In the
United States Court of Appeals
For the Seventh Circuit
No. 07-3984
RK C OMPANY,
Plaintiff-Appellee,
v.
JACKIE R. S EE,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99-cv-04261—Arlander Keys, Magistrate Judge.
A RGUED S EPTEMBER 11, 2009—D ECIDED S EPTEMBER 22, 2010
Before B AUER, R OVNER, and W ILLIAMS, Circuit Judges.
W ILLIAMS, Circuit Judge. Harvard Scientific Corpora-
tion (“HSC”) and its founder Jackie R. See claimed to be
developing a new product to treat male and female
sexual dysfunction. Dr. See touted HSC’s soon-to-be
success in creating this product in a series of press
releases and securities filings. This attracted an invest-
ment by RK Company (“RK”). Unfortunately, HSC’s
claims of success were not true, and following a bench
2 No. 07-3984
trial, the court found Dr. See violated federal and state
securities laws, state deceptive practices law, and com-
mitted common law fraud. Dr. See appeals the judg-
ment, and argues that RK Company is not the real party
in interest, that the magistrate judge’s findings are
clearly erroneous, and that the district court abused
its discretion in admitting deposition testimony at trial.
Dr. See also objects to the awarding of prejudgment
interest and the calculation of attorneys’ fees to RK.
We reject these arguments. Dr. See has waived any argu-
ment based on the real party in interest defense, the
findings of liability were more than adequately sup-
ported, and there was no abuse of discretion in the
awarding of prejudgment interest and attorneys’ fees.
Dr. See has failed to include the transcript of the
relevant motion hearing that led to the admitting of the
deposition testimony, so we dismiss that claim as well.
For these reasons, we affirm the court’s judgment.
I. BACKGROUND
Though there are a myriad of characters, family rela-
tions, and employees involved in this litigation and
discussed in the briefs; we only recount those facts that
are relevant to our analysis. In 1994, Dr. Jackie See
founded HSC, a bio-pharmaceutical development com-
pany. Dr. See was HSC’s founder, largest shareholder,
and served at various points on its board of directors,
executive committee and management committee. He
was also the director of research and development and
intellectual property holder of lypohilized liposome
No. 07-3984 3
prostaglandin E-1 (“LLPGE-1”), the male sexual dysfunc-
tion product that HSC hoped to bring to the market.
To obtain approval to begin clinical trials and test
LLPGE-1 on humans, the United States Food and Drug
Adminstration (“FDA”) required HSC to submit an
Investigational New Drug (“IND”) application. In an
October 1997 meeting between Dr. See and the FDA,
the FDA learned that HSC had falsified the findings of
a study included in its IND application and told HSC
that it must cease further clinical studies until an audit
was completed. Despite this meeting and deepening
investigations by the FDA throughout 1997 and 1998,
HSC released various press releases touting its alleged
successes. In November 1997, HSC claimed it had “ac-
celerated its progress” towards the completion of clinical
trials. In May 1998, HSC announced that a female dys-
function product was moving forward with its male
product. In June 1998, HSC released a statement that
it had received notification from the FDA that it was
free to initiate Phase II clinical trials, and in a separate
release, announced it had developed a topically ap-
plied sexual dysfunction product. When these state-
ments were released, the FDA clinical hold was still in
effect and FDA investigations continued to increase.
No clinical trials were moving forward on any products.
In addition to these press releases, HSC filed various
forms with the United States Securities and Exchange
Commission (“SEC”). In March 1998, for the fiscal year
ending December 31, 1997, HSC stated that the Phase I
trials of LLPGE-1 showed possible benefits of therapy and
4 No. 07-3984
that HSC was in substantial compliance with all
laws during its October 1997 meeting with the FDA. In
a March 1998 filing, for the fiscal quarter ending
March 31, 1998, HSC announced plans for its female
sexual dysfunction product using LLPGE-1. Dr. See’s
actual or electronic signature was on both filings.
