Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-14-02990/USCOURTS-ca7-14-02990-0/pdf.json

Parties Involved:
Nicolas Balagiannis
Appellant
Theodore Mavrakis
Appellee
Reserve Hotels PTY Limited
Appellant

Document Text:

In the

United States Court of Appeals

For the Seventh Circuit

No. 14-2990

RESERVE HOTELS PTY LIMITED, et al.,

Plaintiffs-Appellants,

v.

THEODORE MAVRAKIS,

Defendant-Appellee.

Appeal from the United States District Court for the 

Northern District of Illinois, Eastern Division.

No. 1:13-cv-07475— Harry D. Leinenweber, Judge.

ARGUED MAY 19, 2015 — DECIDED JUNE 23, 2015

Before POSNER, EASTERBROOK, and MANION, Circuit Judges.

MANION, Circuit Judge. Nicolas Balagiannis and his company, Reserve Hotel PTY Limited, sued Theodore Mavrakis in

the district court and in Greece for breach of contract arising

from a failed business venture involving a casino. When

Balagiannis failed to confirm his compliance with the terms of

the settlement agreement, Mavrakis ceased making payments

under the agreement, so Balagiannis sued to enforce it. The

district court dismissed the suit for failure to state a claim. We

affirm.

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I. Background

In the aftermath of a casino investment venture gone awry,

Balagiannis and Mavrakis entered into a settlement agreement.

Under the agreement, Mavrakis would pay Balagiannis $1.225

million; in exchange, Balagiannis would dismiss pending

litigation in the district court with prejudice and “withdraw the

Complaint he ha[d] filed against Mavrakis” in the Greek legal

system no later than September 28, 2012. Mavrakis made three

of five agreed payments, and in March 2012, Balagiannis sent

a three-page letter to a district attorney in Athens. The letter

did not expressly or generally reference withdrawal of the

complaint against Mavrakis. Instead, it only requested

“completion of the ongoing preliminary investigation.” After

Balagiannis refused to confirm that he had withdrawn the

Greek complaint, Mavrakis declined to make the final two

payments amounting to $925,000. In October 2013, Balagiannis

filed this suit alleging that Mavrakis breached the settlement

agreement. Mavrakis moved to dismiss on grounds that

Balagiannis failed to allege that he had satisfied his own

obligation to withdraw the Greek complaint. Three months

later (and nineteen months after the September 28, 2012, date

that withdrawal of the complaint was required under the

settlement agreement), Balagiannis filed a declaration with the

district court (dated March 4, 2014, and filed in Greece), which

may (or may not) have withdrawn the complaint in Greece.

The district court held that Balagiannis failed to allege plausibly his compliance with the settlement agreement, and

dismissed the suit. Balagiannis timely appealed.

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No. 14-2990 3

II. Analysis 

We will treat the district court’s order as a judgment on the

pleadings, which we review de novo. Northern Indiana Gun &

Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 452 (7th

Cir. 1998). Because settlement agreements are contracts, we

look to state law for the rule of decision. Newkirk v. Village of

Steger, 536 F.3d 771, 774 (7th Cir. 2008).

A. Plausibility 

 Under Illinois law, a “party cannot sue for breach of contract

without alleging ... that he has himself substantially complied

with all the material terms of the agreement.” George F. Mueller

& Sons, Inc. v. N. Ill. Gas Co., 336 N.E.2d 185, 189 (Ill. App.

1975). Balagiannis argues that he substantially performed the

terms of the settlement agreement because he did all that he

could do to implement them. He points out that he dismissed

the suit pending in the district court (over which there is no

disagreement) but concedes that he was unable to provide

assurance to Mavrakis that the Greek complaint was dismissed

because the Greek legal system is inquisitorial (a critical fact

here because it means that Greek authorities have no obligation

to dismiss Balagiannis’s suit, even if he sought to do so).

Building on his concession, he contends that Mavrakis has not

suffered any injury because he has not been subjected to any

criminal or civil liability by any Greek court. For these reasons,

Balagiannis argues that he has provided substantial performance under the settlement agreement and that Mavrakis

should be required to continue making payments consistent

with its terms.

