Angelopoulos v. Keystone Orthopedic Specialists, S.C. et al

Filing 440

MOTION by Plaintiff Dr. Nicholas Angelopoulos for judgment (Attachments: # 1 Declaration, # 2 Declaration)(Gair, Chris)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DR. NICHOLAS ANGELOPOULOS,
Plaintiff,
v.
KEYSTONE ORTHOPEDIC SPECIALISTS,
S.C., WACHN, LLC, MARTIN R. HALL, M.D.

Defendants.

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Case No. 12-cv-05836

Hon. Robert M. Dow, Jr.

PLAINTIFF’S MOTION FOR ENTRY OF
JUDGMENT UNDER RULE 58

Contents
Table of Authorities ........................................................................................................................ 3
Introduction ..................................................................................................................................... 4
Argument ........................................................................................................................................ 4
I.

Plaintiff is Entitled to an Award of Compensatory Damages on Count 1. .......................... 4
A.

Damages under 26 U.S.C. § 7434 Include the Costs and Fees Incurred in
Defending Against the Tax Liability, the Costs of Bringing the 7434 Action and
the Reasonable Attorneys’ and Expert Witness Fees Incurred in the Action. ........ 4

B.

Dr. Angelopoulos is entitled to costs and fees here in the amount of $327,486.88.8

II. Plaintiff is Entitled to an Award of Prejudgment Interest on the Remaining Counts. ....... 13
C.

An Award of Prejudgment Interest is a Required Component of Damages Under
the Illinois Interest Act and an Appropriate Component of Damages Under
Principles of Equity............................................................................................... 13

D.

Dr. Angelopoulos is Entitled to an Award Under the Interest Act. ...................... 14

E.

In Any Event, Dr. Angelopoulos is Entitled to an Equitable Award of Interest... 18

F.

Timing and calculation of interest ........................................................................ 19

III. Plaintiff Should Be Awarded Equitable Relief on Count 3 Requiring Dr. Hall and
Keystone to Indemnify and Hold Dr. Angelopoulos Harmless for the WACHN Guaranty. .... 20
IV. The Judgment Should Be Allocated in Order to Avoid Double Recovery. ....................... 20
Conclusion .................................................................................................................................... 22

2

Table of Authorities
Cases
612 N. Michigan Ave. Bldg. Corp. v. Factsystem, Inc., 54 Ill. App. 3d 749 (1st Dist. 1977) ...... 15
Ash v. Georgia-Pac. Corp., 957 F.2d 432 (7th Cir. 1992)............................................................ 17
Bailey v. Shell W. E&P, Inc., 1998 WL 185520 (N.D. Tex. Apr. 14, 1998) ............................ 6, 13
Branham v. Snow, 2006 WL 1750443 (S.D. Ind. June 19, 2006)................................................... 8
Bright v. Land O'Lakes, Inc., 844 F.2d 436 (7th Cir. 1988) ........................................................... 8
Brulin & Co., Inc. v. Higgins, 1987 WL 10304 (N.D. Ill. Apr. 30, 1987).................................... 14
Chicago Title & Trust Co. v. First Arlington Nat. Bank, 118 Ill. App. 3d 401 (1st Dist. 1983) .. 19
Duran v. Town of Cicero, Illinois, 653 F.3d 632 (7th Cir. 2011) .................................................. 21
Emmenegger Const. Co., Inc. v. King, 103 Ill. App. 3d 423 (5th Dist. 1982) .............................. 14
Gen. Dynamics Corp. v. Zion State Bank & Trust Co., 86 Ill. 2d 135 (1981) .............................. 18
Heiar v. Crawford Cty., Wis., 746 F.2d 1190 (7th Cir. 1984) ........................................................ 8
In re Estate of Wernick, 127 Ill. 2d 61 (1989) ............................................................ 13, 14, 18, 19
In re Joy Recovery Tech. Corp., 291 B.R. 111 (Bankr. N.D. Ill. 2003) ....................................... 19
Kerasotes v. Estate of Kerasotes, 238 Ill. App. 3d 1020 (4th Dist. 1992) .................................... 19
Liverett v. Torres Advanced Enter. Sols. LLC, 192 F. Supp. 3d 648 (E.D. Va. 2016) ................... 6
Marcus & Millichap Real Estate Inv. Services Inc. v. Sekulovski, 2010 WL 145785
(N.D. Ill. Jan. 12, 2010) ...................................................................................................... 14, 16
Michaels v. Michaels, 767 F.2d 1185 (7th Cir. 1985) .................................................................. 18
Milligan v. Gorman, 348 Ill. App. 3d 411 (1st Dist. 2004) .......................................................... 13
Nat'l Union Fire Ins. Co. of Pittsburgh v. DiMucci, 2015 IL App (1st) 122725.................... 14, 18
NC Illinois Trust Co. v. First Illini Bancorp, Inc., 323 Ill. App. 3d 254 (3d Dist. 2001) ............. 19
Neumann v. Neumann, 334 Ill. App. 3d 305 (3d Dist. 2002) ....................................................... 18
Obermaier v. Obermaier, 128 Ill. App. 3d 602 (1st Dist. 1984) .................................................. 19
Prignano v. Prignano, 405 Ill. App. 3d 801 (2d Dist. 2010) ........................................................ 18
Riordan v. ASAP Expert Counseling, LLC, 2017 WL 2225223 (D. Kan. May 19, 2017) ....... 7, 11
RRK Holding Co. v. Sears, Roebuck & Co., 563 F. Supp. 2d 832 (N.D. Ill. 2008)...................... 19
Sheth v. SAB Tool Supply Co., 2013 IL App (1st) 110156 ............................................... 13, 14, 16
Shiner v. Turnoy, 2014 WL 3907043 (N.D. Ill. Aug. 11, 2014) ..................................................... 7
Thornton v. Garcini, 382 Ill. App. 3d 813 (3d Dist. 2008) ........................................................... 21
Tully v. McLean, 409 Ill. App. 3d 659 (1st Dist. 2011) .......................................................... 13, 18
U.S. for Use & Benefit of Treat Bros. Co. v. Fid. & Deposit Co. of Maryland,
986 F.2d 1110 (7th Cir. 1993) ............................................................................................ 15, 18
Uniroyal Goodrich Tire Co. v. Mut. Trading Corp., 63 F.3d 516 (7th Cir. 1995) ......................... 8
Statutes
26 U.S.C. § 7434 ..................................................................................................................... 4, 5, 9
28 U.S.C. § 1367 ............................................................................................................................. 9
815 ILCS 205/2 ....................................................................................................................... 13, 14
Other Authorities
H.R. Rep. No. 14-506 (1996) ................................................................................................ 6, 7, 13

