IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS

COUNTY DEPARTMENT, LAW DIVISION

UNGARETTI & HARRIS LLP, an Illinois )
limited liability partnership,
Plaintiff,
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RONALD J. GIDWITZ, an individual, RALPH
W. 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
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No. ____________ _ \
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UNDER THE ALAN GIDWITZ
DECLARATION OF TRUST OF OCTOBER
6, 1997, BETSY R. GIDWITZ, an individual,
THE BURNHAM COMPANIES, a joint
venture, BURNHAM MANAGEMENT
COMPANY, an illinois corporation, NEW
WEST, an Illinois limited partnership, NEW
BLUFF, an Illinois limited partnership,
BURNHAM RESIDENTIAL VENTURE I
L.P., an illinois limited partnership;
BURNHAM RESIDENTIAL VENTURE I
CORP., an Illinois corporation; BURNHAM
RESIDENTIAL VENTURE VII L.P., an
Illinois limited partnership; and BURNHAM
RESIDENTIAL VENTURE VII CORP., an
Illinois corporation.
Defendants.
COMPLAINT
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c:;,
Plaintiff, UNGARETTI & HARRIS LLP ("U&H"), by and through its counsel, Power
Rogers & Smith PC, for its Complaint against Defendants, RONALD J. GIDWITZ, an
individual, 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, an
individual, FAMILY TRUST CREATED UNDER THE ALAN GIDWITZ DECLARATION OF
TRUST 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 Illinois
limited partnership, NEW BLUFF, an Illinois limited partnership, BURNHAM RESIDENTIAL
VENTURE I L.P ., Illinois limited partnership; BURNHAM RESIDENTIAL VENTURE I
CORP., an Illinois corporation; BURNHAM RESIDENTIAL VENTURE VII L.P ., an Illinois
limited partnership; and BURNHAM RESIDENTIAL VENTURE VII CORP., an Illinois
corporation (herein after referred to as "The Burnham Companies"), pleading hypothetically and
in the alternative, states as follows:
INTRODUCTION
1. This is an action by the law firm of Ungaretti & Harris to recover fees and costs
incurred by the firm in its representation of certain members of the Gidwitz family and entities
they own and control. U&H has represented the Gidwitz entities in a wide array of matters
relating 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. It seeks to
recover for breach of contract, breach of contract implied in fact, accounts stated and quantum
meruit. The firm also seeks damages for the Gidwitz family's unjust enrichment and fraudulent
transfers.
THE PARTIES
3. Ungaretti & Harris LLP ("U &H") is a limited liability partnership organized under
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the laws of the State of 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 Companies
were 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 Alan
Gidwitz Trust and Betsy R. Gidwitz.
5. Ronald J. Gidwitz is an individual resident of Chicago, Illinois. Ronald J. Gidwitz
is the controlling force and joint venture partner of The Burnham Companies. He is personally
liable for the debts of the joint venture including the sums owed to U&H.
6. Ralph W. Gidwitz is an individual resident of Pacific Palisades, California. Ralph
W. Gidwitz is a joint venture partner of The Burnham Companies. He is personally liable for the
debts of the joint venture including the sums owed to U&H.
7. James G. Gidwitz is an individual resident of Chicago, Illinois. James G. Gidwitz
is a joint venture partner of The Burnham Companies. He is personally liable for the debts of the
joint venture including the sums owned U&H.
8. Peter E. Gidwitz is an individual resident of Chicago, Illinois. Peter E. Gidwitz is
a joint venture partner of The Burnham Companies. He is personally liable for the debts of the
joint venture including the sums owed to U&H.
9. Thomas R. Gidwitz is an individual resident of South Dartmouth, Massachusetts.
Thomas R. Gidwitz is a joint venture partner of The Burnham Companies. He is personally
liable for the debts of the joint venture including the sums owed U&H.
10. Nancy Gidwitz is an individual resident of 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 the
joint venture including the sums owed U&H.
11. Betsy Gidwitz is an individual resident of Chicago, Illinois. Betsy Gidwitz is a
joint venture partner of The Burnham Companies. She is personally liable for the debts of the
joint venture including the sums owed U&H.
12. Alan Gidwitz Trust is a trust created by Alan Gidwitz, who was formerly an
individual resident of Illinois but is now deceased. Before his decease, Alan Gidwitz was a joint
venture partner of The Burnham Companies. As his successor, the Trust is liable for the debts of
the joint venture including the sums owed U&H. Joyce Gidwitz is the Trustee of the Alan
Gidwitz Trust.