There are two distinct problems with Balagiannis’s argument.

First, here at the pleadings stage, the issue is not whether

Balagiannis substantially performed, but whether he has

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pleaded substantial performance. The Supreme Court’s

decisions in “Iqbal and Twombly hold that a complaint must be

dismissed unless it contains a plausible claim.” Bank of America,

N.A. v. Knight, 725 F.3d 815, 818 (7th Cir. 2013). The district

court concluded that Balagiannis failed to allege plausibly that

he performed both conditions of the settlement agreement that

were preconditions to its enforcement. Balagiannis v. Mavrakis,

2014 WL 3889064, at *2 (N.D. Ill., Aug. 8, 2014) (referring to the

allegations in Balagiannis’s complaint as “utterly implausible”).

 The only allegation in Balagiannis’s complaint that concerns

performance of his obligation to withdraw the Greek complaint

is found at ¶ 30 and states that 

 at the time the Settlement Agreement was signed, Mr. 

 Balagiannis believed that he had requested that the 

 Complaint against Mavrakis and his wife in Greece be 

 withdrawn and that this in fact had occurred.

 Notably, Balagiannis has not pleaded that he made an actual

request to withdraw the complaint, but merely that he believed

that he had done so. This distinction is key. One’s beliefs about

his performance in a commercial dispute are not the same as

one’s allegations about his actual performance. Rule 8 requires

a “short and plain statement of the claim showing that the

pleader is entitled to relief”—it does not sanction a statement

that the pleader believes himself entitled to relief. The civil rules

required Balagiannis to plead that he took some discrete action

to withdraw his complaint in Greece. He did not do so. The

consequence of Balagiannis’s failure to assert that he withdrew

the Greek complaint is that he failed to assert a plausible claim.

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No. 14-2990 5

B. Substantial performance

 We conclude that Balagiannis failed to allege plausibly that

he performed under the settlement agreement. This reason is

wholly sufficient to affirm the district court. However, for the

sake of completeness, we also address his substantial performance argument. Notwithstanding Balagiannis’s defective

pleading, he argues that he substantially performed here

because: 1) the agreement calls for him to satisfy a pair of

conditions; 2) he satisfied the first condition; and 3) he later

learned that the second condition was beyond his control

because the Greek legal system is inquisitorial. 

 So did Balagiannis substantially perform under the terms of

the settlement agreement? Balagiannis contends so, but our

colleague in dissent is more circumspect—his principal

contention is not that Balagiannis should win, but that dismissal was premature. We respectfully disagree. 

 A party’s enforcement action fails unless the would-be

enforcer has first satisfied his obligations under the agreement.

W.E. Erickson Constr., Inc., v. Congress-Kenilworth Corp., 503

N.E.2d 233, 236–37 (Ill. 1986) (Under the doctrine of substantial

performance, “all the essential elements necessary to the

accomplishment of the purpose of the contract” must be

alleged and proven). Based on the papers filed in this case, we

know the following about Balagiannis’s efforts towards his

underlying obligations: we know that the settlement agreement required Balagiannis to withdraw his complaint against

Mavrakis, and we know that he failed to do so because the

three-page letter Balagiannis’s lawyer sent to Greek authorities

before September 28, 2012, does not mention withdrawal or

any analogous mechanism that eliminates Mavrakis from the

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proceeding. See Doc. 26-3. Finally, we know that the belated

March 4, 2014, declaration Balagiannis filed with the district

court—regardless of whether or not it withdrew the complaint

in Greece—was filed nineteen months after the September 28,

2012, deadline in the settlement agreement.

 On the basis of the information discerned from these papers,

Balagiannis has not satisfied his obligations under the agreement, and his enforcement action must fail. Although our

colleague in dissent contests the formalism of that determination, the district court did not need the benefit of an expert in

Greek law to reach the conclusion that a letter which fails to

mention anything about withdrawing a party from the case

will not result in that party being withdrawn from the case.

And while he faults us and the district court for failing to credit

the belated March 4, 2014, declaration, the fact remains that if

the district court had credited this declaration, it could have

granted judgment on the pleadings for Mavrakis because it

proves that Balagiannis did not substantially perform within

the time frame contemplated by the settlement agreement. 