In June 1998, Barbara Berry, who worked for HSC as
its secretary and chief operating officer, was asked by
Thomas Waite, HSC’s then-chief executive officer, to
approach her father, Robert Krilich, about whether
he would be interested in investing in HSC. Berry for-
warded a solicitation letter to her brother, Robert
Krilich, Jr., so that he could send information to their
father, who was in prison at the time.1 Krilich received
her letter, as well as HSC’s SEC filings and press re-
leases. In June and July of 1998, Krilich’s investment
vehicle, RK Company, purchased 166,667 shares of stock
from HSC for $500,000. RK was unable to resell this stock.
In 1999, following a press release acknowledging a
May 18, 1999 warning letter from the FDA, HSC stopped
operations and went bankrupt. On June 25, 1999, RK filed
suit against HSC and a variety of HSC’s employees,
including Dr. See, for inducing RK to buy HSC stock
through its misleading and false press releases, SEC
filings, and reports. Following protracted litigation,
Dr. See remained the last defendant and the parties
agreed to a bench trial and consented to proceeding
1
Throughout this opinion, we refer to Robert Krilich as
Krilich and his son as Krilich, Jr.
No. 07-3984 5
before a magistrate judge, see 28 U.S.C. § 636(c). The
court found for RK on all claims, and Dr. See appeals.
II. ANALYSIS
A. “Real Party in Interest” Argument Waived
Dr. See strenuously challenges RK’s identity, calling it
an unlawful “beast” which does not own the claim and
could not have brought this suit.2 In the midst of
trial, after Krilich testified that “RK Company” was the
name under which he did business, Dr. See investi-
gated RK’s identity on an Illinois public records website
and discovered that RK was not a legally registered
corporation. The next day, Dr. See brought a motion for
judgment as a matter of law, claiming that RK was not
the party alleged in the complaint. He claims that RK is
2
Dr. See also makes a cursory argument that RK lacked the
capacity to sue, and claims that a capacity to sue defense
cannot be waived. The Federal Rules of Civil Procedure how-
ever, clearly state that capacity to sue must be raised in a
specific denial in an appropriate pleading or amendment. Fed.
R. Civ. P. 9(a); see Wagner Furniture Interiors, Inc. v. Kemner’s
Georgetown Manor, Inc., 929 F.2d 343, 345-46 (7th Cir. 1991).
While we briefly note that Illinois law (which governs
capacity to sue here) allows an unregistered “doing business
as” entity to sue and be sued, Thompson v. Cadillac, 543 N.E.2d
308, 310 (Ill. App. Ct. 1989), we do not reach the merits of
this claim as we find that Dr. See has waived the argument
that RK lacked the capacity to sue because he failed to raise it
in his pleadings.
6 No. 07-3984
an unlawful “common law” trust created for tax evasion
purposes, and as such, the trust is the “real party in
interest” and any action needed to be brought by its
trustee.
Rule 17(a) of the Federal Rules of Civil Procedure
requires that “an action must be prosecuted in the name
of the real party in interest.” The “real party in interest”
is the person who possesses the right or interest to be
enforced through litigation, and the purpose of this
procedural rule is to protect the defendant against a
subsequent action by the party actually entitled to re-
cover. Fed. R. Civ. P. 17(a) advisory comm.’s note (2009);
see also Rawoof v. Texor Petroleum Co., Inc., 521 F.3d 750, 756
(7th Cir. 2008); 4 Moore’s Federal Practice § 17.10 (3d.
2009). But the rule also reflects an understanding that
such disputes would be easy to resolve, as it further
provides:
The court may not dismiss an action for failure
to prosecute in the name of the real party in inter-
est until, after an objection, a reasonable time
has been allowed for the real party in interest
to ratify, join, or be substituted into the action.
After ratification, joinder, or substitution, the
action proceeds as if it had been originally com-
menced by the real party in interest.
Fed. R. Civ. P. 17(a)(3). The allowance of a reasonable
time for the correct party to step into the plaintiff’s role
suggests that an “objection will be raised when such
joinder is practical and convenient.” Gogolin & Stelter v.