3

Introduction
Plaintiff respectfully moves for entry of judgment on the jury’s verdict in this case and on
certain relief reserved for determination by the Court. The jury’s verdict found for Plaintiff as to
liability on Count 1 (violation of 26 U.S.C. § 7434) and found for Plaintiff as to liability and
awarded damages on Counts 2 (fraud), 3 (breach of fiduciary duty), 5 (breach of WACHN
Operating Agreement) and 6 (breach of Keystone agreement) as follows:
Count: Defendant
Count 2: Keystone
Count 2: Hall
Count 3: Hall
Count 5: WACHN
Count 6: Keystone

Compensatory
$454,000
$454,000
$908,000
$111,000
$454,000

Punitive
$1,000,000
$1,000,000

In addition, Plaintiff seeks entry of judgment on three items of relief specifically reserved
to the Court: (1) compensatory damages on Count 1 (violation of 26 U.S.C. § 7434); (2)
prejudgment interest on Counts 2, 3, 5 and 6; and (3) equitable relief on Count 3 relating to the
WACHN guarantee.
Finally, while in a case involving multiple theories of recovery and multiple defendants,
the burden is on the defendants to establish how judgment should be entered in order to avoid a
double recovery, Plaintiff respectfully submits his proposal in Section IV of this motion.
Argument
I.

Plaintiff is Entitled to an Award of Compensatory Damages on Count 1.
A. Damages under 26 U.S.C. § 7434 Include the Costs and Fees Incurred in Defending
Against the Tax Liability, the Costs of Bringing the 7434 Action and the Reasonable
Attorneys’ and Expert Witness Fees Incurred in the Action.
The jury returned a verdict on Count 1 finding Defendants Keystone and Hall liable for

willfully filing a fraudulent information return in violation of 26 U.S.C. § 7434 (“Section 7434”).
4

Section 7434 provides a remedy for a person against whom a fraudulent information return has
been filed. Specifically, the statute provides:

(a) In general.--If any person willfully files a fraudulent information return
with respect to payments purported to be made to any other person, such
other person may bring a civil action for damages against the person so
filing such return.
(b) Damages.--In any action brought under subsection (a), upon a finding
of liability on the part of the defendant, the defendant shall be liable to
the plaintiff in an amount equal to the greater of $5,000 or the sum of—
(1) any actual damages sustained by the plaintiff as a proximate
result of the filing of the fraudulent information return
(including any costs attributable to resolving deficiencies
asserted as a result of such filing),
(2) the costs of the action, and
(3) in the court's discretion, reasonable attorneys' fees. 26 U.S.C. §
7434 (emphasis added).
The plain language of the statute, its legislative history, and the only decisions interpreting
the damages provision make clear that Dr. Angelopoulos is entitled to: the costs and attorney and
accountant’s fees incurred by Dr. Angelopoulos in resisting the underlying tax liability and
pursuing the Tax Court litigation (subsection (b)(1)), the costs of this action (subsection (b)(2)),
and attorneys and expert witness fees for pursuing this action (subsection (b)(3)).
At the outset, the attorney and accountant fees charged by Jenner & Block and Vranas &
Vlahos, respectively, in connection with the IRS deficiency notice were indisputably “the
proximate result” of the fraudulent filing of the 1099 by Hall and Keystone and thus must be
awarded under subsection (b)(1). Indeed, that subsection plainly states that all costs “attributable
to resolving deficiencies” are covered. It is patently obvious that the work of the law and
accounting firms to resolve the tax dispute are properly recovered.

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It is just as obvious that all costs of this action are compensable under subsection (b)(2).
And the plain language of subsection (b)(3) provides that the Court may award reasonable
attorneys’ fees incurred “[i]n any action brought under subsection (a).” While the attorneys’ fees
are discretionary, there can be no doubt that here the Court’s discretion should be exercised to
include the attorneys’ fees, based on the evidence heard by the Court at trial, the legislative
concerns underlying the statute, fundamental notions of justice, and the cases interpreting the
statute.
There are powerful reasons set out in the legislative history of the statute supporting the
award of these items of compensable damages. In its report of March 28, 1996, the House of
Representatives’ Committee on Ways and Means explained that the reasoning behind this
provision was that “[s]ome taxpayers may suffer significant personal loss and inconvenience as
the result of the IRS receiving fraudulent information returns, which have been filed by persons
intent on either defrauding the IRS or harassing taxpayers.” H.R. Rep. No. 14-506, at 35 (1996).
As one district court explained, “Congress was aware of a problem—the malicious reporting of
false payments—and designed § 7434 to afford a damages remedy for victims of that problem.”
Liverett v. Torres Advanced Enter. Sols. LLC, 192 F. Supp. 3d 648, 654 (E.D. Va. 2016). As
another court put it, “[i]f one taxpayer falsely reports to the IRS that another taxpayer has received
certain income or made certain payments, the honest taxpayer may be assessed taxes not actually
owed, or have to initiate costly proceedings to straighten out the mess.” Bailey v. Shell W. E&P,
Inc., 1998 WL 185520, at *2 (N.D. Tex. Apr. 14, 1998).
Thus, the Committee explained that Section 7434 would permit a person to “bring a civil
action for damages against the person filing [the fraudulent] return,” where “recoverable damages
are the greater of (1) $5000 or (2) the amount of actual damages (including the costs of the action)

