A federal judge measured once and cut twice, denying a construction company’s motion to undo a $23 million verdict and instead directing it to pay an additional $1.8 million in prejudgment interest.
NHC sued Centaur Construction, along with Spiro Tsaparas and Peter Alexopoulos, accusing the firm of fraud and breach of contract linked to its work building the Nobu Hotel in Chicago’s West Loop. Following summary judgment for NHC on liability, regarding a breach of contract claim against Centaur and Tsaparas, the court held a trial in August 2022 to determine liability and damages on the fraud and breach of contract claims. A jury awarded compensatory damages to NHC and assessed punitive damages against each defendant.
According to a March 15 opinion from U.S. District Judge Matthew Kennelly, NHC bought the Nobu project from a different developer in December 2017 and contracted with Centaur the following April for a maximum price of $48.25 million. In early May 2019, Tsaparas told NHC the project was over budget and at trial an NHC forensic accounting expert said Centaur had spent more than $10 million from NHC on unrelated expenses, including “transferring $1.5 million and $400,000 to Tsaparas’ and Alexopoulous’ personal bank accounts, respectively,” Kennelly wrote.
Centaur’s subcontractors eventually stopped working and filed liens on the property, which NHC said cost it an additional $9.4 million. NHC then hired another firm for $11.5 million to finish the project. NHC further said it racked up $150,000 in legal fees.
The jury sided with NHC, awarding it $9.5 million for payments it made to subcontractors; $10.8 million for what it paid the second construction firm; and $150,000 in legal fees related to the Nobu development. It also awarded punitive damages of $630,666 against Centaur, $1.5 million against Tsaparas and $400,000 against Alexopoulos.
Seeking either a new judgment in its favor or a new trial, Centaur argued the verdict form given to the jury was confusing with regard to distinctions between fraud and breach of contract. Kennelly disagreed, writing that although “there might be some theoretically, hypothetical, plausible possibility that a defendant could be found liable for fraud but not responsible for each and every element of damages,” neither party had offered “a satisfactory way to set that out on the verdict form” aside from apportioning damages for fraud among the defendants, a method he overruled at trial as inappropriate under state law.
Centaur further contended NHC terminated its contract before each entity agreed on a design build agreement, which meant the jury shouldn’t have been able to award damages for breach of contract. But Kennelly said Centaur didn’t raise that point during its initial motion for summary judgement, and “in any event the argument is unpersuasive on the merits” because it rested on faulty logic about the version of the contract the parties did execute.
Kennelly was likewise unpersuaded by Centaur’s arguments that he should grant it judgment on NHC’s fraud claim. Centaur said although it acknowledged some of the payment applications to NHC didn’t reflect the work it had done on the project, “those applications were not misrepresentations because all parties were aware that they were inaccurate,” Kennelly wrote. He said trial testimony supported NHC’s position and rejected the position the $10.8 million paid to another construction firm shouldn’t support a fraud claim. He said NRC principals testified they had no choice but to hire a new contractor.
“In light of these statements, it was not unreasonable for the jury to conclude that NHC's decision to terminate Centaur was based on Centaur’s past behavior — failing to pay the subcontractors, redirecting funds and misrepresenting the status of the project — rather than its inability to fulfill future promises,” Kennelly wrote.
Centaur also failed to convince Kennelly NHC’s fraud claim was merely a restatement of its breach of contract claim. While explaining a plaintiff must distinguish between the two, he said a jury could reasonably conclude NHC did just that, citing as an example that while “failing to pay the subcontractors is a basis for the alleged breach of contract, misleading NHC to believe that the funds actually were going to the subcontractors — while transferring approximately $2 million to Tsaparas’ and Alexopoulos’ personal bank accounts — was a ‘fraudulent act’ that was ‘distinct from the alleged breach.’ ”
Kennelly also pointed to trial testimony that Tsaparas believed it was “absolutely impossible” to build a Nobu-style project for $49 million, but Centaur represented otherwise when signing its contract with NHC. He further said Centaur was wrong to insist a damages award should’ve been split between two claims and among all three defendants, saying all the claims stemmed from the same legal injury.
Finally, Kennelly said prejudgment interest was appropriate because “damages were easy to determine, as the jury awarded the exact amount NHC requested relating to payments to subcontractors and based the other elements of the compensatory damages award on Tsaparas’ admission in one of NHC's trial exhibits.”
NHC has been represented by attorney Nicole Joy Wing and others with the firm of Vedder Price, of Chicago.
Centaur has been represented by attorney Matthew Walker Horn and others with the firm of SmithAmundsen, of Chicago.