Karn’s Auto Imports, Inc., 886 F.2d 100, 102 (5th Cir. 1989);
No. 07-3984 7
see also 6A Wright, Miller & Kane, Federal Practice and
Procedure § 1554 (3d ed. 2008) (“Regardless of what
vehicle is used for presenting the objection . . . it should
be done with reasonable promptness.”). Other circuit
courts have held that the defense is waived if it is first
raised during or shortly before trial. See, e.g., Rogers v.
Samedan Oil Corp., 308 F.3d 477, 483 (5th Cir. 2002);
United HealthCare Corp. v. Amer. Trade Ins. Co., 88 F.3d
563, 569 (8th Cir. 1996) (waived when first raised at pre-
trial conference); Allegheny Int’l v. Allegheny Ludlum Steel
Corp., 40 F.3d 1416, 1431 (3d Cir. 1994); Whelen v. Abell,
953 F.2d 663, 672-73 (D.C. Cir. 1992); United States ex rel.
Reed v. Callahan, 884 F.2d 1180, 1183 n.4 (9th Cir. 1989);
Hefley v. Jones, 687 F.2d 1383, 1388 (10th Cir. 1982) (waived
when first raised sixteen days before trial). In Weissman
v. Weener, we observed that our legal system is “not
geared to having judges take over the function of law-
yers even when the result would be to rescue clients
from their lawyers’ mistakes,” in acknowledging that
other circuits have found Rule 17(a) to be an affirmative
defense that can be waived. 12 F.3d 84, 86 (7th Cir. 1993)
(citations omitted). Today, we too hold that “real party
in interest” is a defense subject to waiver. We review the
factual determinations upon which a court predicates
a finding of waiver for clear error and the legal question
of whether the conduct amounts to waiver de novo. e360
Insight v. Spamhaus Project, 500 F.3d 594, 599 (7th Cir.
2007); Ernst & Young LLP v. Baker O’Neal Holdings, Inc.,
304 F.3d 753, 756 (7th Cir. 2002).
Dr. See acknowledges that the defense that RK was not
the real party in interest is subject to waiver, Appellant’s
8 No. 07-3984
Br. at 31, but insists that his motion was timely because
he filed it as soon as he discovered that RK was not
duly incorporated. Dr. See claims he had no reason to
doubt RK’s legal status and that he was blindsided by
the realization that RK was not the registered corpora-
tion he believed it to be. Dr. See misunderstands
what it means to be “timely.” Over seven years passed
between RK’s complaint and the bench trial. Dr. See
could have, as he did the evening of Krilich’s testi-
mony, uncovered this information by a simple search
of Illinois’s public records. He could also have filed
discovery requests about the authenticity of RK’s
identity and incorporation. He did not, and his mid-trial
objection was far too late. See, e.g., Gogolin & Stelter, 886
F.2d at 102-03 (defense waived when made at the close
of plaintiff’s evidence); Allegheny Int’l, 40 F.3d at 1431
(defense waived when brought in a summary judgment
motion).
Moreover, had Dr. See earlier objected to RK’s position
as the plaintiff, the only consequence would have been
for Krilich to ratify the commencement of the action, or
to be joined or substituted as the plaintiff. Krilich has
testified that he did business as “RK Company.” If RK
and Krilich are one and the same, there would have
been no reason for the court to have dismissed the
suit without giving Krilich the opportunity to formally
substitute his name for that of RK. And, a timely objec-
tion during the early stages of litigation would have
uncovered any truth to, and allowed the parties to deter-
mine the relevance of, Dr. See’s claim that RK was an
No. 07-3984 9
unlawful common law trust set up for tax evasion pur-
poses.3 Dr. See waived the defense that RK was not
the “real party in interest” by failing to object during the
more than seven years between the complaint and the
beginning of trial.
