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# United States Court of Appeals For the Seventh Circuit

No. 12-3557
TABFG, LLC, Plaintiff-Appellee ,

v.

R I C HAR D P F E I L, Defen dant-Appellant.
Appe al f ro m the Uni ted S tates Distri ct Co urt fo r the Nor thern Distri ct o f Il l i noi s, Eastern Di v i sio n. No. 1: 08 -cv-06 97 9 — Robert W. Get tle man , Judg e.
A RGU E D A PRI L 15, 2013

— D E C I D E D M ARC H 20, 2014

Before R I P PL E, R OVN E R

, and W I L L I AM S

, Circ uit Judges.

R OVN E R , Cir cui t Judge. T

ABFG, a li mi ted li abi li ty corpor ation, brought sui t agains t Richard Pfei l allegi ng, among o ther clai ms, tor tious interfer ence wi th a contract. After a bench tr i al, the di stric t court enter ed judgment in fav o r o f T ABFG, and
aw arded a judgment in the amount of $957,659.68, compri sed of a prin ci pal amount of $674,121.87 plus prej udgment intere st2 No. 12-3557
of $279,530.36 and costs of $4,007.45. Pfei l now appeals that deter minati on, and w e affi rm. In April 2003, a jo int v enture w as formed bet w een tw o li mi ted li abi li ty compani es, T ABFG and NT Prop T

radin g (“NT Prop”), for the purpose of tr ading secu riti es for financi al gain

. T ABFG w as the entity responsible for all of the tr ading for the jo int v enture, and w as compri sed of three indi vidu al members and managers, Cal Fis hki n, Igo r Chernomzav , and Ken t Spellman. NT Prop w as tasked wi th fund ing the v enture, and inclu de d tw o members who w ere also li mi ted li abi li ty corpor ations —NT Fin anci al and Pfei l Comm od i ty Fun d ( “ Pfei l Commodi ties ”). The sole member , manager and owner of Pfei l Commodi ties w as Ri chard Pfei l (“Pfe i l”), who w as known as the “money man” for the jo int v enture and i s the defendant in thi s case. NT P ro p w as managed by tw o indi vidu als, W i lli am Anthony , who w as Pfei l’s atto rney , and Larry Nocek. Under the ter ms of the Joint V enture Agr eement, NT Prop

w ould prov i de the money to fund the tr ading by T ABFG. The agr eement called for an ini tial fu nd ing in the amount of $2 mi lli on, follow ed by a sub sequent infus i on of a n a d d i tional $2

. 5 milli on. At fi rst, thi s arr angement appeared to func tion

w ell. NT Prop prov i ded the ini tial $ 2 mil li on in start -up mo ne y , whi ch came from Pfei l Commodi ties, and the tr ader s proved adept at their craft, earnin g pro fi ts of $3.4 mi lli on. A problem aro se, how ev er , whi ch threat ened the abi li ty of the jo int v enture to conti nue in i ts mi ssi on. Before formin g T ABFG, Fis hki n and Cher nomzav (herei nafter the “T rader s”)

w ere e mploy ees of Susquehann a Inter nati onal Group LLP (“SI G” ), a company that engaged in the tr ading of equi ties,No. 12-3557 3 futures, and other deriv ativ e products and secur ities

. In that employment, the T

rader s w ere si gnato ries to an e mployment contract that contai ned rest r i cti v e cov enants whi ch li mi ted their abi li ty to compete wi th t he ir former employ er upon leaving their jo bs. The parties to the Joint V enture Agree ment

w ere aw are of those l i mi tations, and prov i ded in that agr eement for the payment of atto rneys’ fees and o t he r costs
necess ary to escape the stric tures of that employment contract. T ow ard that end, the T rader s fil e d a laws ui t again st SIG seeki ng a declara t or y judgment to inv ali date the restr i cti v e cov enants. SIG responded by adding T ABFG and NT Prop t o their laws ui t as addi tional counterclai m defendants see kin g di sgor gement of all profits, thus creating consternation among the part i es to t he jo int v enture that the money in that v enture coul d be i mperi led. On Sept ember 16, 2003, SIG obtained an injuncti on in a Pennsylv ani a di stric t court e nj oin ing the T rader s for nine mo nths after their departur e from SIG from tr ading any secu rity that they had tr aded wi thi n the last three
mon t hs of their employment wi th SIG, and enjo ining them from associ atin g wi th each other on a secu ritie s tr ading bus iness for nine months. That p r e vente d the T rader s from