13. Herbert J. Halperin is a resident of Boynton Beach, Florida and was an executive
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officer 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 beneficial
interest in two Illinois land trusts that hold title to the two Evergreen Terrace parcels at issue in
this case. They are, in effect, shell entities that are not capable of independent operations without
the control, direction and resources of the Gidwitz family and The Burnham Companies joint
venture.
15. Burnham Residential Venture I L.P. and Burnham Residential Venture I Corp. are
the general partners of New West. They are owned and controlled by Defendants Ronald
Gidwitz and Ralph Gidwitz. Burnham Residential Venture VII L.P. and Burnham Residential
Venture VII Corp. are the general partners ofNew Bluff. They are also owned and controlled by
Defendants Ronald Gidwitz and Ralph Gidwitz. Each of these general partners are conduits for
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the exercise of the Gidwitz family's control ofEvergreen Terrace.
16. Burnham Management Company is a corporation organized under the laws of the
State of Illinois. The principal place of business of Burnham Management Company is in
Chicago, Illinois. It is wholly owned in equal parts by the members of the Gidwitz family
described above. It was and continues to be the management company for Evergreen Terrace.
JURISDICTION
17. 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 of the Gidwitz Family
18. The Defendant members of the Gidwitz family described above ("Core Family
Members") are wealthy descendants of Gerald and Joseph Gidwitz, successful businessmen who
bequeathed significant wealth to their descendants.
19. The Gidwitz family coordinated the management and operation of their wealth
and business interests through a centralized family business office with employees and advisors
to assist the Core Family Members in making coordinated business decisions. In many cases,
Core Family Members jointly acquired interests or made investments in the same business
enterprises.
20. One of the business strategies of the Gidwitz family has been to invest in, acquire,
own and operate real estate. This has been accomplished through various related entities, many
of which include the name "Burnham" as part of the entity name. One of the entities used by the
Gidwitz family for its real estate investment activities is "The Burnham Companies."
21. The Burnham Companies is not organized as a corporation, a limited partnership
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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 ofthe Core Family Members.
22. The Burnham Companies joint venture seeks to limit any exposure for its actions
and those of the Core Family Members by operating through a host of shell entities including
corporations, limited liability companies and limited partnerships.
B. The Gidwitz Ownership of Evergreen Terrace
23. The fee dispute at issue here arises out of work performed by U&H in support of
the ownership and operation of a low income housing project commonly known as Evergreen
Terrace. Evergreen Terrace consists of two parcels which provide housing to approximately 350
very low income families. It relies heavily on subsidized rents. Title to the two Evergreen
Terrace parcels is held by two Illinois land trusts, the beneficial owners of which are New West
and New Bluff who, along with their general partners, are shell entities. The Defendant Burnham
Management Company provided property management services to Evergreen Terrace.
24. Since the early 1980s, HUD has provided credit enhancement and financial
subsidies to New West and New Bluff in order to support Evergreen Terrace as rental housing for
low-income tenants. HUD's credit enhancement consisted of mortgage insurance pursuant to the
National 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 New
Bluff on behalf of low-income persons and families residing at Evergreen Terrace pursuant to
Section 8 of the United States Housing Act of 1937. Those housing assistance payments were
made 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 of New West and New Bluff, the properties were, in fact, controlled by the
Core Family Members. Thus, the general partners of New West are Burnham Residential
Venture I Corp. and Burnham Residential Venture I L.P. which Ronald and Ralph Gidwitz
together own and control. Similarly, the general partners of New Bluff are Burnham
Residential Venture VII Corp. and Burnham Residential Venture VII L.P. which Ronald and
Ralph Gidwitz also own and control. Other Core Family Members own limited partnership
investment interests in New West and New Bluff and/or exercise their control and influence
through their control of The Burnham Management Company. All do business as part and
parcel of the joint venture known as The Burnham Companies.
26. The Gidwitz family sold limited partnership interests in New West and New
Bluff to third party investors as a tax shelter investment. The limited partners investors agreed
to make capital contributions in exchange for a percentage of profits, losses and cash
distributions. The limited partners investors had no management rights in New West or New
Bluff Nor did they have any obligation to make additional capital contributions.
27. The Core Family Members d/b/a The Burnham Companies agreed to own,
operate, manage and control a housing development known as Evergreen Terrace.
