The Docket - Lake County Bar Association - January 2019 by Town Square Publications, LLC

THE

DOCKET The Official Publication of the Lake County Bar Association • Vol. 26 No. 1 • January 2019

2018 YEAR IN REVIEW

CONFERENCE ROOM For meetings only. Seats 16 – 20 comfortably During business hours (8 am – 5 pm) • Member- Free • Non-Member $150/1st hour. $50/hour after • Non-Member, Not-for-Profit: $25/hour

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MEMBER CENTER “The Bar” Accommodates up to 100 people During business hours (8 am – 5 pm) Members (add $25/hour for after hour events) • Meeting only (individual or group, no food or beverages served: Free • Self-Service reception or party (provide own alcoholic beverages): $50 per hour • Hosted beer & wine reception or party (beer & wine provided by Association): $250/ 1st hour, $50/hour after Non-Members: (add $50/hour for after hour events) • Meeting only (individual or group, no food or beverages served): $50 per hour • Self-Service reception or party (provide own alcoholic beverages and food): $300/ 1st hour, $50/hour after • Hosted beer & wine reception or party – Not Available Non-Member, Not-for-Profit: (add $25/hour for after hour events) • Meeting only (individual or group, no food or beverages served): $25 per hour • Self-Service reception or party (provide own alcoholic beverages and food): $150/1st hour, $25/hour after • Hosted beer & wine reception or party – Not Available Association Committee Meetings (Conference Room or Member Center) Without beer & Wine - Free With Hosted Beer & Wine - $150 flat fee (for 5 – 15 people), $200 (over 15 people) Room rentals are based on availability. Rentals include use of A/V already in room (phone, TV, Speaker. WIFI). All rentals include free parking in our large, well-lit, 45 vehicle parking lot adjacent to the LCBA building.

Contact the LCBA Office at 847-224-3143 or info@lakebar.org

Contents THE DOCKET • Vol. 26, No. 1 • January 2019

FEATURES

LCBA EVENTS

8 An Offer We Must Refuse

IFC 2018 LCBA Office Rental Pricing 3 Real Estate Committee Conference 4 The Calendar of Events 7 LCBA Office Space 13 LCBA Holiday Party 21 25th Annual Family Law Conference 22 Lawyer Referral Service 25 Member Reception 28 Monthly Committee Meetings

BY ADAM WHITEMAN

14 What You and Your Clients Need to Know About Tax Planning and Tax Preparation

A publication of the

BY WAYNE SILVERMAN

18 “’I’ve Seen the Needle and the Damage Done.’ –Neil Young” BY HON. CHARLES D. JOHHNSON

300 Grand Avenue, Suite A Waukegan, Illinois 60085 (847) 244-3143 • Fax: (847) 244-8259 www.lakebar.org • info@lakebar.org THE DOCKET EDITORIAL COMMITTEE Jeffrey A. Berman,Co-Editor Hon. Charles D. Johnson,Co-Editor Jennifer C. Beeler Hon. Michael J. Fusz Deborah L. Goldberg Hon. Daniel L. Jasica Sarah A. Kahn Kevin K. McCormick Hon. Raymond J. McKoski Tracy M. Poulakidas Stephen J. Rice Neal A. Simon Hon. James K. Simonian Michael S. Strauss Rebecca J. Whitcombe Alex Zagor

1/8 Page 1/4 Page 1/2 Page Full Page Inside Front or Inside Back Cover

Back Cover

ONE ISSUE

6 ISSUES

2 President’s Page My Hope For This Year… BY BRIAN J. LEWIS, PRESIDENT

4 The Chief Judge’s Page The New Year BY CHIEF JUDGE JAY W. UKENA

6 Bar Foundation A Fresh Start, and an Opportunity, in a New Year BY JEFFREY A. BERMAN, PRESIDENT

24 The Meeting Minutes November 15, 2018 BY SHYAMA S. PARIKH

STAFF Dale Perrin Executive Director Jose Gonzalez Membership Coordinator

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COLUMNS

26 In the Director’s Chair A New Start BY DALE PERRIN

12 ISSUES

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Reproduction in whole or part without permission is prohibited. The opinions and positions stated in signed material are those of the authors and not necessarily those of the Association or its members. All submitted manuscripts are considered by the Editorial Board. All letters to the editor and articles are subject to editing. Publications of advertisements is not to be considered as an endorsement of any product or service advertised unless otherwise stated.

My Hope For This Year…

s we return to our offices in early 2019, I want to wish everyone a Happy New Year! May this year bring us health (without which we have nothing at all) and happiness. My hope this year is that we can be more compassionate to each other despite the pervasive, vitriolic attacks we see on social media (and seemingly everywhere else). We are a

2017-18 OFFICERS & DIRECTORS Brian J. Lewis President Stephen J. Rice First Vice President Patricia L. Cornell Second Vice President Joseph M. Fusz Treasurer Shyama S. Parikh Secretary Jennifer J. Howe Immediate Past President Tara R. Devine Torrie M. Newsome Hon. Christen L. Bishop Katharine S. Hatch David R. Del Re Thomas A. Pasquesi

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community of professionals, and those around us, from clients in our offices, to fellow shoppers at the grocery store, to workers at the bank or at a restaurant, to our children, look to us as examples. So even when we feel the urge to lash out from behind a keyboard or even face to face, we must resist. We must remember the ways of human decency and respect. Choosing not to fight fire with fire corrects inappropriate conduct. In those moments, I try to remember the prophetic words of my friend and author Brad Meltzer, who reminds us that, “Everyone you meet is fighting a battle you know nothing about. Be kind. Always.” Kindness was never more evident than at our holiday party in early December. As I looked around, there was an atmosphere of happiness and camaraderie in the packed room of more than 140 members in attendance. I saw our LCBA members smiling and enjoying each other’s company and stories. We talked about our families and our plans for the holidays. We toasted to good health and

The

President’s Page

paused to think about those in need of healing. We enjoyed delicious food and free drinks. Our new home at 300 Grand Avenue is blossoming into exactly what we first envisioned a decade ago – a warm, welcoming place to work, entertain, reunite and relax. Please don’t forget that the LCBA Headquarters is available for your firm’s meetings and events. You can host clients or opposing counsel in the Donald T. Morrison Member Center and show them what the LCBA is all about. I challenge you to find a more

BY BRIAN J. LEWIS PRESIDENT dignified, well-appointed, or sophisticated venue in Waukegan. Please make use of your LCBA Headquarters. I am excited for what this new year holds for us as an organization. Already on the calendar we have monthly member receptions, committee meetings and committee seminars. We have numerous community outreach projects planned as well. I am especially optimistic, though, for the opportunity to show the community around us what kindness, compassion and respect look like. Happy 2019 to everyone!

2019 REAL ESTATE COMMITTEE CONFERENCE February 22, 2019 7:30 A.M. - 4:00 P.M.

SCHEDULE OF EVENTS: Friday, Feb. 22, 2019 7:30 am - Continental Breakfast 8:00 am - 3 hours of CLE (8:00 am-11:30 am)

DoubleTree by Hilton Hotel Libertyville-Mundelein 510 E. Route 83, Mundelein, IL 60060

11:30 am - Lunch 12:30 pm - 3 hours of CLE (12:30 -pm-4:00 pm) 4:00 pm - Reception

________$125 per person ________$200 per person

STANDARD TUITION (paid after 2/1/19 and before 2/22/19) ________$200 per person ________$275 per person

LCBA Member: Non–Association Member: SEMINAR MATERIALS:

_______$25 per packet

Printed & Bound Seminar Materials: (Electronic copies included at no cost w/advance registration) PLEASE REGISTER (Non-Registerd, Walk-In Attendees will be charged 50% more at the Door!)