w or kin g tog ether to tr ade on behalf of T ABFG, and spelled the end of the jo int v enture becau se their combin ed tr ading prow ess w as the corner stone of the v enture. The Joint V enture Agr eement prov i ded that “[u] pon ter minati on of the Joint V enture, a Reconci li ation S t a t e ment wi ll be prepar ed by NT Prop and deli v ered to the parties wi thi n fi fteen (15) days after ter minati on, an d all profits and the H old B ack, i f any , shall be
concu rr ently di strib uted to the respecti v e parties.” The di stric t court conclu ded that the v enture effectiv ely en d e d when the4 No. 12-3557

injuncti on w as enter ed, and that the ter ms of the Joint V enture Agr eement requi red a disbursement of fund s as of October 2, 2003. The di stric t co u rt found that the Joint V enture Agr eement prov i ded for an e v en spli t of the profits be t w e e n T A BFG and N T Pr op less expenses and payments. A lette r of October 3 , 2003, from couns e l fo r the T rader s sought a di strib uti on of fund s under the Joint V enture Agr ee me nt , and noted that a refusal by NT Prop to di strib ute such finds w ould consti tute a breach. The T

rader s in that lett er als o expressed a wi llingness to conti nue to tr ade un d er the Joint V enture Agr eement, but acknowledged that such a course of acti on mi ght not be in the best intere st of the part i es. Numerous di scu ssi ons ensued between the parties as to the amounts due fro m N T Prop to T ABFG under the agr eement, and NT Prop created spreadsheets in a n effort to detail the amounts ow ed. The parties fai led to agr ee as to the final
accoun t ing, but Fis hki n on behalf of T ABFG li ter ally begged Pfei l to di strib ute what w a s ow ed to T ABFG so that i t w ould hav e the fund s needed to mount a defense in the laws ui t by SIG. On January 6, 2004, Pfei l caus ed NT Prop to di strib ute $360,0 0 0 t o T

ABFG, $533,023.69 to NT Fin anci al, and $2,742,182.02 to Pfei l Comm od i ti e s, whi ch he solely owned and whi ch fund s he acknowledged went to hi m personally and for hi s own personal use. Pfei l and Nocek sig ne d a n agr eement tw o days later

, on January 8, 2004, purpor tin g to authorize that di strib uti on, and Pfei l si gned i t as a manager although the only managers of NT Pro p in fact were Nocek and Anthony

. After the di strib uti on, ap prox i mately $200,000 w as left in the as sets of the jo int v enture, whi ch w as mainly spent for legal fees andNo. 12-3557 5

taxe s. In Sept ember

, 2004, NT Prop w as inv olunta ril y d i s s ol v ed by the Illinoi s Secretar y of S tate

. T ABFG s ubs equently fi led a laws ui t against Pfei l, allegin g among other clai ms that Pfei l tor tious ly int erfer ed wi th the contractual obli gations of NT Prop in i ts Joint V enture Agree

ment under whi ch the di strib uti on of profits w as supp osed to be ev enly spli t betw een T ABFG and N T Prop, less expenses and payments. Under Illinoi s law , whi ch appli es to thi s clai m, a clai m of tor tious interfer ence requires proo f of a l e g a l ly enforceable contract o f whi ch the defendant had knowledge, and the defendant’s intentional interfer ence induc ing a breach by a party to the contract, resulti ng in damages. Stafford v
. Puro , 63 F .3d 1436, 1441 (7th Ci r
. 19 9 5 ); Dallis v
. Don Cun nin gham & Ass oc

. , 11 F .3d 713, 717 (7th Ci r
. 1993). Ess ential ly , T ABFG
ass e r ted that when Pfei l, who w as not an offi cer , di recto r or manager of NT Pro p, engin eered a di strib uti on of the bulk of the jo int v enture fund s to hi mself , he tor tious ly caus ed NT Prop to breach i ts contractual obli gations under the Joint V enture Ag reement t o T ABFG on thatdate. After a bench tr i al, the di strict co ur t judge agr eed wi th T ABFG, and aw arded j udgment to T ABFG against Pfei l. In so holding, the di stric t court judge explic i tly found Pfei l to be not credible in hi s testim ony , and found Fis hki n and Chernomzav

v ery credible. In rev i ewing the deci si on of the di stric t court, w e rev i ew factual findings for clear err or , wi th speci al deference to the di stric t court’s deter minati ons of credibi li ty that are not contradic ted by ext rins i c evidenc e. Fur ry v
. United States , 712 F .3d 988, 993 (7th Ci r
. 2013); Un i te d S tat es v
. Stadfeld, 689 F .3d 705, 709 (7th Ci r . 2012).6 No. 12-3557
Pfei l rais es tw o challen ges to the di stric t court’s decisio n. First, he asserts that the clai m of tor tious interfer ence i s barred by the statut e of li mi tations. Second, he ass ert s that hi s dis tr i