28. The Core Family Members and The Burnham Companies agreed to work
together with a joint interest in the Evergreen Terrace low income housing development by
contributing money, property and other resources for profit.
29. The Core Family Members and The Burnham Companies maintained control
over 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 the
Evergreen Terrace low income housing development.
C. The Burnham Companies' Engagement of U&H
31. In order to establish a national program for preservation of HUD-assisted
low- income multifamily housing, Congress enacted the Multifamily Assisted Housing
Reform and Affordability Act, P .A. 105-65, as amended ("MAHRA"). MARRA gave
HUD authority to restructure the HUD-insured mortgage debt, and restructure and extend
the HAP Contracts, for HUD-assisted low-income multifamily housing under a program
referred to as Mark-to-Market ("M2M"). In exchange for the M2M debt restructuring
and HAP Contract extension, the property owner was required to agree to continue the
property as low-income housing for thirty years. The Core Family Members and The
Burnham 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 was
functionally obsolete, a magnet for crime, a blight on the Joliet community and should
be demolished. Joliet opposed the efforts ofNew West and New Bluff to proceed under the
M2M program because the successful completion of the M2M process would have required
that Evergreen Terrace remain low-income housing for thirty additional years. Joliet
declared The Burnham Companies, the Gidwitz family, and Ronald Gidwitz, in
particular, to be slumlords and absentee owners concerned only with bleeding profits from
the property at the expense of the low income residents of Evergreen Terrace and its
surrounding community.
33. The actions by Joliet to oppose the M2M restructuring for Evergreen
Terrace 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. In response, the Core Family Members and The Burnham Companies
concluded that they needed legal counsel to mount an effective challenge to Joliet's opposition
to Evergreen Terrace. In early 2005, The Burnham Companies engaged U&H to oppose
Joliet's efforts including assisting with the M2M process and litigating claims against the
City. The Burnham Companies joint venture and U&H entered into an engagement letter
dated March 17, 2005. The engagement letter was executed by Herbert J. Halperin as president
ofThe Burnham Companies.
35. The U&H engagement letter (attached as Exhibit A) included the
following relevant provisions:
(a) The Burnham Companies engaged U&H to represent The Burnham
Companies "in Fair Housing Act and civil rights litigation against Joliet
and certain of its officials arising from their efforts to deny affordable
housing to the tenants of, and prevent HUD from closing on the
refinancing 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 be
paid within thirty days of receipt."
(c) The Statement of Policy on Fees, Costs and Charges attached to the
U &H Engagement Letter provides that "[ f]ull payment is due upon
receipt of the statement."
36. U&H actively (and successfully) assisted The Burnham Companies with the
Evergreen Terrace M2M restructuring. Additionally, in March 2005, U&H filed a lawsuit
against Joliet in United States District Court for the Northern District of Illinois as New West
v. City of Joliet, et al., Case No. 05 C 1743 (the "Fair Housing Lawsuit"). New Bluff later
joined with New West as a co-plaintiff in the Fair Housing Lawsuit. New West and New Bluff
alleged, 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.
3 7. After the initial filing of 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 of Will County, Illinois as City of
Joliet
v. Mid-City National Bank of Chicago, as Successor Trustee, et al., Case
No. 05 ED 39 pursuant to which Joliet seeks to acquire Evergreen
Terrace by exercise of powers of eminent domain. The eminent domain
lawsuit was removed to federal court and is now pending in United States
District Court for the Northern District of Illinois as Case No. 05 C 6746.
(b) Joliet filed a lawsuit in the Circuit Court of Will County, Illinois as City
of Joliet v. Mid-City National Bank of Chicago, as Successor Trustee
under
Trust Agreement dated May 9, 1980 and known as Trust No. 1252, Case
No. 2005 OV 4533, pursuant to which Joliet alleged that Evergreen
Terrace I was in violation of Joliet's building code.
(c) Joliet filed a lawsuit in the Circuit Court of Will County, Illinois as City
of Joliet v. Mid-City National Bank, et al., Case No. 05 CH 1800,
pursuant to which Joliet sought repair or demolition of Evergreen Terrace
I.
(d) Joliet filed a lawsuit in the Circuit Court of Will County, Illinois as City
of Joliet v. Mid-City National Bank of Chicago, as Successor Trustee,
et al., Case No. 2005 OV 5695, pursuant to which Joliet alleged that
Evergreen Terrace II was in violation of Joliet's building code.