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and, in the court’s discretion, reasonable attorney’s fees.” H.R. Rep. No. 14-506, at 35 (1996)
(emphasis added).
In a case decided just a month ago, a federal court in Kansas awarded a plaintiff attorneys’
fees incurred in bringing an action under Section 7434 after entering a default judgment on her
claims. Riordan v. ASAP Expert Counseling, LLC, 2017 WL 2225223, at *2–3 (D. Kan. May 19,
2017). In Riordan, plaintiff filed a complaint against her former employer, alleging common law
claims of wrongful termination, breach of contract, and unjust enrichment, along with a claim
under Section 7434. The Section 7434 claim was based on plaintiff’s employer filing fraudulent
returns with the IRS, which misclassified her as an independent contractor rather than an employee
and which caused her to have to pay payroll taxes that her employer should have paid. Id. at *1.
After entering a default judgment against the defendant, the court awarded plaintiff one-hundred
percent of her attorneys’ fees incurred in bringing the action without separating out work done on
the claim under Section 7434 from the state law claims. Id. at *2-3; Dkt No. 43 in Riordan v. ASAP
Counseling, LLC, the United States District Court of the District of Kansas, Case No. 16-cv-2011.
Judge Shadur similarly awarded plaintiff attorneys’ fees incurred in pursuing an action
under Section 7434 in Shiner v. Turnoy, 2014 WL 3907043, at *2 (N.D. Ill. Aug. 11, 2014),
reversed on other grounds, 850 F.3d 923 (7th Cir. 2017), holding that plaintiff had established
having incurred costs and attorneys’ fees and “[i]t would be a major injustice for Shiner to be
compelled to bear, unrecompensed, those amounts expended to establish the unlawfulness of
Turnoy's willfully fraudulent filing of the 1099.”
Also compensable under Section 7434 are the expert fees of Jay Sanders under either
(b)(2), as costs of the action, or (b)(3) as part of attorneys’ fees. Even where a statute, unlike
Section 7434, does not explicitly provide for costs, costs and fees relating to an expert witness are

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included in “attorneys’ fees.” Uniroyal Goodrich Tire Co. v. Mut. Trading Corp., 63 F.3d 516,
526 (7th Cir. 1995) (awarding costs relating to plaintiff’s expert witness, relying on cases in which
“‘reasonable attorney’s fees’ are construed to include the costs of expert witnesses”); Heiar v.
Crawford Cty., Wis., 746 F.2d 1190, 1203 (7th Cir. 1984) (“expenses for such things as postage,
long-distance calls, xeroxing, travel, paralegals, and expert witnesses—are part of the reasonable
attorney's fee…”); Branham v. Snow, 2006 WL 1750443, at *14–15 (S.D. Ind. June 19, 2006)
(awarding expenses relating to plaintiff’s expert witnesses under the Rehabilitation Act); Bright v.
Land O'Lakes, Inc., 844 F.2d 436, 444–45 (7th Cir. 1988) (awarding accountants’ fees).
B. Dr. Angelopoulos is entitled to costs and fees here in the amount of $327,486.88.
Count 1 arises out of Keystone and Hall’s fraudulent filing of the 1099-MISC for tax year
2007, in which form Defendants fraudulently reported that Dr. Angelopoulos had earned
$159,577.45 in miscellaneous income for that tax year. The jury found that the 1099-MISC was
fraudulent as to a material matter and that Keystone and Hall filed the fraudulent return willfully,
and thus returned a verdict finding Defendants Keystone and Hall liable on Count 1. Because
Plaintiff’s damages are all costs and fees, and because the defendants insisted pretrial that
attorneys’ bills not be submitted to the jury as exhibits, the parties agreed prior to trial that those
damages were to be awarded by the Court upon a finding of liability by the jury.
As Dr. Angelopoulos testified at trial, because of the fraudulent 1099-MISC and the IRS
audit on it, he was forced to hire legal counsel and expend significant amounts of money on legal
costs and fees and accountants’ costs and fees to contest the Notice of Deficiency. With the
assistance of his counsel and his accountants, Dr. Angelopoulos initiated an action in the United
States Tax Court, challenging the IRS’s Notice of Deficiency (the “Tax Court litigation”).
Ultimately, the Tax Court litigation was resolved in Dr. Angelopoulos’ favor, such that the IRS
eventually agreed that Dr. Angelopoulos was due a refund. Dr. Angelopoulos’ legal counsel in the
8