 In short, Balagiannis was required to deliver if he wanted

Mavrakis’s performance. If we were to agree with Balagiannis,

he would be entitled to all the money promised in the settlement even though he admits he has not delivered (and cannot

deliver) what Mavrakis wanted in exchange: peace of mind

that no criminal prosecution in Greece would be forthcoming.

Balagiannis could have avoided this conundrum if he had

sought rescission in the district court on grounds that it was

impossible for him to terminate the proceeding in Greece. But

he did not, and it is not our responsibility to re-litigate this case

for him.

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No. 14-2990 7

III. Conclusion

 Balagiannis failed to allege that he complied with both

conditions of the settlement agreement. Additionally, his

pleadings show that he failed to substantially perform.

Accordingly, we AFFIRM the judgment of the district court.

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POSNER, Circuit Judge, dissenting. Balagiannis sued Mavrakis and others and the parties settled, agreeing that Mavrakis would pay $1.225 million to Balagiannis, who in exchange would release all his claims against Mavrakis and his 

wife. There were several claims, and it is uncontroverted 

that Balagiannis timely settled all but one—a complaint 

seemingly both criminal and civil in nature that he had filed 

with Greek prosecutorial authorities, who in response to the 

complaint had instituted an investigation. (Although both 

parties, though ethnically Greek, are American citizens, the 

fraud alleged by Balagiannis arose from transactions involving the stock of a casino located in Greece.) In 2012, after 

having paid $300,000 of the $1.225 million that he owed Balagiannis, Mavrakis refused to pay the rest on the ground 

that Balagiannis had not withdrawn the Greek complaint as 

promised. Balagiannis had written a letter to the Greek authorities in March 2012 that he says withdrew the complaint. 

Actually the letter just asked the authorities to expedite their 

investigation, which is the opposite of a request to dismiss. 

But Balagiannis may have thought (and for all we know may 

have been thinking correctly) that only when the investigation was complete would the criminal complaint be dismissed. He also says his Greek lawyer told him the letter 

would bring about the withdrawal of the Greek proceeding 

against the Mavrakises.

In 2013 Balagiannis brought the suit that is before us 

against Mavrakis for the $925,000 that remained of Balagiannis’s $1.225 million contract claim. The following year,

Mavrakis having moved to dismiss the suit for failure to 

state a claim, Balagiannis filed in the district court a statement that his (new) Greek lawyer had just submitted to the 

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No. 14-2990 9

Greek authorities unequivocally requesting termination of 

the Greek investigation of Mavrakis and his wife. The letter 

did not request termination of the other defendants, but said 

only that on the basis of additional information that Balagiannis had recently obtained he had concluded that Mavrakis and his wife “have no involvement and connection to 

the felonies of embezzlement, fraud and forgery committed 

against me” and therefore “I do not wish to legally sue Theodore Mavrakis and [his wife] and I will not attend as plaintiff against them,” as distinct from four other defendants 

against “whom I wish to proceed with the prosecution to 

[sic] against them and [as to them] I will attend as the plaintiff.”

For Balagiannis to prevail in his breach of contract suit 

against Mavrakis he had only to show that he had substantially performed his end of the bargain. George F. Mueller & 

Sons, Inc. v. Northern Illinois Gas Co., 336 N.E.2d 185, 189 (Ill. 

App. 1975), citing Christopher v. West, 98 N.E.2d 722, 725 (Ill. 

1951); W.W. Vincent & Co. v. First Colony Life Ins. Co., 814 

N.E.2d 960, 967 (Ill. App. 2004). The district judge nevertheless dismissed Balagiannis’s suit with prejudice for failure to 

state a claim, primarily on the ground that the second letter 

had come too late, having been filed with the court more 

than four months after the complaint had been filed. The 

judge also cited a Greek source, cited by Mavrakis, for the 

proposition that as long as the Greek investigation continued 

against the four other defendants, it could not be terminated 

against any of the defendants.