buti on of the fund s w as pr ote cted by privi lege, and therefor e he cannot be he l d li able for that di strib uti on. W e take these arg uments in turn. Th e relev ant statute of li mi tations for a clai m of tor tio us interfer ence wi th contract i s fi v e y ears , a nd Pfei l arg ues on appeal that the li mi tations period began to run on O ctober 2, 2003. Accordi ng to Pfei l, the Jo int V enture Agr eement w as effecti v ely ter minated when t he Pennsylv ani a di stric t court enter ed the injuncti on against the T rader s, thus tr i gge ring the requirement in the Jo int V enture Agr eement that NT Prop prepar e a Reconci li ation St atement and di strib ute the fund s wi thi n 15 days. Pfei l asserts tha t t he fai lure to di strib ute the fund s wi thi n that ti me period consti tuted a breach of contract
on Octobe r 2 , 2 0 03, and there fore that i s the relev ant date of breach for li mi tations pu rposes. As an ini tial matter

, w e note that t his arg ument w as fi rst made to the di stric t court in the Mot i on to Alter or Amend the Judgment after the adv erse tri al v erdic t w as render ed again st Pfei l. A party cannot wi thhold a statute of li mi tations clai m li ke a t rump card, to be play ed in the ev ent thatthe tr i al ends unfav or ably

. That i s essenti ally what happened here. In hi s Answer to the Complaint, Pfei l rais ed as an affi rmativ e defense the following statute of li mi tations clai m, though he nev er arg ued i t further after t hat time: Plainti ff’s clai ms are barred by the s tatut e of li mi tations

. Plainti ff knew or had reason to know of theNo. 12-3557 7
di strib uti ons allegedly made by NT Prop prior to Ja nu a ry 2004 and fai led to fi le the instant laws ui t wi thi n the appli cable s tatut e of li mi tations peri od. That i s a di stinct arg ument from the one made in the postjudgment motion and before thi s court on appe a l

. I n that affi rmat ive d efense, Pfei l alleges that T ABFG had k nowledge of di strib uti ons by NT Prop prior to the January 2004 di strib ution, and that the li mi tations period began t o r un as of those earlier di strib uti ons. On appeal and in the post-judgment motion, how ev er

, Pfei l asserts that the Joint V enture Agr eement w as breached on October 2, 2003, when di strib uti ons
w ere required following the ter minati on of the contract but not made, and there fore that the di strib uti on in January 2004 could not tr i gge r the li mi tations period becau se that di strib uti on claus e had already been breached on October 2nd. In fact, Pfei l recog ni zed that i ts arg ument could be percei v ed as d i stinct from i ts affi rmativ e defens e in the answer , and in the Mot i on to Alter or Amend the Judgment Pfei l sought leav e to amend that affi rmativ e defense to reflect the ne w approach. The fai lure to rais e a speci fi c statute of li mi tations arg ument may consti tute a w ai v er ev en i f other statute of li mit a t io ns arg uments are raised. Dexia Credit Local v. Rogan , 629 F .3d 612, 626 (7th Ci r
. 2010). Here, the fai lure to rais e, or pursue, the statute of li mi tations arg ument before judgment w as enter e d a fte r tr i a l presents the i ssu e of w ai v er

. T ABFG ne ver arg ued w ai v er , how ev er , and the di stric t court also di d not consi der that possi bi li ty

. W e hav e often noted that parties can w ai v e w ai v er by fai ling to assert i t, and becau se the di stric t court and the parties addressed the i ssu e solely on the merits, and there i s in fa ct no merit to the arg ument, w e li mi t our di scu ssi on to th e8 No. 12-3557

