Schiappa v. F.I.T. Management, Inc.

2024 IL App (1st) 230412-U

• Court: Appellate Court of Illinois
• Decided: December 31, 2024
• Docket: 1-23-0412
• Status: Unpublished

Opinion

2024 IL App (1st) 230412-U No. 1-23-0412 Order filed December 31, 2024 Third Division

NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the limited circumstances allowed under Rule 23(e)(1). ______________________________________________________________________________ IN THE APPELLATE COURT OF ILLINOIS FIRST DISTRICT ______________________________________________________________________________ DEBORAH ANN SCHIAPPA, and DEBORAH ANN ) Appeal from the SCHIAPPA, S.C., ) Circuit Court of ) Cook County. Plaintiffs-Appellants and Cross-Appellees, ) ) v. ) No. 19 L 10714 ) F.I.T. MANAGEMENT, INC., d/b/a Germbusters ) Management Corp., or d/b/a Germbusters Infectious ) Diseases of Adults and Children, and ROBERT N. ) TIBALLI, ) Honorable ) Brendan A. O’Brien, Defendants-Appellees and Cross-Appellants. ) Judge, presiding.

PRESIDING JUSTICE LAMPKIN delivered the judgment of the court. Justices Reyes and D.B. Walker concurred in the judgment.

ORDER

¶1 Held: Where the parties disputed the amounts due to plaintiffs under their agreement, the trial court properly (1) dismissed plaintiffs’ breach of fiduciary duty claim against the company’s owner, (2) analyzed plaintiffs’ claims regarding the challenged transactions, (3) admitted challenged documents and testimony into evidence, (4) analyzed plaintiffs’ breach of contract claim, and (5) ruled that the corporate plaintiff was the prevailing party for purposes of assessing attorney fees under the parties’ agreement. No. 1-23-0412

¶2 After a bench trial, the court awarded plaintiffs Deborah Ann Schiappa and Deborah Ann

Schiappa, S.C. (Schiappa S.C.) damages against defendants F.I.T. Management, Inc. (FIT), d/b/a

Germbusters Management Corp., or d/b/a Germbusters Infectious Diseases of Adults and

Children, and Robert N. Tiballi on plaintiffs’ claims of breach of contract and fiduciary duty. The

court also ruled that plaintiff Schiappa, S.C. was the prevailing party for purposes of assessing

attorney fees under the parties’ agreement.

¶3 On appeal, plaintiffs argue that the trial court erred by (1) dismissing their breach of

fiduciary duty claim against Tiballi, (2) not applying a presumption of fraud to certain transactions

that defendants made and that plaintiffs asserted were amounts due to them under the parties’

agreement, (3) allowing evidence defendants disclosed after the close of discovery, and

(4) improperly analyzing plaintiffs’ breach of contract claim.

¶4 In their cross-appeal, defendants argue that the trial court erred in ruling that plaintiff

Schiappa, S.C. was the prevailing party.

¶5 For the reasons that follow, we affirm the judgment of the circuit court. 1

¶6 I. BACKGROUND

¶7 Plaintiff Dr. Deborah Schiappa and defendant Dr. Robert Tiballi are infectious disease

doctors. In 2003, Tiballi hired Schiappa as an employee of his medical professional corporation,

Germbusters P.C. (Germbusters). This was Schiappa’s first full-time job in a private medical

practice. She saw patients as directed by Tiballi and did not have any role in the management of

1 In adherence with the requirements of Illinois Supreme Court Rule 352(a) (eff. July 1, 2018), this appeal has been resolved without oral argument upon the entry of a separate written order.

-2- No. 1-23-0412

the practice; that was handled exclusively by Tiballi. Starting in 2007, Tiballi reorganized

Germbusters. Instead of all the doctors working for Germbusters, each doctor employed by

Germbusters formed their own medical professional corporation, which then entered into a

management service agreement (MSA) with defendant FIT, the medical practice management

company Tiballi owns. Thereafter, Tiballi continued to run the FIT practice through the new

corporate structure. Schiappa resigned in 2018 and demanded unpaid compensation and missing

financial records.

¶8 In September 2019, Schiappa and her medical professional corporation, plaintiff Schiappa,

S.C., sued Tiballi and FIT, claiming that defendants failed to pay all amounts due to plaintiffs

under their MSA. Specifically, plaintiffs alleged claims for breach of contract (count I), breach of

fiduciary duty (count II), unjust enrichment (count III), and conversion (count IV). Plaintiffs also

sued Tiballi only for tortious interference (count V).

¶9 Defendants moved under section 2-615 of the Code of Civil Procedure (Code) (735 ILCS

5/2-615 (West 2018)) to dismiss all counts of the complaint other than the breach of contract claim

against FIT. In September 2020, the circuit court granted FIT’s motion with respect to the unjust

enrichment and conversion claims and granted Tiballi’s motion with respect to the breach of

contract, unjust enrichment, conversion, and tortious interference claims. The court denied

defendants’ motions as to the breach of fiduciary duty claims.

¶ 10 In November 2021, plaintiffs moved to amend their complaint, seeking to replead their

previously dismissed tortious interference claim against Tiballi and amend their fiduciary duty

claim to seek the imposition of a constructive trust. The trial court denied this motion, holding that

-3- No. 1-23-0412

plaintiffs failed to state a tortious interference claim against Tiballi and failed to meet the

heightened pleading standard necessary for a constructive trust. In May 2022, the parties filed

cross-motions for summary judgment, which the court denied in August 2022.

¶ 11 From October 13 through 25, 2022, the court conducted a bench trial on the breach of

contract claim against FIT and the breach of fiduciary duty claims against both FIT and Tiballi.

The evidence presented at trial showed that in or around March 2006, Tiballi and Germbusters’

employees—including Schiappa—began to have meetings discussing the FIT reorganization plan.

As the plan took shape, the employee doctors met with Tiballi’s attorney Phillip Pomerance,

Germbusters’ outside accountant, and a medical practice management consultant to discuss the

new FIT business model and ask questions about it. Pomerance advised the employee physicians

that they should retain their own independent counsel. Schiappa retained attorney William Doran

to represent her during the reorganization process and negotiation of the MSA. With Doran’s

assistance, Schiappa formed Schiappa S.C.

¶ 12 FIT was incorporated in November 2006. On January 1, 2007, plaintiffs and FIT entered

into an MSA that governed their relationship. Tiballi was not a party to the MSA in his individual

capacity. Following the execution of the MSA, Schiappa was no longer an employee of

Germbusters. Schiappa was never an employee of FIT. Schiappa S.C. was an independent

contractor of FIT.

¶ 13 Like Schiappa, the other doctors employed by Germbusters also formed their own medical

corporations and entered into MSA agreements with FIT, which were identical in all material

-4- No. 1-23-0412

respects to the MSA agreement signed by plaintiffs. Germbusters also entered into an MSA with

FIT.

¶ 14 FIT began operations on January 1, 2007. As part of the transition from Germbusters to

FIT, Germbusters’ vendor contracts were transferred to FIT in a process that took several months.

Among the vendors that transitioned from Germbusters to FIT was Healix, a company that

operated infusion clinics within FIT’s medical offices.

¶ 15 To supply FIT with initial operating capital, Germbusters transferred its then-existing

uncollected accounts receivable (AR) from its pre-2007 operations—approximately $350,000—to

FIT (the AR Transfer). The AR Transfer allowed plaintiffs to be paid on AR that previously

belonged only to Germbusters. Schiappa’s ending AR at the end of December 2006—her last

month as a Germbusters employee—was $181,772, which became her beginning AR when FIT

began its operations in January 2007. FIT reimbursed Germbusters for the AR Transfer over a

three-year period.

¶ 16 Pursuant to its MSA with plaintiffs and its identical MSAs with the other affiliated

physician corporations, FIT performed essentially all of the non-medical services required in

operating the affiliated physicians’ medical practices. These services included supplying medical

office space and equipment; providing non-physician personnel, including medical and

administrative support staff; billing and collecting receivables; procuring malpractice insurance;

and assisting the physicians in obtaining necessary licenses and credentials.