TOTAL TUITION $ ________

PRINT CLEARLY Name: ______________________________________________________________ ARDC # _____________________ Firm: _________________________________________ Address: __________________________________________ City: ___________________________________________ State: _______________________ ZIP: ________________ TEL: _________________________________ E-Mail: ____________________________________________________ Payment method: □ Check Enclosed □ AmEx □ VISA □ MasterCard □ Discover Card # ___________________________________________________________ Exp Date: ___________ CVC_______ Signature: ________________________________________________________________________________________

Return registration form to:

Lake County Bar Association 300 Grand Ave STE A Waukegan, IL 60085 TEL 847-244-3143 FAX January 847-244-8259 2019

The New Year

his time last year I began my term as Chief Judge and had 8

The

Calendar of Events January 1 New Year’s Holiday Office Closed

January 10 Family Law Committee Holiday Party, 5 pm January 15 LCBF Board Meeting @ LCBA Office, 4 pm January 17 LCBA Board Meeting @ LCBA Office, 12 pm January 18 Brown Bag CLE Lunch @ LCBF Unit C (New Maintenance Statute) by Michael Strauss & Nancy Shafer, 12 pm January 24 Member Reception @ LCBA Office, 4:30 pm, Hosted by Manning Silverman April 11-13 Family Law Conference, Scottsdale, AZ February 22 Real Estate Committee Conference with the NWSBA @ DoubleTree in Mundelein

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the honor of submitting my first Chief Judge’s Page to the Docket. Over the last year the Chief Judge’s Page has given me the opportunity to indulge my enthusiasm for all things historical and share my affection for Lake County. It has been an honor to serve as your Chief Judge over this past year, which has been a year of monumental change and progress for the 19th Judicial Circuit. As I discussed in my first article one year ago, New Years is a unique time in which we both look back on the past year’s accomplishments and challenges and forward to the opportunities and challenges that the new year brings. The year 2018 marked the end of downtown construction and the opening of the new Criminal Courts Tower. This new state-of-theart courthouse in the heart of Waukegan is the culmination of years of hard work and planning and is a testament of Lake County’s commitment to progress and to providing its citizens with access to justice. The moving of

The

Chief Judge’s Page most of the criminal court and administrative operations to the new facility, and the reorganization and expansion of the civil division throughout the existing buildings, with minimal disruption to court operations, was no small feat. As Chief, I was amazed and humbled by hard work and dedication of our administrative, information technology, maintenance and other staff, without whose herculean efforts this could never have happened. I was equally impressed and grateful for the hard work and commitment shown by our justice partners in the Circuit Clerk, Public Defender, States Attorney, Sheriff and County Administrator offices. The Lake County Bar Association and the private bar also play integral parts in assuring this smooth transition. 2018 also saw the addition of four new members to the Lake County judiciary with

BY CHIEF JUDGE JAY W. UKENA the swearing-in of Judges Steven DeRue, Jacqueline Melius, Ari Fisz and Reginald Mathews. Each one brings a wide breath of talent and experience to the bench that will enrich the 19th Judicial Circuit for years to come. And they will have big shoes to fill with the retirement of Judge Margaret (Meg) Marcouiller, who stepped down from the bench in December, after a remarkable professional career dedicated to public service. Judge Marcouiller is a graduate of Northwestern University and Loyola University of Chicago School of Law. She began her legal career by serving as an Assistant Illinois Attorney General and worked as a Staff Attorney for the Administrative Office of the Illinois Courts. Prior to her appointment to the bench in 2009, Meg served as the Chief Deputy for the Civil Division of the Lake County State’s Attorney’s Office. During her tenure as an

Associate Judge, Judge Marcouiller served in the Civil, Family, and Traffic & Misdemeanor Divisions. Meg distinguished herself during her assignment to Chancery court where she focused her keen intellect and compassion to resolving some of the most complex issues presented to our court system. She was appointed to the Faculty of the 2018 Judges Education Conference and she served as a Facilitator for the Supreme Court’s Judicial Performance Evaluation Program. She also served as a Topic Editor for the 2018 Illinois Judicial Benchbook on Mortgage Foreclosures. Meg will be missed by her colleagues and friends throughout the 19th Judicial Circuit

who wish her a happy and fulfilling retirement and congratulate her on a job well done. Finally, New Years is a traditional time for making personal resolutions and taking stock of our blessings. Some say this too has historical and religious origins. The Babylonians made promises to their gods at the start of each year for the return of moral objects and paid their debts. The Romans began each year by making promises to the God Janus for whom the month of January is named. In the medieval era, the knights took a “peacock vow” at the end of the Christmas season where each of them reaffirmed their commitment to chivalry. During Rosh Hashanah,

the Jewish New Year, “one is to reflect upon one’s wrong doing over the year and both seek and offer forgiveness”. The Methodist practices of New Year’s resolutions came in part from Lenten sacrifices. Regardless of origin or creed the overarching concept is one of reflection and self-improvement. This year, as we individually take stock of the year that has passed and the year that is to come, many of us will pledge to improve ourselves; to further our education, advance our career, improve finances, work on our physical wellbeing such as eating healthy food, losing weight and exercising more. Some of us may pledge to help the poor or become more

environmentally responsible. As you do so, I hope that you are surrounded by family, friends and loved ones. From myself and my family to you and yours, please have a safe and joyous New Year, and may 2019 bring you a year

Visit the LCBA Website: lakebar.org

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A Fresh Start, and an Opportunity, in a New Year “And now we welcome the new year, full of things that have never been”

BY JEFFREY A. BERMAN PRESIDENT

― Rainer Maria Rilke

y the time you read this column, the December holidays will be behind us and we will have officially turned Board of Trustees Jeffrey A. Berman President Carey J. Schiever Vice President Joann M. Fratianni Secretary Perry S. Smith Jr. Treasurer Melanie K. Rummel Immediate Past President Jennifer L. Ashley Nandia P. Black Patricia L. Cornell Douglas S. Dorando Hon. Fred Foreman (Ret.) Scott B. Gibson Kenneth J. Glick David J. Gordon Keith C. Grant Amy L. Lonergan Fredric B. Lesser Steven P. McCollum Michael G. Nerheim Mark B. Peavey Nicholas A. Riewer Hon. Henry C. Tonigan (Ret.) Hon. Joseph R. Waldeck (Ret.) Brian J. Wanca

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the page from 2018 to 2019. There’s just something positive and hopeful about starting a new year. One of the wonderful things about each new year is that it brings with it a sense of a new beginning, 365 days of untapped promise and possibility, like a fresh book with blank pages just waiting for us to fill them. The new year inevitably also brings with it a flood of resolutions. While the timing of these pledges is somewhat arbitrary and their results often short-lived, the symbolic importance of the new year and its seemingly infinite possibilities is undeniable. Where does this notion of self- and social refashioning come from? Is the concept of “new beginning” just a reassuring ideal, or is it something more? There was an article in

the New Yorker a few years back in which the author claimed that the idea of a “fresh start” is distinctly American: “It’s an appealing and very American notion — the fresh start, the clean slate, the second (or third, or sixth) act.”1 While in some sense this may be true, the concept of new beginning seems to be older and broader than the American conception of a clean slate. Indeed, the etymology of the word “begin” stems from a Germanic word meaning “to open” or “to open up.”2 That sense of opening up toward something new is embodied in the concept of a new beginning. 1

Jeff Shesol, Can You Reset A Presidency, the New Yorker, January 2, 2014 (available at https://www.newyorker.com/ news/news-desk/can-you-reset-a-presidency). 2 https://www.etymonline. com/word/begin.

A new beginning entails both a rupture with the past and a re-visioning of the future. In everyday usage, a new beginning usually is described as something like “turning over a new leaf”: a fundamental reorientation of one’s life, a departure from the previously chosen path, a change of course. The birth of a child symbolizes such a new beginning (i.e., Baby New Year). Other formative moments of a person’s life also contain aspects of new beginning. Some view the college experience is a good example of such a moment – an opportunity to remake oneself, to determine one’s future, and to start a life that is not necessarily determined by one’s prior circumstances. A team of researchers at the Wharton School recently examined what

they called “the fresh start effect,” which they defined as the energy and determination we feel when we’re able to “wipe the slate clean,” when they found that visits to a university fitness center spiked around turning points, like birthdays, the beginning of the semester, and the beginning of the week. To follow up on those observations, the researchers conducted a series of experiments to evaluate the impact of what they called “salient temporal landmarks,” and their work was later examined in an article by the Association for Psychological Science.3 In one of several experiments, the researchers asked participants to describe a goal they would like to pursue. They then prompted participants to imagine that they had just moved to a new apartment. Some were told that this was the first time they had moved since coming to this city nine years ago; others were told they had moved every year. All of the participants were asked how motivated they would be to pursue their goal, and how differently they felt from their past, imperfect selves. The researchers found that participants who imagined that this was the first time they had moved in nine years were more motivated to make progress on their goals and experienced more distance between their current and past 3 https://www.psychologicalscience.org/news/ minds-business/why-monday-is-the-best-day-for-setting-new-goals.html.