B. Standing Argument Waived
Dr. See’s constitutional and prudential standing argu-
ments also lack merit. Because the real party in interest
rule is only concerned with whether an action can be
maintained in the plaintiff’s name, it is similar to,
but distinct from, constitutional or prudential standing
limitations. Rawoof, 521 F.3d at 756-57. The familiar
Article III standing requirements are: (1) an injury in
fact; (2) causation; and (3) redressability. Sprint Commc’ns
Co., L.P., v. APCC Servs., Inc., 128 S. Ct. 2531, 2535 (2008);
Pollack v. U.S. Dep’t of Justice, 577 F.3d 736, 739 (7th
Cir. 2009). RK easily meets these constitutional mini-
mum requirements because it alleges: (1) it lost its
$500,000 investment (2) due to Dr. See’s violations of
federal and state securities laws and (3) damages
would remedy the injury.
3
In response to questions about RK, Krilich testified that his
business entity was set up by a man named in the
transcripts as “Edward Bartolli,” who he claimed was a
Harvard University professor. During the course of litiga-
tion, Dr. See submitted no evidence or discovery requests on
this matter, and we express no opinion as to the legitimacy of
RK as an investment vehicle.
10 No. 07-3984
In addition to jurisdictional limits on standing, there
are prudential limitations on a federal court’s power to
hear cases. One well-established prudential limitation
on justiciability is the principle that the named plaintiff
cannot sue in federal court to assert the rights of a third
party. Nocula v. UGS Corp., 520 F.3d 719, 726 (7th Cir.
2008). A court determines whether the named plaintiff
owns the claim by looking to applicable state or federal
law. See, e.g., Frank v. Hadesman & Frank, Inc., 83 F.3d 158,
159 (7th Cir. 1996). The court can sua sponte address
this concern when it sees fit, Weissman, 12 F.3d at 86, but
is not obligated to do so, Rawoof, 521 F.3d at 757. Be-
cause prudential limitations include concerns about a
claim’s rightful owner, we have described Rule 17(a) as
a codification of this non-constitutional limitation on
standing. Rawoof, 521 F.3d at 757. Prudential standing
issues are subject to waiver, Mainstreet Org. of Realtors
v. Calumet City, 505 F.3d 742, 749 (7th Cir. 2007); Ensley
v. Cody Res. Inc., 171 F.3d 315, 320 (5th Cir. 1999), and
Dr. See waived any prudential standing concerns here.
C. The Evidence Was Sufficient
After a bench trial, the district court made findings of
fact supporting its conclusion of liability against Dr. See
and entered judgment in favor of RK. Picking and
choosing elements from the various securities laws in
question, Dr. See challenges the court’s findings that
Dr. See had an intent to defraud, that RK relied on
material facts, and that Dr. See was a person with
control over HSC. We review Dr. See’s sufficiency of the
No. 07-3984 11
evidence challenge under a clearly erroneous standard,
Fed. R. Civ. P. 52(a), and will not second-guess a district
court’s resolution of conflicting evidence or credibility
determinations. Anderson v. City of Bessemer City, 470
U.S. 564, 573 (1985); Freeland v. Enodis Corp., 540 F.3d 721,
733 (7th Cir. 2008). We reverse only if we are left with
the “definite and firm conviction that a mistake has
been committed.” Anderson, 470 U.S. at 573.
Dr. See supports his challenge by insisting that his
version of the relevant events is true. He asserts that
the district court “became confused and flustered” by
Dr. See’s testimony and that key facts were “not under-
stood” by the court. We disagree and find the evidence
is more than sufficient to support the district court’s
findings. Documentary and testimonial evidence estab-
lished that the press releases included false statements
and material omissions, such as HSC’s claims that the
FDA had authorized clinical studies when it had actually
suspended them and HSC’s intention to ship its products
globally when there were no immediate plans to do so.
Krilich and his son testified that Krilich read the SEC
filings and press releases and relied on them. Several
witnesses, including former employees of HSC, testified
as to Dr. See’s role in the company, his approval of press
releases, his knowledge of the information in the SEC
filings, and his signature that accompanied those SEC
filings.