¶ 17 In accordance with formulas set forth in the MSA, Schiappa S.C. received monthly

distributions of the net practice revenues (NPR) collected by FIT as a result of Schiappa

-5- No. 1-23-0412

performing medical care. FIT distributed 50% of the NPR to Schiappa S.C., minus a 4%

management fee. The remaining NPR would be kept by FIT, which used these funds to pay

expenses incurred in operating the medical practice, including but not limited to salaries, benefits

and costs associated with FIT’s employees or independent contractors, and rent and expenses for

FIT’s office space. Under the MSA, “expenses of the Practice which are shared by other practices

being managed by [FIT]” were to be allocated as part of plaintiffs’ “Practice Expenses,” and FIT

had the authority to allocate those “shared expenses” to the practices based on actual expenses

incurred by each practice, or on a pro rata basis, or “such other fair and reasonable basis as [FIT]

may determine.” Tiballi testified that expenses such as rent and utilities for FIT’s medical offices

and management fees for the office infusion clinics were treated as shared expenses among the

affiliated MSA-level physicians and the costs were borne equally among them. FIT, however,

failed to follow the MSA’s requirements to segregate plaintiffs’ money from the money generated

from the other medical practices; segregate ancillary revenues, which were to be shared between

the medical practices; make detailed calculations on behalf of plaintiffs and the other medical

practices and account for their money; and provide required financial reports.

¶ 18 For each month from FIT’s inception in January 2007 until February 2019, plaintiffs (and

the other affiliated medical corporations) received their contracted-for share of NPR from FIT. At

trial, plaintiffs did not present evidence establishing that FIT miscalculated plaintiffs’ correct share

of NPR or failed to pay plaintiffs their correct share of NPR for any month from January 2007

through February 2019.

-6- No. 1-23-0412

¶ 19 In addition to receiving monthly distributions of NPR, Schiappa S.C. and the other

affiliated practices received “ancillary revenues” from FIT. Pursuant to the MSA, “ancillary

revenues” included fees generated through infusion practices affiliated with the practice or

radiological services provided by the practice, as well as the amount FIT retained in excess of the

actual practice expenses FIT incurred. Ancillary revenues were to be distributed to the affiliated

practices at least once every year based on an “RVU” share formula. At the end of each year from

2007-2018, FIT calculated the “ancillary pot” by taking its remaining cash-on-hand at year end,

taking out funds for any expenses FIT had to pay by the end of the year, and distributing the rest

to the MSA-level practices according to the RVU share formula.

¶ 20 The MSA specifically authorized FIT to pay rent for its medical offices, including its office

located in Elgin, Illinois. The physicians and staff used these medical offices to perform medical

services on patients and to perform the administrative services associated with and necessary for

the physicians’ medical practices. FIT entered into a written lease with Germbusters Building,

LLC, an entity owned by Tiballi, for the Elgin office. The lease was later assigned from

Germbusters Building LLC to FIT Properties, LLC, another Tiballi-owned entity. At trial,

defendants’ expert witness Robert Palffy opined that it was normal practice within the medical

industry for an entity owned by Tiballi to lease medical office space to FIT. Palffy also opined that

the rental rate in the lease between FIT and Germbusters Building LLC was an appropriate rent

lease structure and that the rent FIT paid was at all times fair and appropriate. Palffy’s opinions

were not rebutted at trial. In addition to rent, FIT paid all expenses associated with the medical

offices.

-7- No. 1-23-0412

¶ 21 Section 3.1 of the MSA obligates FIT to provide management services and personnel for

the practice. At certain times between 2007 and 2018, Tiballi was forced to assume the duties of

an office manager and/or bookkeeper for FIT due to staff turnover. He performed these duties in

addition to the medical services that he provided to his patients. Thus, during times when Tiballi

would perform these duties, FIT would pay him the equivalent salary of what the previous office

manager received. Tiballi informed the MSA-level physicians when he would assume office

manager duties. FIT’s former COO Matthew Tuck testified that he personally observed Tiballi

performing office manager duties.

¶ 22 In 2009, FIT recruited two new physicians, Monica Sharma and Mia Taormina, to join its

practice group as associate physicians rather than have FIT enter into MSA’s with the new

physicians. As a management company, FIT was not able to employ physicians directly. As a

workaround, with the approval of FIT’s board of advisors, Sharma and Taormina entered into

contracts with Germbusters, but they performed medical services exclusively for FIT. From

February 2009 until July 2010, Germbusters paid Sharma’s and Taormina’s salaries and was

reimbursed for doing so by FIT. In the summer of 2010, Sharma and Taormina entered into MSA

agreements with FIT after which they were no longer “associate physicians” employed by

Germbusters. In later years, Germbusters similarly employed other associate physicians who also

performed medical services solely for FIT.

¶ 23 Avni Patel was a physician assistant who was an employee of Germbusters prior to 2007

and was then employed by FIT from 2007 until early 2010. In early 2010, Patel entered into an

employment agreement with Germbusters, where she worked directly under Tiballi. Schiappa and

-8- No. 1-23-0412

the other MSA-level physicians approved of Patel being offered this contract and were aware of

the change in Patel’s status from a FIT employee to a Germbusters employee.

¶ 24 Under her Germbusters’ employment agreement, Patel’s billings were collected by FIT and

distributed among FIT, Germbusters, and Patel. Patel continued to work under the contract with

Germbusters until she resigned in 2017. Patel moving from a FIT employee to a Germbusters

employee also resulted in FIT’s payroll being reduced by approximately $95,000 per year, the cost

of Patel’s salary.

¶ 25 In 2016 and 2017, FIT’s revenues declined. By December 2017, FIT faced an impending

financial crisis and was in danger of being unable to make payroll. On December 6, 2017, Tiballi

personally loaned FIT $150,000. In April 2018, FIT repaid the loan from Tiballi once it was able

to secure a bank loan.

¶ 26 Schiappa resigned from FIT in July 2018. Following her resignation, FIT continued to pay

Schiappa her monthly NPR as it was collected until March 2019, when FIT lost access to its

electronic medical records.

¶ 27 Plaintiffs called three witnesses in their case-in-chief: Schiappa, Tiballi, and plaintiffs’

damages expert, Allan Jacque. Jacque presented several spreadsheets of challenged transactions

that plaintiffs claimed were improper and reduced the amount of ancillary revenues that would

have been owed to plaintiffs. Jacque did not offer any expert opinion as to whether or not any of

the challenged transactions were improper or were not legitimate expenses of FIT. Jacque did not

offer any testimony as to whether Germbusters or FIT was an alter ego of Tiballi, or whether funds

were commingled between Germbusters and FIT. Instead, Jacque simply offered his opinion as to

-9- No. 1-23-0412

the amount of plaintiffs’ damages if the transactions were determined to be improper or not

legitimate expenses of FIT.

¶ 28 Plaintiffs called Tiballi as an adverse witness, and he testified over the course of four days.

Tiballi was questioned extensively by plaintiffs’ counsel and defendants’ counsel regarding the

facts surrounding the challenged transactions. Tiballi’s testimony was based on FIT’s business

records, which had been admitted into evidence. These included meeting minutes and agendas

from monthly meetings of FIT’s MSA-level physicians; FIT’s monthly and year-end distribution

summaries, which Tiballi prepared in the regular course of business; financial statements and

general ledgers prepared for FIT and Germbusters by their outside accountants; and FIT’s bank

statements.

¶ 29 At the conclusion of plaintiffs’ case in chief, defendants moved for judgment pursuant to

section 2-1110 of the Code (735 ILCS 5/2-1110 (West 2022)). The court took the 2-1110 motion

under advisement until the conclusion of the trial and allowed plaintiffs leave to file a written

response to this motion.

¶ 30 In their case-in-chief, defendants called Pomerance, the attorney who assisted in the

reorganization; Tuck, FIT’s former COO; and Palffy, defendants’ expert witness. Defendants

renewed their section 2-1110 motion at the close of their case in chief. In November 2022,

plaintiffs filed their response to the section 2-1110 motion.

¶ 31 On November 15, 2022, the court held a posttrial hearing on the section 2-1110 motion and

granted it with respect to the breach of fiduciary duty claim against Tiballi. The court stated that

Tiballi testified credibly “in explaining 90 percent of [the challenged] charges and that although

- 10 - No. 1-23-0412

“certain errors” were made, Tiballi did not personally gain from those errors. The court concluded:

“So to me there were breaches. I don’t see it towards Tiballi individually though.” The court

granted plaintiffs leave to file a motion for reconsideration of its decision to grant the section 2-

1110 motion as to Tiballi.

¶ 32 On February 1, 2023, the court denied plaintiffs’ motion for reconsideration and entered

judgment in favor of Tiballi on the breach of fiduciary duty claim. In its ruling, the court again

discussed its assessment of Tiballi’s testimony:

“I didn’t see any fraudulent acts or *** ill intent on Dr. Tiballi’s position. He did

testify I think for two days. I got to see his credibility. I got to see him testify, very good

adverse witness testimony that he did give in response to the Plaintiff who did a good job

calling him as an adverse witness, but I didn’t just see the ill will or bad intent or fraudulent

acts of his from the testimony that I’ve heard and the documents I’ve reviewed. For that

reason, I don’t believe the exception, direct participation theory exception applies here. I

think the general rule would apply. I did not see clear and convincing evidence proving the

existence of the fiduciary relationship, in fact, with Dr. Tiballi.”