(e) Joliet filed a lawsuit in the Circuit Court of Will County, Illinois as City
of Joliet v. New West et al., Case No. 05 L 246, seeking payments from
New West and Burnham Management Company for amounts allegedly
owed to it for certain security services allegedly provided by Joliet for
Evergreen Terrace.
(t) Certain tenants of Evergreen Terrace filed a lawsuit in the United States
District Court for the Northern District of Illinois as Davis, et al. v. City
of Joliet, et al., Case No. 07 C 07214, alleging that Joliet was in violation
of the Fair Housing Act and federal civil rights laws because of its actions
in relation to Evergreen Terrace.
(g) The United States filed a lawsuit in the United States District Court for
the Northern District of Illinois as United States v. City of Joliet, Case
No. 11 C 5305, pursuant to which the United States alleged that Joliet
was in violation of the Fair Housing Act and federal civil rights laws
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because of its actions in relation to Evergreen Terrace.
38. In addition, in approximately 2010 HUD suspended federal grants to Joliet
under HUD's Community Development Block Grant and HOME programs because of
Joliet's actions in relation to Evergreen Terrace.
39. As a result of the proliferation oflawsuits relating to Evergreen Terrace as well
as controversies relating to HUD's suspension of federal grants to Joliet, the scope of
U&H's engagement was expanded by The Burnham Companies to include the
representation of the interests of The Burnham Companies and its related persons and entities
in all of the foregoing
lawsuits and federal grant program matters. This was an array of work that required a
substantial investment of time and personnel by U &H.
D. Propping up the Shells: Gidwjtz Insider Loans to New West and New Bluff
40. When New West and New Bluff filed the Fair Housing Lawsuit against Joliet
in March 2005, The Burnham Companies and the Core Family Members knew that New
West and New Bluff had no funds of their own to pay the legal fees and expenses anticipated
to be incurred for the Fair Housing Lawsuit. Further, The Burnham Companies and the Core
Family Members knew that the limited partners/investors had no obligation to make any
additional capital contributions to pay those anticipated legal fees and expenses.
41. In addition, once the closings of the M2M restructuring transactions were
completed, New West and New Bluff were required by HUD to advance substantial funds
for M2M transaction costs and project rehabilitation. At the time of the closing of the
M2M transactions in November 2006, New West and New Bluff did not have funds to
pay such assessments.
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42. In order to provide New West and New Bluff with funds to pay legal fees
and expenses relating to the Evergreen Terrace lawsuits, and to pay rehabilitation and
other costs related to the M2M transactions for Evergreen Terrace, the Core Family Members
(joint venture partners in The Burnham Companies) extended certain insider interest-bearing
loans ("Gidwitz Insider Loans") to New West and New Bluff, as follows:
(a) Each of the eight Core Family Members individually agreed to advance
funds in equal shares (one-eighth each) as needed to provide the required
funds to New West and New Bluff.
(b) Ralph Gidwitz (one of the Core Family Members) acted as nominee for
the other seven Core Family Members with respect to such funding.
(c) Those other seven Core Family Members advanced their respective funds
to Ralph Gidwitz as nominee, and Ralph Gidwitz in turn advanced those
funds, plus the funds representing his own one-eighth share, as interest-
bearing loans to the general partners of New West and New Bluff
(Burnham Residential Venture I L.P. and Burnham Residential Venture VII
L.P., respectively).
(d) Those general partners in turn advanced such loan proceeds as interest-
bearing loans to New West and New Bluff, respectively.
(e) New West and New Bluff used the proceeds of those loans to pay legal
fees and expenses, M2M transaction costs, Evergreen Terrace
rehabilitation costs and other costs, as needed.
(f) The loan and repayment terms that applied to Ralph Gidwitz's loans to
the general partners (as to which he acted as nominee for the other seven
Core Family Members) were identical to the loan and repayment terms that
applied 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 partners
of New West and New Bluff acting solely as pass-through entities with
respect to such loans from the Core Family Members toN ew West and New
Bluff.
43. In addition to the foregoing loans, Burnham Management Company made
interest-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 the
outstanding principal balances, and (c) payments of principal and interest made out of
operational proceeds. The total amount of principal and interest due on the Gidwitz Insider
Loans as of September 28,2012 was $10.08 million.