merits as well. See Cromeens, Holloman, S ibert, Inc. v. AB V olvo , 349 F .3d 376, 389 (7th Ci r . 2003). The fai lure to di sbu rse the payment wi thi n the 15 days w as not tr eated by any part y a s an abrog ation of the duty to di strib ute the payment i tself, and i t i s apparent that the fai lure to di sbu rse wi thi n the 15 days w as not a material breach. In fact, the parties ro utinely di sregar ded the tim eliness requirements of the contract. See Arrow Mast er , Inc. v
. Uniqu e Formin g Ltd. , 12 F .3d 709, 716 (7th Ci r
. 1993) (notin g Illino is cases holding that there is no material breach where conduc t indi cates acqui escenc e such as an acceptanc e of delays and an absenc e of demand for perfor manc e). Th e c ontr a c t re q u i red NT Prop to fund the or i gin al $2 mi lli on, a nd a l t ho ugh $1 mi lli on
w as pai d, the addi tional $1 mi lli on w a s d elay ed bey ond the tim e prov i ded in the Joint V enture Agr eement. Pfei l, who w as known as the “money man” behind those payments, also delay ed and ulti mately fai led to release the su bsequent $2.5 mi lli on required by the contract. The fai lure to di sbu rse wi thi n the 15 da y s w as tr eated no di fferently by the parties, who conti nued to negot i ate the amounts ow ed in the di sbu rsement thro ugh the ensuing months unti l Pfei l di strib uted the money on January 6. It w as only at that point that t here w as a breach of the di sbu rsement requi rement of the c ontr act, becau se that

w a s t he point at whi ch it became clear that the money w ould not be di sbu rsed in the m anner requi red by the contract. Pfei l in fact arg ued in a motion in li mine that evidenc e of any breach prior to January 2004 should be excluded, a posi t io n fir mly counte r to the contention now that the clai m i s outsi de the statute of l imit a tions becau se a breach occurred prior to January 2004. The court proper ly deter mined t hat the obli ga-No. 12-3557 9
tion to di sbu rse conti nued unti l the January 2004 date, and that the statute of li mi tations for the tor tious interfer ence cl a i m began to r un as of the date o f that breach. Pfei l ne x t a r gues that hi s acti on in di strib uting the fund s
w as privi leged, and there fore that he cannot be held li able for that acti on

. The Illinoi s Supreme Court has recog ni zed a p rivil e ge in tor tious interfer ence cases where the intere st whi ch the defendant w as acting to prot ect i s one whi ch the law deems to be of equal or gr eater v alue than the plainti ff’s contract ual rights. HPI Health Car

e v
. Mt. V ernon Hosp ., 545 N.E.2d 672, 677 (Ill. 1989). Illinoi s has there fore gr anted a condi tional privi lege to managers or co r porat e offi cers that prot ects them from personal li abi li ty for their deci si ons made on beh a lf of the corpor ation. Id. ; Nation v
. American Capital, Ltd. , 682 F .3d 648, 651–52 (7th Ci r
. 2012); Stafford, 63 F .3d at 1442. The privi lege i s necess ary becau se a corpor ation a ct s thro ugh i ts agents, and the duty that those agents ow e to the corpor ation’s shareholders outw ei ghs their duty to the corpor a ti on’s c ontr a c t c reditors. Stafford, 63 F .3d at 1442; HPI Health Care, 545 N.E.2d at 677. The bus iness judgment rule i s the basi s for t he privi lege. Nation , 682 F .3d at 652. “Becaus e the intere sts of corpor a t e o ff i cers, di recto rs, and shareholders are suffi ci ently ali gned wi th those of the co mp a ny

, they gener ally cannot be li able in tor t when they interfer e wi th the company’s contract for the benefi t of the company

.” Id. The uti li ty of such a rule i s clear

. For instance, a company facing a li qui di ty cri si s may need to take measu res to address the cash flow problems such as deferring payments to

v endors an d reneg otiating terms w i th s uppli ers. Such acti ons take n to prot ect t he fu ture of the company and the ongo ing viab i li ty of th o se bus iness relat i onshi ps should not result in10 No. 12-3557

t o r t li abi li ty to those agents acting in the company’s be st intere sts. See Nation , 68 2 F

. 3 d at 653. Those agents are not prot ected from any and all deci si ons, ho wev er

. The privi lege ext ends only to acts undert aken on behalf of the corpor ation, and corpor ate offi cers “a r e no t justifi ed in acting solely for their own benefi t or so lely in or der to injure the plainti ff becau se such conduc t i s contrar y to the be st intere sts of the corpo r a tion.” Stafford, 63 F .3d at 1442, ci tin g HPI Health Care, 545 N.E.2d at 678 Pfei l maintai ns that the di stric t court mi sapp l ied the law

. Accordi ng to Pfei l, a person subject to privi lege cannot be held li able unles s that person w as acting only for hi s own personal benefi t and acted contrar y t o the intere sts of the corpor ation. See Nation , 682 F .3d at 653; V on D e r R u hr v
. Immtech Intl. , 570 F .3d 858, 866 (7th Ci r
. 2009). Pfe il maintai ns that the di stric t court consi dered only the fi rst part of that test, and upon finding that Pfei l di stribut e d the money for hi s o wn per sonal intere st, ended the inqui ry and held that the privi lege di d not there fore shi eld hi m from li abi li ty