The court then issued its final judgment in favor of plaintiffs on their breach of contract and breach

of fiduciary duty claims against FIT, with total damages of $109,965.76. Specifically, the court

found that plaintiffs were entitled to $95,671 in damages on counts I (breach of contract) and II

(breach of fiduciary duty), and an additional $14,294.76 for count II only. The court explained that

FIT breached the MSA in two instances. First, the court held that FIT breached section 5.2 of the

MSA when FIT paid Tiballi’s tuition for his MBA at the University of Michigan because the

- 11 - No. 1-23-0412

advisory board did not approve those payments. The court accepted Jacque’s estimate of damages

to Schiappa flowing from these charges, which totaled $45,671. Second, the court held that FIT

breached section 3.10(a) of the MSA when it charged Schiappa S.C. to cover the cost of the salary

of physician assistant, Jennifer O’Shea. Although Schiappa used O’Shea and accepted her

assistance for Schiappa’s patients, the court accepted plaintiffs’ assertion that Schiappa would

never have used O’Shea if Schiappa knew that she would be charged for O’Shea’s salary. The

court accepted Jacque’s calculation of damages to Schiappa flowing from these charges, which

totaled $50,000.

¶ 33 The court also found that two additional transactions constituted breaches of FIT’s

fiduciary duty to plaintiffs, but did not constitute breaches of the MSA. The first was FIT’s

payment, made March 16, 2007, to Germbusters as reimbursement for Germbusters covering the

cost of the employer’s share for the employees’ 401(k) plan. Based on Jacque’s calculation, the

court awarded $7,770 as damages for this breach. The second breach was FIT’s failure to collect

and distribute plaintiffs’ AR after February 2020. For this breach, the court awarded plaintiffs

$6,524.76 in damages.

¶ 34 The court also discussed several other categories of challenged transactions presented by

plaintiffs and explained that the charges did not constitute either breaches of the MSA or a

fiduciary duty to plaintiffs. These included (1) FIT’s payments to Germbusters relating to Tiballi’s

physician assistant Patel, (2) an alleged failure by FIT to pay plaintiffs’ “PHO” bonuses,

(3) reimbursement payments from FIT to Germbusters for the AR transfer that supplied FIT with

initial operating capital, (4) payments made by FIT to its infusion clinic vendor Healix, (5) FIT’s

- 12 - No. 1-23-0412

payments of office manager salaries and expenses, (6) FIT’s payment of management fees for its

office infusion clinic, (7) allegedly “unexplained transfers” which were made to reimburse

Germbusters for its payment of FIT’s start-up costs or to repay Germbusters for short-term loans

made to FIT, (8) and FIT’s payment of rent for its Elgin medical office. The court also found that

FIT’s alleged commingling of NPR and ancillary revenues resulted in no damages to plaintiffs.

Finally, the court found that plaintiff Schiappa, S.C. was the prevailing party for purposes of the

attorney fees provision in section 13.11 of the MSA.

¶ 35 Plaintiffs timely filed their appeal, and defendants timely filed their cross-appeal.

¶ 36 II. ANALYSIS

¶ 37 A. Breach of Fiduciary Duty by Tiballi

¶ 38 Plaintiffs argue that the court erred when it granted Tiballi judgment as a matter of law on

plaintiffs’ breach of fiduciary duty claim because Tiballi either directly participated in FIT’s

breaches, which benefitted him personally, or had an implied fiduciary duty under the

circumstances.

¶ 39 Tiballi, however, did not file a motion for judgment as a matter of law, and the trial court

did not rule in Tiballi’s favor “as a matter of law.” The trial granted Tiballi’s motion under section

2-1110 of the Code (735 ILCS 5/2-1110 (West 2022)), and its ruling was made in its role as the

finder of fact after considering the totality and quality of the evidence presented at trial. Unlike a

motion for a directed verdict during a jury trial, “under section 2-1110 the court is not to view the

evidence in the light most favorable to the plaintiff. Rather, the circuit court must weigh all the

- 13 - No. 1-23-0412

evidence, determine the credibility of the witnesses, and draw reasonable inferences therefrom.”

People ex rel. Sherman v. Cryns, 203 Ill. 2d 264, 276 (2003). Section 2-1110 provides:

“In all cases tried without a jury, defendant may, at the close of plaintiff’s case, move for

a finding or judgment in his or her favor. In ruling on the motion the court shall weigh the

evidence, considering the credibility of the witnesses and the weight and quality of the

evidence. If the ruling on the motion is favorable to the defendant, a judgment dismissing

the action shall be entered.” 735 ILCS 5/2–1110 (West 2022).

¶ 40 In ruling on a section 2-1110 motion, a trial court must perform a two-step analysis.

Prodromos v. Everen Securities, Inc., 389 Ill. App. 3d 157, 170 (2009). First, the court must

determine whether the plaintiff has presented a prima facie case by presenting at least “some

evidence” on every essential element of its cause of action. Id. If the plaintiff fails to satisfy this

first step, the trial court must grant a directed verdict and, because the establishment of a prima

facie case is a matter of law, a reviewing court will examine this decision de novo. Walsh/II In One

Joint Venture III v. Metropolitan Water Reclamation District of Greater Chicago, 389 Ill. App. 3d

138, 145 (2009). “However, if the trial court determines that the plaintiff has establish[ed] a prima

facie case, the court moves to the second prong of this analysis in which it, as a finder of fact, must

consider the totality of the evidence presented, including that favorable to the defendant, to weigh

its quality and the credibility of the witnesses.” Id.

¶ 41 After weighing the evidence presented by both parties, and drawing reasonable inferences

therefrom, the court then determines, based upon the standard of proof for the underlying cause of

action, whether sufficient evidence remains to satisfy the plaintiff’s prima facie case. Prodromos,

- 14 - No. 1-23-0412

389 Ill. App. 3d at 170. Where the trial court states that it has considered the evidence, the trial

court has engaged in the second step of its analysis and has necessarily found the plaintiff has met

the first step of the analysis by presenting a prima facie case. Id. “When the analysis has progressed

to this point, a reviewing court affords deference to the trial court and will not reverse its decision

unless it is against the manifest weight of the evidence.” Walsh/II In One Joint Venture III, 389

Ill. App. 3d at 146.

¶ 42 Here, the trial court’s ruling granting the section 2-1110 motion in Tiballi’s favor was made

after it considered the totality and quality of the evidence. When defendants filed the section

2-1110 motion at the close of plaintiffs’ case, the court took it under advisement and proceeded to

hear defendants’ case-in-chief and plaintiffs’ rebuttal. The court also allowed plaintiffs time to file

a 25-page written response brief to the section 2-1110 motion.

¶ 43 During the posttrial hearing on November 15, 2022, the court heard extensive oral

argument from both sides as to the evidence presented at trial, including in relation to the fiduciary

duty claim against Tiballi. In its ruling, the court weighed the credibility of the witnesses and made

findings of fact. Specifically, the court stated:

“But I did not—and I repeat—did not see any sort of wrongdoing or unconscionable

conduct by Dr. Tiballi in his capacity for [FIT] and in his individual capacity, as there is a

claim for breach of his fiduciary duty individually. I didn’t see it.”

***

“I don’t see any ill intent on [Tiballi’s] part ***. I don’t think he was trying to take money

from one or the other. It was just too much. Especially [MSA sections] 5.1. and 5.2. To do

- 15 - No. 1-23-0412

that it would be almost impossible. You would need an accountant full time right there

doing it and separating the expenses and everything else *** I don’t see that he was

intending on trying to take away from [the MSA-level physicians], including Dr.

Schiappa.”

“Dr. Tiballi to me was credible in explaining 90 percent of these charges to me as a finder

of fact, and he showed that it was paid—maybe certain errors were made, but not in the

amount—I don’t see that he personally gained from it. *** I think this agreement was too

complicated, et cetera, for someone with a busy medical practice and the situations going

on. So to me there were breaches. I don’t see it towards Tiballi individually though.”

¶ 44 In denying plaintiffs’ motion to reconsider the granting of defendants’ section 2-1110

motion, the court reiterated: “So again, I heard all the evidence. I heard everything.” The court

explained that it reviewed the entirety of the trial transcripts and specific evidence such as the

MSA and Jacque’s damages charts. The court again discussed its assessment of Tiballi’s credibility

as a witness:

“I didn’t see any fraudulent acts or *** ill intent on Dr. Tiballi’s position. He did testify I

think for two days. I got to see his credibility. I got to see him testify, very good adverse

witness testimony that he did give in response to the Plaintiff who did a good job calling

him as an adverse witness, but I didn’t just see the ill will or bad intent or fraudulent acts

of his from the testimony that I’ve heard and the documents I’ve reviewed. For that reason,

I don’t believe the exception, direct participation theory exception applies here. I think the

- 16 - No. 1-23-0412

general rule would apply. I did not see clear and convincing evidence proving the existence

of the fiduciary relationship, in fact, with Dr. Tiballi.”

