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Nicholas Balagiannis and Reserve Hotels Pty Limited, As Trustee For the Nbf Trust v. Theodore Mavrakis

October 31, 2011

NICHOLAS BALAGIANNIS AND RESERVE HOTELS PTY LIMITED, AS TRUSTEE FOR THE NBF TRUST, PLAINTIFFS,
v.
THEODORE MAVRAKIS, DEFENDANT.



The opinion of the court was delivered by: Hon. Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

This case is now before the Court on the Defendant's Motion for Summary Judgment on Counts I (Breach of Contract), II (Promissory Estoppel), and III (Common Law Fraud). The Court previously ruled on Defendant's Motion to Dismiss which was directed at the previous Complaint, granting the Motion without prejudice as to Count II (now Count I), with leave to amend, and denied the Motion as to Counts III and IV (now Counts II and III). The basis for dismissing the old Count II was the failure of Plaintiff to allege consideration for a guarantee. Plaintiff has since amended his Complaint to allege breach of contract (rather than breach of guarantee) as well consideration for the alleged contract.

I. BACKGROUND

The factual setting for this dispute is the alleged agreement on the part of Defendant, Theodore Mavrakis (the "Defendant"), to sell his shares in Theros Gaming International, Inc. ("Theros"), the corporate owner of a Greek casino located in Patras, Greece.

The following facts are taken from the parties' respective Local Rule 56 statements. Initially, the Court notes that the Defendant has been extremely evasive in his response to Plaintiff's Rule 56.1 Statement of Additional Facts. He repeatedly responds to Plaintiff's statement by making partial admissions followed by the following boiler plate qualification: ". . . and denies that the remainder of the statement is supported by the record citation." The Seventh Circuit has repeatedly stated that Local Rule 56.1 is "not satisfied by evasive denials that do not fairly meet the substance of the material facts asserted." Bordelon v. Chicago School Reform Board of Trustees, 233 F.3d 524, 528 (7th Cir. 2000). To give an example here, Plaintiff's Additional Statement No. 2 says: "As of January 27, 1999, Ted and Costas Mavrakis, Ted's brother, each owned 43,6875% of the shares of Theros. Michael Rose owned the remaining shares." To which Defendant's response was "Ted admits only that Ted and Costas Mavrakis at one time each owned 43 percent of the shares of Theros and denies that the remainder of the statement is supported by the record citation." It defies common sense to assert that a major shareholder of a very closely held corporation (three shareholders), would not know as of January 27, 1999, who owned the other shares of Theros. Another example: Statement No. 11: "In order to close the purchase by Costas of Ted's shares in Theros, an escrow was created between Ted and Costas, to which Balagiannis was not a party." Defendant's response: "Ted denies the statement because the documents Plaintiffs attach to the ASOF are illegible. Ted does admit that he and Costas were parties to an escrow account." Why in the world Defendant would not be able to admit that Balagiannis was or was not a party to the escrow account to which he was a party is baffling to say the least. As the Seventh Circuit stated in Bordelon, District courts are not obligated to wade through improper denials in search of genuinely disputed facts. So the Court, while not striking Defendant's response, will deem admitted those facts that clearly are in the knowledge of Defendant and are denied solely based on what he perceives as not being supported by the record citation.

II. FACTS

At the time of the alleged agreement Defendant and his brother, Costas Mavrakis ("Costas"), owned approximately 43.5% of the corporate owner, Theros International Gaming, Inc. Defendant entered into an agreement with a third party, Anakon Investments, Ltd. ("Anakon"), to sell his shares in Theros for $4 million in cash, a $5 million promissory note, and a release from Rose, the shareholder, who owned the approximate 13% remainder of Theros shares. Costas after learning of the proposed sale of Defendant's shares to Anakon invoked what he claimed was his right of first refusal and demanded that Theodore sell him his shares for the same consideration as given to Anakon. In order to finance the proposed purchase of Defendant's shares, Costas entered into an agreement with Nicholas Balagiannis (the "Plaintiff") to transfer 34% of Theodore's shares to Plaintiff after the purchase was completed for the price of $6,954,530. (The transfer was to be made to Plaintiff individually or to an entity to be named by Plaintiff.) The Plaintiff originally intended to name Reserve Hotels Pty, Ltd. ("Reserve"), as Trustee for the NBF Trust, as the designee for the ownership of the shares but this did not come to pass. (The Plaintiff agrees that Reserve should therefore be dismissed from this suit.) This sum was to be paid as follows: by the deposit of $4 million in an escrow to be used to close on Costas' acquisition from Defendant and the remaining amount would be used to make the majority of the first three payments due on the $5 million promissory note due to Defendant. The Plaintiff also agreed to lend $500,000 to Costas to pay his attorneys' fees in connection with a dispute over Costas' right to purchase the shares from Defendant then pending in a Chicago court. Plaintiff also advanced Costas an additional $300,000 with the understanding that he would deposit that sum into the escrow account.

