b. Superiority

Rule 23(b)(3) provides the following factors to consider in determining whether a class
action is superior (o other available methods of adjudication: (a) the interest of the class
members in individually controlling the prosecution or defense of separate actions; (b) the extent
and nature of any litigation concerning the controversy already commenced by or against the
members of the class; (c) the desirability or undesirability of concentrating the litigation of the
claims m a particular forum, and (d).the difficulties likely to be encountcred in the management
ofa class action. Fed. R. Civ. P. 23(b)(3); Rahim v. Sheahan, No. 99 C 395, 2001 WL 1263493,
at *16 (N.D. II. Oct. 19, 2001).

Defendants argue that this case will be unmanageable as a class action because it will
requirc consideration of the Jaws of some 35 different states. Defs. Mem., pp. 15-16. Tn fact,
only two state laws govern this case ~ Massachusetts and Tllinois. The parties do not dispute that
Massachusetts law governs Counts 1, 3, 4 and 5. Defs. Mem., p. 16; Pls. Reply, pp. 17-18. See
Birnberg v. Milk Street Residential Associates Ltd. Partnership, Nos. 02 C 978, 02 C 3436, 2003
WL 151929, at *15 (N.D. Tll. Jan. 21, 2003) (Manning, J.) And Judge Manning has decided that
Lilinois law governs Counts 2, 6 and 7 because Illinois has the most significant relationship to
those counts. Birnberg, 2003 WI. 151929, at *15,

Nevertheless, plaintiffs have not demonstrated that a class action is the superior method
of adjudicating this case. According to the complaint, most of the limited partners have over
$170,000 at stake, Cmplt. (68. They paid $141,000 per unit for their interests in the partnership,
and the morc than two-thirds of the limited partners who consented to the LMA transaction

certified that they had consulted with an attorney or advisor prior to signing the proxy forms. Id.

13



DISCUSSION

A Standards for Rule 23 Class Certification

A court has broad discretion to resolve whether certifying a class is proper. Keele v.
Wexler, 149 F.3d 589, 592 (7" Cir. 1998). In making this determination, the substantive
allegations in the complaint are taken as true and, generally, the ullimate merits of the case arc
hot examined. Eggleston v. Chicago Journeymen Plumbers’ Local Union No. 130, 657 F.2d
890, 895 (7"" Cir. 1981); Hill v. Shell Oil Co., No. 98 C 5766, 2002 WL 663583, at *2 (N.D. Ill.
Mar, 28, 2002). However, the “boundary between a class determination and the merits may not
always be easily discernible.” Retired Chicago Police Association v. City of Chicago, 7 F.3d
584, $99 (7TM Cir, 1993); Coopers & Lybrand v. Livesay, 437 U.S. 463, 469 (1978) (class
determination generally depends on factors “enmeshed in the factual and legal issues comprising
the plaintiff's cause of action”). Thus, a court “should make whatever factual and legal inquiries
are necessary under Rule 23” before deciding whether a case should proceed as a class action.
Szabo v. Bridgeport Machines, Inc., 249 F.3d 672, 675 (7" Cir. 2001); Woodard v. Tower
Automotive Products Co., No. 00 C 50459, 2002 WL 832572, at *2 (N.D. TIl, May 1, 2002).

To achieve certification under Rule 23, plaintiffs must first meet the four requircmcents of
Rule 23(a): (1) the class is so numerous that joinder of all members is impracticable
(numerosity); (2) there are questions of law or fact common to the class (commonality); (3) the
claims or defenscs of the representative parties are typical of the claims or defenscs of the class
(typicality); and (4) the representative partics will fairly and adequately protect the interests of
the class (adequate representation). See Rosario v. Livaditis, 963 F.2d 1013, 1017 (7" Cir. 1992).

If plaintiffs satisfy all of these requirements, they then must meet one of the requirements sct



Relief. Defendants argue that plaintiffs cannot adequately represent any limited partner that
wants to keep the LMA transaction intact. The Court agrees.