¶ 45 The proper standard of review for the trial court’s ruling dismissing the breach of fiduciary

duty claim against Tiballi is the manifest weight of the evidence standard. See Walsh/II In One

Joint Venture III, 389 Ill. App. 3d at 146. A ruling is against the manifest weight of the evidence

when “the opposite conclusion is clearly evident or the determination is unreasonable, arbitrary,

or without basis in the evidence presented.” Prodromos, 389 Ill. App. 3d at 170-71. For a claim of

a breach of fiduciary duty, a party must allege and ultimately prove “(1) that a fiduciary duty exists;

(2) that the fiduciary duty was breached; and (3) that such breach proximately caused the injury of

which the party complains.” Lawlor v. North American Corporation of Illinois, 2012 IL 112530,

¶ 69.

¶ 46 1. Direct Participation Theory

¶ 47 First, plaintiffs argue that Tiballi should be held personally liable for FIT’s breaches of

fiduciary duty under a direct participation theory of liability because the evidence showed that he

personally made or approved every one of the challenged transactions. According to plaintiffs, to

the extent that the challenged transactions were breaches of FIT’s fiduciary duty to plaintiffs,

Tiballi’s direct participation in them renders him personally liable under the direct participant rule.

¶ 48 To support their argument, plaintiffs cite Forsythe v. Clark USA, Inc., 224 Ill. 2d 274

(2007), for the proposition that individuals can be held liable for a corporation’s breaches if they

are actively involved, irrespective of their shareholder status. Forsythe involved direct participant

liability in the context of a parent company being held liable for the negligent actions of its

- 17 - No. 1-23-0412

subsidiary. In Forsythe, the plaintiffs, employees of a wholly owned subsidiary of the defendant,

brought wrongful-death claims against the defendant parent corporation. Id. at 297-98. The

plaintiffs alleged that the defendant parent required its subsidiary to engage in cost-cutting

measures that affected job safety and proximately caused the deaths of the decedents. Id. The

defendant parent company argued that it had no duty to the decedents and was merely a holding

company. Id. Forsythe held, as a matter of first impression:

“Where there is evidence sufficient to prove that a parent company mandated an overall

business and budgetary strategy and carried that strategy out by its own specific direction

or authorization, surpassing the control exercised as a normal incident of ownership in

disregard for the interests of the subsidiary, that parent company could face liability.” Id.

at 290.

¶ 49 Since Forsythe was decided, Illinois appellate courts have applied it only in cases involving

similar parent-subsidiary relationships. See, e.g., Burge v. Exelon Generation Co., LLC, 2015 IL

App (2d) 141090 (employee of subsidiary sued parent for allegedly creating unsafe working

conditions); Graham v. Bostrom Seating, Inc., 398 Ill. App. 3d 302, 312 (2010) (employee of

subsidiary sued parent for allegedly forcing subsidiary to purchase a semi-truck with a defective

seat.) No Illinois court of review has applied the direct participation theory set forth in Forsythe to

attach liability to an individual defendant as opposed to a parent corporation. Schiappa S.C. was

not a subsidiary of FIT or Tiballi, so the Forsythe direct participation theory is not applicable here.

¶ 50 However, even if the direct participation theory in Forsythe could apply to this type of

case, plaintiffs did not present sufficient evidence to apply it. Plaintiffs argue that because Tiballi

- 18 - No. 1-23-0412

personally made or approved the challenged transactions, he should be held liable for any of FIT’s

breaches. This is not enough to apply direct participant liability under Forsythe. Plaintiffs failed

to provide “sufficient evidence to prove” that Tiballi “mandated an overall business and budgetary

strategy and carried that strategy out by [his] own specific direction or authorization, surpassing

the control exercised as a normal incident of ownership in disregard for the interests of the

subsidiary.” Forsythe, 224 Ill. 2d at 290.

¶ 51 Contrary to the circumstances in Forsythe, the trial court here specifically found that Tiballi

did not act in disregard of plaintiffs’ interests. Of the few challenged transactions that the court

found constituted breaches of the MSA and/or FIT’s fiduciary duty, none were found to have been

made in disregard of plaintiffs’ interests. Rather, the court found that “errors were made” due to

Tiballi “doing too many things” and the MSA being “too complicated” for Tiballi to manage, and

that Tiballi had not “personally gained” from these errors.

¶ 52 Plaintiffs’ reliance on Allabastro v. Cummins, 90 Ill. App. 3d 394 (1980), is similarly

misplaced. In Allabastro, the plaintiffs entered into a written contract with defendant Equity,

whereby Equity would act as the plaintiffs’ exclusive agent in obtaining a loan. Id. at 395. The

contract mandated that the loan obtained by Equity must meet specific criteria, including an

agreed-upon interest rate and repayment schedule. Id. Thereafter, Equity obtained a loan

commitment for the plaintiffs that did not meet the specifications of the contract. Id. at 396. The

plaintiffs refused to sign off on the loan agreement and demanded repayment of their deposit. Id.

The individual corporate officer defendants (Cummins and Weissman) refused to give back the

deposit paid to Equity, and continually delayed the refund. Id. at 396 (“These delaying tactics were

- 19 - No. 1-23-0412

pursued by both of the individual defendants.”) The trial judge found that the terms of the loan

commitment secured by the defendants “differed substantially from the terms required by the

contract between the parties,” and that “the contract was tainted by fraud in the inducement by the

defendants.” Id. at 397. The reviewing court affirmed the trial court’s invocation of the “fraudulent

acts” exception to the general rule that corporate officers are not liable for actions of their

corporation, stating

“this record convinces us the individual defendants both participated personally in this

transaction and breach of fiduciary relationship. ‘As a general rule a corporate officer or

director is not liable for the fraud of other officers or agents merely because of his official

character, but he is individually liable for fraudulent acts of his own or in which he

participates.’ ” (Internal citation omitted) Id. at 398.

¶ 53 Contrary to plaintiffs’ argument, Allabastro did not establish a “rule” regarding corporate

officer liability. Rather, the Allabastro court ruled that based on the specific factual circumstances

of that case—namely Cummins’s and Weissman’s direct involvement in “fraudulent acts”—the

trial court was justified in imposing liability against them for the corporation’s actions. Id. As

noted in Allabastro, Illinois courts recognize that a corporation is a legal entity that exists separate

and apart from its shareholders, directors, and officers, who are not as a general rule liable for the

corporation’s debts and obligations. Ted Harrison Oil Co. v. Dokka, 247 Ill. App. 3d 791, 794

(1993). Allabastro stands as a limited exception to this general rule, with the court finding that a

corporate officer could be individually liable for “fraudulent acts of his own” or if there is a

corporate fraud “in which he participates.” Allabastro, 90 Ill. App. 3d at 398.

- 20 - No. 1-23-0412

¶ 54 The exception in Allabastro does not apply here. After carefully reviewing the voluminous

trial evidence and weighing the credibility of the witnesses, the trial court stated:

“I did not see any wrongdoing by Tiballi individually, did not see any ill intent, did not see

any self-benefit for Dr. Tiballi individually. So I just didn’t feel the [Allabastro] direct

participation theory applied here under the facts, and I was the finder of fact, and I didn’t

see it. I didn’t see any fraudulent acts or *** ill intent on Dr. Tiballi’s position.”

¶ 55 Girsberger v. Kresz, 261 Ill. App. 3d 398, 408-09 (1993) is also inapposite. There, an

employee brought defamation and tortious interference claims against a shareholder of his

employer. The appellate court found that the qualified privilege did not apply to shield the

shareholder’s actions because “a reasonable jury could have concluded that [the shareholder] did

not act in good faith or that the corporate resolution was published with reckless disregard for the

truth.” Id. at 415. Here, by contrast, the court found that Tiballi did act in good faith.

¶ 56 The only actions that plaintiffs point to in support of their direct participation theory are

FIT’s tuition payments for Tiballi’s MBA. However, at trial, Tiballi testified extensively regarding

his reasons for pursuing an MBA. Specifically, he wanted to enhance his management skills and

abilities to be a more effective manager of FIT, and to try and develop a new practice model for

FIT due to changes in the healthcare industry as a result of the passage of the Affordable Care Act.

Prior to enrolling in the MBA program, Tiballi discussed his reasons for pursuing the MBA with

Schiappa and FIT’s other MSA-level physicians and received their “unanimous support” to enroll.