The establishment of the escrow account was a term of Costas' agreement with Defendant to which he and Defendant would be the only parties. The terms of the Escrow Agreement were that Defendant would deposit his shares in Theros and Costas would deposit the $4 million cash, the $5 million promissory note and the release form the remaining shareholder. When the required deposits were made, the Escrow Agent would release the shares to Costas and the cash, note, and release to Defendant.

In August 2003 Plaintiff was asked to deposit the $4 million into the Escrow. However, because he was not a party to the escrow Plaintiff was reluctant to do so. Plaintiff through his counsel, Konstantinos Grekos ("Grekos"), requested that Costas agree that the funds not be released from the Escrow without Plaintiff's agreement unless the terms of the Escrow were satisfied. By letter dated August 27, 2003, Costas and his attorney, Robert Nieman ("Nieman"), agreed to this. Thereafter, on September 1, 2003, Plaintiff caused $3,700,000 to be deposited in the Escrow. This sum plus the $300,000 already advanced to Costas was to satisfy the $4 million cash requirement due Defendant. In October, Costas and Defendant apparently concluded that the terms of the Escrow could not be satisfied, and Costas' attorney directed the Escrow Agent to disburse the Escrow Funds to a Greek bank in Defendant's name to serve as a deposit while Costas continued with his efforts to purchase the shares from Defendant. At that time Defendant knew the funds came from Plaintiff and their intended use was to purchase Defendant's shares.

On October 21, 2003, Plaintiff's lawyer spoke to Defendant by telephone wherein Defendant agreed that the money in escrow would not be at risk and Defendant would purchase Plaintiff's rights under his agreement with Costas for $4 million at any time that Plaintiff requested. Based on this assurance, the lawyer executed a written direction to release the funds to a bank account in Greece in Defendant's name. The lawyer then drafted the terms of this agreement in a handwritten letter which he faxed to Defendant on October 21, 2003. Defendant signed the letter and faxed it back to the attorney on October 22, 2003. On October 24, 2003, the sum of $3,703,606.80 held in the escrow was released and sent to Defendant's Greek bank account.

In late 2003 or early 2004, the parties and their attorneys met in Athens during which Defendant represented to Plaintiff and his attorney that if he did not want to continue the transaction, that Defendant would purchase Plaintiff's rights under his agreement with Costas within 20 to 30 days after notice from Plaintiff. On February 2, 2007, Plaintiff's lawyer sent a letter to Defendant requesting that Defendant purchase Plaintiff's rights pursuant to the terms of their Agreement. While Defendant did not respond to this letter, he did send a letter to Costas, with a copy to Plaintiff, on March 31, 2007, stating that he had the funds on deposit and would return them if the parties wished to cancel the transaction. This was false because almost all of the funds save $17,000 had been distributed to Costas by January 27, 2004. Defendant claims that he made these transfers to Costas as gifts. However, he did not file any gift tax returns. None of Plaintiff's money has been returned to him and he has received no shares in Theros.

III. ARGUMENT

A. Count I

Count I of the Second Amended Complaint alleges that Defendant breached the October Agreement by refusing to purchase Plaintiff's rights under the Stock Purchase Agreement with Costas. The Agreement allegedly breached consisted of a telephone conversation between Plaintiff's attorney and Defendant on October 21, 2003, which was reduced to writing, faxed to, and signed by Defendant, and, returned by fax to Plaintiff. Defendant acknowledges that he signed the fax. Defendant contends that there was no consideration ...


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