46. The Core Family Members authorized substantial payments to themselves of
principal and interest as New West and New Bluff continued to make periodic payments
of principal and interest out of Evergreen Terrace proceeds to reduce Gidwitz Insider Loans
at the expense ofU&H.
E. Management Fees Paid to Burnham Management Company
47. Additionally, annual management fees were authorized by members ofthe
Core Family Members and The Burnham Companies to be paid to Burnham Management
Company. The aggregate management fee paid to Burnham Management Company and its
insider 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 other
entities controlled by the Core Family Members to pay, all or substantially all of U&H's
invoices. Payments were arranged to bring U&H's invoices substantially current by the
end of each of U&H's fiscal years (which end on September 30) from 2005 to 2011. It was
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understood by all that The Burnham Companies joint venture and the Core Family Members
were responsible for such payments. This was consistent with the engagement letter executed
by the president of The Burnham Companies and the parties' practice.
49. The most critical (and urgent) litigation for which U&H was retained was
the eminent domain lawsuit brought by Joliet. Although the eminent domain proceeding was
consolidated 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 of the cases pending in the
Northern District of Illinois were consolidated for discovery purposes and the court imposed
an expedited
discovery schedule for all matters. Thus, as the parties prepared for a September, 2012 trial
in the eminent domain lawsuit, more than 50 depositions were taken and defended,
dozens of witnesses interviewed and prepared for trial; expert reports were drafted and
defended; hundreds of exhibits were exchanged and evaluated. Dozens of pre-trial motions
were argued. This was all done in a very compressed time frame.
50. On the eve of trial, on September 24, 2012, The Burnham Companies paid,
or caused their affiliates to pay, a portion of the amounts billed by U &H for legal services
but left unpaid approximately $1 million of legal fees and expenses. This payment would
be the last made to U&H by the Core Family Members or The Burnham Companies or its
affiliates with respect to Evergreen Terrace matters.
51. Following the September 24, 2012 payment, The Burnham Companies and
the Core Family Members led U&H to believe that not only would the unpaid $1 million
receivable be paid within the near future, but that the U &H would be paid on a going forward
basis. On the eve of trial, no representative of 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 The
Burnham Companies and the Core Family Members never intended to pay U&H's fees. In
effect, U&H was wrongfully induced to undertake an extraordinarily complex trial from which
it 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.
It was, and continues to be, an extraordinary affair: (a) the taking of evidence consumed 15
months and roughly 100 days of trial; (b) dozens of witnesses were examined and cross-
examined - 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 motion
practice continued; and (e) complex evidentiary disputes were briefed and argued.
53. Representatives of The Burnham Companies and the Core Family Members
were in attendance at the trial for all but a few of the 100 days of trial work. These
representatives have been highly complimentary of U&H and its trial team for the work they
performed. These representatives were also provided with daily transcripts and the numerous
exhibits 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 of
the accrued amounts. Nothing has been paid for the entire trial effort; U&H has been paid
nothing since September 2012.
55. During the course of the trial, no Core Family Member or representative of
The Burnham Companies directed that U&H cease its efforts; indeed, representatives of the
Gidwitz family continued to participate in strategic discussions and trial evaluations with the
expectation 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. On
September 24, 2013 Ronald Gidwitz on behalf of The Burnham Companies and the Core
Family Members advised U&H that: "Please be advised that as of this time we decline to
make any additional loans to New West and New Bluff to 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 Evergreen
Terrace at trial. But once the taking of evidence was complete, U&H moved to withdraw
over the objection of the Core Family Members and The Burnham Companies.
58. On January 24,2014, Judge Norgle granted the U&H Motion to Withdraw.
59. As of February 1, 2014, the total amount of outstanding legal fees owed by
the Core Family Members and The Burnham Companies to U&H was approximately
$6,365,915.
COUNT I - Breach of Contract
60. 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 The
Burnham Companies, on its own behalf and on behalf of its affiliates and partners with
interests in Evergreen Terrace including Core Family Members. The contract provided for
the rendering of legal services by U &H in exchange for the payment of fees by The Burnham
Companies and Core Family Members.
62. U &H has performed all of the obligations required of it under the contract which
The Burnham Companies accepted without protest or objection.
63. The Defendants in this action, however, have breached the contract by failing
to 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 compensatory
damages of
$6,365,915 plus prejudgment interest at the rate permitted by Illinois law.