Tiballi also testified that the group discussed and approved of FIT paying tuition for his MBA and

that he never did anything to hide the fact that FIT was paying his MBA tuition.

- 21 - No. 1-23-0412

¶ 57 The trial court found that although Tiballi had received unanimous support for enrolling in

the MBA program, FIT’s meeting minutes did not clearly specify that FIT’s advisory board

approved of FIT paying the tuition, as required for an “unusual expense” under the MSA.

Importantly, although the court found that these tuition payments were a breach of the MSA, the

court did not find that these payments constituted fraud or that the actions were taken in disregard

for the interests of plaintiffs. The tuition payments do not constitute sufficient evidence to apply a

direct participation theory of liability.

¶ 58 The trial court’s ruling that the direct participation theory of liability did not apply in this

case was made in its role as the fact finder and based upon a careful consideration of the credibility

of the witnesses and the weight and quality of the evidence presented at trial. Plaintiffs fail to show

that the trial court’s ruling was “unreasonable, arbitrary, or without basis in the evidence

presented.” Prodromos, 389 Ill. App. 3d at 170-71. Consequently, plaintiffs have failed in their

burden of demonstrating that the trial court’s rulings were against the manifest weight of the

evidence.

¶ 59 2. Implied Fiduciary Duty

¶ 60 Plaintiffs also argue that Tiballi should be held personally liable because he owed them an

implied fiduciary duty since he placed himself in a position of trust over plaintiffs, including by

personally handling their money.

¶ 61 A fiduciary duty may exist in one of two ways: “as a matter of law, such as an attorney-

client or principal-agent relationship,” or as a matter of fact due to “the special circumstances of

the parties’ relationship, where one party places trust in another so that the latter gains superiority

- 22 - No. 1-23-0412

and influence over the former.” Ransom v. A.B. Dick Co., 289 Ill. App. 3d 663, 674 (1997).

Plaintiffs argue that Tiballi owed them a fiduciary duty because it can be implied based on the

circumstances of the parties’ relationship. The existence of this type of “fiduciary-in-fact”

relationship “must be shown by proof so clear and convincing, so strong, unequivocal and

unmistaken that it leads to only one conclusion.” Carey Electric Contracting, Inc. v. First National

Bank of Elgin, 74 Ill. App. 3d 233, 238 (1979). To determine whether such a relationship exists,

courts look to “the degree of kinship between the parties, the disparity in age, health, education, or

business experience between the parties, and the extent to which the servient party entrusted the

handling of its business to the dominant party and placed its trust and confidence in it.” Benson v.

Stafford, 407 Ill. App. 3d 902, 912 (2010).

¶ 62 Here, the age, health, kinship, and education factors do not provide a basis to imply a

fiduciary relationship. The trial court found that Tiballi and Schiappa are close in age, were in

good health at all relevant times, are not related to one another, and are both well-educated medical

doctors. Plaintiffs do not dispute these findings on appeal.

¶ 63 Plaintiffs argue that Tiballi held a superior position over Schiappa based on her having

“work[ed] for and at his direction for fifteen years,” and that she allegedly relied on Tiballi’s

“guidance and mentorship.” However, according to the record, Schiappa worked for Tiballi at

Germbusters only from 2003 to 2006, during which time she and Tiballi had a normal employer-

employee relationship. Following the execution of the MSA, Schiappa was no longer an employee

of Tiballi. From 2007 on, plaintiffs were independent contractors with FIT and maintained

autonomy and a separate business structure from FIT.

- 23 - No. 1-23-0412

¶ 64 At trial, plaintiffs did not present evidence of an instance in which Tiballi acted as a

“mentor” to Schiappa or offered her any specific advice or guidance. Schiappa testified that she

trusted Tiballi simply “[b]ecause I had worked with him for several years. I thought things were

going along well. I believed that he was a good doctor and that we had a good practice.” Schiappa

presented no documentary evidence or third party witness testimony to corroborate her claim that

she had a high level of trust in Tiballi. In fact, Schiappa testified that she raised countless questions

and complaints regarding FIT’s finances to Tiballi throughout her affiliation with FIT. Plaintiffs’

attempt to characterize the ordinary working relationship between Tiballi and Schiappa as a

relationship “rooted in decades of trust” is unsupported by the record.

¶ 65 Furthermore, during the reorganization process in 2006, Schiappa was represented by

independent counsel. Illinois courts have often found that the presence of independent counsel is

a powerful factor weighing against finding that sufficient trust and confidence was reposed in

another to create a fiduciary relationship. Benson, 407 Ill. App. 3d at 916 (no fiduciary relationship

where attorneys advised plaintiffs on specialist purchase agreements); Geaslen v. Berkson, Gorov

& Levin, Ltd., 155 Ill. 2d 223, 228 (1993) (no fiduciary relationship where plaintiffs were

represented by independent legal counsel). Plaintiffs raised their “implied fiduciary theory” at trial.

After considering the parties’ evidence and the witnesses’ credibility, the court rejected this theory.

Plaintiffs failed to offer clear and convincing evidence establishing an implied fiduciary

relationship between Tiballi and plaintiffs, and the trial court’s ruling on defendants’ section

2-1110 motion with respect to the breach of fiduciary duty claim against Tiballi, which was based

on the trial court’s careful review of the trial evidence, was not against the manifest weight of the

- 24 - No. 1-23-0412

evidence. Accordingly, we affirm the trial court’s judgment in favor of Tiballi on plaintiffs’ breach

of fiduciary duty claim.

¶ 66 B. The Presumption of Fraud

¶ 67 Plaintiffs argue that by granting the section 2-1110 motion with respect to the breach of

fiduciary duty claim against Tiballi, the trial court also erred by failing to apply the presumption

of fraud to each of the challenged transactions, which plaintiffs assert were self-interested

transactions that benefitted FIT or Tiballi. Plaintiffs argue that that the challenged transactions are

undisputedly self-interested and thus presumed fraudulent because FIT or Tiballi obtained a

benefit by paying their own expenses with plaintiffs’ money. Plaintiffs argue that the trial court

appeared to have inquired only whether the transactions were payments of a legitimate expense of

FIT, without considering anything about disclosures or whether the payments were for plaintiffs’

practice expenses. Plaintiffs contend that the trial court’s judgment should be reversed, and

judgment on the breach of fiduciary duty claim should be entered in favor of plaintiffs and against

FIT and Tiballi in the amount of $2,801,004.

¶ 68 Plaintiffs’ argument that the trial court erred by “failing to apply the presumption of fraud”

to all of the challenged transactions lacks merit. Under certain circumstances not present in this

case, a presumption of fraud applies where “any conveyance of the principal’s property that either

materially benefits the agent or is for the agent’s own use is presumed to be fraudulent,” but it

must be a transaction “between parties” and the alleged fiduciary must profit from it. In re Estate

of Elias, 408 Ill. App. 3d 301, 319 (2011). See Spring Valley Nursing Center, L.P. v. Allen, 2012

IL App (3d) 110915, ¶ 12 (presumption of fraud extends only to “conveyances of the principal’s

- 25 - No. 1-23-0412

property”). Further, a transaction is only presumed fraudulent where the agent is “seeking or

obtaining any selfish benefit for himself.” Id.

¶ 69 As discussed above, Tiballi was not in any kind of fiduciary relationship with plaintiffs.

Therefore, plaintiffs’ presumption of fraud theory is inapplicable as to plaintiffs’ claims against

Tiballi. The theory also does not apply to plaintiffs’ claims against FIT. Plaintiffs have not shown

that FIT was seeking or obtained a “selfish benefit” from the challenged transactions. The evidence

at trial showed that nearly all of the challenged transactions involved everyday business expenses

such as paying workers’ wages, paying vendors, and paying rent. None of these things resulted in

a selfish benefit to FIT. They resulted merely in FIT being able to continue to operate its business.

¶ 70 Further, the challenged transactions did not involve a “conveyance of the principal’s

property.” Plaintiffs received their contracted-for share of NPR for every month they were

affiliated with FIT. The remaining NPR was kept by FIT, and FIT was authorized to use those

funds to pay plaintiffs’ practice expenses, as well as the expenses incurred in operating the medical

practices of the other MSA-level physicians, including but not limited to salaries, benefits and

costs associated with FIT’s employees and independent contractors, and rent and expenses for

FIT’s office space. This was not plaintiffs’ “property” for purposes of establishing a presumption

of fraud.