selves. Their conclusion – this fresh start phenomenon has the potential to help people overcome important willpower problems that often limit goal attainment. Their work certainly seems to support the conclusion that “new beginnings” can prompt us to better tackle personal goals. That’s likely because at that point we feel especially empowered to leave our past selves behind, and to embrace our “new” selves and their potential for success. In other words, the perception of a new beginning can provide a boost when motivation otherwise is flagging. All you really need to do, it seems, is recognize that it’s an opportunity to try again. So (you knew this was coming), as we turn the calendar to 2019, I would like to seize the moment to encourage everyone to make it one of your goals to support the Foundation. Through the Foundation, the Lake County bar is giving back to our communities and helping to fulfill our profession’s public service obligation. At this “new beginning” of 2019, please consider becoming more involved in the Foundation’s efforts. How can you help? Here are just a few examples of means to those ends: Contribute some of your time to support the Foundation. Please consider volunteering to serve on the Board or a Committee, or just participate in the Foundation’s efforts. And, of course, please attend and support the Foundation’s

events. We had an amazing Gala in November and raised significant funds for our principal beneficiary, Waukegan to College (more on that next month). That event could not have happened, let alone achieved such a level of success, without the participation of our committee members and countless volunteers, supporters and attendees. We can do more, but we need your help. Contribute financially to the Foundation. It’s simple. Just write a check. You can support the Foundation, generally, or sponsor Foundation events. You can join in a fundraising effort, or earmark cy pres funds to the Foundation. Whatever the source, those funds

are distributed to deserving recipients to advance justice and support our community. Just as they always will, lawyers see ways to change the world for good and are acting to make it so. Every day thousands of lawyers help people, through actions large and little, public and imperceptible. If you have supported the Foundation in the past, in whatever way, your help and contributions are greatly appreciated. And, either way, this new beginning, the start of 2019, is a great time to recognize that it’s an opportunity to try again. “We’re here together, so begin!” Johann Wolfgang von Goethe, Faust, Part One

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January 2019

An Offer We Must Refuse

The Case for Ending a Residential Condominium’s Right of First Refusal

BY ADAM WHITEMAN

he ability of a Condominium Association to step into the shoes of a prospective purchaser of one of its units through what is known as the “Right of First Refusal” is an ill-conceived anachronism that has no present utility, is an administrative waste of time and resources, and is a mine field of potential liability for the modern day real estate practitioner in the residential setting. It is time for a legislative fix. HISTORICAL BACKDROP The IICLE on Illinois Condominium Law explains that: The right of first refusal or a preemptive right has been enforceable in Illinois since Gale v. York Center Community Cooperative, Inc. 171 N.E.2d 30, 21 Ill.2d 86 (1960) in which the Illinois Supreme Court found that Adam this all-important right was not Whiteman maintains a an unreasonable restriction on law practice alienation. Initially an essential with concomponent of all documents used centrations for cooperative governance, it came on Real into greater use with the growth of Estate Law and Litigathe condominium form of housing.1 In Gale, the principal question was whether a co-operative housing associ-

1 IICLE Illinois Condominium Law §9.34, pg. 9-27.

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ation may partially restrain the alienability of its members’ property interests in order to maintain its existence as a cooperative enterprise. The cooperative was governed by a membership agreement which provided that when a member wishes to withdraw, they must give written notice of their intent to the board of directors. The association then has a twelve-month period in which to purchase the membership at any of the following prices, as determined by the association: (1) the selling price fixed in the notice; or (2) whatever price the member and the association agree on; or (3) the price determined by impartial appraisal. In deciding whether the co-op agreement constituted a “restraint on trade,” the court noted that such a restraint “may be sustained...when it is reasonably designed to attain or encourage accepted social or economic ends.”2

tion and is a Principal with the firm of Whiteman Borden, LLC in Chicago, IL.

2 Gale v. York Center Community Cooperative, Inc., 21 Ill.2d 86, 92 (1960).

The Gale court further stated that “the crucial inquiry should be directed at the utility of the restraint as compared with the injurious consequences that will flow from its enforcement.”3 The Court reasoned that “the law of property, like other areas of law, is not a mathematical science but takes shape at the direction of social and economic forces in an ever-changing society, and decisions should turn on these considerations.”4 Finally, the Court determined that “[t]he restrictions on transfer of a membership are reasonably necessary to the continued existence of the co-operative association.”5 The Court explained that “[i]n order for a contract to be binding, it must be definite and certain in all of its terms...It is sufficiently definite and certain, however, if the court is able from the terms and provisions thereof, under proper rules of construction and applicable rules of equity, to ascertain what the parties have agreed to.”6 The Court then determined that the cooperative housing agreement in question was sufficiently specific to satisfy its test of enforceability.

er from which a condominium’s right of first refusal is derived. I disagree. The provision itself does not create a right of first refusal. It simply states that the rule against perpetuities and rules regarding restraints on alienation cannot be used to defeat any of the provisions of the Act. Since a right of first refusal is not a “provision of the Act,” it is not protected or even invoked by this section. COOPERATIVE HOUSING VS. CONDOMINIUM PROPERTY I believe that legal practitioners were too quick to apply the Gale decision (which related only to cooperative housing arrangements) to the condominium living setting because of major differences in the overall financial structural differences between the two. The restriction on alienation inherent in a right of first refusal makes some sense in regard to the personal property rights in a cooperative living arrangement. But in today’s fast moving, highly regulated real estate market, the right of first refusal is an anachronism which no longer makes sense in regard to the real property rights inherent in condominium ownership. A person who owns a condominium has a deed to their unit which includes a right to use common areas shared by other units comprising the condominium association. As indicated above, the respective rights of the unit holder with regard to the association are set forth in the Illinois Condominium Property Act.8 A cooperative is quite a different animal. A person living in a cooperative has no deed in their name and there is no specific statute regulating cooperatives. According to Illinois case law:

Residential condominium

unit owners should have an absolute right to sell their

units without fear of their association interfering.

THE ILLINOIS CONDOMINIUM PROPERTY ACT “The affairs of a condominium association are controlled by the Condominium Property Act. The Condominium Property Act comprehensively regulates the creation and operation of Illinois condominium associations.”7 The Illinois Condominium Property Act became law in 1963. Interestingly, the Act contains no express provision granting to a condominium a right of first refusal. One would have expected explicit language addressing this issue if the legislature intended such a right in light of the Gale decision. However, the only provision found in the original Act that is remotely relevant is Par. 320 §20 which states:

a cooperative is somewhat of a ‘legal hybrid’ in that the stockholder possesses both stock and a lease, and the relationship between the tenant-shareholder and the owner-cooperative is largely determined by reading together the certificate of incorporation, stock offering prospectus, the stock subscription agreement, and the proprietary lease. The primary interest of every stockholder in such a corporation is the longterm propriety lease and the stock is incidental to such purpose and merely affords the practical means of combining an ownership interest with

It is expressly provided that the rule of property known as the rule against perpetuities and the rule of property known as the rule restricting unreasonable restraints on alienation shall not be applied to defeat any of the provisions of this Act. 3 4 5 6 7

Some may argue that this language is the pow-

Id. Id. at 93. Id. Id. at 94. Apple II Condominium Ass’n v. Worth Bank and Trust Co., 277 Ill.App.3d 345, 348 (1st Dist. 1995).

765 ILCS 605/1 et. seq.

January 2019

the method of sharing proportionately the assessments for maintenance and taxes.9 According to Casenotes Underwriters Bulletin, distributed by ATG, Unlike condominium ownership, the tenant-shareholders in a cooperative are financially interdependent. There is usually a single blanket mortgage covering the entire property and taxes are assessed against the entire property. Therefore, each member must pay monthly maintenance charges for the cooperative corporation to fulfill its continuing financial obligations to third parties. If one member fails to pay the monthly maintenance fees, the corporation must pay that member’s portion of the operating costs. Every member of the cooperative risks losing their respective unit if the corporation cannot pay the taxes or other debts. Consequently, potential purchasers may be required to disclose an extensive amount of financial information. Because of the risks associated with cooperative housing, prospective purchasers often prefer condominium ownership.10 In other words, a person can own a condominium with their own mortgage, but a person who owns a share in a cooperative living arrangement generally shares a mortgage with the other shareholders/tenants. Thus, the financial well-being of the co-op owner is a key factor in cooperative living arrangements. Stated another way, in general, an individual cooperative owner is exposed to greater financial risk than an individual condominium owner because the shared financial burdens in a cooperative are greater than the shared financial burdens in a condominium project. This is why it makes more sense for a cooperative to have a right of first refusal when a shareholder/tenant is attempting to sell their ownership interest. If the rest of the cooperative owners are not satisfied with the financial health of a prospective owner, they can pony up, exercise their right of first refusal, and acquire the departing shareholder/tenant’s interest. The co-op owners can then search for a more fitting purchaser if they wish. PROBLEMS CREATED BY THE RIGHT OF FIRST REFUSAL FOR A CONDOMINIUM SALE I think it was creative lawyering to rely upon the Gale decision to insert right of first refusal language in a condominium declaration. Indeed, a leading practitioner in the field, Jordan Shifrin, suggested in 1986 that the protections 9

Sinnissippi Apartments, Inc. v. Hubbard, 114 Ill.App.3d 151, 156-157 (2d Dist. 1983). 10 Attorneys Title Guaranty Fund, Inc., Casenotes Underwriters’ Bulletin, https://www.atgf.com/tools-publications/pubs/coopera tive-housing.

