Kenneth Michaels, Jr., Bauch & Michaels, LLC, Chicago
312-588-5000 | Email Kenneth Michaels, Jr.
Appellate Court Affirmed Dismissal of Developer’s Claims Related to Acts of Association’s Design Review Committee
The Second District recently affirmed dismissal of a developer’s claims allegedly arising from the joint actions of a competing developer and an association’s design review committee. Silverthorne Development Co. v. Sycamore Creek Homeowners Ass’n, 2025 IL App (2d) 240703-U.
Facts
In a case that was originally filed in 2018, the plaintiff developer that built custom homes and owned lots in a development administered by the defendant homeowners’ association sued a competing developer, the HOA, and the sole decision-maker (Hall) of the HOA’s design review committee who also owned the competing developer. 2025 IL App (2d) 240703-U at ¶¶2, 7. The plaintiff’s claims on appeal arose from allegations focused on the design review committee’s adoption of a rule prohibiting installing vinyl windows in the HOA’s properties. 2025 IL App (2d) 240703-U at ¶2.
The competing developer used clad or fiberglass frame windows. 2025 IL App (2d) 240703-U at ¶9. (Clad windows are wood framed windows with a protective material such as fiberglass on the exterior parts of the window frame.) The plaintiff alleged that its vinyl frame windows were cheaper and more energy efficient than the clad or fiberglass framed windows used by Hall’s company. Id. The plaintiff pleaded that there was greater demand for his homes with vinyl windows. He also pleaded that the defendants intentionally and maliciously interfered with the plaintiff’s anticipated building projects and that Hall’s actions were not in accordance with the HOA’s bylaws. The plaintiff did not identify any particular bylaw being breached and did not attach a copy of the bylaws to his complaints. Id. The plaintiff also alleged that he lost several potential clients because he could not obtain approval from the HOA for designs using vinyl windows. 2025 IL App (2d) 240703-U at ¶10.
This appeal focused on three causes of action that were presented and dismissed at different times in the plaintiff’s original complaint and seven amended complaints. 2025 IL App (2d) 240703-U at ¶¶2 – 6. When causes of action were dismissed, they were pleaded again in subsequent complaints to preserve the claims for appeal. 2025 IL App (2d) 240703-U at ¶4.
Analysis
All three counts considered on appeal were dismissed pursuant to §2-615 of the Code of Civil Procedure, 735 ILCS 5/2-615, for failure to plead sufficient facts to plead a cause of action on which relief could be granted. 2025 IL App (2d) 240703-U at ¶16. The Illinois Supreme Court’s test under §2-615 is that no cause of action should be dismissed “unless it is clearly apparent that no set of facts can be proved that would entitle the plaintiff to recovery.” Id., quoting Hulsh v. Hulsh, 2025 IL 130931, ¶13. Review of a 2-615 dismissal is de novo.
Count II of the complaints alleged tortious interference with business expectancy (also referred to as intentional interference with prospective economic advantage). 2025 IL App (2d) 240703-U at ¶17. The elements of the action are “(1) a reasonable expectancy of entering into a valid business relationship; (2) the defendant’s knowledge of the expectancy; (3) the defendant’s intentional and unjustified interference that prevents the realization of the business expectancy; and (4) damages resulting from the interference.” Id., quoting State Auto Property & Casualty Insurance Co. v. Distinctive Foods, LLC, 2024 IL App (1st) 221396, ¶83, 254 N.E.3d 891, 481 Ill.Dec. 302.
The appellate court affirmed the dismissal of the plaintiff’s action for tortious interference because the claim did not plead actions taken by the defendants directed at any third parties. “It is well established that ‘Illinois courts require that a tortious interference claim be supported by allegations that the defendant acted toward a third party.’” 2025 IL App (2d) 240703-U at ¶19, quoting Du Page Aviation Corp. v. Du Page Airport Authority, 229 Ill.App.3d 793, 594 N.E.2d 1334, 1341, 171 Ill.Dec. 814 (2d Dist. 1992) (holding there was no showing of act directed toward third party when airport authority refused to enter into lease with plaintiff; plaintiff’s argument that its relationship with its customers was interfered with by refusal was not sufficient). The plaintiff did not plead that either the HOA or Hall had engaged in any act directed to a third party. Although the court does not discuss how this test arose from the prima faciecase for tortious interference with prospective economic advantage, it would presumably be tied to the third element, namely, the defendant’s intentional and unjustified interference that prevents the realization of the business expectancy.
The appellate court examined some other tortious interference cases to support its analysis. In particular, it relied on Boffa Surgical Group LLC v. Managed Healthcare Associates Ltd., 2015 IL App (1st) 142984, 47 N.E.3d 569, 399 Ill.Dec. 887, in which a physicians’ group argued tortious interference when it was excluded from a managed-care group at a hospital where the physicians had staff privileges, thereby losing referrals of future patients. The appellate court in Boffa held that there was not a direct action against a third party giving rise to a tortious interference claim. 2025 IL App (2d) 240703-U at ¶20. In the instant case, the plaintiff focused on pleading that there was “impact” on third parties. The plaintiff argued that acts directed against third parties and having an impact on third parties are essentially the same. The appellate court rejected this contention. 2025 IL App (2d) 240703-U at ¶24. It relied on Boffa in which the court stated: “It is not enough for the defendant’s action to impact a third party; rather, the defendant’s action must be directed towards the third party.” 2015 IL App (1st) 142984 at ¶28.
The appellate court used as an example of a viable allegation of action directed against a third party a case in which defendant, while working for plaintiff company as a director, officer, and employee, acquired a competing company that was also sought by the plaintiff. On appeal, there was no dispute that the defendant’s acquisition of a competitor was action directed against a third party, namely the target company. 2025 IL App (2d) 240703-U at ¶26.
The appellate court also affirmed dismissal of Count V alleging the defendants engaged in a civil conspiracy. The elements of a civil conspiracy are “(1) an agreement to accomplish by concerted action either an unlawful purpose or a lawful purpose by unlawful means; (2) a tortious act committed in furtherance of that agreement; and (3) an injury caused by the defendant.” 2025 IL App (2d) 240703-U at ¶28, quoting Kovac v. Barron, 2014 IL App (2d) 121100, ¶103, 6 N.E.3d 819, 379 Ill.Dec. 491. Here, the plaintiff alleged that Hall and the HOA adopted the committee guidelines regarding windows in violation of the HOA’s bylaws. 2025 IL App (2d) 240703-U at ¶30. However, the complaint also alleged that at all times Hall was acting as an agent for the HOA as a member of its committee. The appellate court observed that it is well established that under agency law, “’there can be no conspiracy between a principal and an agent because the acts of an agent are considered in law to be the acts of the principal.’” Id., quoting Alpha School Bus Co. v. Wagner, 391 Ill.App.3d 722, 910 N.E.2d 1134, 1150, 331 Ill.Dec. 378 (First Dist. 2009).
Similarly, the appellate court affirmed dismissal of Count VI sounding under §876 of the RESTATEMENT (SECOND) OF TORTS(1979), for tortious acts resulting in harm to third persons by “concert of action.” Again, the court applied agency principles to find that Hall was an agent for both the HOA and for his company, which competed against the plaintiff. Silverthorne, supra, 2025 IL App (2d) 240703-U at ¶37. Principals may be found liable for the torts of their agents if the agents are acting with “actual authority,” which is either expressed authority or implied authority. The court found that the plaintiff did not plead facts on the scope of Hall’s actual authority for either the HOA or his company and that the court could not presume that Hall’s company authorized him to violate the HOA’s declaration. Id. Therefore, the dismissal of Count VI was also affirmed.
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