¶ 71 Plaintiffs’ cited cases all involve situations where an individual entrusted their personal

estate or family finances to a fiduciary. None of the cases cited by plaintiffs involve application of

a “presumption of fraud” to everyday business transactions. Plaintiffs seem to argue that FIT was

required by law to provide full disclosure and outside advice to plaintiffs and all other MSA-level

- 26 - No. 1-23-0412

physicians prior to making any expenditure of funds, no matter how small and no matter how

routine. Such a requirement is unworkable in a business setting, and plaintiffs ignore the fact that

FIT not only had an MSA with plaintiffs, but also an identical MSA with Germbusters and the

other medical corporations. Tiballi testified that expenses such as rent and utilities for FIT’s

medical offices and management fees for the office infusion clinics were always treated as “shared

expenses” among the affiliated MSA-level physicians and the costs were borne equally among

them. The MSA specifically allowed this. Under plaintiffs’ theory, every single dollar that FIT

ever spent would be subject to a presumption of fraud. Plaintiffs failed to show that a presumption

of fraud should apply to the challenged transactions.

¶ 72 However, even if a presumption of fraud applied, any such presumption was conclusively

rebutted by FIT at trial. In cases where the presumption applies, once a fraudulent transaction has

been alleged, the burden then shifts to the fiduciary to prove by clear and convincing evidence that

“the transaction was fair and did not result from his undue influence over the principal.” Estate of

Alford v. Shelton, 2017 IL 121199, ¶ 23. At trial, plaintiffs challenged hundreds of FIT transactions

that occurred during the period from 2007 through 2018. After considering the credibility of the

witnesses and reviewing thousands of pages of exhibits, the trial court found issues with only four

challenged transactions: (1) the MBA tuition payments, (2) the charge to plaintiffs for the salary

of the physician assistant that Schiappa indisputably used, (3) the recoupment of 401(k)

contributions, and (4) a failure to pursue old, unpaid receivables. The court did not find that any

of these breaches constituted fraud. For the overwhelming majority of challenged transactions, the

trial court, after considering the testimony and exhibits, found that FIT proved that the transactions

- 27 - No. 1-23-0412

were fair and legitimate and did not result from any undue influence by FIT over plaintiffs. The

trial court noted that Tiballi gave “exhaustive testimony” to go through each of the challenged

transactions to show that each was a “legitimate business expense.” Even if a presumption of fraud

existed, defendants conclusively rebutted the presumption. Accordingly, the trial court did not err

in its ruling awarding plaintiffs only limited damages from FIT’s breaches.

¶ 73 C. Evidentiary Rulings

¶ 74 First, plaintiffs argue that the trial court erred by admitting into evidence two documents

that were produced 27 days prior to trial. Specifically, plaintiffs challenge the trial court’s

admission of (1) an MSA between FIT and Germbusters that Tiballi testified about at length during

his deposition but was unable to locate prior to September 2022, and (2) a signed version of a lease

between FIT and Germbusters Building LLC for the medical office space in Elgin, which had

previously been produced in unsigned form.

¶ 75 A trial court’s decision whether or not to impose a particular sanction for a failure to

comply with discovery rules or orders under Illinois Supreme Court Rule 219(c) (eff. July 1, 2002)

lies “within the discretion of the trial court and, thus, only a clear abuse of discretion justifies

reversal.” Shimanovsky v. General Motors Corp., 181 Ill. 2d 112, 120 (1998). An abuse of

discretion happens only when no reasonable person would rule as the lower court ruled. Kim v.

Mercedes-Benz, U.S.A., Inc., 353 Ill. App. 3d 444, 452 (2004). In determining what sanction, if

any, to impose on a discovery violation, the trial court considers the (1) surprise to the adverse

party, (2) prejudicial effect of the proffered testimony or evidence, (3) nature of the testimony or

evidence, (4) diligence of the adverse party in seeking discovery, (5) timeliness of the adverse

- 28 - No. 1-23-0412

party’s objection to the testimony or evidence, and (6) good faith of the party offering the

testimony or evidence. Shimanovsky, 181 Ill. 2d at 124.

¶ 76 The trial court heard extensive oral argument from the parties and asked detailed questions

regarding the documents themselves and the circumstances surrounding their production. In

making its ruling, the court first clarified that “the purpose of a discovery sanction is not to punish,

it’s to try to get a full and fair disclosure.” The court also stated that “the purpose of discovery

sanctions is to effectuate discovery, not to inflict punishment, and require full and complete

disclosure, achieve an ultimate goal of a speedy, efficient and a just resolution of cases.” The trial

court walked through each of the Shimanovsky factors in relation to the signed lease and the

Germbusters MSA.

¶ 77 As to the signed lease, the trial court found that the signed and unsigned leases were

essentially identical. Thus, the court found that “the surprise is not as great as it would seem.” The

court “[did not] find a ton of prejudice in that document being used now. It’s there, you can bring

it out on cross, whatever you need, why didn’t you produce it, and Dr. Tiballi can respond to that.

I don’t see much prejudice in that.” The trial court also stated, “I do see good faith on the part of

the defense. I don’t think they were hiding this document *** I don’t think there was bad faith in

producing the documents.” Because none of the Shimanovsky factors weighed in favor of barring

it, the court admitted the signed lease. As to the Germbusters MSA, the court found that there was

some surprise and prejudicial effect to plaintiffs due to the inability of their expert to review the

Germbusters MSA, but again ruled that defendants had not acted in bad faith in producing the

document.

- 29 - No. 1-23-0412

¶ 78 As a sanction for the late production of the documents, the trial court allowed plaintiffs’

expert to issue supplemental opinions based on the documents and barred defendants’ counsel

from seeking a deposition of the expert as to any new opinions he issued. The court also ordered

Tiballi to submit a sworn affidavit attesting to “the process and the steps he took to get these

documents.” In accordance with the court’s order, Tiballi submitted the next morning an affidavit

describing the process and steps he took to locate the documents.

¶ 79 Although plaintiffs claim that they were surprised by the late disclosure of the Germbusters

MSA, Tiballi testified during his October 2021 deposition that he had “the identical working

relationship to [FIT] as Dr. Schiappa and the other doctors” and that Dr. Schiappa was aware that

all the other medical corporations had the same management agreement with FIT. Tiballi testified

that Germbusters had “the exact same [contract] that Dr. Schiappa had, the exact same one that

[another doctor] had. It was the exact same one that all of the similarly credentialed

doctor/physician/medical practice entities had.” The record indicates, consistent with Tiballi’s

testimony, that the Germbusters MSA is in all material respects identical to the Schiappa S.C.

MSA. Given Tiballi’s testimony in 2021 that Germbusters had an identical contract with FIT,

plaintiffs should not have been surprised that a signed MSA between Germbusters and FIT existed.

¶ 80 Furthermore, plaintiffs’ counsel did not bear any great burden by having to review the

Germbusters MSA in depth, since its content is exactly the same as the MSA entered into by

plaintiffs, the operative contract this lawsuit was based on. Plaintiffs had nearly a month before

trial to inspect the Germbusters MSA. Had there been any material differences between the

- 30 - No. 1-23-0412

Germbusters MSA and the Schiappa S.C. MSA, plaintiffs’ counsel was free to cross-examine

Tiballi about the differences.

¶ 81 Similarly, there was no prejudice or surprise to plaintiffs by allowing the signed lease to

be admitted as a trial exhibit. Defendants produced an unsigned copy of the exact same lease in

their initial discovery production in 2020, then supplemented their production in March 2022 with

another copy of the same lease which included a two-page “Lease Summary” that had been

inadvertently left off the previous production. The signed lease found by Tiballi in September 2022

was nothing more than a signed version of the same document that plaintiffs had since 2020. There

was no prejudice to plaintiffs in allowing this document into evidence. The lease had already been

produced in unsigned form and plaintiffs had ample opportunity to develop their case based on

that lease.

¶ 82 The purpose of Rule 219(c) is not to punish a party’s dilatory conduct. Given that the court

found there was no bad faith in the late production and that the contents of the two documents

were well known to plaintiffs prior to their production, there was no basis to completely bar the

two documents at issue. See Wagner v. City of Chicago, 254 Ill. App. 3d 842, 850-51 (1993) (trial

court did not abuse its discretion in not imposing a discovery sanction where the documents at

issue were produced on the eve of trial and approximately three years after the production request

was served because the party did not do so in bad faith and the other side was not prejudiced by

the late information); Reyes v. Menard, Inc., 2012 IL App (1st) 112555 (finding that trial court

order barring plaintiff from testifying and presenting evidence at an arbitration hearing due to her

tardiness in producing written discovery was too severe of a sanction and an abuse of discretion).

- 31 - No. 1-23-0412

The trial court undertook the correct analysis under Shimanovsky and did not abuse its discretion.

We affirm the lower court’s decision in admitting the signed lease and the Germbusters MSA.

