1995). This de novo review, however, is not the same as a de novo hearing. The district court is

not required to conduct another hearing to review the magistrate judge’s findings and credibility
determinations. United States vy. Raddatz, 447 U.S. 667, 675 (1980); Goffman v, Gross, 59 F.3d
668, 671 (7th Cir, 1995); United States y. Severson, 49 F.3d 268, 273 (7th Cir. 1995). Rather,
the district court has discretion to “accept, reject, or modify, in whole or in part, the findings or
recommendations made by the magistrate.” 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b),

If the district court finds a problem with the R&R, it may take additional evidence, call

witnesses, or remand to the magistrate judge for further proceedings. Raddatz, 447 U.S. at 675.

Judicial efficiency, however, requires parties lo present their arguments to the magistrate judge in
the first instance, as the review procedure is not an opportunity to present new arguments not

considered by the magistrate judge. Scholes v. Stine, McGuire & Benjamin, 786 F. Supp. 1385,

1394 n. 8 (ND. Ill. 1992). If, following a review of the record, the district court is satisficd with
the magistrate judge’s findings and recommendations, it may in its discretion treat those findings
as its own. Raddatz, 447 U.S. at 676. With these principles in mind, the Court reviews Judge

Nolan’s R&R de novo.

ANALYSIS
Plaintiffs object to Judge Nolan’s R&R recommending that this Court deny their Motion
for Class Certification. Judge Nolan found that Plaintiffs’ failed to meet: (1) Rule 23(a)(4)’s

adequacy of representation requirement; and (2) Rule 23(b)(3)’s requirement that common

questions of fact or law predominate over issues affecting individual class members.



ventures, would not adequately protect the class, the other joint ventures, filed affidavits with the
court stating their displeasure with the suite).

Accordingly, this Court overrules Plaintiffs’ objection to Judge Nolan’s finding that
Plaintiffs had a serious potential conflict of interest with some of the class members and
therefore are not adequate representatives as required by Rule 23(a)(4). Because this ground is
sufficient to deny the motion for class certification, the Court will not discuss the other reason

that Judge Nolan recommended that class certification be denied.



BACKGROUND!

This matter stems from a partnership dispute arising out of the Franklin Building
Associates Limited Partnership (“the Franklin Partnership”), which was formed by BFTGI in
1984 to own units in Onteric Associates, an Illinois limited partnership, which was created to
own and operate the Onterie Center, a 60 story residential and commercial building in Chicago,
Mllingis, Plaintiffs were among 174 limitcd partners who bought an interest in the Franklin
Partnership.

The Franklin Partnership, however, was not a financial success and by June of 1998, it
was facing foreclosure. Plaintiffs allege that Defendants created a scheme to unlawfully enrich
themselves at the expense of the limited partners by fraudulently obtaining the consent of two-
thirds of the limited partners for approval of a plan to buy out the limited partners.

STANDARD OF REVIEW

Scction 636(b)(1)(B) of Title 28 authorizes a district court to refer a matter to a magistrate
judge to conduct an evidentiary hearing. Following this hearing, the magistrate judge cannot
enter a final judgment, but must submit to the district court proposed findings of fact and
recommendations for disposition, to which either party may file written objections within 10
days. 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b). The district court is required to conduct a
de novo review of those portions of the magistrate judge’s report and recommendations to which

specific written objections have been filed. Rajaratnam y. Moyer, 47 F.3d 922, 924 (7th Cir.

The facts of this action are throughly discussed both in Judge Nolan’s R&R and this
Court’s prior Memorandum and Order granting in part and denying in part Defendants’ motion to
dismiss.



I. Adequacy of Representation

Rule 23(a)(4) mandates that “the representative parties will fairly and adequately protect
the interest of the class.” (Emphasis added.) To determine whether the class represcntatives will
adequatcly represent the class as a whole, courts examine whcthcr: (1) the representatives have
antagonistic or conflicting claims with the other class members; and (2) the counsel for named
plaintiffs can sufficiently represent the class, Retired Chicago Police Assoc. v, City of Chicago,
7 F.3d 584, 598 (7th Cir. 1993). In examining the conflict of interest prong, courts may consider
potential conflicts which may arise as the litigation progresses. Gilpin v. American Federation of
State, County, and Municipal Employees, AFL-CIO, 875 F.2d 1310, 1313 (7th Cir. 1989).