Dismissal with prejudice was improper with the suit at 

such an early stage, see Fed. R. Civ. P. 15(a)(2); Foman v. Davis, 371 U.S. 178, 182 (1962); cf. General Electric Capital Corp. v. 

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10 No. 14-2990

Lease Resolution Corp., 128 F.3d 1074, 1085 (7th Cir. 1997), 

given the abundance of factual issues raised by the parties’

submissions to the district court—those issues could not be 

sensibly resolved without proceedings that the judge impatiently cut off. Whether Greek law would allow the investigation to be terminated against fewer than all the persons 

being investigated was an especially critical issue and surely 

merited the judge’s consideration, which it did not receive. 

Another ignored issue of potential consequence was whether

Balagiannis’s first letter to the Greek authorities, despite its 

literal meaning—a meaning that may however have been the 

product of an imperfect translation from Greek into English—was a bona fide effort to terminate the criminal investigation of the Mavrakises. (The statement in the majority 

opinion that “the district court did not need the benefit of an 

expert in Greek law to reach the conclusion that a letter 

which fails to mention anything about withdrawing a party 

from the case will not result in that party being withdrawn 

from the case” could be thought to reflect a certain naïveté 

concerning the potential loss of meaning in translations.) 

And if not, the next issue requiring consideration was 

whether the second letter was such an effort, even though it 

reserved the right to urge that the criminal investigation of 

the Mavrakises’ codefendants proceed. That issue too the 

judge ignored.

Still another ignored issue of consequence was whether, 

assuming that either one or both of the letters was a bona 

fide effort to call off the Greek investigatory hounds, the effort amounted to substantial performance by Balagiannis of 

his obligations under the settlement agreement. He did not

promise in the settlement agreement to deliver “peace of 

mind that no criminal prosecution in Greece would be forthCase: 14-2990 Document: 27 Filed: 06/23/2015 Pages: 14
No. 14-2990 11

coming,” as the majority puts it; he didn’t agree to become 

an insurer. But he agreed “to withdraw the Complaint he 

has filed against Mavrakis and [his wife] in the Greek Action.”

The phrase “withdraw the Complaint” could mean either “terminate prosecution of the complaint” or “ask the 

Greek authorities not to prosecute the complaint.” If Greek 

law doesn’t allow a private complainant to terminate the 

prosecution of a complaint against fewer than all the defendants, then a plausible interpretation of “withdraw the 

Complaint” is that Balagiannis was required only to tell the 

Greek authorities that he didn’t want Mavrakis and his wife 

prosecuted—for he could not block the prosecution but 

could only ask that it be terminated. This interpretation

would require Balagiannis to do only what Greek law allowed him to do. To interpret the contract to require him to 

do something the law didn’t allow him to do, such as withdraw the complaint against all the defendants, would signify 

a mutual mistake by the parties concerning the applicable 

Greek law, see Schaefer v. Wunderle, 39 N.E. 623, 627 (Ill. 

1895); 27 Williston on Contracts § 70:134 (4th ed., Westlaw database updated May 2015); Restatement of Restitution § 55, 

comment c; Eclavea et al., 12 Ill. Law and Practice, Contracts

§ 69 (Westlaw database updated May 2015), by agreeing to 

do something the law forbade. If there was no mistake, Balagiannis wouldn’t have to rescind the contract for relief, as 

the majority suggests, because he had done all he could do—

his performance though it might prove ineffectual had been 

substantial.

Further supporting this interpretation is Mavrakis’s

promise in the settlement agreement “to provide reasonable 

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cooperation in connection with Balagiannis’ claims against 

the remaining parties in the Greek Action.” Since Balagiannis is not asking that his Greek complaint be dropped 

against them as well as against the Mavrakises, he did not 

harm Mavrakis and so did not breach his contract; “reasonable cooperation” would require Mavrakis to accept Balagiannis’s interpretation of Greek law as not requiring Balagiannis to obtain the dismissal of all the defendants in order 

to obtain the dismissal of just the two Mavrakises.