As noted, more than two-thirds of the limited partners approved the LMA transaction.
Plaintiffs point out that this consent may have been obtained under falsc pretenses, but many of
the limited partners may nonetheless prefer the LMA transaction over the AIMCO or any other
deal, much less no deal at all.? Yet those limited partners are by necessity included in the
putative class because the injunctive relief sought is an all-or-nothing proposition ~ plaintiffs
want the LMA transaction declared “null and void.” See Buycks-Roherson v. Citibank Federal
Sav. Bank, 162 F.R.D. 322, 335 (N.D. Ill. 1995) (“Le]quitable relief, unlike actual damages, is not
subject to individualized interests”). Thus, plaintiffs have not demonstrated that they would
adequately represent the proposed class. See, ¢.g., Jn re Hartmarx Securities Litigation, No. 01 C
7832, 2002 WI. 33103491, at *6 (ND. Ill. Sept. 19, 2002) (to be adequate representative,
plaintiffs must protect the “different, separate and distinct interest of the class members”);
Retired Chicago Police Association, 7 F.3d at 598 (class representative not adequate where
actual or potential conflict existed between members who benefitted from a settlement agreement
and the representative secking to undo it).

2. Requirements of Rule 23(b)(3)

Even if plaintiffs could show that they would adequately represent the proposed class of
limited partners, their motion for class certification would still fail because they cannot satisfy

the requirements of Rule 23(b)(3). Rule 23(b)(3) requires that common questions of fact or Jaw

2

* Indeed, at the time of the LMA transaction, HUD was about to foreclose on the
property, Cmplt. 27, 28.


Rule 23(a)(2).” Rosario, 963 F.2d at 1018. A common nucleus of operative fact is typically
found where “defendants have engaged in standardized conduct towards members of the
proposed class.” Keele, 149 F.3d at 594, Some variation among the claims of the individual
class members does not defeat commonality. Rosario, 963 F.2d at 1017. “There nced only be a
single issue [of law or fact] common to all members of the class.” Gomez v. Illinois State Board
of Education, 117 F.R.D. 394, 399 (N.D, Tl. 1987) (quoting Edmondson v. Simon, 86 F.R.D.
375, 380 (N.D. Ill. 1980)).

There are several common legal and factual questions present in this case, including (1)
whether defendants disseminated false and mislcading proxy solicitations to the limited partners
which misrepresented the truc value of the Onteric Center; (2) whether defendants breached
fiduciary dutics owed to the limited partners in connection with the proxy solicitations, the
allegedly self-dealing LMA transaction and the AIMCO offer; and (3) whether defendants
breached their contractual obligations to the limited partners in connection with the proxy
solicitations, the allegedly self-dealing LMA transaction and the AIMCO offer. The claims of
plaintiffs and the proposed class members arise from the same practices of defendants and, thus,
the commonality requirement of Rule 23(a)(2) has been met. See McKenzie v. City of Chicago,
175 F.R.D, 280, 286 (N.D. Tl. 1997) (quoting Jn re VMS Securities Litigation, 136 F.R.D. 466,
473 (N.D. Ill. 1991)) (“[p]laintiffs need only show that there is ‘at least one question of law or
fact common to the class’ to satisfy the commonality requirement”).

eG Typicality
Rule 23(a)(3) requires that the claims or defenses of the representative parties be typical

of the claims or defenses of the class. The question of typicality is “closcly related” to the



forth in Rule 23(b). Retired Chicago Police Association, 7 F.3d at 596. In this case, plaintiffs
scck certification pursuant to Rule 23(b)(3), which requires that “questions of law or fact
common to the members of the class predominate over any questions affecting only individual
members, and that a class action is superior to other available methods for the fair and efficient
adjudication of the controversy.” Fed. R. Civ. P. 23(b)(3).
B. Analysis