COUNT II - Breach of Contract Implied in Fact
65. 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) assumed
responsibility for the payment of invoices; and (d) directed and supervised the work that
U&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 Companies
created a contract implied in fact. U&H has performed all that was required of it under this
contract. The Defendants have breached this contract by their failure to pay $6,365,915 in fees
and costs.
WHEREFORE, U&H requests that a judgment be entered against the Core Family
Members and The Burnham Companies and related entities for $6,365,915 plus
prejudgment interest at the rate permitted by Illinois law.
COUNT III- Account
Stated
68. 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 that
covered the entire $6,365,915 in fees and costs now due and owing.
70. Although Ronald Gidwitz on behalf of Core Family Members and The
Burnham Companies now takes the position that the Defendants will not pay, no specific
invoice was ever objected to and no specific amount ever challenged. Moreover, no specific
reason for not paying has ever been provided to U&H.
71. The Core Family Members, The Burnham Companies or any of its related
entities were aware of the amounts being incurred or the volume of tasks the representation
required. Representatives of the Core Family Members, The Burnham Companies and
New West and New Bluff were: (a) present in court on a regular basis for more than a
year; (b) participated in strategic and tactical discussions with U&H; (c) reviewed trial
exhibits; and (d) helped prepare witnesses both for trial and for depositions. The Defendants
and their representatives had a full and complete opportunity to review U&H's invoices and
yet 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 as
an account stated against the Core Family Members and The Burnham Companies plus
prejudgment interest at the rate permitted by Illinois law.
COVNT IV- Quantum Meruit
73. U&H realleges and incorporates herein by reference Paragraph Nos. 1-59, 66,
and 70-71.
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74. The Core Family Members, The Burnham Companies and New West and
New Bluff have been enriched by U&H providing legal services to or for the benefit of the
Defendants. 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, knew
that 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 the
for restitution ofthe value oflegal services rendered by U&H for which payment
has not been made, plus prejudgment interest at the rate permitted by Illinois law.
COUNT V- Unjust Enrichment
77. 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 Core
Family Members, The Burnham Companies, New West, New Bluff and U&H - owed
one another fiduciary duties, including the fiduciary duty of candor and honest dealing.
79. The Core Family Members and The Burnham Companies breached those
fiduciary duties by inducing U&H to undertake a massive effort to try the eminent
domain proceeding when the Defendants had no intention of paying 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&H
for 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 the
19
Defendants, for damages equal to the benefit conferred on the Defendants by U&H's legal
services for which the Defendants have not paid, plus prejudgment interest at the rate
permitted by Illinois law.
COUNT VI- Fraudulent Transfer
82. U&H realleges and incorporates by reference herein Paragraph Nos. 1-59.
83. U&H's right to payment of its fees and costs for servtce related to
Evergreen Terrace is a "claim" under the Illinois Fraudulent Transfer Act.
84. Each of the Defendants is an insider and controlling person with respect to
New West, New Bluff, Burnham Management Company and The Burnham Companies.
85. New West and New Bluff and their general partners are insolvent under
Sections 3(a) and 3(b) ofthe Fraudulent Transfer Act.
86. Payments made by New West and New Bluff in payment or repayment of
Gidwitz 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 their
advances for the Gidwitz Insider Loans; and (ii) payments to Burnham Management
Company to repay sums advanced for operating deficits at Evergreen Terrace.
87. Payments by New West and New Bluff for management fees to Burnham
Management Company were also ''transfers" under Section 2(1) of the Fraudulent Transfer Act.
88. Transfers of funds made by New West and New Bluff for payment of the
Gidwitz Insider Loans were fraudulent as to U&H. They were made with actual intent to
hinder, delay or defraud U&H under Section 5(a)(l) and (b) of the Fraudulent Transfer Act
because:
(a) The transfers were made to insiders consisting of the Core Family
20
Members and Burnham Management Company;
(b) New West, New Bluff and their respective general partners were insolvent
at the time the transfers were made in payment of the Gidwitz Insider Loans;
(c) All of the Defendants in this action had actual knowledge that the payments
to insiders would leave New West and New Bluff with insufficient funds
to pay the attorneys' fees and expenses payable to U&H;
(d) All of the Defendants in this action had actual knowledge that
additional attorneys' fees and expenses would be incurred in connection
with the eminent domain lawsuit and other matters relating to Evergreen
Terrace, and they failed to establish any reasonable reserves for payment
of such anticipated attorneys' fees and expenses.