Tax Court litigation was Jenner & Block. In connection only with the Tax Court litigation, Dr.
Angelopoulos incurred $49,758.75 in Jenner & Block legal costs and fees. (See Gair Decl. ¶ 22
and Exhibit 3.) Dr. Angelopoulos’ accountants, Vlahos & Vranas, also expended significant time
and effort in cooperating with the IRS audit and assisting Jenner & Block in the Tax Court
litigation. Dr. Angelopoulos incurred fees and costs associated with Vlahos & Vranas’ work in
resolving the Notice of Deficiency in the amount of $40,875. (Gair Decl. ¶24 and Exhibit 4.) All
of these costs and fees are actual damages sustained by Dr. Angelopoulos “as a proximate result
of the filing of the fraudulent” 1099-MISC as they were “costs attributable to resolving
deficiencies asserted” by the IRS “as a result” of the fraudulent filing. 26 U.S.C. § 7434(b)(1).
In order to recover those significant fees and costs Dr. Angelopoulos was forced to incur
as a result of the Tax Court litigation (in addition to other damages Defendants caused him), Dr.
Angelopoulos filed this action in July 2012. Federal jurisdiction existed based on the Section 7434
claim; this Court had supplemental jurisdiction over the state law claims under 28 U.S.C. § 1367.
The filing of the fraudulent 1099-MISC is one of the central issues in this case. Count 1
depended on discovery, investigation, analysis and presentation of proof regarding: (a) Dr.
Angelopoulos’s income and expenses on the bucket reports, (b) Dr. Angelopoulos’ cash reserves,
(c) shared income allocated to Dr. Angelopoulos, (d) WACHN’s loans with Great Lakes Bank,
and (e) Dr. Hall’s calculations of amounts supposedly not paid by Dr. Angelopoulos. The “cash
reserves” payment and the propriety of the charged expenses in the Bucket Reports were among
the primary disputed issues in this case. (See Gair Decl. ¶ 6; Dedinas Decl. ¶ 15).
Given the centrality and importance of Count 1, the claim has been highly litigated in this
case. Since 2013, Defendants have filed numerous pleadings attacking Count 1, seeking to dispose
of it and divest this Court of jurisdiction. (See Dkt. Nos. 36, 37, 233, 269). Among other filings,

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Defendants filed a motion for summary judgment that reargued pure legal issues already decided
on the motions to dismiss, including issues relating to Count 1, and, which improperly set forth
the allegedly uncontested facts. (See Gair Decl. ¶ 13). Responding to that pleading alone required
an enormous amount of time and effort on the part of Plaintiff’s counsel. In each pleading
challenging Plaintiff’s claims, this Court rejected Defendants’ arguments. (See Dkt. Nos. 82, 257,
303.) In some cases, the Court rejected the same argument two or three times.
In discovery, Dr. Angelopoulos’ counsel was required to expend significant time and effort
obtaining discovery relevant to Count 1. Defendants’ counsel initially produced just 319 pages of
documents in response to Plaintiff’s broad document requests. It was only through costly discovery
motions that Plaintiff was able to obtain documents bearing on the Bucket Reports, the Keystone
expenses, and cash reserves, which were necessary to prove up Count 1, including the following:
a. Obtaining and reviewing over 10,000 pages of documents from Hall, Keystone
and WACHN relating to billings, bucket reports, WACHN loans and the 1099.
This required Dr. Angelopoulos to advance and brief four motions to compel
(Dkt 70, 88, 144, 195), all of which were granted in part (Dkt 98, 114, 163,
210), and resulted in this court imposing sanctions (Dkt 380).
b. Obtaining and reviewing over 3,000 pages of workpapers and financial records
from Ira Dubin relating to Keystone’s income, expenses, and tax filings.
c. Obtaining and reviewing over 5,000 pages of records from Great Lakes Bank
regarding WACHN’s loan agreements and Keystone’s income and expenses,
which records were denied to Plaintiff for a significant period of time due to the
bank’s sustained and erroneous insistence that its records retention policy had
caused the records to no longer be in existence. The records were finally
produced after Plaintiff directed counsel to their archiving system and loan
document vault and agreed to pay for bank personnel time to search and retrieve
records.
d. Obtaining and reviewing records from numerous additional third party
subpoena respondents to attempt to verify the accuracy of the bucket report
charges.
e. Taking the depositions of Dr. Hall in his various capacities in representing
Keystone, Hall MDSC, Vertical Plus and WACHN, in addition to Ira Dubin,

10

and Michael Pakter, as well as defending the depositions of Dr. Angelopoulos
and Jay Sanders. (See Dedinas Decl. ¶¶ 6-7).
Plaintiff’s counsel also expended significant time and effort in tracking down,
interviewing, and deposing fact witnesses who possessed knowledge relevant to Count 1. (Dedinas
Decl. at ¶¶ 7-10). Bear Roalsen was one of those witnesses. Dr. Hall testified in one of his
depositions that Bear Roalsen had left the Chicago area, that he did not know where Roalsen then
resided, that he had not spoken to Roalsen in years, and that Roalsen’s last-known whereabouts
was somewhere in the state of California. Through diligent investigation, Plaintiff’s counsel was
able to locate Mr. Roalsen in the Nashville, Tennessee area. (Dedinas Decl. ¶7.) Counsel
interviewed him by phone on several occasions in an effort to persuade him to cooperate with
Plaintiff’s investigation and eventually traveled twice to Nashville, once to interview him and
another time to take his deposition. (Id.). Some of the Rule 404(b) witnesses, including Roalsen
and George Cloud, were the subject of motions in limine.
Much of the expert report and testimony performed by Plaintiff’s expert, Jay Sanders, was
required to establish the factual predicates for his opinion on Count 1 and would have been
necessary even if Count 1 had been the only cause of action. (Gair Decl. ¶ 19; Dedinas Decl. ¶ 7)
Plaintiff also spent time and expense in responding to and seeking to bar the unfounded opinions
on Count 1 of Defendants’ expert, Michael Pakter. (Dedinas Decl. ¶ 7.)
In Riordan, the court awarded the plaintiff one-hundred percent of her legal fees and costs
incurred in bringing the civil action in which she asserted a claim under Section 7434 even though
she pled several state law claims in addition to the statutory claim. Riordan, 2017 WL 2225223,
at *2; see Dkt No. 43 in Riordan v. ASAP Counseling, LLC, the United States District Court of the
District of Kansas, Case No. 16-cv-2011).