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of the right of first refusal may be an illusion noting that “it is practically unenforceable and in all likelihood should be automatically waived in most instances.”11 Mr. Shifrin cites the case of Wolinsky v. Kadison,12 for the proposition that “if a right of first refusal is exercised so that a prospective purchaser is unable to purchase a unit because of his or her race, religion, sex, sexual preference, marital status or national origin, the ordinance [i.e. the antidiscrimination provision of the City of Chicago Condominium Ordinance] has been violated.” Mr. Shifrin then explains that “Clearly, associations are now being held accountable for their actions and exercise of the preemptive right can no longer be arbitrarily mandated by a board of directors without a showing of good cause.” 13 Similarly, in Phillips v. Hunter Trails Community Association, a homeowner’s association was ordered to pay actual and punitive damages due to an exercise of a right of first refusal in a racially discriminatory manner.14 The IICLE on Illinois Condominium Law writes: Phillips, coupled with a shortage of mortgage money in the early 1980s, was essentially the death knell for this type of provision as an option. VA and FHA also frowned on this restriction as imposing an unfair burden on open housing and frequently rejected loan applications made for properties that had a right of first refusal. The provision still exists in the older documents, but rarely in any written since.15 THE RIGHT OF FIRST REFUSAL HAS REFUSED TO DIE If, as predicted by the authorities above, the 1980s marked the death knell for the right of first refusal, I am forced to ask my fellow practitioners why it is that we are still required, thirty years later, to require a waiver of the right of first refusal in virtually every single residential condominium transaction? I would say that even when the condominium declaration does not mention a right of first refusal, the title companies still require a waiver “just in case”. THE PERSISTENCE OF THE EXISTENCE OF THE RIGHT OF FIRST REFUSAL HAS CAUSED TROUBLE AND CONSTERNATION In my over 20 years of experience, I only encountered a single instance of a condominium’s attempted exercise of a right of first refusal, and this matter came to my attention as a litigator where I successfully obtained 11 Jordan Shifrin, First Right of Refusal - Protection or Illusion, 1986 Ill. Bar J. 398. 12 114 Ill.App.3d 527 (1st Dist. 1983). 13 1986 Ill. Bar J. at 400. 14 685 F.2d 184 (7th Cir. 1982). 15 IICLE Condominium Law, Sec. 9.42.

compensation for my client in the settlement of a legal malpractice case against her prior real estate lawyer. My client had listed her condominium unit for sale and found a buyer. She was then told by her condominium association that they wished to exercise their right of first refusal. My client’s former attorney counseled her to sell her condominium unit to the condominium association, and he told her not to tell the current buyer about this decision in case the association was not able to close. While the first buyer thought they were still under contract, my client’s attorney coordinated a sale to the association. After the sale to the association, the initial buyer sued claiming (1) that they were never even informed that the sale to the association was taking place and (2) that the subject condominium declaration did not actually contain a right of first refusal. This case led to a malpractice claim against my client’s former attorney who handled her closing. The matter was ultimately resolved by the attorney’s malpractice insurance carrier. In researching the matter, I was surprised that there was so little guidance in the literature, case law, or statutes about the procedures and ethical obligations an attorney must follow when an association exercises a right of first refusal. The case revealed to me the surfeit of problems faced by an attorney presented with the purported exercise of a right of first refusal. WHAT DOES CONDOMINIUM DECLARATION SAY? The attorney must carefully review the Condominium Declaration to determine if the association actually has a right of first refusal. If there is no empowering language in the Condominium Declaration, then there is no right of first refusal. Thus, “a board of managers may not take any action that is beyond the authority granted it under the condominium instruments and the Condominium Property Act.” 16 The problem is that the language in the Condominium Declaration is not always so clear and can require the interpretation of vague and imprecise language. In the malpractice case I handled, the condominium bylaws stated that the Association had a right of first option as detailed in paragraph xyz of the Condominium Declaration. However, upon review, the Condominium Declaration did not contain a paragraph xyz. The drafter forgot to draft right of first refusal language in the actual Declaration. I moved for a summary determination of this single fact, i.e., that that Condominium Declaration in question did not empower the condominium to exercise a right of first refusal. The court agreed. DEMAND 22.1 LETTER This is a reason why buyer attorneys should demand 16

Board of Directors of 175 East Delaware Place Homeowners Ass’n v. Hinojosa, 287 Ill.App.3d 886, 890 (1st Dist. 1997) (quoting 765 ILCS 605/18.4, Historical & Practice Notes, at 129 (West 1993).

responses to 22.1 letters17 as soon as possible after contracting, and they should demand that the letter address the existence and exercise of a right of first refusal. INFORM ALL PARTIES, THEIR ATTORNEYS, BUYER’S LENDER AND THE TITLE COMPANY If a right of first refusal is asserted, there is then the problem of “now what?”. In my view, everyone involved in the transaction must immediately be informed that the condominium is exercising its right of first refusal. This means the lender, the agents, and most importantly the buyer’s attorney. All parties involved in the transaction must be informed that there is a new buyer on the transaction. The reasons for this are plentiful. First, it is not fair to string a buyer along thinking they are under contract and preparing to buy a unit that eventually will be sold to someone else. Buyers incur lender costs, appraisal fees, moving fees, attorney fees, etc., in anticipation of a closing. If the condominium association will be purchasing the unit, the buyers have a right to know so they can back out of the transaction without incurring additional financial expenditures. The same is true for the buyers’ lender. Why should they continue forward through the underwriting process if the sale will never take place? In fact, they probably will cancel the loan application process if they are informed that the association has asserted the right of first refusal. The same is true for the buyers’ attorney and real estate agent. They are continuing to monitor the property inspection and closing process. They should not be required to do this if the condominium will be purchasing the unit. Similarly, the real estate agent should be given fair opportunity to know in advance that they might not earn a commission if the condominium ends up being the purchaser rather than the agent’s buying client. Finally, the seller’s title company will need to know who the new buyer and lender are for proper title to issue. DEMAND FULLY EXECUTED CONTRACT FROM THE CONDOMINIUM ASSOCIATION If an attorney receives a letter from a condo association claiming to exercise a right of first refusal, I think the proper response is to demand a formal letter from the association accompanied by a fully executed contract or other such form which would contractually bind the association to the purchase. I would say a fully executed resolution from the condo board/membership would also be required along with whatever proof of funds or earnest money requirements existed for the initial buyer. CANCEL THE CONTRACT AND RETURN THE BUYER’S EARNEST MONEY In my view, the exercise of the right of first refusal by the condominium is, by its very nature, a new contract 17 See 765 ILCS 605 22.1.