89. Transfers of funds made by New West and New Bluff for payment of the
Gidwitz Insider Loans were fraudulent as to U&H under Section 6(b) of the Fraudulent
Transfer Act because:
(a) U&H's claims against New West, New Bluff and their respective
general partners arose before the transfers were made by New West, New
Bluff and their respective general partners;
(b) The transfers were made to insiders consisting of the Core Family
Members and Burnham Management Company;
(c) The transfers were made to the insiders on account of an antecedent
debt consisting of the Gidwitz Insider Loans;
(d) New West, New Bluff and their respective general partners were insolvent
at the time the transfers were made in payment of the Gidwitz Insider Loans;
and
(e) All of the Defendants had reasonable cause to believe that the debtors
were insolvent at the time those transfers were made.
90. Transfers of funds made by New West and New Bluff to Burnham
Management Company in payment of management fees were fraudulent as to U&H under
Section 6(b) of the Fraudulent Transfer Act because:
(a) U&H's claims against New West, New Bluff and their respective
general partners arose before the transfers were made by New West and
New Bluff to Burnham Management Company on account of property
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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 of
an antecedent debt consisting of its rights to receive property management
fees;
(d) New West, New Bluff and their respective general partners were insolvent
at the time the transfers were made in payment of the management fees; and
(e) Burnham Management Company had reasonable cause to believe that
New West and New Bluff were insolvent at the time those management
fees were paid.
WHEREFORE, U&H prays for entry of judgment in its favor and against the
Defendants as follows:
(a) For avoidance of all transfers made by New West and New Bluff for
payment of Gidwitz Insider Loans, including those payments to the Core
Family Members and to Burnham Management Company;
(b) For avoidance of all transfers made by New West and New Bluff to
Burnham Management Company in payment of property management fees
with respect to Evergreen Terrace;
(c) For attachment against the funds and assets of the Defendants equal to
the amount of the transfers made to them that are fraudulent as to U&H
under the Fraudulent Transfer Act;
(d) For preliminary and permanent InJUnctions against the Defendants
against further disposition by the Defendants of the assets transferred by
or to them that are fraudulent as to U &H under the Fraudulent Transfer
Act; and
(e) For all compensatory damages, punitive damages, attorneys' fees, costs
and 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 shell
entities to avoid obligations and to obscure their ownership interests. Moreover, Ronald
Gidwitz on behalf of the Core Family Members and The Burnham Companies has
acknowledged that New West and New Bluff and their general partners are not able to pay the
invoices at issue.
93. In order to ensure a proper recovery of sums legitimately owed, U&H seeks
an accounting to determine which entities now hold which recoverable assets and the
nature of transfers between and among Core Family Members, The Burnham Companies
and 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 an
accounting be completed at Defendants' expense for each of the Defendant entities.
WHEREFORE, U&H prays for entry of judgment in its favor and against Herbert
J. Halperin for $6,365,915 in unpaid fees and costs plus prejudgment interest at the rate
permitted by Illinois law.
Dated: ____ , 2014
Joseph A. Power, Jr.
Power Rogers & Smith P.C.
70 West Madison Street, 55th Floor
Chicago, Illinois 60602
312/236-9381
Atty. No. 31444
POWER ROGERS & SMITH PC
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IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT, LAW DIVISION
UNGARETTI & HARRIS, LLP, an Illinois Limited
Liability Partnership,
Plaintiff,
vs.
RONALD J. GIDWITZ, an individual, RALPH W.
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
UNDER THE ALAN GIDWITZ DECLARATION OF
TRUST OF OCTOBER 6, 1997, BETSY R. GIDWITZ,
an individual, THE BURNHAM COMPANIES, ajoint
venture, BURNHAM MANAGEMENT COMPANY, an
Illinois Corporation, NEW WEST, an Illinois Limited
Partnership, NEW BLUFF, an Illinois Limited
Partnership, BURNHAM RESIDENTIAL VENTURE I,
L.P., an Illinois Limited Partnership; BURNHAM
RESIDENTIAL VENTURE I CORP., an Illinois
Corporation; BURNHAM RESIDENTIAL VENTURE
VII L.P., an Illinois Limited Partnership; and
BURNHAM 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, PC
Attorneys for Plaintiff
70 W. Madison Street, 55
1
h Floor
Chicago, IL 60602
312-236-9381
Atty. No. 31444