Kenneth Nelson says his onetime partners, Bruce Schultz and Jon Rodgers, cut him out of the profits when the 89-unit Ritz Carlton Residences was built along the Magnificent Mile.

In late 2005, Schultz and Rodgers voted to remove Nelson as a manager of the project, per their corporation’s operating agreement, alleging he had a negative $15 million net worth that prevented the team from getting construction loans. Without Nelson, Schultz and Rogers obtained financing and construction started in 2008.

Nelson sued in 2015, claiming the partners bounced him to pad their pockets, causing him to lose $1.1 million in development fees. (Right) Interior of a unit at Ritz-Carlton Residences. (Click on image to view larger version.)

To fight Nelson’s litigation, Schultz and Rodgers demanded he turn over personal and business tax returns and bank statements for a period of several years. Nelson refused, maintaining he did not guarantee his creditworthiness when he signed on with the Ritz-Carlton project and that many of the requested records were irrelevant.

Schultz and Rodgers filed a motion to compel Nelson to furnish the records, which Senior United States District Judge Harry Leinenweber granted. The judge repeatedly warned Nelson his suit would be thrown out if he did not supply the documents, but Nelson never satisfied Leinenweber’s demands, and the judge tossed the suit.

In dismissing Nelson’s action, Leinenweber (left) said Nelson had engaged in a “pattern of dilatory conduct” and exhibited a “failure to cooperate.” Nelson appealed, arguing Leinenweber’s decision to dismiss the suit was out of proportion to the alleged misconduct but he found no sympathy from the United States Court of Appeals for the Seventh Circuit.

“Despite three orders and two last-chance warnings, [Nelson] did not produce the documents or provide a declaration stating he could not find them after a diligent search,” observed the appeals panel, ruling Leinenweber acted correctly.

The December 21 decision was issued by Chief Circuit Judge Diane Wood, Senior Circuit Judge Daniel Manion, and Circuit Judge Michael Kanne.