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Here, unlike in Riordan, Dr. Angelopoulos is not seeking one-hundred percent of his
attorneys’ fees in connection with this action, or anything close to that. Dr. Angelopoulos is only
seeking fees for the attorney, accountant and expert work that fairly pertained to proving Count 1
and that would have been necessary even if Count 1 had been the only count. However, the work
on Count 1 was inextricably intertwined with the work on the fraud and breach of fiduciary duty
counts, and it was neither practical nor even possible to separately account for time devoted to
Count 1. (Dedinas Decl. ¶ 12; Gair Decl. ¶ 16.) Thus, Plaintiff has estimated what the percentage
of effort employed before and during trial would have been had Count 1 been the only cause of
action. Accordingly, Plaintiff estimates that 25% of the total work represents a conservative
estimate of the effort attributable to Count 1. As set forth in the attached declarations, 25% of the
total attorneys’ fees and costs expended in this litigation between Jenner & Block, Plaintiff’s
former counsel, and Gair Eberhard Nelson Dedinas, Ltd., Plaintiff’s current counsel, are
$227,016.52. And 25% of the expert work of Jay Sanders is $16,130.35. (See Dedinas Decl. ¶¶ 1216; Gair Decl. ¶¶ 10-26.) To avoid double-counting, the court should deduct 25% of the $25,175
in fees already awarded as discovery sanctions (Dkt 380) – or $6,293.75.
Thus, the total appropriate damages award on Count 1 is:
100% of Tax Court Legal Fees
100% of Accounting Fees related to 1099, Audit,
and Tax Court Proceedings
25% of Jenner & Block Litigation Fees
25% of Gair Litigation Fees and Costs

$ 49,758.75
$ 40,875.00
$ 35,859.57
$ 191,156.96

Less 25% of sanctions awarded

($ 6,293.75)

25% of PBC Advisors Expert Witness Fees

$ 16,130.35

Total

$ 327,486.88

12

Dr. Angelopoulos respectfully submits that these costs and fees are reasonable and further
the purpose of the statute, which is to protect a taxpayer from the “significant personal loss and
inconvenience as the result of the IRS receiving fraudulent information returns” and to compensate
him for the costliness of “straighten[ing] out the mess” caused by the fraudulent filing. H.R. Rep.
No. 14-506, at 35 (1996); Bailey, 1998 WL 185520 at *2. Given the extent of Defendants’ fraud
and the “mess” created by their filing of the fraudulent 1099-MISC here, it is hard to think of a
case more deserving of such an award.
II.

Plaintiff is Entitled to an Award of Prejudgment Interest on the Remaining Counts.
A. An Award of Prejudgment Interest is a Required Component of Damages Under the
Illinois Interest Act and an Appropriate Component of Damages Under Principles of
Equity.
Courts award prejudgment interest in recognition of the fact that “[i]n our society, the use

of money is worth money.” Milligan v. Gorman, 348 Ill. App. 3d 411, 416 (1st Dist. 2004). By an
award of prejudgment interest, “the injured party is thus compensated for any economic loss
occasioned by the inability to use his money.” In re Estate of Wernick, 127 Ill. 2d 61, 87 (1989).
“In cases involving a breach of fiduciary duty, the rationale behind an award of interest is to make
the injured party whole by forcing the fiduciary to account for profits gained from his use of the
injured party's funds.” Tully v. McLean, 409 Ill. App. 3d 659, 685 (1st Dist. 2011).
Under Illinois law, an award of prejudgment interest is required when the case fits within
section 2 of the Interest Act, 815 ILCS 205/2. Sheth v. SAB Tool Supply Co., 2013 IL App (1st)
110156, ¶ 96. That section provides:
Creditors shall be allowed to receive at the rate of five (5) per centum per
annum for all moneys after they become due on any bond, bill, promissory
note, or other instrument of writing; on money lent or advanced for the use
of another; on money due on the settlement of account from the day of
liquidating accounts between the parties and ascertaining the balance; on
money received to the use of another and retained without the owner's
13