Balagiannis’s lawyer told us at oral argument that his 

client would not resist being ordered to return some portion 

of the damages to which Balagiannis would be entitled had 

he managed to withdraw the Greek complaint early on. The 

concession appears in amplified form in his brief, which 

states that “Balagiannis and Reserve [his company, a 

coplaintiff] are entitled to maintain their claim against Ted 

[Mavrakis] for his failure to pay the $925,000 that remains 

due under the Settlement Agreement, subject to any damages 

that Ted [Mavrakis] can prove that were caused by Balagiannis 

failing to timely withdraw the claims against Ted and his wife in 

the Greek Complaint” (emphasis added).

The majority opinion states that the delay makes Balagiannis’s second letter ineffectual, but doesn’t explain why 

damages cannot remedy any harm that the Mavrakises suffered from the delay. The Illinois courts have ruled that 

“mere delay in the performance of a building contract will 

not defeat the right of the contractor to collect the contract 

price.” Ahmer v. Peters, 149 N.E.2d 503, 506 (Ill. App. 1958), 

quoting Walsh v. North American Cold Storage Co., 103 N.E. 

185, 188 (Ill. 1913); see also Israel v. National Canada Corp., 658 

N.E.2d 1184, 1190 (Ill. App. 1995). Why should the result be

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No. 14-2990 13

any different in this case? The Mavrakises haven’t been 

prosecuted yet, so even a delayed withdrawal may spare 

them any consequences from Balagiannis’s delay in endeavoring, in his second letter, to make clear his desire that the 

Greek authorities terminate their investigation of the Mavrakises.

The result of a trial—even perhaps of summary judgment proceedings—might well be a finding that the Greek 

investigation is dead in the water. Indeed, since the Greek 

authorities have not brought the Mavrakises to trial in the 

six years since Balagiannis filed his Greek claims, or so far as 

appears done anything else to suggest a live investigation

and expectation of an eventual trial, it is unlikely—it may in 

fact be out of the question—that the couple will ever be 

prosecuted in Greece. (Would Greece even request their extradition, and if so would the United States honor the request?) To determine that possibility would require evidence 

from experts on Greek criminal procedure who—whether 

Greek or American—are knowledgeable about the extraordinary current strains on the Greek government as a result 

of Greece’s dire financial straits, which have produced a bitter conflict between that government and the European Union’s financial authorities plus the nation’s numerous importunate creditors.

If indeed the investigation will not result in a prosecution, Balagiannis is entitled to the promised $925,000 minus 

any damages that delay has imposed on the Mavrakises. 

Should it be impossible to determine the fate of the investigation or to assess damages that the investigation’s continued existence, limbo-like though it is, is imposing on the 

Mavrakises, an alternative remedy might be to require them

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14 No. 14-2990

to place the $925,000 that they may ultimately be determined 

to pay Balagiannis in escrow (where it would earn interest) 

for a period of say three years. If at any time during that period the investigation was definitely closed, the money, including any accrued interest, would go to Balagiannis. Otherwise it would stay with the Mavrakises.

All that is clear at this stage is that the suit has been dismissed prematurely and therefore that the dismissal should 

be reversed and the case remanded to the district court for 

evidentiary proceedings.

I want in closing to remark a general issue of federal 

practice that this case illustrates. Recall that the district 

judge’s main reason (mysteriously ignored in the majority 

opinion) for dismissing Balagiannis’s suit was his fourmonth delay in filing the second letter. The second letter is 

crucial to his case. I find myself increasingly uncomfortable 

with basing dismissals with prejudice on harmless procedural bobbles. The only argument in favor of such summary 

justice that I can imagine is that by punishing parties for 

their lawyers’ mistake we improve the quality of the bar; the 

lawyers who disserve their clients attract fewer new clients 

and eventually perhaps are forced to leave the practice—an 

example of the positive effect of competition on the quality 

of goods and services that a market provides. But while this 

is plausible in theory, I have to say that in more than 33 

years as a federal court of appeals judge I have not noted 

any improvement in the average quality of the lawyers who 

appear before us. I find it difficult to believe that punishing 

Balagiannis and his lawyer by in effect a “fine” of $925,000 

will promote the quality of legal representation in the courts 

of this circuit.

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