Most importantly, the court repeatedly described
Dr. See’s testimony as not credible. At times, direct evi-
dence contradicted Dr. See’s testimony, such as when
12 No. 07-3984
Dr. See testified that HSC had conducted clinical human
trials and was confronted with his deposition testimony
in which he had admitted that no human trials had
been conducted. The district court described other testi-
mony as “so unbelievable” as to be incredible on its face,
such as Dr. See’s insistence that he read and approved
the first and third paragraph of a press release but
missed the second paragraph entirely. Dr. See points to
no evidence that unequivocally supports his version of
events, Bullard v. Sercon Corp., 846 F.2d 463, 466 (7th
Cir. 1988), and we see no reason to doubt the court’s
credibility determinations. Based on the testimony and
documentary evidence presented, the court did not err
in determining that HSC, under the control and direc-
tion of Dr. See, released misleading statements of
material fact upon which RK had relied in making its
investment.
D. Challenge to Gorgy’s Deposition Testimony Fails
Since Ruling Was Not Provided
Dr. See next appeals the court’s decision to admit
Medhat Gorgy’s deposition testimony in evidence. Gorgy
was the president of a company that provided contract,
manufacturing, and analytical services for biotech and
pharmaceutical companies. HSC hired Gorgy to, among
other tasks, review and prepare submissions of the IND
application to the FDA. Dr. See claims that the court,
“for reasons unknown,” amended the pretrial order to
admit Gorgy’s deposition. The reasons are unknown,
however, because Dr. See failed to order the transcript
No. 07-3984 13
of the motion proceedings and include it in the record.
Beyond the phrase “for the reasons stated on the re-
cord” on the minute docket entry, we have no evidence
of the court’s reasoning.
Federal Rule of Appellate Procedure 10(b)(2) provides
that “if the appellant intends to urge on appeal that
a finding or conclusion is unsupported by the evidence
or is contrary to the evidence, the appellant must
include in the record a transcript of all evidence relevant
to that finding or conclusion.” Fed. R. App. P. 10(b)(2).
This failure to produce the transcript makes it impos-
sible for us to determine whether there was a reasonable
basis for the district court’s decision to admit Gorgy’s
deposition testimony. Woods v. Theiret, 5 F.3d 244, 245
(7th Cir. 1993). This is not a case where review remains
possible despite the absence of a transcript, see Piggie v.
Cotton, 342 F.3d 660, 663 (7th Cir. 2003), because the
parties do not agree on what findings the district court
made to support its decision to admit the deposition
testimony in evidence. And although the district court
allowed the parties to restate their positions in a portion
of the trial transcript found in the record, it ultimately
relied on its previous ruling on the matter, citing again
“the reasons stated on the record.” Because meaningful
review of the court’s reasoning is precluded, we dismiss
Dr. See’s challenge to the use of Gorgy’s deposition
testimony. LaFollette v. Savage, 63 F.3d 540, 544 (7th
Cir. 1995) (“[D]ismissal is the appropriate course if
the absence of a complete record precludes meaningful
appellate review.”). We also decline to use our au-
thority to order Dr. See to supplement the record with
14 No. 07-3984
the transcript of the motion hearing. Fed. R. App. P. 10(e);