Judge Nolan found that Plaintiffs had a serious potential conflict of interest with some of
the class members. The Named Plaintiffs seek to have the sale of the limited partners’ shares
declared void and a return of their interest in the Onterie Center. As Judge Nolan pointed out,
however, two-thirds of the limited partners approved the transaction and might not wish to have
it undone, particularly because of the financial condition of the venture and the possible tax
consequences of voiding the transaction.

Plaintiffs contend that Judge Nolan erred because: (1) whether the class members voted
against the transaction is irrelevant to the determination of adequacy; and (2) she only considered
the injunctive relief sought and not whether the Named Plaintiffs would be adequate
representatives in seeking to disgorge Defendants’ ill-gotten gains. After reviewing the R&R and
the relevant case law, this Court finds that these contentions are not sufficient to overrule Judge

Nolan’s R&R.



CONCLUSION

For the reasons discussed above, this Court overrules Plaintiffs’ Objections [110-1] and

adopts and affirms Magistrate Judge Nolan’s Report and Recommendation denying Plaintiffs’

Motion for Class Certification [83-1]. It is so ordered.

ENTER: Baek Mew

BLANCHE M. MANNING
U.S. DISTRICT COURT JUDGE

pare; AUG 19 2003


Minute Order Form (06/97)

United States District Court, Northern District of Illinois

ramet suge | Blanche M. Manning | sine Jue ote

CASE NUMBER 2 C 0978.02 C 3436 DATE August 19, 2003
CASE Birnberg v. Milk Street, et al.
TITLE

nature of the motion being presented. |

fIn the following box (a) indicate the purty filing the motion, ¢.g., plaintiff, defendant, 3ru party plaintiff, and (b) state briefly che

COFRCP4(m) O General Rule 21 () FRCP41(a)(1) [© FRCP41(a)(2).

(11) a [For further detail see order on the reverse side of the original minute order.]

MOTION:

DOCKET ENTRY:

(1) a Filed motion of [ use listing in “Motion” box above.]

(2) q Brief in support of motion due

(3) a Answer brief to motion due. - Reply to answer brief due__

(4) oO Ruling/Hearing onset for __— at

(5) oO Status hearing(held/continued to] [set for/re-set for] on set for at
(6) oO Pretrial conference[held/continued to] [set for/re-set for]on__set for at
(1) o Trial[set for/re-set for]on ss at_

(8) oO [Bench/Jury trial] [Hearing] held/continued to at

9) a This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

(10) O [Other docket entry] For the reasons set forth in the attached Memorandum and Order, this Court
overrules Plaintiffs’ Objections [110-1] and adopts and affirms Magistrate Judge Nolan’s Report and
Recommendation denying Plaintiffs’ Motion for Class Certification [83-1]. It is so ordered.

No notices required, advised in open court

No notices required.
number of notices. ‘

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Y_ | Notices mailed by judge's staff,
Notified counsel by telephone, WG

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Docketing tw mati notices.

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With regard to the first contention, it mischaracterizes Judge Nolan’s finding. She did
not rest her adequacy holding on the fact that-two-thirds of the limited partners approved the
transaction. Instead, she relied on the fact that there was a distinct and real possibility that many
of the limited partner would not want the transaction voided.

As for the second contention, this Court finds that the majorily of cases have held that,
regardless of the relief sought, where there is a possibility that the other shareholders/class
members would not want the transaction/merger voided, the named plaintiffs are not adequate

representatives under Rule 23(a)(4). See Isen v. GSC Enters., Inc., 508 F. Supp. 1278, 1295-96

(N.D, Ill. 1981) (in denying class certification where the complaint sought declaratory,
injunctive, and monetary rclicf, the court found that the named plaintiff was not an adequale
representative of the class where over 80% of the shareholders had approved the merger and “it is
unlikely” that those shareholders would want the merger rescinded three years later); Kas v. Fin.