¶ 83 Second, plaintiffs argue that the trial court erred by allowing Tiballi to offer “undisclosed

opinions” about the challenged transactions and that the trial court was “required to exclude all

this testimony” under Illinois Supreme Court Rule 213 (eff. Jan. 1, 2018). The admission of

evidence pursuant to Rule 213 is within the sound discretion of the trial court, and the court’s

ruling will not be disturbed absent an abuse of that discretion. Fosse v. Pensabene, 362 Ill. App.

3d 172, 188 (2005). Rule 213(f)(1) requires that, upon written interrogatory, a party must furnish

the identities and addresses of lay witnesses who will testify at trial and identify the subjects on

which the witness will testify. Granville Tower Condominium Ass’n v. Escobar, 2022 IL App (1st)

200362, ¶ 52.

¶ 84 Plaintiffs’ argument fails for two reasons. First, the vast majority of Tiballi’s testimony

that plaintiffs claim was improper was not opinion testimony, but was fact testimony. Tiballi

verified FIT’s business and financial records, which he either prepared himself or of which he had

personal knowledge of their creation. These records, which were produced in discovery and relied

upon by plaintiffs’ damages expert during litigation, showed that the challenged transactions were

normal business expenses of FIT. Second, the opinions that Tiballi did offer as to the nature of

certain transactions were logical corollaries to opinions he had already disclosed in his deposition

testimony.

¶ 85 Plaintiffs argue that the trial court simply “allowed Tiballi to go through each of the

challenged transactions and opine as to what each one was and whether each was legitimate.” This

- 32 - No. 1-23-0412

is an inaccurate reflection of the trial. The trial court considered plaintiffs’ Rule 213 objections in

depth, stopping the trial at multiple points to hold mini-hearings on these objections. During one

of these mini-hearings, the trial court considered testimony Tiballi gave during FIT’s Illinois

Supreme Court Rule 206(a)(1) (eff. Oct. 1, 2021) deposition, including on issues such as the AR

Transfer from Germbusters to FIT and the billing arrangement between FIT and Healix. The court

held that the opinions that Tiballi gave at trial on these issues were a logical corollary to opinions

given during the deposition.

¶ 86 Tiballi’s testimony was based on FIT’s business records that were admitted into evidence.

For example, Tiballi testified that four of the challenged transactions from 2007 were payments

made to Healix, FIT’s infusion clinic vendor, that were incorrectly labeled on FIT’s QuickBooks

as “Paydown of AR Debt???” This testimony was based on FIT’s 2007 general ledger prepared by

its outside accountant, which plainly showed that these transactions were Healix payments.

¶ 87 The court similarly overruled plaintiffs’ objections to Tiballi’s testimony regarding facts

surrounding certain challenged transactions involving payments made to reimburse Tiballi for

performing office manager duties, payments made to reimburse Germbusters for paying the

salaries of FIT’s administrative assistants, and payments to Germbusters for paying the salaries of

employed associate physicians Sharma and Taormina. Tiballi’s testimony regarding the

challenged transactions was based on FIT’s business records that had been admitted into evidence.

This included meeting minutes and agendas from monthly meetings of FIT’s MSA-level

physicians, FIT’s monthly and year-end distribution summaries, financial statements and general

ledgers prepared for FIT and Germbusters by their outside accountants, and FIT’s bank statements.

- 33 - No. 1-23-0412

All of these documents were available to plaintiffs throughout discovery, including prior to

Tiballi’s and FIT’s depositions. These documents were relied on by plaintiffs’ expert in drafting

his expert reports.

¶ 88 Plaintiffs take issue with answers Tiballi gave as FIT’s Rule 206(a)(1) corporate

representative in a deposition. Plaintiffs, however, mischaracterize the transcript. During the

deposition, Tiballi was shown a list of allegedly improper transactions compiled by Jacque less

than a month earlier and asked broad, general questions about them. During Schiappa’s deposition,

which was held just one week prior to FIT’s, it had been established that this list was unreliable.

Jacque himself admitted at trial that his initial list, which FIT was questioned about at the

deposition, contained $988,429.26 of transactions that were payments made by FIT to Schiappa

and another doctor, as opposed to Tiballi or Germbusters. Tiballi pointed this out during the

deposition and, understandably, stated that “this is not my document, not my construction ***

I cannot attest to its accuracy.” Throughout the deposition, Tiballi was asked questions regarding

vast amounts of information such as: “Do you know the amount of ancillary revenues [FIT] had

each year from 2007 to 2018?” without being shown any exhibits. When Tiballi understandably

asked whether plaintiffs’ counsel wanted him “to list it by year, 2007, 2008, 2009, like that—,” he

was cut off by plaintiff’s counsel. The trial court noted that given the vast scope of the issues,

Tiballi could not be expected to “foresee all the questions that were going to be asked” at his

deposition.

¶ 89 Even assuming that defendants did not comply with Rule 213, this “does not automatically

require the exclusion of the noncomplying party’s witnesses or testimony.” Kovera v. Envirite of

- 34 - No. 1-23-0412

Illinois, Inc., 2015 IL App (1st) 133049, ¶ 59. In determining whether the trial court erred in

allowing previously undisclosed witness testimony, courts consider (1) the surprise to the adverse

party, (2) the prejudicial effect of the testimony, (3) the nature of the testimony, (4) the diligence

of the adverse party, (5) the timely objection to the testimony, and (6) the good faith of the party

calling the witness. Granville Tower Condominium Ass’n, 2022 IL App (1st) 200362, ¶ 52. Where,

as here, the supposedly non-complying witness disclosures are not included in the record on

appeal, this court has held that it is “unable to determine whether [a party] violated the

requirements of Rule 213(f)(1).” Id. ¶ 53. Yet even if we consider the above factors, we cannot

find that the trial court abused its discretion by allowing Tiballi’s testimony under the specific

circumstances of this case.

¶ 90 As stated above, plaintiffs and their damages expert had all of the business records upon

which Tiballi’s testimony relied. Moreover, his testimony involved looking at documents he

created or had personal knowledge of and stating facts. Any surprise from Tiballi testifying as to

the challenged transactions based on the business records of FIT and Germbusters that were freely

available to all parties is minimal.

¶ 91 Also, Tiballi’s testimony did not prejudice plaintiffs. The trial court gave plaintiffs wide

latitude to cross-examine Tiballi regarding any differences between his trial testimony and his

deposition testimony. Further, the nature of Tiballi’s testimony was to establish a foundation for

the business records and provide a link between the business records and the challenged

transactions. This was helpful to aid the trial court in its understanding of the ultimate facts that it

was required to decide at trial, especially considering that Tiballi was FIT’s sole shareholder and

- 35 - No. 1-23-0412

its key decision maker. Plaintiffs have also failed to establish any bad faith on the part of

defendants in calling Tiballi as a witness to testify regarding the challenged transactions. We

conclude that the trial court did not abuse its discretion in allowing Tiballi to testify about the

challenged transactions.

¶ 92 Third, plaintiffs argue that the trial court erred in admitting into evidence the printouts of

FIT’s data and the third-party accountant data under the business records exception to the rule

against hearsay where defendants used Tiballi as the sponsoring witness to show that the records

were business records and did not present either testimony from the third parties who created the

records or testimony or affidavits from any records custodian.

¶ 93 A “trial court’s decision on the admission of a document as a business record is a matter of

discretion and is disturbed only for an abuse of that discretion.” Kimble v. Earle M. Jorgenson Co.,

358 Ill. App. 3d 400, 415 (2005). It is not necessary that the author or creator of the record testify

or be cross-examined about the contents of the record to fulfill the foundational requirements of a

business record. Troyan v. Reyes, 367 Ill. App. 3d 729, 733 (2006). Rather, “a custodian or any

person familiar with the business and its mode of operation may provide testimony establishing

the foundational requirements of a business record.” Id. That the author of the record does not

testify may affect the weight of the evidence, but it does not affect its admissibility. Kimble, 358

Ill. App. 3d at 415. Illinois Supreme Court Rule 236 (eff. Aug. 1, 1992) “requires only that the

party tendering the record satisfy the foundational requirements that (1) the record was made in

the regular course of business and (2) at or near the time of the event or occurrence.” Kimble, 358

Ill. App. 3d at 414. Once a witness has established the foundational requirements of a business

- 36 - No. 1-23-0412

record, the record “should only be barred from admission if [it is] irrelevant, prejudicial or for

some other legally appropriate reason.” Troyan, 367 Ill. App. 3d at 733. “Where a third party is

authorized by a business to generate the record at issue, the record is of no use to the business

unless it is accurate and, therefore, the record bears sufficient indicia of reliability to qualify as a

business record under the hearsay rule.” Argueta v. Baltimore & Ohio Chicago Terminal R.R. Co.,

224 Ill. App. 3d 11, 21 (1991).

¶ 94 Defendants satisfied the necessary prerequisites for the business records exception to apply

to the printouts of QuickBooks data, as well as to the general ledgers prepared by Germbusters’

and FIT’s outside accountants. Tiballi testified that he supervised the process by which FIT’s

bookkeeper or office manager input transaction data into QuickBooks, transferred the QuickBooks

data to outside accountants, then received data back from the accountants, and that this was a

regularly conducted activity. He also testified that FIT’s QuickBooks files were stored on a remote

Citrix server, whereas Germbusters’ QuickBooks files were separately stored on a local computer.