knowledge; and on money withheld by an unreasonable and vexatious delay
of payment.
815 ILCS 205/2 (emphasis added).
Even where a claim does not fall within the precise terms of the Interest Act, a court has
equitable power to award interest to compensate an injured party for the lost use of money.
Wernick, 127 Ill. 2d at 75; Nat'l Union Fire Ins. Co. of Pittsburgh v. DiMucci, 2015 IL App (1st)
122725, ¶82.
B. Dr. Angelopoulos is Entitled to an Award Under the Interest Act.
Dr. Angelopoulos is entitled to an award of prejudgment interest under the Illinois Interest
Act. Each of the categories of damages awarded by the jury to Dr. Angelopoulos are both “money
received to the use of another and retained without the owner's knowledge” and “money withheld
by an unreasonable and vexatious delay of payment,” and therefore require payment of
prejudgment interest. 815 ILCS 205/2. Statutory interest applies regardless of whether the interest
is awarded under a cause of action for fraud, Sheth, 2013 IL App (1st) at ¶ 96, breach of fiduciary
duty, Brulin & Co., Inc. v. Higgins, 1987 WL 10304, at *4 (N.D. Ill. Apr. 30, 1987), or breach of
an oral contract. Emmenegger Const. Co., Inc. v. King, 103 Ill. App. 3d 423 (5th Dist. 1982).
Money is “received to the use of another and retained without the owner's knowledge”
either where funds are obtained through a fraudulent misrepresentation, Sheth v. SAB Tool Supply
Co., 2013 IL App (1st) 110156, ¶ 98, or retained when they should rightfully be surrendered to
another. Marcus & Millichap Real Estate Inv. Services Inc. v. Sekulovski, 2010 WL 145785, at *6
-7 (N.D. Ill. Jan. 12, 2010).
In order to constitute an “unreasonable and vexatious delay of payment,” a defendant’s
conduct must be “tantamount to fraud,” or another manifestation of a bad faith effort to avoid
payment. U.S. for Use & Benefit of Treat Bros. Co. v. Fid. & Deposit Co. of Maryland, 986 F.2d
14

1110, 1121 (7th Cir. 1993) (defendant knew that it had not paid amounts owed to the Plaintiff, but
filed a frivolous counterclaim based on a supposed debt owed to it by the Plaintiff); 612 N.
Michigan Ave. Bldg. Corp. v. Factsystem, Inc., 54 Ill. App. 3d 749, 755 (1st Dist. 1977) (holdover
tenant wrongfully occupied property).
The damages proved by Dr. Angelopoulos fall into five categories: (1) expenses
overcharged to Dr. Angelopoulos by virtue of fraud and breach of fiduciary duty, resulting in
wrongfully withheld income; (2) clawbacks of previously credited shared income relating to
physical therapy and MRIs that resulted in wrongfully withheld income; (3) the direct failure,
amounting to fraud and breach of fiduciary duty, to credit Dr. Angelopoulos with income in Q2
and Q3 2007 and collections on his billings through 2008; (4) WACHN expenses improperly
overbilled to Dr. Angelopoulos through Keystone; and (5) withholding, by means of fraud and
breach of fiduciary duty, the value of Plaintiff’s interest in WACHN after he dissociated. The first
four categories of misconduct all resulted in Keystone and WACHN wrongfully and fraudulently
retaining more of Dr. Angelopoulos’ patient billings than those to which they were entitled. The
jury found that this conduct was a fraud by Keystone and Dr. Hall, and a breach of fiduciary duty
by Dr. Hall. The fifth category, which the jury also found to be a breach of fiduciary by Dr. Hall,
resulted in WACHN and Hall retaining more of Dr. Angelopoulos’ funds than those to which they
were entitled after Dr. Angelopoulos dissociated from WACHN.
The damages awarded to Dr. Angelopoulos were “money received to the use of another
and retained without the owner's knowledge.” As to Keystone, Dr. Hall’s own characterization of
the agreement with Dr. Angelopoulos was: “split expenses, keep what you make,” an admission
that money received by Keystone for Dr. Angelopoulos’ patients belonged to Dr. Angelopoulos,
and was subject only to paying a reasonable share of expenses to Keystone. In fact, Keystone and

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Hall retained a much larger share of Dr. Angelopoulos’ collections than those to which they were
entitled, and fraudulently concealed and misrepresented the amounts Dr. Angelopoulos should
have received. Like in Sheth and Marcus & Millichap, these amounts were clearly money received
by Keystone for Dr. Angelopoulos but wrongfully retained and used by Keystone and Dr. Hall for
many years. The same is true of Dr. Angelopoulos’ contributions and other payments to WACHN
after he dissociated.
These sums awarded to Dr. Angelopoulos were also “withheld by an unreasonable and
vexatious delay of payment.” Beyond simply retaining his money, Hall and Keystone hindered Dr.
Angelopoulos’ collection of that money by providing him with accountings containing false and
inflated expenses, misrepresenting what he owed and not accurately reporting the amounts actually
collected by Keystone for Dr. Angelopoulos. Worse yet, Dr. Hall and Keystone not only delayed
payment, but created documents (like JX 54 and the phony 1099) whose only purpose was to create
false justifications for the amounts withheld, to create tax problems for Dr. Angelopoulos, and
ultimately to support an utterly unfounded counterclaim for over $500,000. Dr. Hall’s vexatious
conduct is further demonstrated by his repeated lies, evasions and self-contradictory statements
under oath in his depositions and at trial. The vexatious nature of the conduct was perhaps best
illustrated by the fact that on the witness stand Dr. Hall repeatedly asserted that the amounts
recorded in the bucket reports as negatives to Dr. Angelopoulos’s account were only accounting
entries and that upon his departure Dr. Angelopoulos would not owe Hall or Keystone anything.
There is no way to reconcile that sworn testimony with Hall’s counterclaim against Dr.
Angelopoulos apart from the explanation that the documents and the counterclaim were fraudulent.