Gen. Bankshares, Inc., 105 F.R.D. 453, 462-63 (D.D.C. 1985) (in denying class certification

where the complaint sought declaratory, injunctive, and monetary relief, the court found that the
named plaintiff was not an adequate representative of the class, where many of the class
members “may” not want the merger declared void); Maynard, Merel & Co. v. Carcioppolo, 51

F.R.D, 273, 277-78 (S.D.N.Y. 1970) (same). See also Pomicrski y. W.R. Grace & Co., 282 F.

Supp. 385, 392 (N.D. Ill. 1967) (finding that named plaintiff's interest antagonistic to class
members because many of the class members would not want the deal undone); Shulman v.

Ritznberg, 47 F.R.D. 202, 207-08 (D.D.C. 1969) (finding the class representative, one of 49 joint



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

CARL BIRNBERG and JACOB MOSKOVIC,
on behalf of themselves and all others similarly
situated,

DOCKETED

Plaintiffs,
AUG 2 0 2003

ve

MILK STREET RESIDENTIAL ASSOCIATES
LIMITED PARTNERSHIP, LEND LEASE REAL
ESTATE INVESTMENTS, INC., BOSTON
FINANCIAL TECHNOLOGY GROUP INC.,

LAKE MICHIGAN ASSOCIATES, LLC, LMA Hon. Blanche M. Manning
GP LLC, CLARK ENTERPRISES, INC. AND
CLARK ONTERIE, L.L.C., 02 C 0978, 02 C 3436

(Consolidated Proceedings)
Defendants.

CARL BIRNBERG and JACOB MOSKOVIC,
on behalf of themselves and all others similarly
situated,

Plaintiffs,

\.
BOSTON FINANCIAL GROUP, LIMITED
PARTNERSHIP, AND BOSTON FINANCIAL
GROUP, INC,

Defendants.

MEMORANDUM AND ORDER

Plaintiffs Carl Birnberg and Jacob Moskovic are former limited partners of a partnership
that owned a high rise building in Chicago, Mlinois. After selling their interests in the limited
partnership, Plaintiffs brought the instant action, on behalf of themselves and a proposed class

(consisting of the other limited parmers), for breach of fiduciary duty, breach of contract, breach


of implied covenant of good faith and fair dealing, violation of the Illinois Consumer Fraud and
Deceptive Business Practices Act, intentional interference with contractual relations, fraud, and
negligent misreprescntation against: (1) Milk Street Residential Associates Limited Partnership
(“Milk Strect”), a Massachusetts limited partnership; (2) Lend Lease Real Estate Investments,
Inc. (“Lend Lease”), a Delaware corporation; (3) Boston Financial Technology Group, Inc.
(“BFTGI”), a Massachusetts corporation; (4) Lake Michigan Associates LLC (“Lake Michigan”),
a Delaware limited liability company; (5) LMA GP LLC (“LMA”), a Delaware limited liability
company, (6) Clark Enterprises, Inc. (“Clark Enterprises"), a Maryland corporation; (7) Clark
Onterie, LLC (“Clark Onterie”), a Maryland corporation; (8) Boston Financial Group, Limited
Partnership (“BFGLP”), a Massachusetts limited partnership; and (9) Boston Financial Group,
Inc, (“BFGI"), a Massachusetts corporation,

The instant matter comes before the Court on Plaintiffs’ Objcctions to the Report and
Recommendation (“R&R”) of Judge Nolan, submitted to this Court pursuant to Federal Rule of
Civil Procedure 72, recommending that this Court deny Plaintiffs’ Motion for Class Certification.
Having reviewed Judge Nolan’s thorough and well-reasoned R&R, the objections and
submissions, and the pertinent parts of the record, this Court adopts Judge Nolan’s R&R in its

entirety denying the motion for certification and OVERRULES Plaintiffs’ Objections.