1 Requirements of Rule 23(a)

a. Numerosity

Rule 23(a)(1) requires that the class be “so numerous that joinder of all members is
impracticable.” See Williams v. Brown, _ F.R.D. _, 2003 WL 1898932, at *1 (N.D. IIL. Apr.
16, 2003). Defendants do not dispute that the proposed class consists of 174 limited partners
scattered throughout the United States, including 27 in Illinois. This is sufficient to satisfy (he
requirement of numerosity. See, ¢.g., Scholes v. Stone, McGuire & Benjamin, 143 F.R.D. 181,
184 (N.D. Ill. 1992) (certifying class of 129-300 persons geographically dispersed throughout the
United States); Scort v. Universal Fidelity Corp., No. 98 C 3659, 1999 WL 138868, at *3 (N.D.
Til. Mar. 5, 1999) (“[c]ourts have certified classes in which there were forty or fewer members”)
(citing Riordan v. Smith Barney, 113 F.R.D. 60, 62 (N.D. Ill. 1986) (certifying class of 29
persons) and Swanson v. American Consumer Industries, Inc., 415 F.2d 1326, 1333 n9 (7" Cir.
1969) (40 class members sufficient).

b. Commonality

Rule 23(a)(2) requires a showing that the class has common questions of law or fact. “A

common nucleus of operative fact is usually enough to satis{y the commonality requirement of



Communications, Inc., 189 F.R.D. 391, 398 (N.D. TI]. 1999) (“[p]ure speculation witl not defeat a
finding of typicality”).
d. Adequacy of Representation

More problematic for plaintiffs is the final requirement of Rule 23(a) that “the
representative parties will fairly and adequately protect the interests of the class.” The adequacy
of representation requirement has three elements: (1) the chosen class representative cannot have
antagonistic or conflicting claims with olher members of the class, . . . (2) the named
representative must have a sufficient interest in the outcome to ensure vigorous advocacy, . . .
and, (3) counsel for the named plaintiff must be competent, experienced, qualified, and generally
able to conduct the proposed litigation vigorously. Gammon v. GC Services Ltd. Partnership,
162 F.R.D. 313, 317 (N.D. Ill. 1995) (citations and quotations omitted). See also Rosario, 963
F.2d at 1018 (“[a] class is not fairly and adequately represcnted if class members have
antagonistic or conflicting claims”),

Defendants do not seriously dispute that plaintiffs intend to vigorously pursue this case or
that they have retained qualified and experienced counsel to represent them. Instead, defendants
focus on the fact that more than two-thirds of the limited partners approved the LMA transaction
and may not want to undo the deal. Defs. Mem., pp. 11-12. In addition to monetary damages,
plaintiffs are seeking injunctive relief to restrain defendants from substituting LMA as general
partner of the Franklin Partnership and from completing LMA’s acquisition of the limited
partners’ interests. They also seek a declaration that the LMA transaction is “null and void” and

they want LMA to return the limited partner interests purchased to date. Cmplt., Request for



Mine Order Farm (06/97)

United States District Court, Northern District of Illinois

a Magia Judge Blanche Manning “nan Awiged Jude Nan R. Nolan
CASE NUMBER 02 C978 DATE 5/28/2003
CASE Birnberg vs. Milk St Residential
TITLE
[In the following box (a) indicute the party (ling the motian, ¢-g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the mature
MOTION: of the motion being presented.}
DOCKET ENTRY:
(1) Qa Filed motion of [ use listing in “Motion” box above.]
(2) oO Brief in support of motion due__.
(3) a Answer brief to motion due___. Reply to answer briefdue___
(4) Oo Ruling/Hearing on____sset fora
(5) a Status hearing[held/continued to] [sct for/re-set for] on set for at
(6) Oo Pretrial conference[held/continued to] [set for/re-set for}on__—set fora
(7) o ‘Trial[set for/re-set for] on __ at
(8) Oo {Bench/Jury trial] [Hearing] held/continued to.
(9) im This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4(m) OLocal Rule 41.1 OFRCP41(a)(1) 1 FRCP41(a)(2).

(io) (Other docket entry] Status hearing set for June 12, 2003 at 9:00 a.m. For the reasons stated in the
attached report and recommendation, class certification is not appropriate in this case. The Court
tecommends that Plaintiff's motion for class certification be denied.