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The jury found that these actions were not only tantamount to fraud, they were in fact
fraudulent. By its very nature, Hall’s fraud unreasonably delayed and hindered Dr. Angelopoulos
from collecting the proper amount of his earned income from 2004 until today.
Likewise, with respect to Dr. Angelopoulos’ WACHN interest, Hall and WACHN
unreasonably and vexatiously delayed paying the amount to which Dr. Angelopoulos was entitled
after dissociation. This money was clearly due a reasonable time after dissociation, and Hall and
WACHN failed to pay it, and instead fraudulently asserted that Dr. Angelopoulos owed him money
related to WACHN and created documents, including JX 54, which purported to justify his
position.
As part of this unreasonable and vexatious delay, by filing a false form 1099, Hall caused
Dr. Angelopoulos to undergo a protracted and costly audit as well as tax court proceedings. All of
that needless litigation further served to hinder and delay Dr. Angelopoulos’ recovery of amounts
due to him.
Finally, in order to award interest under the Act1, the amount on which interest is to be
paid must be easily ascertainable. That is plainly the case here. A good faith dispute over items
of liability does not preclude damages being ascertainable. Ash v. Georgia-Pac. Corp., 957 F.2d
432, 439 (7th Cir. 1992) (reversing trial court’s denial of interest, finding that damages were
ascertainable despite being “hotly contested and right up to the jury's verdict it was unclear what
plaintiff's loss had been.”) Interest can be awarded under the Act “even when the amount
payable may be uncertain until legally resolved.” Gen. Dynamics Corp. v. Zion State Bank &

Under equitable principles, however, a court “is not precluded from awarding prejudgment
interest merely because the damages are not subject to exact computation.” Neumann v. Neumann,
334 Ill. App. 3d 305, 311, 777 N.E.2d 981, 985 (3d Dist. 2002).
1

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Trust Co., 86 Ill. 2d 135, 140 (1981); U.S. for Use & Benefit of Treat Bros. Co. v. Fid. & Deposit
Co. of Maryland, 986 F.2d 1110, 1121 (7th Cir. 1993).
Dr. Angelopoulos’ damages in this case are ascertainable, and were in fact specifically
ascertained and calculated as specific items of overcharge and withheld income. In the end, it
appears that the jury did not simply accept all of Plaintiff’s items of damage but exercised its duty
to independently ascertain damages. This simply means that, like the damages sought in Ash, the
damages here were hotly contested, and required the jury to resolve a dispute over the Defendants’
liability. Dr. Angelopoulos was awarded compensatory damages for concrete ascertainable items
of economic loss caused by Defendants’ fraud, breaches of contract, and breaches of fiduciary
duty.
C. In Any Event, Dr. Angelopoulos is Entitled to an Equitable Award of Interest.
Even if an award of interest were not mandated by the Illinois Interest Act, this court has
the equitable power under Illinois law to award interest to compensate the Plaintiff for the lost use
of wrongfully withheld income and should do so here.
The court may make an equitable award of prejudgment interest arising out of fraud or
breach of fiduciary duty. Courts in this circuit, and the Illinois state courts, routinely make
equitable awards of prejudgment interest under both of these causes of action when they find that
that a defendant deprived a plaintiff of the use of money. In re Estate of Wernick, 127 Ill. 2d 61,
87 (1989) (breach of fiduciary duty); Michaels v. Michaels, 767 F.2d 1185, 1204 (7th Cir. 1985)
(fraud); Nat'l Union Fire Ins. Co. of Pittsburgh v. DiMucci, 2015 IL App (1st) 122725, ¶¶ 86, 91
(fraud); Tully v. McLean, 409 Ill. App. 3d 659, 685, 948 N.E.2d 714, 741 (1st Dist. 2011) (breach
of fiduciary duty by LLC manager); Prignano v. Prignano, 405 Ill. App. 3d 801, 822 (2d Dist.
2010) (breach of fiduciary duty); Neumann v. Neumann, 334 Ill. App. 3d 305 (3d Dist. 2002)
(breach of fiduciary duty); NC Illinois Trust Co. v. First Illini Bancorp, Inc., 323 Ill. App. 3d 254,
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266 (3d Dist. 2001) (breach of fiduciary duty); Obermaier v. Obermaier, 128 Ill. App. 3d 602, 604
(1st Dist. 1984) (fraud and breach of fiduciary duty in stock sale).
Courts likewise award prejudgment interest under a variety of other theories when the lost
time-value of money is implicated. RRK Holding Co. v. Sears, Roebuck & Co., 563 F. Supp. 2d
832, 839 (N.D. Ill. 2008) (trade secret misappropriation); In re Joy Recovery Tech. Corp., 291 B.R.
111, 118 (Bankr. N.D. Ill. 2003) (fraudulent transfer); Kerasotes v. Estate of Kerasotes, 238 Ill.
App. 3d 1020, 1030 (4th Dist. 1992) (equitable accounting between partners); Chicago Title &
Trust Co. v. First Arlington Nat. Bank, 118 Ill. App. 3d 401, 412 (1st Dist. 1983) (constructive
trust and unjust enrichment).
D. Timing and calculation of interest
Courts of equity have traditionally looked to the Interest Act to set a fair rate of interest,
though they are not bound by it. See In re Estate of Wernick, 127 Ill. 2d 61, 87 (1989) (awarding
interest in excess of statutory rate). Here, the Plaintiff suggests that 5% simple interest will fairly
compensate him for the time-value of funds withheld from him.
Whether under the Interest Act, or under equitable principles, Dr. Angelopoulos should be
compensated for the lost use of the compensatory damages awarded by the jury. Interest should be
calculated beginning on January 1, 2008—the latest date upon which Dr. Angelopoulos should
have been fully paid amounts due and owing after his dissociation from Keystone and WACHN.2
Dr. Angelopoulos respectfully requests an award of prejudgment interest from January 1,
2008 to July 1, 2017 in the amount of $431,486.58 on Count 3, 3 $215,743.29 on counts 2 and 6,
and $52,747.81 on Count 5 as detailed below:

2
3

As the evidence showed at trial, Dr. Weber was paid out his $111,000 in December 2007.
Plaintiff requests an opportunity to update this calculation if judgment is entered after August 1, 2017.

