In 2005, Shahin and Nasila Edalatdju contracted to buy four Chicago condominium units from developer American Invsco, contingent on the Edalatdjus’ ability to obtain financing for the purchases.

Under Invsco’s 2-2-2 Lease Program, Invsco guaranteed the Edalatdjus sufficient monthly rental income to cover their debt service and other costs of owning the units for the first two years of ownership, according to court documents.

Also under the program, Invsco directed the Edalatdjus to Guaranteed Rate Inc. (GRI) for financing. GRI rendered its financing of the units contingent upon each unit being appraised at the purchase price, and retained appraiser Lazer to appraise the units. The appraisals came in satisfactorily and all four loans and purchase transactions closed.

When the Edalatdjus sought to refinance the units in 2007, GRI refused and took more than two months to provide the Edalatdjus with the copies of the appraisal reports they requested, claiming they were lost, court documents state.

After the loans on the units went into foreclosure, the Edalatdjus filed suit, claiming that after the 2-2-2 Lease Program had expired, they realized that "the true rental value of their units was substantially less than half of their monthly debt service and fixed costs for the units."

The lawsuit alleged that GRI and Lazer conspired to defraud and misrepresent the value of the units and the standards on which the original value appraisals were based.

Both GRI and Lazer moved to dismiss the case. The U.S. District Court for the Northern District of Illinois denied Lazer’s motion, and granted GRI’s motion in part — also denying it in part.

The court first looked at the fraud claims in the complaint. GRI argued that the fraud claims against it were vague, lacking the high level of specificity required to bring a fraud claim. The court agreed — the Edalatdjus simply failed to specifically state what fraudulent claims GRI allegedly made, who specifically made them, when, and by what mode of communication they were made.

Because fraud claims must be stated with this level of particularity, the court dismissed the fraud claims against GRI.

However, the court rejected Lazer’s similar argument, that the fraud claims against him were not stated with sufficient specificity, and his additional argument that the plaintiffs failed to show that they relied on his allegedly fraudulent statement.

Because the complaint alleges that Lazer’s fraud was committed via his appraisal reports, the reports themselves held all the required details, such as who, when, how, and specifically what allegedly fraudulent claims formed the basis of the claim.

Additionally, because Lazer’s appraisal was required to obtain financing, and the purchase agreements between the Edalatdjus and Invsco were contingent on financing, the plaintiffs’ reliance on Lazer’s appraisal was clear.

Both GRI and Lazer objected to the conspiracy claims on grounds that the claims were not pleaded with the requisite specificity, that the Edalatdjus failed to state that GRI and Lazer both committed "an overt tortious or unlawful act," and that the Edalatdjus could not sue GRI for conspiracy if they could not sue GRI for fraud. The court rejected all of these arguments.

Explaining that the plaintiffs were not required to plead their conspiracy allegations with the same level of precision as the fraud claims, the court found that the nature of the alleged conspiracy — "that Lazer’s appraisals significantly overstated the value of the condo units … and that GRI and Lazer acted together for the purpose of procuring inflated loans" — was clear.

Further, the complaint clearly alleged that Lazer committed the tort of inflating the value of the condominiums by $800,000, and Illinois law requires that only one conspirator be alleged to have committed an overt, wrongful act.

Finally, because the Edalatdjus adequately alleged fraud on Lazer’s behalf, they did not need to allege fraud on GRI’s behalf in order to successfully bring the conspiracy claim.

As a result, all the conspiracy claims were allowed to proceed, as was the fraud claim against Lazer.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription