ungaretti lawsuit

5/22/2018 Ungaretti Lawsuit

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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 Family20


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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

ungaretti lawsuit

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