. Pfei l asserts that hi s acti ons
w ere in the intere sts of NT Pr o p, and there fore he cannot be held li able. There are sev eral problems wi th thi s arg ument, not the least of whi ch i s that Pfei l w as no t a manager , di recto r or offi cer of NT Prop, and w as not authorized to act on NT Prop’s behalf. Pfei l has presented no arg ument that he w as somehow the de facto manager of NT Prop, and in fact arg ued at v arious tim es again st any atte mpt to equate hi m wi th NT Prop. He w as merely the sole member of one of tw o membe r s of NT Prop, albei t the person who ultimately prov i ded virtually all o f the fund s for the enter pris e. Absent authority to act on behalf ofNo. 12-3557 11

NT Prop, the privi lege does not attach. The di stric t court, how ev er , di d not ex plore whether Pfei l w as autho rized to act
on behalf of NT Prop, noting me rely that he w as pulling the strings all along. Gi v en the lack of fact findings as to hi s ro le in the corpor ate structure, w e wi ll not address whether the privi lege appli es as an ini tial matter , and instead wi ll consi der only the di stric t court’s deci si on that the condi tional privi lege

w as ov ercome. The di stric t court held t ha t Pfei l’s act in di strib uting the money w as a personal one, not a corpor ate one at all, and that i t w as done solely for hi s own personal benefi t. The court also rej ected as not credible Pfei l’s cont ention that he beli ev ed the hold-bac k prov i si on in the contract reduced the amount ow ed to T ABFG to less than $360,000. The court noted that under the plain lang uage of the Joint V enture Ag reement t he hold-bac k prov i si on di d not apply , and that i t w as clear that T ABFG w as ow ed si gni fi cantly more t han $360,000.
W e hav e repeat edly recog ni zed that acti ons take n solely for one’s own personal benefi t are not acti ons take n in the intere sts of the corpor ation. Stafford, 63 F .3d at 1442; Dallis , 11 F .3d at 717; see also HPI Health Car e, 545 N.E.2d at 678. Mor eov er , Pfei l hi mself testifi ed that he w as unaw ar e o f t he ter ms of the di strib uti on ag r e e ment, or the numb ers in the spreadsheets prepar ed by NT Prop, although he w as aw are of the exis tence of those d o cum ents. Therefore , by hi s o wn admi ssi on, he di d not atte mpt to deter mine the legal responsibi li ties of NT Prop before di strib ut ing the fund s, nor di d he atte mpt to allocate that di st r ibu t ion in a manner consi stent wi th the numb ers in the spreadsheet dev eloped by NT Prop to deter mine the proper di strib uti on. Furt hermor e, as the di stric t court poin ted12 No. 12-3557
out, the bulk of the money w as put into Pfei l’s own pocket, not into a tr ust or escrow or other accoun t desi gned to prot ect the intere sts of NT Prop. The di stric t court found Pfei l not credible in indi cating that he w as not aw are of the numb ers, bu t t ha t too leads to the conclu si on that he w as not acting in the intere st of NT Prop, beca us e he di d not di strib ute the fund s in the
manner required by that agr eement and there w as no apparent
corr esponding benefi t to NT Prop in hi s fai lure to d o so. The spread sheet prepar ed by NT Prop rev ealed that si gni fi cantly
more money w as ow ed T ABFG than the $360,0 0 0 pai d. The only benefi t from Pfei l’s skew ed di str ibution of that money
w as to Pfei l personally

. The fai lure to ascertai n the l e g a l obli gations o f NT Prop and t he allocati on o f the fund s for hi s own personal benefi t supp or t the di stric t court’s d e te rm in a ti on that Pfei l w as acting solely in hi s own intere st and not in the best intere st of NT Prop. Mor eov er , the di stric t court’s holding that T ABFG d i d not r ecei v e the fundsto whi ch i t w as entitled under the Joint V

enture Agr eement further establi shes that the di strib uti on w as not in NT Prop’s intere st. There i s no evidenc e that in fai ling to comply wi th that legal obli gation Pfei l gain ed
some other benefi t to NT Prop, and in fa ct N T Prop w as inv oluntarily di ssolv ed wi thi n 9 mon t hs of that di strib uti on. The findings by the di stric t court establi sh tha t Pf e il acted solely for hi s own personal be ne fit, and that the di strib uti on
w as not in the intere st of NT Prop, and t he r e fo re Pfei l i s not shi elded from li abi li ty by privi lege. The deci si on of the dis tr i ct court is AFF IRM ED.