(il) if [For further detail scc order attached to the original minute order.]
No notices required, advised in open court. Document
; Number
No notices required. okapiccs
| Notices muiled by judge’s staff.
Notified counsel by telephone e dockfes
Docketing to mail notices,
Mail AO 450 form, acl itis
| Cony to judge/magistrate judge :
7342008
date msiled noice
courtronm
cay deputy’s ow
initials

Date/time reecived in
central Clerk's Office railing dept initials



Plaintiffs are correct that a detcrmination of whether defendants breached their fiduciary
and contractual duties and made misrepresentations or omissions of fact by understating the
value of the Onterie Center in the proxy solicitations, by engaging in a self-dealing transaction
with LMA and by failing to present the AIMCO deal to the limited partners are common
questions for all potential class members. And contrary to defendants’ suggestion, their
affirmative defenses do not raise individual issucs sufficient to preclude class certification. The
statute of hmitations defense is based on the theory that plaintiffs seek to recover for “alleged
wrongs dating back to 1984” — which they do not — and would not consume the merits of the
case. Defs. Mem., p. 10; Pls, Reply, p. 16. See Gaspar v. Linvatec Corp., 167 E.R.D, 51 758
(N.D, IIL. 1996) (“it is only when a unique defense will consume the merits of a case that aclass
should not be certified”). In addition, defendants have not cited any cases where class
certification was denied because the defendant, as opposed to the plaintiff, asserted an estoppel
defense.

Nevertheless, this case docs involve significant individual questions of causation,

damages, and for the common law fraud and negligent misrepresentation claims, teliance.? See

3 See Hanover Ins. Co. v. Sutton, 46 Mass. App. Ct. 153, 164, 705 N.E.2d 279
(1999) (plaintiff must show causal connection between breach of fiduciary duty and damages);
Sentinel Products Corp. v. Platt, No. , 2002 WL 1613713, at *3 (D. Mass. July 22, 2002)
(“plaintiff must be able to show that the defendant breached a material provision of the contract
and that the plaintiff sustained damages as a result of that breach”); Medical Air Technology
Corp. v. Marwan Inv., Ine., 303 F.3d 11, 22 (1* Cir. 2002) (“[w]ithout causation, there can be no
claim for... a breach of the implied covenant of good faith and fair dealing”); Williams v. BAK
Medical Systems, Ine., 49 Mass, App. Ct. 563, 732 N.E.2d 300, 307 (2000) (for tortious
interference with contract claim, plaintiffs must show they were “harmed by the defendant’s
actions”); brahim v. Old Kent Bunk, No. 99 C999, 2000 WL 263987, at *6 (NLD. Ill. Feb. 25,
2000) (“‘as a prerequisite to recovering under the ICFA each class member will have to make an
individual showing that [defendant] proximately caused his or her damages”); Hefferman v.
Board of Trustees of Illinois Community College Dist. 508, 310 F.3d 522, 525 (7"" Cir. 2002)

ll


predominate over issues affecting individual members. The predominance question requires the
court to determine whether plaintiffs seek to remedy a common legal grievance. Doe v.
Guardian Life Ins. Co, of America, 145 F.R.D. 466, 475 (N.D. TI. 1992). Common questions of
law or fact will predominate when there is a common course of conduct that leads to injury of all
the class members. Fietsam y. Connecticut General Life Ins. Co., No. 93 C 916, 1994 WL
323313, at *5 (N.D. Ll. June 27, 1994). The common issues need not, however, be dispositive of
the entire litigation. Doe, 145 F.R.D, at 475; Riordan, 113 F.R.D. at 65. Rule 23(b)(3) also
requires the Court to consider whether a class action is superior to other methods of adjudication,
The underlying purpose of the predominance and superiority requirements is to evaluate whether
class certification will have practical utility in the suit. Doe, 145 F.R.D. at 474.
a. Predominance