Further, the financial statements and general ledgers prepared by FIT’s outside accountants were

prepared at the request of FIT as part of FIT’s regularly conducted business activities and were

maintained by FIT in the ordinary course of business.

¶ 95 The trial court correctly admitted the printouts of FIT’s and Germbusters’ QuickBooks

data, and the financial statements and general ledgers from the outside accountants under the

business records exception to the hearsay rule. The trial court’s rulings admitting this evidence

were not an abuse of discretion and are affirmed.

- 37 - No. 1-23-0412

¶ 96 D. Breach of Contract

¶ 97 Plaintiffs argue that the trial court erred by finding that FIT did not breach the MSA

because, under its terms, the challenged transactions could only have been used to pay for

plaintiffs’ practice expenses, but FIT allegedly used plaintiffs’ money to pay FIT’s own expenses.

Plaintiffs argue that the trial court’s finding that FIT did not breach the MSA is at odds with the

court’s finding that FIT violated the MSA by commingling plaintiffs’ money with FIT’s own

money and that of the other doctors and Germbusters.

¶ 98 Plaintiffs mischaracterize the trial court’s ruling on this issue. The court found that

“commingling of the [NPR] and ancillary revenue *** may have been a breach of contract and it

may have been a breach of fiduciary duty” but the court “could not find any damages that resulted

from it.” The trial court continued:

“The Court as the finder of fact could not find damages. Damages caused by the breach in

both the breach of fiduciary duty and a breach of contract has to be shown. Even by a

preponderance of evidence, I could not find it. I looked and that was the big one. So I did

not see any damages flowing from any breaches on that one.”

Further, the trial court noted that the MSA was “overly complicated” and that it would be “almost

impossible” to comply with the MSA.

¶ 99 Plaintiffs do not argue that the court was wrong in making this finding that no damages

resulted from this action. Rather, plaintiffs attempt to argue that defendants were required to “show

the amount by which Plaintiffs benefitted from any of the Challenged Transactions.” Plaintiffs,

however, offer no case law in support of this theory and thus have forfeited review of this issue.

- 38 - No. 1-23-0412

See Porter v. Cook County Sheriff’s Merit Board, 2020 IL App (1st) 191266, ¶ 76 (a party’s

“failure to articulate and explain his contentions and *** failure to support them with relevant legal

authority are sufficient to consider his contentions waived”). Forfeiture aside, the trial court’s

ruling was correct; injury is a required element for breach of contract and fiduciary duty actions.

See Gonzalzles v. American Express Credit Corp., 315 Ill. App. 3d 199, 206 (2000); Lawlor, 2012

IL 112530, ¶ 69. Furthermore, plaintiffs’ claims that the court engaged in an “unspoken rewriting”

of the MSA or that the court “adopted” defendants’ “methodology” regarding the challenged

transactions are not supported by any citation to the record and thus are forfeited. See People v.

Universal Public Transportation, Inc., 2012 IL App (1st) 073303-B, ¶ 50 (party forfeited its

argument that the trial court erred by failing to cite to the pages in the record relied upon in support

of the contentions in its brief as required by Illinois Supreme Court Rule 341(h)(7) (eff. Oct. 1,

2020)). We affirm the trial court’s decision finding no damages from the commingling of NPR

and ancillary revenues.

¶ 100 E. Prevailing Party and Attorney Fees

¶ 101 In their cross-appeal, defendants argue that the trial court abused its discretion in finding

that Schiappa S.C. was the prevailing party in this litigation for purposes of awarding attorney fees

under the parties’ MSA. Defendants argue that when value, complexity, and time are considered,

the issues at trial on which plaintiffs prevailed were insignificant compared to the claims and issues

in this case on which defendants prevailed. Specifically, defendants argue that two of the four

claims plaintiffs asserted against FIT were dismissed at the pleading stage. Furthermore, plaintiffs

received only $109,965.76 of the $2,801,004 they sought in damages, which amounts to a recovery

- 39 - No. 1-23-0412

of only 3.9% of plaintiffs’ claimed damages. In addition, plaintiffs challenged 387 of FIT’s

transactions as improper distributions, but the trial court found that only several of those

transactions constituted a breach of contract, i.e., the payments FIT made for Tiballi’s MBA tuition

in 2013-14, and a March 2007 reimbursement payment FIT made to Germbusters for fronting the

cost of FIT’s 401(k) contribution. The remaining damages came from FIT’s charges to plaintiffs

for a physician assistant who provided services to Schiappa S.C., and FIT’s failure to collect

Schiappa S.C.’s old AR long after Schiappa had resigned. In the alternative, defendants argue that

this court should find that neither FIT nor Schiappa S.C. qualify as a prevailing party.

¶ 102 As the trial court applied the terms of the MSA to the facts, we review the trial court’s

ruling for an abuse of discretion. See Peleton, Inc. v. McGivern’s, Inc., 375 Ill. App. 3d 222, 226

(2007) (whether a party prevailed in the trial court involves an application of the facts to the law);

cf. Mirar Development, Inc. v. Kroner, 308 Ill. App. 3d 483, 485 (whether the trial court properly

applied the law when it denied attorney fees presented a legal question that the appellate court

reviewed de novo). Illinois follows the “American rule,” which prohibits a prevailing party from

recovering its attorney fees from the losing party absent an express statutory or contractual

provision. Forest Preserve District v. Continental Community Bank & Trust Co., 2017 IL App

(1st) 170680, ¶ 31. Accordingly, contracts that provide for an award of attorney fees to the

prevailing party are in derogation of common law and must be strictly construed. Id. The MSA

here contained a provision allowing the “prevailing party” in a lawsuit to recover reasonable

attorney fees and costs. The MSA defined “prevailing party” to mean “the party in whose favor

- 40 - No. 1-23-0412

final judgment after appeal (if any) is rendered with respect to the claims asserted in the

Complaint.”

¶ 103 A “prevailing party, for purposes of awarding attorney fees, is one that is successful on a

significant issue and achieves some benefit in bringing suit.” Peleton, 375 Ill. App. 3d at 227; see

Powers v. Rockford Stop-N-Go, Inc., 326 Ill. App. 3d 511, 518 (2001) (plaintiff did not prevail

where the issue was not significant relative to either the value of the remaining claims, their

complexity, or the time devoted to the other issues at trial). Where, as here, a ‘‘dispute involves

multiple claims and both parties have won and lost on different claims, it may be inappropriate to

find that either party is the prevailing party and an award of attorney fees to either is inappropriate.”

(Internal quotation marks omitted.) Timan v. Ourada, 2012 IL App (2d) 100834, ¶ 29.

¶ 104 Plaintiffs prevailed on their breach of contract and fiduciary duty claims against FIT. The

trial court entered judgment in plaintiffs’ favor against FIT, and plaintiffs obtained an affirmative

recovery—$109,965.76 in damages. Moreover, plaintiffs’ breach of contract claim was a

significant issue in this litigation. See Pepper Construction Co. v. Palmolive Tower

Condominiums, 2024 IL App (1st) 221319, ¶ 22 (a party is considered a prevailing party if “(1) it

succeeds on any significant issue in the action and achieves some benefit in bringing suit, or (2) it

receives a judgment in its favor, or (3) it obtains an affirmative recovery”). A “party may be the

prevailing party even if it does not succeed on all matters or claims” Id. Where the trial court

conducted the bench trial and was well aware of the significant issues of this case, their relative

value and complexity, and the time the parties devoted to proving or disproving the various claims,

- 41 - No. 1-23-0412

we cannot say, under the circumstances of this case, that the trial court abused its discretion in

finding that Schiappa S.C. was the prevailing party.

¶ 105 Finally, without citation to any authority, defendants argue that the MSA fee shifting

provision should be applied in favor of Tiballi even though he was not a party to the MSA in his

individual capacity. Defendants have forfeited review of this issue by failing to cite any relevant

authority. Porter, 2020 IL App (1st) 191266, ¶ 76.

¶ 106 III. CONCLUSION

¶ 107 For the foregoing reasons, we affirm the judgment of the circuit court.

¶ 108 Affirmed.

- 42 -