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with a different buyer on the same terms and conditions as the previous buyer. Therefore, the previous contract with the initial buyer must be cancelled and the earnest money from that buyer must be returned. If the prior contract is not cancelled, then the seller would effectively be obligated to sell under two different contracts to two different buyers, i.e., the initial buyer, and the subsequent condo buyer. One of these contracts must be cancelled. ADDITIONAL THOUGHTS AND ISSUES In my view, no two contracts can ever be identical if they involve two different buyers. This is because everyone has different financial circumstances. A condominium can take over a contract of another buyer using a right of first refusal, but now the seller has new risks associated with a buyer (i.e., the condominium) with whom they did not originally intend to contract. This means a seller is forced to accept risks for which they did not contract. A right of first refusal can also be a source of mischief by the condominium. For example, a condo association could continuously delay a sale by exercising its rejection of the condition of the property by way of inspection. The condo could thereby harass the seller or even cause a price decrease by interfering with prospective sales. A seller might purposely delay requesting the 22.1 letter until the contingency periods are expired to prevent any delays by the condo. But this now seems unfair to the prospective buyer who has spent time and resources with inspections and loan applications. The questions of inspection and mortgage contingencies can complicate matters. Does the condominium simply step into the exact same contract as the prospective

buyer? If the inspection period under the main contract has passed, does the condominium have the right to demand another inspection? The same goes for the mortgage contingency. Thus, can the association assert a right of first refusal only to back out of the deal if they are not satisfied with the inspection or they do not get a mortgage commitment? Such a delay could spell disaster for a seller who is facing foreclosure or short sale time lines. In light of the power of the condominium association to completely destroy a seller’s transaction, I don’t believe they should be given the same rights as the prospective buyer they are replacing. In my view, since the association is essentially intervening in the deal, I would argue they would not have a right to conduct any inspection or benefit from a mortgage contingency. I think the association should be required to accept the unit “As Is” and provide proof of funds. ABOLISH THE RIGHT OF FIRST REFUSAL IN ILLINOIS According to Gale, “restraints on alienation are void unless reasonably designed to attain or encourage accepted social or economic ends.”18 In my view, the right of first refusal constitutes a restraint on alienation that is not reasonably designed to attain or encourage accepted social or economic ends. The discussion above reveals that the right of first refusal (1) arose out of questionable legal parentage, (2) is extremely difficult to exercise from a practical perspective, (3) can be a source of mischief and harassment by a condo association against a unit owner, (4) can cause irreparable financial harm to a condo owner who is trying to sell their unit, and (5) creates a real risk of malpractice against attorneys involved in trying to carry them out. Certainly, there are no acceptable social ends in preventing a condo unit owner from selling their unit. This has been made certain by the Wolinsky v. Kadison19 decision which would prevent exercising a right of first refusal for discriminatory purposes. Likewise, the reality is that there are no economic ends in preventing such a sale. Condominiums have the right to evict unit owners who are not paying their association dues and they can rent said units to make up for the shortfall. Let us end this fiction. Residential condominium unit owners should have an absolute right to sell their units without fear of their association interfering. Let us follow the example of other states such as New Jersey which passed a law generally declaring that no contract for the sale of a condominium unit shall contain a clause or provision affording an association the right of first refusal. In my view, the law should be both proactive and retroactive.

18 Gale, 21 Ill.2d at 93. 19 114 Ill.App.3d 527 (1st Dist. 1988).

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DECEMBER 7, 2018

January 2019

What You and Your Clients Need to Know About Tax Planning and Tax Preparation

BY WAYNE SILVERMAN

he Tax Cuts and Jobs Act of 2017 provides many opportunities for 2018 Tax Preparation and 2019 Tax Planning. One of the most advantageous opportunities is the new qualified business income deduction. If you are a sole proprietor, a partner in a partnership, a member in an LLC taxed as a partnership, or a shareholder in an S corporation, you may be entitled to a deduction for qualified business income for tax years beginning after December 31, 2017, and before January 1, 2026. Trusts and estates are also eligible for this deduction.

While there are important restrictions to taking this deduction, the amount of the deduction is generally 20 percent of qualifying business income from a qualified trade or business. A qualified trade or business means any trade or business other than (1) a specified service trade or business, or (2) the trade or business of being an employee. A â&#x20AC;&#x153;specified service trade or businessâ&#x20AC;? is defined as any trade or business involving the performance of services in the Wayne E. fields of health, law, accounting, acSilverman, tuarial science, performing arts, conCPA is a sulting, athletics, financial services, founding brokerage services, including investshareholder in Manning ing and investment management, Silverman & trading, or dealing in securities, Company in partnership interests, or commodiLincolnshire, ties, and any trade or business where Illinois. the principal asset of such trade or business is the reputation or skill of

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one or more of its employees. Engineering and architecture services are specifically excluded from the definition of a specified service trade or business. However, there is a special rule which allows you to take this deduction even if you have a specified service trade or business. Under that rule, the provision disqualifying such businesses from being considered a qualified trade or business for purposes of the qualified business income deduction does not apply to individuals with taxable income of less than $157,500 ($315,000 for joint filers). After an individual reaches the threshold amount, the restriction is phased in over a range of $50,000 in taxable income ($100,000 for joint filers). Thus, if your income falls within the range, you are allowed a partial deduction. Once the end of the range is reached,

the deduction is completely disallowed. For purposes of the deduction, items are treated as qualified items of income, gain, deduction, and loss only to the extent they are effectively connected with the conduct of a trade or business within the United States. In calculating the deduction, qualified business income means the net amount of qualified items of income, gain, deduction, and loss with respect to the qualified trade or business of the taxpayer. Qualified business income does not include any amount paid by an S corporation that is treated as reasonable compensation of the taxpayer, or any guaranteed payment (or other payment) to a partner in a partnership for services rendered with respect to the trade or business. Qualified items do not include specified investment-related income, deductions, or losses, such as capital gains and losses, dividends and dividend equivalents, interest income other than that which is properly allocable to a trade or business, and similar items. If the net amount of qualified business income from all qualified trades or businesses during the tax year is a loss, it is carried forward as a loss from a qualified trade or business to the next tax year (and reduces the qualified business income for that year). The deductible amount for each qualified trade or business is the lesser of: (1) 20 percent of the taxpayer’s qualified business income with respect to the trade or business; or (2) the greater of: (a) 50 percent of the W-2 wages with respect to the trade or business, or (b) the sum of 25 percent of the W-2 wages with respect to the trade or business and 2.5 percent of the unadjusted basis, immediately after acquisition, of all qualified property (generally all depreciable property still within its depreciable period at the end of the tax year). The W-2 wage limitation does not apply to individuals with taxable income of less than $157,500 ($315,000 for joint filers). After an individual reaches the threshold amount, the W-2 limitation is phased in over a range of $50,000 in taxable income ($100,000 for joint filers). In the event a taxpayer is slightly over the limits for the qualified business income deduction and wants to qualify, I recommend examining the entities retirement plans and fringe benefits. Benefits are very attractive to employees. If you haven’t done so already, you may want to consider using benefits rather than higher wages to attract employees. While your business is not required to have a retirement plan, there are many advantages to having one. By starting a retirement

savings plan, you not only help your employees save for the future, you can also use such a plan to attract and retain qualified employees. Retaining employees longer can impact your bottom line as well by reducing training costs. In addition, as a business owner, you can take advantage of the plan yourself, and so can your spouse. If your spouse is not currently on the payroll, you may want to consider adding him or her and paying a salary up to the maximum amount that can be deferred into a retirement plan. So, for example, if your spouse is 50 years old or over and receives a salary of $25,000 in 2019, all of it could go into a 401(k), leaving your spouse with a retirement account but no taxable income. Plans like defined benefit plans and cash balance plans may allow entities to deduct hundreds of thousands of dollars and may help owners fund their retirement. By offering a retirement plan, you also generate tax savings to your business because employer contributions are deductible and the assets in the retirement plan grow tax-free. Additionally, a tax credit is available to certain small employers for the costs of starting a retirement plan. Another benefit of the new tax law is that it increases the depreciation limitations that apply to certain “listed” property such as vehicles with a gross unloaded weight of 6,000 lbs. or more (known as “luxury” automobiles). For luxury automobiles placed in service after 2017, an additional $8,000 deduction is available, thus making the write-off for the first year $18,000. The deduction is $16,000 for the second year, $9,600 for the third year, and $5,760 for the fourth and later years in the recovery period. In addition, computer or peripheral equipment has been removed from the definition of listed property, which means that such property is not subject to the heightened substantiation requirements that previously applied. Expenses relating to business vehicles can add up to major deductions. If your business could use a large passenger vehicle, consider purchasing a sport utility vehicle weighing more than 6,000 pounds. Vehicles under that weight limit are considered listed property and deductions are more limited. However, if the vehicle is more than 6,000 pounds, up to $25,000 of the cost of the vehicle can be immediately expensed. Vehicle expense deductions are generally calculated using one of two methods: the standard mileage rate method or the actual expense method. If the standard mileage rate is used, parking fees and tolls incurred for business purposes can be added to the total amount deducted.

You may want to

consider using benefits

rather than higher wages to attract employees.