Plaintiffs insist that common issues predominate here because their primary allegation is
that defendants submitted false and misleading proxy solicitations that understated the valuc of
the Onteric Center, According to plaintilts, “the core question of Defendants’ liability
predominates over any individual issues” such as reliance and damages. Pls. Mem., p. 10.
Defendants argue (hat this case turns on individual questions, including: (1) whether each limiied
partner actually suffered tax liabilities as a result of defendants’ alleged misconduct; (2) whether
each limited partner relied on the proxy solicitations in deciding whcther to consent to the LMA
transaction; and (3) whether each limited partner would actually prefer the LMA transaction over
the AIMCO proposal as advocated by plaintiffs. Defendants also claim that their statute of
limitations and estoppel defenses raisc additional questions that must be addressed on an

individualized basis. Defs. Mem., pp. 6-7, 10.

10



question of commonality, Rosario, 963 F.2d at 1018. “A plaintiff's claim is typical if it arises
ftom the same event or practice or course of conduct that gives rise to the claims of other class
members and his or her claims are based on the same legal theory.” Keele, 149 F.3d at 595
(quoting De La Fuente v. Stokely-Van Camp, Inc., 713 F.2d 225, 232 (7" Cir. 1983)). Typicality
may be found even where “there are factual distinctions between the claims of the named
plaintiffs and those of other class members.” Retired Chicago Police Association, 7 F.3d at 597.
“Instead, we look to the defendant’s conduct and the plaintiff's legal theory to satisfy Rule
23(a)(3).” Rosario, 963 F.2d at 1018; Wagner v, Nutrasweet Co., 95 F.3d 527, 534 (7" Cir.
1996) (indicating typicality “should be determined with reference to the [defendants’] actions,
not with respect to particularized defenses it might have against certain class members”),
Defendants claim that plaintiffs’ claims are not typical of the other potential class
members because they did not all suffer the same alleged tax consequences as a result of the
LMA transaction. Defs. Mem., pp. 11-12. However, “the [typicality] requirement may be
satisfied even though . . . there is disparity in the damages claimed by the representative parties
and the other members of the class.” Hinton v. First American Mortgage, No. 96 C 5668, 1998
WL 111668, at *4 (N.D, Ill Mar. 4, 1998). Nor is the Court persuaded that Birnberg’s claims are
atypical because his prior lawsuit against Milk Street estops him from asserting claims arising
before 1994, or because he allegedly failed to report the LMA transaction on his tax returns.
Defs. Mem., pp. 12-13. Plaintiffs are not asserting any pre-1994 claims, Pls. Reply, p. 16, and
defendants’ speculation that most limited parmers abided by federal income tax laws while

Bimberg did not is not sufficient to defeat plaintiffs’ showing of typicality, See Danis v. USN


The Franklin Partnership was not as financially successful as originally projected and in
June 1998, the United States Department of Housing and Urban Development (“HUD”), which
partially financed the Ontcric Center with a mortgage, threatened to foreclose on the property.
Cmplt. 9927, 28. In 1999, Boston Financial presented the limited partners with a plan to bring in
a corporate investor — LMA GP LLC (“LMA”) — that would both buy out the limited partners and
replace Milk Street as the general partner. /d. 135-37. The requisite number of limited partners
accepted the plan, but plaintiffs allege that defendants fraudulently obtained that consent by (1)
using misleading consent, proxy and power of attorncy solicitations that misrepresented the true
valuc of the Onterie Center; (2) failing to disclose an appraisal of the Onterie Center that
provided a substantially higher estimate of the property’s valuc than the estimate provided by
defendants; (3) failing to disclose conflicts of interest with the LMA transaction; and (4) failing
to disclose an offer by Apartment Investment Management Company (“AIMCO”) to purchase the
Onterie Center on morc favorable terms to the limited partners than the LMA deal. Plaintiffs
claim that this misconduct resulted in “huge tax liabilities” to the limited partners. /d. 43.