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Count
Count 2
Count 3
Count 5
Count 6

III.

Compensatory
$454,000
$908,000
$111,000
$454,000

Years
9.504
9.504
9.504
9.504

Rate
5%
5%
5%
5%

Interest
$215,743.29
$431,486.58
$52,747.81
$215,743.29

Plaintiff Should Be Awarded Equitable Relief on Count 3 Requiring Dr. Hall and Keystone
to Indemnify and Hold Dr. Angelopoulos Harmless for the WACHN Guaranty.
The evidence at trial demonstrated that as part of his fraud against Dr. Angelopoulos, Dr.

Hall wrongfully prevented Great Lakes Bank from releasing Dr. Angelopoulos as a guarantor on
the WACHN loans. The trial evidence showed that the three departing WACHN members sought
a release of the guaranty, that the bank did an exhaustive credit analysis of the loan without those
three guarantors, and that all necessary internal levels of approval were obtained. The guaranty
was not released, however, based on the objection of one of the “parties,” which the Court can
fairly infer was Dr. Hall and Keystone. It appears that the jury assigned little or no money damages
to Dr. Angelopoulos in relation to that guaranty.
In order to facilitate Dr. Angelopoulos’ release from those loans, this court should exercise
its equitable powers to order Dr. Hall and WACHN to indemnify Dr. Angelopoulos and hold him
harmless for any amounts due under Dr. Angelopoulos’ personal guaranty.
Alternatively, the court should order Dr. Hall, in his individual capacity, and on behalf of
Keystone and WACHN to submit a formal written request that First Midwest Bank (as acquirer of
Great Lakes Bank) release Dr. Angelopoulos from all his obligations under the personal guaranties.

IV.

The Judgment Should Be Allocated in Order to Avoid Double Recovery.
Based on the jury’s verdict, the damages on Count 1, and the award of prejudgment

interest, the total monetary award in this case should be as follows.

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Count: Defendant
Count 1: Keystone & Hall
Count 2: Keystone
Count 2: Hall
Count 3: Hall
Count 5: WACHN
Count 6: Keystone

Compensatory
$327,486.88
$454,000.00
$454,000.00
$908,000.00
$111,000.00
$454,000.00

Interest
$215,743.29
$215,743.29
$431,486.58
$52,747.81
$215,743.29

Punitive

Total
$327,486.88
$669,743.29
$1,000,000 $1,669,743.29
$1,000,000 $2,339,486.58
$163,747.81
$669,743.29

Plaintiff appreciates, of course, that it is not entitled to a double recovery for the same
injury. Duran v. Town of Cicero, Illinois, 653 F.3d 632, 639 (7th Cir. 2011); Thornton v. Garcini,
382 Ill. App. 3d 813, 820 (3d Dist. 2008). The issue potentially arises here for two reasons—the
existence of multiple overlapping theories of recovery and the existence of multiple defendants. It
is indisputably the defendants who have the burden of establishing the amount of the set-off to
avoid a double recovery. Thornton, 382 Ill. App. 3d at 820. However, plaintiff submits that the
following allocation is appropriate.
Based on the proof at trial, the closing arguments, the instructions and the jury’s final
question to the Court, there should be little doubt about how to allocate the recoveries for purposes
of the judgment here. The plaintiff’s theory and proof at trial, including the expert testimony, was
that the damages against Hall and Keystone for fraud, breach of fiduciary duty and breach of the
Keystone contract were identical and overlapping. The jury plainly recognized the overlap but
obviously concluded that, in light of the burdens of proof, plaintiff had proved greater damages on
the breach of fiduciary duty count than on the fraud count. The jury also awarded the identical
amount of punitive damages against Hall on Counts 2 and 3, and given the overlap, it seems likely
that the jury intended only one recovery of $1 million in punitives.
Count 1 was not presented to the jury and involves a completely distinct harm from those
compensated on the other counts. The damages awarded by the jury were for money which Dr.
Angelopoulos was entitled to but was never paid by virtue of the fraud and breach of fiduciary
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duty, as well as breach of contract. Count 1, by contrast, involves an entirely different harm: the
injury Dr. Angelopoulos suffered in defending against the phony information return and
subsequently seeking to vindicate his statutory right to redress. The damages on Count 1 must
therefore be aggregated with the damages on Count 1, and no set-off is appropriate. Taking the
damages on Count 3 of $2,339,486.58 and adding the damages on Count 1 of $327,486.88, the
maximum total recovery for the plaintiff from all defendants should be $2,666,973.46.

Conclusion
Thus, Plaintiff submits that judgment should be entered as follows:
1. Judgment against defendant Hall on Counts 1, 2, and 3 in the total amount of
$2,666,973.46, with that liability being joint as to defendants Keystone and WACHN to
the extent described below.
2. Judgment against defendant Keystone on Counts 1, 2 and 6 in the total amount of
$997,230.17, with that liability being joint with the liability of defendant Hall.
3. Judgment against defendant WACHN on Count 5 in the total amount of $163,747.81, with
that liability being joint with the liability of defendant Hall.
4. The maximum total recovery of plaintiff against all defendants is $2,666,973.46.

Respectfully submitted,
/s/ Chris Gair
Chris Gair
One of Plaintiff’s attorneys
Dated: June 27, 2017
Chris Gair (ARDC # 6190781)
Thomas R. Heisler (ARDC # 6296712)
Ryan P. Laurie (ARDC # 6318306)
Gair Eberhard Nelson Dedinas Ltd
1 East Wacker Drive, Suite 2600
Chicago, IL 60601
[phone]

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