January 2019

Since the IRS tends to focus on vehicle expenses in an audit and disallow them if they are not properly substantiated, you should ensure that the following are part of your business’s tax records with respect to each vehicle used in the business: (1) the amount of each separate expense with respect to the vehicle (e.g., the cost of purchase or lease, the cost of repairs and maintenance); (2) the amount of mileage for each business or investment use and the total miles for the tax period; (3) the date of the expenditure; and (4) the business purpose for the expenditure. The following are considered adequate for substantiating such expenses: (1) records such as a notebook, diary, log, statement of expense, or trip sheets; and (2) documentary evidence such as receipts, canceled checks, bills, or similar evidence. Records are considered adequate to substantiate the element of a vehicle expense only if they are prepared or maintained in such a manner that each recording of an element of the expense is made at or near the time the expense is incurred. Asset additions can also help a taxpayer reduce income and qualify for the qualified business income deduction. For 2018, businesses can write off up to $1,000,000 (adjusted for inflation) of qualifying property under Section 179. The theory is that the money a business saves on taxes, as a result of deducting the full amount of equipment and other business property,

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can be reinvested back into the business. Additionally, writing off an asset in the year it is purchased, saves you the time and money it takes to keep track of the remaining basis of an asset after its yearly depreciation. The $1,000,000 amount is reduced (but not below zero) by the amount by which the cost of the qualifying property placed in service during the tax year exceeds $2,500,000. In addition, the definition of property that qualifies for the Section 179 deduction has been expanded to include certain depreciable tangible personal property used predominantly to furnish lodging or in connection with furnishing lodging, as well as any of the following improvements to nonresidential real property: roofs; heating, ventilation, and air-conditioning; fire protection and alarm systems; and security systems. The tax law extended and modified the additional first-year (i.e., “bonus”) depreciation deduction, which had generally been scheduled to end in 2019. An enhanced bonus depreciation deduction is now available, generally, through 2026. Under the new rules, the 50-percent additional depreciation allowance that was previously allowed is increased to 100 percent for property placed in service after September 27, 2017, and before January 1, 2023, as well as for specified plants planted or grafted after September 27, 2017, and before January 1, 2023. These deadlines are extended for certain longer production period property and certain aircraft. Another new provision removes the requirement that, in order to qualify for bonus depreciation, the original use of qualified property must begin with the taxpayer. Thus, the bonus depreciation deduction applies to purchases of used as well as new items. The new tax law also expands the definition of qualified property eligible for bonus depreciation to include qualified film, television and live theatrical productions, effective for productions placed in service before January 1, 2023. On the detrimental side, the new tax law eliminated business deductions for entertainment. As a result, no deduction is allowed with respect to: (1) an activity generally considered to be entertainment, amusement or recreation; (2) membership dues with respect to any club organized for business, pleasure, recreation or other social purposes; or (3) a facility or portion thereof used in connection with any of the above items. Under prior law, there was an exception to this rule for entertainment, amusement, or recreation directly related to (or, in certain cases, associated with) the active conduct of a trade or business. This is no longer the case. In addition, no deduction is allowed for expenses associated with providing any qualified transportation fringe benefits to your employees, except as necessary for ensuring the safety of an employee, including any expense incurred for providing transportation (or any payment or reimbursement) for commuting between the employee’s residence and place of employment.

A business may still generally deduct 50 percent of the food and beverage expenses associated with operating their trade or business (e.g., meals consumed by employees during work travel). If meals are combined with entertainment, the meal portion needs to be separately stated in order for the business to deduct the meal expense. For individual tax returns, two of the most significant changes are the repeal of the personal exemption deductions and the increase in the standard deduction amounts. The standard deduction amounts are almost twice what they were in 2017: $24,000 for joint filers and surviving spouses, $18,000 for heads of household and $12,000 for single individuals and those who are married but filing separately. Additional amounts for the elderly and blind are also available. Because the standard deduction is generally claimed only when it exceeds available itemized deductions, the increase in the standard deduction will not benefit you if you itemize deductions. The repeal of the personal exemption deductions, by contrast, will affect you whether you itemize or not. To compensate for the repealed exemptions for dependents, the new law increased the child tax credit from the 2017 amount of $1,000 (which was fully refundable) to $2,000 ($1,400 is refundable). The modified adjusted gross income threshold where the credit phases out has been increased to $400,000 for joint filers and $200,000 for all others (up from $230,000 and $115,000, respectively). The maximum age for a child to be eligible for the credit remains 16 (at the end of the tax year). In addition, a $500 nonrefundable tax credit for dependent children over age 16, and all other dependents, is also available beginning in 2018. Most families with non-child dependents will lose some ground here, as the $500 credit will generally be less valuable than the $4,150 exemption deduction it replaces. Other significant changes as a result of the new tax law include the elimination of many expenses that were previously deductible and new limitations on other expenses, particularly the $10,000 limitation on the deduction of state and local income and property taxes. This limitation will effect many of us in Lake County, Illinois. The mortgage interest deduction on acquisition indebtedness (e.g., mortgages) of more than $750,000 obtained after December 14, 2017, is limited to the portion of the interest allocable to $750,000 ($375,000 in the case of married taxpayers filing separately). In the case of acquisition indebtedness incurred before December 15, 2017, the limitation is the same as it was under prior law: $1,000,000 ($500,000 in the case of married taxpayers filing separately). Additionally, no deduction is allowed for interest paid on home equity indebtedness. However, to the extent the debt is used for certain purposes, the interest on the debt may still be deductible. If you deducted miscellaneous itemized expenses in prior years, such deductions are no longer available for 2018. The miscellaneous itemized expense deduction has

been eliminated for tax years 2018 through 2025. The biggest benefit to most individuals is the reduction in income tax rates. While the new law keeps the same number of tax brackets for individuals as there were in 2017, many tax rates are two to three percentage points lower than prior years. The top rate is reduced from 39.6 percent to 37 percent and kicks in at higher taxable income levels - $600,000 of taxable income for joint filers, $300,000 for married taxpayers filing separately, and $500,000 for all other individual taxpayers. The 2018 tax rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%, compared with the 2017 tax rates of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. However, while applicable tax rates at any given level of income have generally gone down by two to three points, some individuals will see an increase in taxes due to the tax brackets at which the rates apply. For example, the tax rate for single taxpayers with taxable income between $200,000 and $400,000 goes from 33 percent to 35 percent (head of household filers face a similar jump, but at a slightly different breakpoint). However, high-income taxpayers are also subject to a 3.8 percent net investment income tax and/or the .9 percent Medicare surtax. There were no changes made to these taxes in last yearâ&#x20AC;&#x2122;s tax overhaul. In addition, the maximum tax rates on net capital gain and qualified dividends are the same in 2018 as they were in 2017.

January 2019

“’I’ve Seen the Needle and the Damage Done.’–Neil Young”

BY HON. CHARLES D. JOHHNSON

t about 11 a.m. on September 14, 2015, Ahmet Gocmen was found behind the wheel of his car on Route 52 in Will County by Shorewood Police Officer Adam Beaty. The car was partially off the pavement, in park, with the engine running. Mr. Gocmen was semi-conscious, unable to correctly identify where he was traveling, and “tired and lethargic,” according to Officer Beaty. After Mr. Gocmen was removed from the scene by paramedics, Officer Beaty observed half of a Red Bull can on the passenger side of the vehicle with burn marks on the interior of the can and brown residue on the outside bottom of the can. Officer Beaty performed a “NARK swipe” test of the residue, which turned up positive for the presence of opiates. The officer Hon. Charles also saw an uncapped, used hypoD. Johnson dermic syringe on the passenger seat, has been an and he found Mr. Gocmen’s wallet in Associate Judge for the the center console, which contained 19th Judicial a plastic bag with a brown, granular Circuit since 1 substance in it. Before leaving the 2005. He was scene, the paramedics advised Officer an assistant Beaty that Defendant was sweating, Lake County State’s had pinpoint pupils, had a rapid heart Attorney from rate of 144 beats per minute, and was 1

At this point, it would seem appropriate to begin referring to Mr. Gocmen as “Defendant.”