Plaintiffs sued the following entities: (1) Boston Financial and its successors in interest,
Boston Financial Group, Limited Partnership and Boston Financial Group, Inc.; (2) Milk Street;
(3) LMA; (4) Lake Michigan Associates LLC (“Lake Michigan”) - the parent of LMA; (5) Clark
Onterie, L.L.C. — a company that owns part of Lake Michigan; (6) Clark Enterprises, Inc. - a
company that owns a company that owns part of ake Michigan; and (7) Lend Lease Real Estate
Investments, Inc. — the current owner of the Onterie Center. Plaintiffs now seek to certify a class
of all Franklin Partnership limited partners as of February 23, 1999 with respect to all seven

counts of the complaint.



419; Defs. Mem., p. 14, The cxistence of such large individual claims by sophisticated investors
undercuts the alleged supcriority of the class action. See Liberty Mutual Ins. Co. v. Tribco
Construction Co., 185 F.R.D. 533, 541 (N.D. TI]. 1999) (“courts oflen find that class actions are
not appropriate when the individual members are sophisticated and have large claims”); Mace v.
Van Ru Credit Corp., 109 F.3d 338, 344 (7" Cir, 1997) (the “policy at the very core of the class
action mechanism is to overcome the problem that small recoveries do not provide the incentive
for any individual to bring a solo action”); Fisher, 181 F.R.D. at 373 (class action not superior
method of adjudication where it was unlikely that many class members would have de minimis
claims). Compare Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 809 (1985) (class action
superior where “lawsuit involve[d] claims averaging about $100 per plaintiff’).

In addition, plaintiffs have not addressed the fact that they seek injunctive relief that may
not be acceptable to all class members — more than two-thirds of whom voted to approve the
LMA transaction. Limited partners who either do or do not want to undo the LMA transaction
do not share similar interests in the litigation, which could affect the different tactical decisions
made with regard to the case. See Guillory v. American Tobacco Co,, No. 97 C 8641, 2001 WL
290603, at *9 (N.D. Lil. Mar. 20, 2001). And each limited partner will be involved in extensive
individualized proceedings to determine causation, damages and reliance whether a class is
certified or not, See Fisher, 181 F.R.D. at 373 (little efficiency gained by certifying class on
liability only where prospective class members would still need to participate in “extensive
individualized proceedings regardless of whether we certify a class”).

On balance, plaintiffs have not shown that a class action is a superior method of resolving

their claims.

14



Illinois. The dispute in this casc centers around a 1999 deal that resulted in both the buy-out of
the limitcd partners’ interests in the partnership and the replacement of the old general partner
with anew general partner. Plaintiffs sucd the old and new general partners as well as several
related entities, alleging breach of fiduciary duty (Count 1), violation of the Tllinois Consumer
Fraud and Deceptive Business Practices Act (“ICFA”) (Count 2), breach of contract (Count 3),
breach of an implied covenant of good faith and fair dealing (Count 4), intentional interference
with contractual relations (Count 5), fraud (Count 6), and negligent misrepresentation (Count 7).

In this motion, plaintiffs move to certify a class consisting of all limited partners as of
February 23, 1999, or their successors in interest. Cmplt. 17; Pls. Mem., p. 1. Defendants
assert that plaintiffs have failed to meet the standards of Fed. R. Civ. P. 23(a) or (b). For the
reasons set forth below, the Court recommends that plaintiffs’ motion be denied.

BACKGROUND

In 1983, defendant Boston Financial Technology Group, Inc. (“Boston Financial”) set up
the Franklin Building Associates Limited Parmership (“Franklin Parmership”). At that time, the
Jranklin Partnership consisted of approximately 170 limited partners (including the two
plaintiffs) and the general partner Milk Street Residential Associates Limited Partnership (“Milk
Street”). The Franklin Partnership’s sole assct is a 90% interest in an entity that owns the
Onterie Center — a large residential and commercial building located between Ontario and Erie

streets in Chicago, Illinois. Cmplt. 42, 20, 21."