LaFollette, 63 F.3d at 545. Dr. See was given the oppor-
tunity to correct the omission when RK pointed out in
its answer brief that Dr. See had failed to provide the
transcript, Appellee’s Br. at 40, but Dr. See has made no
attempt to supplement the record or to explain why a
transcript was not necessary to permit meaningful
review. Learning Curve Toys, Inc. v. PlayWood Toys, Inc.,
342 F.3d 714, 731 n.10 (7th Cir. 2003).
E. Prejudgment Interest and Award of Attorneys’ Fees
Was Reasonable
Dr. See’s final two arguments challenge the district
court’s decision to award prejudgment interest and at-
torneys’ fees to RK, both of which we review for an
abuse of discretion. Serafinn v. Local 722, Int’l Bhd. of
Teamsters, Chauffeurs, Warehousemen & Helpers of Am., 597
F.3d 908, 919 (7th Cir. 2010) (attorneys’ fees); Shott v. Rush-
Presbyterian-St. Luke’s Med. Ctr., 338 F.3d 736, 746 (7th
Cir. 2003) (prejudgment interest). As to prejudgment
interest, it is well-established in this circuit that prejudg-
ment interest is presumptively available to victims of
federal law violations. Gorenstein Enters. v. Quality Care-
USA, Inc., 874 F.2d 431, 436 (7th Cir. 1989). Prejudgment
interest ensures that victims of federal law violations are
fully compensated for their loss, as “a dollar received in
1992 is worth considerably more than a dollar in 2009.”
S.E.C. v. Koenig, 557 F.3d 736, 745 (7th Cir. 2009). Dr. See
argues that RK’s failure to request prejudgment interest
in the final pretrial order waived RK’s entitlement to
No. 07-3984 15
such an award. See, e.g., Lindy Investments, LP v. Shakertown
Corp., 209 F.3d 802, 804 (5th Cir. 2000). But, in this circuit,
a failure to request prejudgment interest in the final
pretrial order does not result in a waiver. Williamson v.
Handy Button Mach. Co., 817 F.2d 1290, 1298 (7th Cir. 1987).
Rule 54(c) of the Federal Rules of Civil Procedure provides
that a prevailing party will be granted all the relief to
which it is entitled, “even if the party has not demanded
that relief in its pleadings,” and we cannot see what
prejudice Dr. See has suffered by RK’s failure to include its
request in the pretrial order. Prejudgment interest is
presumptively available in this circuit, and Dr. See cannot
argue that he would have acted any differently had the
request been spelled out in the pretrial order. The court did
not abuse its discretion in awarding prejudgment interest
to RK.
We similarly find that the district court did not abuse
its discretion in awarding RK attorneys’ fees. An award
of attorneys’ fees will only be reversed if “it cannot be
rationally supported by the record.” Cintas Corp. v. Perry,
517 F.3d 459, 469 (7th Cir. 2008) (citations omitted). In
the district court, and again here, Dr. See neglects to
specify his objections to RK’s fee petition. He tells us that
there is no evidence that RK actually paid or incurred
any fees, that Dr. See had “virtually no time” to prepare
objections to the fee petition, and that “merely a cursory
review” of RK’s bills would establish the “duplicity” of
the work. Then, Dr. See tells us that a court can disallow
hours that were not reasonably expended. This is true,
Hensley v. Eckerhart, 461 US. 424, 433-37 (1983), but to do
so, Dr. See must detail his objections to the fee petition
such that the court can determine what portion of the
16 No. 07-3984
fees, if any, were not reasonably expended. To facilitate
the district court’s ability to determine reasonable fee
amounts, Local Rule 54.3 of the Northern District of
Illinois requires parties who cannot agree on the amount
of fees to file a motion documenting fees, hours, rates,
and any objection to the fees, hours and rates of the
opposing party. Though Dr. See asserts he had “virtually
no time” to do this, RK sent invoices to him on April 9,
2007. In far excess of the 21 days granted by the local
rule, Dr. See received extensions and did not file his
general five-page response until August 2, 2007. The
court did its best to respond to Dr. See’s objections, and
concisely supported its grant of attorneys’ fees by ob-
serving that the litigation had lasted over seven years,
involved complex securities fraud issues, and involved
thousands of documents and filings. Furthermore, our
“cursory review” of the fees reflect that the invoices
were being paid by an RK employee, and we have previ-
ously stated that “the best evidence of whether at-
torney’s fees are reasonable is whether a party has paid
them.” Cintas Corp., 517 F.3d at 469. Given Dr. See’s
failure to raise specific objections to RK’s attorneys’ fees
and mindful of the district court’s “superior under-
standing of the litigation,” we find the district court
did not abuse its discretion in awarding RK the full
amount of fees requested.
III. CONCLUSION
We A FFIRM the magistrate judge’s decision.
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