnership,Plaintiff,vs.RONALD J. GIDWITZ, an individual, RALPH
W.GIDWITZ, an individual, JAMES G. GIDWITZ, anindividual, PETER E.
GIDWITZ, an individual,THOMAS R. GIDWITZ, an individual,
NANCYGIDWITZ, an individual, FAMILY TRUST CREATEDUNDER THE ALAN
GIDWITZ DECLARATION OFTRUST OF OCTOBER 6, 1997, BETSY R. GIDWITZ,an
individual, THE BURNHAM COMPANIES, ajointventure, BURNHAM
MANAGEMENT COMPANY, anIllinois Corporation, NEW WEST, an Illinois
LimitedPartnership, NEW BLUFF an Illinois LimitedPartnership,
BURNHAM RESIDENTIAL VENTURE IL.P., an Illinois Limited Partnership;
BURNHAMRESIDENTIAL VENTURE I CORP., an IllinoisCorporation; BURNHAM
RESIDENTIAL VENTUREVII L.P., an Illinois Limited Partnership;
andBURNHAM RESIDENTIAL VENTURE VII CORP.,an Illinois
Corporation.Defendant.
No.
JURY DEMANDED
AFFIDAVIT
NOW comes Affiant, JOSEPH A. POWER, JR., and being first duly
sworn on oath, deposes and states:1. That he is one ofthe attorneys
representing UNGARETTI HARRIS, LLP.2. That he is familiar with the
facts in the above cause.3. That he has reviewed the available
information to the money damages in the above matter.4. That based
upon information and belief, the total money damages sought in the
above cause
are worth in excess of Fifty Thousand Dollars ( 50,000.00).
POWER ROGERS SMITH PCAttorneys for Plaintiff70 W. Madison
Street, 551h FloorChicago, IL 60602312-236-9381Atty. No. 31444