' The referenced citations are drawn from plaintiffs’ complaint against Milk Street

etal., No. 02 C 978, which is substantively identical to the allegations in their consolidated
complaint against Boston Financial ct al., No. 02 C 3436,

2



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

CARL BIRNBERG and JACOB MOSKOVIC, )
on behalf of themselves and aJl others similarly}
situated,

Plaintiffs,
vy,

MILK STREET RESIDENTIAL ASSOCIATES
LIMITED PARTNERSHIP, LEND LEASE
REAL ESTATE INVESTMENTS, INC.,
BOSTON FINANCIAL TECHNOLOGY
GROUP, INC., LAKE. MICHIGAN
ASSOCIATES LLC, LMA GP LLC, CLARK
ENTERPRISES, INC., and CLARK ONTERIE,
LLC,

Nos. 02 C 0978 and 02 C 3436
(Consolidated Proceedings)

Judge Blanche M. Manning

we eee ee we eee ewer

Defendants.

Magistrate Judge Nan R. Nolan

CARL BIRNBERG and JACOB MOSKOVIC,

on behalf of themselves and all others similarly
situated,

Plaintiffs,

ve

DOCKETep

BOSTON FINANCIAL GROUP, LIMITED i
AY 2 9 2003

PARTNERSHIP, and BOSTON FINANCTAL
GROUP, INC.,

wee ee eS SS SE SS

Defendants,

REPORT AND RECOMMENDATION
NAN R, NOLAN, Magistrate Judge:
Plaintiffs Carl Birnberg and Jacob Moskovic are former limited partners of a partnership

that owns a substantial interest in a large residential and commercial building in Chicago,



infra, p. 13 regatding choice of law. For example, a determination whether cach limited partner
suffered “huge tax liabilities” or other damages as a result of defendants’ alleged misconduct will
require an individual assessment of such issues as each limited partners’ particular tax
circumstances, the relative benefits to them of the IMA transaction versus the AIMCO deal, and
the reasons why they did or did not consent to the LMA transaction, Thus, plaintiffs have not
demonstrated that common issues predominate their claims.

Plaintiffs argue, however, that these individual issues can be addressed separately after
the liability phase is complete. See Arenson v. Whitehall Convalescent and Nursing Lome, Inc.,
164 F.R.D. 659, 666 (N.D. LIL. 1996) (“[i]n the event that it becomes necessary to adjudicate the
individual issues of either damages or reliance, the Court has several options available to it”),
Riordan, 113 F.R.D. at 65 (“[i]t is well established that individual issues of reliance do not
thwart class actions”); Zbrahim, 2000 WL 263987, at *6 (liability aspects of ICFA claim could
proceed as class action while the causation and damages portions were adjudicated as individual
actions). Common issues would in fact predominate with respect to the basic liability questions
alone, but the Court must still consider whether class certification is a superior method of
adjudicating this case. See Fisher v. Bristol-Myers Squibb Co., 181 F.R.D. 365, 372 (N.D. Ill.
1998) (“[tJhe Federal Rules give us the power to certify a class for the limited purpose of
resolving basic liability issues alone . . . but it remains to be considered whether doing so would

be a superior method of resolving the parties’ controversy”).

(fraud claim requires a showing that plaintiffs justifiably relied on a matcrial misrepresentation
and suffered resulting damage); Orix Credit Alliance, Ine. v, Taylor Machine Works, Inc., 125
F.3d 468, 475, n.2 (7" Cir. 1997) (citing Board of Education of City of Chicago v. A, C&S, Inc,
131 IIL.2d 428, 546 N.£.2d 580, 591 (1989)) (same showing of reliance required for negligent
misrepresentation claim).

12



CONCT.USION
For the reasons stated above, class certification is not appropriate in this case. There are
significant individual questions involved, and plaintiffs have not shown that they would be
adequate representatives or that class action is a superior method of adjudicating their claims.

Thus, the Court recommends that plaintiffs’ motion for class certification be denied.

Mov Ro dbo

‘NAN R. NOLAN
United States Magistrate Judge
Dated: May 28, 2003

15