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drifting in and out of consciousness; he also had a “fresh track mark” on his arm. Defendant was ultimately charged with Driving Under the Influence of Drugs (625 ILCS 5/11501(a)(4)) and his driver’s license was suspended for his failure to submit to chemical testing, pursuant to 625 ILCS 5/11-501.1(e). Defendant filed a Petition to Rescind the summary suspension of his driving privileges, alleging that the arresting officer lacked reasonable grounds to believe that he was driving a motor vehicle while under the influence of drugs. At the hearing on his Petition, Defendant called Officer Beaty, who testified to all of the facts set forth above. Additionally, he testified that he had been a police officer for 1990 to 1994, two years, and had received training and a local prosecutor from 1994 to in DUI/alcohol detection, but had no 2005. He is currently assigned to the Criminal Division.

specific DUI/drug detection training.2 Defense rested after Officer Beaty’s testimony, and the Court denied the State’s Motion for Directed Finding. When the State presented no evidence, the Trial Court granted Defendant’s Petition, specifically finding that a showing of drug intoxication “can’t be based purely on lay testimony.”3 In reversing the Trial Court’s finding, (which was affirmed by the Appellate Court,4) the Supreme Court relied upon two well established cases: People v. Stout5 and People v. Shelton.6 These two cases held that while a lay person can testify regarding alcohol intoxication, “the effects of drugs are not commonly known, and training and experience are necessary to understand their effects on people.”7 In People v Gocmen,8 the Illinois Supreme Court has now held that, examining the totality of the circumstances, a reasonably cautious person can reach a conclusion that a person may be under the influence of drugs, even in the absence of expert testimony.910 In reaching this conclusion, the Supreme Court examined both the Stout and Shelton decisions in detail. In Stout, an officer stopped a vehicle for a traffic violation, and, according to his testimony at a hearing on the Defendant’s Motion to Suppress, smelled an odor of burnt cannabis. The Trial Court granted the Motion to Suppress, finding that the officer’s uncorroborated testimony that he smelled cannabis was facially insufficient to support probable cause and the Appellate Court affirmed.11 The Supreme Court reversed and remanded, stating that the need to consider the officer’s training and experience in determining if his testimony is sufficient: “What constitutes probable cause for searches and seizures must be determined from the standpoint of the arresting officer, with his skill and knowledge, rather than from the standpoint of the average citizen under similar circumstances.”12 The Stout court went on to say: “Just as this court has never defined the quantum of knowledge necessary for the admissibility of expert witness testimony, this court will not bite at the defendant’s lure to define the exact number of training hours or employment

years necessary to render an officer’s belief reliable.”13 In Shelton,14 the defendant was convicted of the offense of Driving Under the Influence of Drugs. At trial, the arresting officer testified that he had little experience dealing with drug-influenced persons. The Appellate Court reversed the conviction, in part because it found that the State had failed to lay a proper foundation for the officer’s opinion that Shelton was under the influence of drugs at time of his arrest.15 The Appellate Court based its ruling in part on the arresting officer’s testimony, but also on the prior case of People v. Jacquith.16 In Jacquith, the Appellate Court, like the Appellate Court in Shelton, reversed a trial court verdict for the offense of Driving Under the Combined Influence of Alcohol and Drugs because the arresting officer lacked sufficient experience in dealing with drug-influenced persons, and therefore his opinion that defendant Jacquith was, in fact, under the influence of drugs was also insufficient. The Jacquith Court examined cases from other jurisdictions dealing with the question of police officers’ competency to render an opinion on the effects of drug intoxication, and a quote from one of those cases may in fact have given rise to the perceived need for expert testimony in all such cases: “The testimony of a police officer who has been qualified by the court as an expert may well be sufficient.” 17 The Supreme Court holding in Gocman changes this landscape. As can be seen, all of the above issues turn on

The question now becomes whether an officer is

credible in reaching an opinion of drug intoxication.

13 14 15 16 17

Id. @ 87 303 Ill. App. 3d 915 Id. @ 926 129 Ill. App. 3d 107 Id. @ 114; “The officer ‘would have to be qualified by the court as an expert in order to reach such a conclusion.’” People v. Workman, 312 Ill. App. 3d at 310.

Ay, there’s the rub. Hamlet, III.i.64 People v. Gocmen, 2018 IL 122388, ¶13 2017 IL App (3d) 160025 106 Ill. 2d 77 (1985) 303 Ill. App. 3d 915 (1999) People v. Shelton, 303 Ill. App. 3d at 925 2018 IL 122388, opinion filed Sept. 20, 2018 It is worth mentioning that the specific ruling only dealt with a finding of probable cause for Gocmen’s arrest; more on this later. 10 The reader may also pause here to lament the societal conditions that may have led to this ruling. 11 106 Ill 2d @ 82 12 Id. @ 86, emphasis added 2 3 4 5 6 7 8 9

January 2019

the question of the officer’s credibility in reaching his probable cause determination. The Gocman Court considered the trial and appellate court holdings which stated “categorically that a police officer could not opine as to whether a motorist was under the influence of drugs without being qualified as an expert witness,” and ruled rather clearly: “we reject this conclusion.”18 The Court differentiated its facts from People v McKown,19 which held that a Horizontal Gaze Nystagmus test was so scientific that expert testimony (of a “properly trained officer”20) is necessary for the Court to consider the evidence. In contrast, Officer Beaty’s conclusion that Gocmen was under the influence of drugs “was not based on scientific, technical or specialized knowledge that required specialized training or experience.”21 Thus, the question now becomes whether an officer is credible in reaching an opinion of drug intoxication, even without being qualified as an expert witness. The new, post-Gocmen rule holds that while a trained drug-recognition expert may certainly be more credible in testifying on the effects of drugs on the human body, there is no requirement that an expert be presented in every such case.22 Several additional aspects of Gocmen also merit discussion: first, the specific decision is likely limited to the 2018 IL 122388, ¶38 emphasis added 236 Ill.2d 278 (2010) Id. @ 306 In fact, the Court stated tautologically that “there is no question that the defendant was impaired.” 2018 IL 122388, ¶37 22 Id. ¶34 18 19 20 21

question of probable cause.23 By its nature, probable cause determinations may rely on hearsay, such as the information Officer Beaty received from the paramedics regarding Gocmen’s physical symptoms.24 It is clear that additional evidence would be necessary to satisfy the burden of proof at trial. Secondly, the particular procedural posture of the case is also of relevance. As indicated earlier, Defendant called the Police Officer in support of his Summary Suspension petition and then rested; the opinion notes that the only evidence of diabetes (as it relates to the presence of the syringe, a fact which the Appellate Court relied on extensively in its affirmance of the trial court’s decision25) is something that Gocmen told the officer.26 Defense practitioners would do well to consider this section of the opinion in presenting arguments at Summary Suspension hearings; it seems clear that the mere fact that the Defendant told the officer that he was diabetic, without corroboration either through evidence or testimony at the hearing, will be insufficient to refute otherwise-sufficient evidence of probable cause.27 Finally, it appears that the Supreme Court engaged in a fair amount of independent fact finding in reaching its decision; for instance, at ¶45, the opinion refers to an online article regarding NARK Presumptive Drug Tests and their proper use. Similarly, at ¶51, the Supreme Court goes so far as to say that the Appellate Court is “incorrect” about “common knowledge” notice of how insulin is properly injected. The opinion states: “(a)bsent common knowledge, (the trial and appellate courts) lacked any evidentiary basis for this conclusion.”28 Footnote 2 then cites to an internet resource on the question of how insulin is properly injected. The Court even goes so far as to say: “If not a matter of common knowledge, this information is readily available,” before citing the internet article. Ordinarily, Judges are to refrain from conducting independent research of factual issues in cases pending before them, with the exception of Judicial Notice,29 which does not appear to apply in this case. The author wonders whether the appearance of such internet research in a reviewing court opinion presages an expanded use of such information in cases generally.30 So in summary, lots of stuff going on with Gocmen. Stay tuned… Id. ¶23 Id. ¶43 Id. ¶49-51 Id. ¶52-55 The author has heard this question innumerable times in such cases: “Officer, didn’t my client tell you that he was diabetic (tired, sick, quadriplegic, et. al.)…” Absent other evidence, defendant may have to take the stand to corroborate such allegations. 28 Id. ¶51 29 Cf. IRE 201(b): “A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.” 30 Cf. ABA Standing Committee on Ethics and Professional Responsibility Formal Opinion 478 (http://www.abajournal.com/ images/main_images/FO_478_FINAL_12_07_17.pdf) 23 24 25 26 27

20 The Docket

January 2019

22 The Docket

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January 2019

Board of Directors’ Meeting

The

Meeting Minutes BY SHYAMA S. PARIKH SECRETARY

November 15, 2018

he Lake County Bar Association Board of Directors met at noon on Thursday, November 15, 2018 at its office in Waukegan, Illinois. Present were B. Lewis, S. Rice, P. Cornell, S. Parikh, J. Fusz, J. Howe, T. Devine, Honorable C. Bishop, K. Hatch, D. Del Re, and Executive Director D. Perrin. The meeting was called to order at 12:13 p.m. CONSENT AGENDA A motion was made to approve the consent agenda, was seconded, discussion ensued and the motion passed. Steve Rice and Dale Perrin attended the Elgin swearing-in ceremony of newly admitted attorneys and were able to recruit some new members. TREASURER’S REPORT The Association continues to have sufficient operating reserves and is outperforming its budget in several categories, but

24 The Docket

the annual outlook still requires both cost-cutting and revenue enhancement to be successful. The Association is realizing cost savings due to a reduction in expenses for accounting as well as payroll. Like most other organizations, the Association will begin adding credit card processing fees to its invoices, which will further reduce costs. In addition, the new IT audit solutions are being implemented and we will see some savings from that this year, and over $7,000 annually in coming years. 2017-18 TAX FILINGS UPDATE, & INSURANCE PAYMENT Our accounting firm anticipates finishing our 990 tax returns in the coming weeks. Also, the insurer that reimbursed us for some of the theft losses has confirmed it will not seek reimbursement of the restitution payment received from Boadt.

INDEPENDENT ACCOUNTING BIDS The Board considered a revised accounting services proposal from Manning Silverman. The new proposal revises the services to be provided, and the costs. The services will include a quarterly review of the Association’s books, and the Board would like to request a report after each review, which the Executive Director will address with Manning Silverman. A motion was made to approve using Manning Silverman until the end of this fiscal year, was seconded, discussion ensued, and the motion passed. EDUCATIONAL PROGRAM FOR YOUTH OFFENDERS The President and Criminal Law Committee Co-Chair Dan Hodgkinson continue to work towards developing a program through which youth offenders could be required

to participate in an online educational program that the Association will produce. The program would be implemented in communities that use administrative adjudication. A meeting with local prosecutors netted positive feedback, and they will seek to provide statistics on the number of ordinance violations in their communities. CREDIT CARD FEES FOR MEMBERSHIP DUES The Board again addressed how to best add credit card processing fees to the members who pay on a monthly basis. The Executive Director will do some further research about our credit card processor and the costs we incur. STAFFING UPDATE The Executive Director has begun contacting candidates who applied for the Association’s open po-

sition, and will attempt to hire someone in December. HOLIDAY PARTY The LCBA Holiday Party will take place on December 7 at the LCBA office. The plan is for the Board to “literally and figuratively” serve the membership: Board members will all pitch in to help with décor, food, and drinks.

INFORMATIONAL ITEMS Gift Drive: The LCBA again has “ornaments” that members can take to fulfill gift requests for Elliot Pinsel’s annual gift drive. The Association has supported this worthy effort for several years. Judicial Selection: The JSRC will again spring into action to help review

the candidates for Judge Marcouiller’s opening. Additionally, several JSRC Board positions are expiring in the near future, necessitating either their retention or new appointments. Pro Se Clinic: Jennifer Howe met with Judges Ukena, Winter, and Collins about developing a clinic for pro se litigants.

Ombudsperson: The Board needs to recruit a member for the ombudsperson position, as per the Association By-Laws. The Board was asked to consider suitable people and forward their names to the President. A motion was made and seconded to adjourn, and on passing the meeting ended at 1:23 p.m.

MEMBER RECEPTION January 24 4:30 - 6:30 p.m.

Join us after work to network with fellow members at the LCBA Member Center. Sponsored by

MEMBER RECEPTION SPONSORSHIP OPPORTUNITIES LCBA Member Receptions will generally be held on the 4th Thursday of every month.

Your $500 sponsorship includes: •R ecognition in advertising before the event and on signage at the event • Reception from 4:30 – 6:30 p.m. •C omplimentary beer and wine. Upgrades available for additional fee.

Contact Dale Perrin at dale@lakebar.org to add your name to a reception.

January 2019 25

A New Start

h, a New Year! A new start. New and refreshed hope for better things. We all do it. Whether you want to admit it publicly or not, we all do it - make new goals and resolutions for the new year. Most just do it in their head and make it a goal or simply hope that things will be better in the new year. Better can mean many things and is different from person to person. Better husband. Better father. Better brother. Better lawyer, boss or employee. Better golfer. Who doesn’t want to strive to be better? But what does “Being Better” really mean? How do I know when I’m better? Some things are obvious as in if I only lose 9 golf balls, rather than my normal 12 on a round of golf, then I’m better. But only if it happens regularly. Things with scores like golf are easy to measure. But what about things like being a better lawyer or boss? If you earn more money this year than last, does that mean you’re a better lawyer, or did you just increase your rates? To properly set goals,

26 The Docket

follow the 5 Golden Rules of Goal Setting: 1. Set Specific Goals. Your goal must be clear and well defined. 2. Set Measurable Goals. Include precise amounts, dates, and so on in your goals so you can measure your degree of success. 3. Set Attainable Goals. Make sure that it’s possible to achieve the goals you set. 4. Set Relevant Goals. 5. Set Time-Bound Goals. So how does this relate to non-tangible things like being a better boss? First, what makes you think you need to be a better boss? Do your employees treat you with disrespect? Do they show up late frequently and leave as soon as it’s 5 pm? Are you turning over employees frequently? If you think any of these are yes, swallow your pride and ask them. Let them know that being a better boss is your goal this year and you’d like to find out what that means to them. Same thing with being a better husband

In the

Director’s Chair

or father. I think we all know that spending more (quality) time with your spouse and kids and less time at work, is the first answer. But what about the other (small) things like complaining when the toilet seat is left up, or the dishes are left in the sink? If you can figure out how to prevent those things from happening (other than yelling and complaining) or learn how to deal with it, would that make you a better husband and father? Maybe. That’s for you, or your family, to decide. What can you do to be a better lawyer or have a better law practice? How are you with billing and collecting payments? How about HR issues like payroll and employee reviews? These are all common issues of small business owners, which most of you are. The good news is there are lots of resources out there to help you. Such as

BY DALE PERRIN

the LCBA, Small Business Administration (SBA), College of Lake County, SCORE, and your local Chamber of Commerce. The LCBA’s CLE Committee is putting together a series of Brown Bag Lunches this year to address your needs as a lawyer and business owner. They will include topics such as this month’s topic: The New Maintenance Statue (on the 18th), and other general issues like HR, Marketing, Finances, Taxes, etc. Watch for announcements about upcoming Brown Bag Lunches throughout the year and plan to bring a lunch and Learn. Let me know if there is a topic you’d like to learn more about. As always, thank you for your continued support, participation and membership in the Lake County Bar Association.

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January 2019 27

Monthly

Bar

Bulletin Board

Committee Meetings

DAY

MEETING

LOCATION

TIME

1st Tuesday

Diversity & Community Outreach

LCBA

12:15-1:15

1 Thursday

Real Estate

Primo, Gurnee

5:30-6:30

Editorial 1st Thursday (Odd Mo.) Docket Committee

LCBA

12:15-1:15

2nd Tuesday

Waukegan Courthouse 12:15-1:15

Criminal Law

2nd Tuesday (Odd Mo.) Immigration

LCBA

4:30-5:30

2nd Wednesday

Family Law Advisory Group (FLAG)

LCBA

12:00-1:00

2nd Wednesday

Civil Trial and Appeals

LCBA

4:00-5:00

2 Thursday

Young & New Lawyers

TBD

5:30-6:30

3rd Tuesday

Local Government

LCBA

12:15-1:15

3rd Tuesday

LCBF Board of Trustees

LCBA

4:00

3rd Wednesday

Debtor/Creditor Rights

Varies

5:30-6:30

3rd Wednesday

Family Law

C-105

12:00-1:00

3nd Wednesday

Trusts and Estates

LCBA

12:15-1:15

3rd Wednesday (Odd Mo.) Employment Law

Varies

5:15-6:15

3rd Thursday

LCBA

12:00 noon

LCBA Board of Directors

• RSVP to a meeting at www.lakebar.org. • Meetings subject to change. Please check your weekly e-news, the on-line calendar at www.lakebar.org or call the LCBA Office @ (847) 244-3143. • Please feel free to bring your lunch to the LCBA office for any noon meetings. Food and beverages at restaurants are purchased on a individual basis.

28 The Docket

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