Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_02-cv-02099/USCOURTS-azd-2_02-cv-02099-10/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1441 Petition for Removal- Property Damage

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1 The court assumes familiarity with this protracted litigation,

including all prior proceedings and decisions herein. 

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Diane Mann, as Trustee for )

the Estate of LeapSource, Inc.,)

et al., ) 

 )

Plaintiffs, ) No. CIV-02-2099-PHX-RCB

 )

vs. ) O R D E R

 )

GTCR Golder Rauner, L.L.C., )

a Delaware limited liability )

company, et al., )

Defendants. ) )

Introduction1

Defendant Michael Makings had an integral role in LeapSource,

Inc., a now defunct business process outsourcing company. In late

2000, he assumed the responsibilities of LeapSource's Chief

Operating Officer ("COO"). DSOF (doc. 341), exh. 20 thereto at 83. 

For a short time, beginning on February 27, 2001, until roughly

mid-March, 2001, Mr. Makings was Chief Executive Officer ("CEO")

and a director of LeapSource. Doc. 324 at ¶ 5 (citation omitted). 

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 1 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2 Hereinafter, all references to plaintiffs in the plural form shall be

read as referring to the individuals, as opposed to the trustee.

- 2 -

In addition to his involvement with LeapSource, as detailed in Mann

v. GTCR Golder Rauner, L.L.C., 351 B.R. 708 (D. Ariz. 2006), Mr.

Makings has been involved in several capacities with ICG Group,

Inc. Primarily because of LeapSource's sale of its ICG division to

Mr. Makings in late March 2001, he was named as a defendant in this

action. Defendant Makings was "at all times ICG Group's sole

shareholder and sole director." Id. at 709 (citations omitted).

Before the court are motions directed at nine counts of the

Fourth Amended Complaint ("FAC") (doc. 21) against defendant

Makings. Five of those counts are being brought by the plaintiff

bankruptcy trustee, Diane Mann. The other four are being brought

by the individual plaintiffs, all former LeapSource shareholders

and employees.2 

Currently pending before the court is defendant Makings'

motion for summary judgment pursuant to Fed. R. Civ. P. 56 (doc.

340). Having carefully considered that motion, plaintiffs'

response (doc. 418), and defendant's reply (doc. 447), and having

determined that oral argument is unnecessary, the court rules as

follows. 

Discussion

I. Standard of Review

The court assumes familiarity with what has sometimes been

referred to as the Celotex trilogy wherein the Supreme Court, in

1986, clarified and refined the standards for deciding Rule 56

summary judgment motions. See Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v.

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 2 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 -

Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); and

Matsushita Elec. Industr. Co. v. Zenith Radio Corp., 475 U.S. 574,

106 S.Ct. 348, 89 L.Ed.2d 538 (1986). There is no need to repeat

the entire body of summary judgment case law which has developed

since then, but a few principles are worth highlighting. 

A motion for summary judgment shall be granted "if the

pleadings, depositions, answers to interrogatories, and admissions

on file, together with the affidavits, if any, show that there is

no genuine issue as to any material fact and that the moving party

is entitled to a judgment as a matter of law." Fed. R. Civ. P.

56(c). It is beyond dispute that "[t]he moving party bears the

initial burden to demonstrate the absence of any genuine issue of

material fact." Horphag Research Ltd. v. Garcia, 475 F.3d 1029,

1035 (9th Cir. 2007) (citation omitted). "Once the moving party

meets its initial burden, . . . , the burden shifts to the nonmoving party to set forth, by affidavit or as otherwise provided in

Rule 56, specific facts showing that there is a genuine issue for

trial." Id. (internal quotation marks and citations omitted). 

This "[e]vidence must be concrete and cannot rely on 'mere

speculation, conjecture, or fantasy.'" Bates v. Clark County, 2006

WL 3308214, at * 2 (D.Nev. Nov. 13, 2006) (quoting O.S.C. Corp. v.

Apple Computer, Inc., 792 F.2d 1464, 1467 (9th Cir. 1986)). 

Similarly, uncorroborated and self-serving testimony or

declarations, without more, will not create a genuine issue of

material fact precluding summary judgment. See Dubois v. Ass'n 

Apart. Owners 2987 Kalakaua, 453 F.3d 1175, 1180 (9th Cir. 2006),

cert. denied, 2007 WL 506192, 75 USLW 3436 (Feb. 20, 2007). 

Nor will "a mere 'scintilla' of evidence" be sufficient "to

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 3 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3 Mr. Makings is the only remaining defendant in this count because Mr.

Eaton and AEG entered into settlement agreements dismissing all claims as against

them with prejudice, and judgment was entered in their favor on September 8, 2006

(doc. 461). Furthermore, the court previously granted a motion for summary

judgment in favor of the law firm Kirkland & Ellis ("K&E") on this count and

others. 

- 4 -

defeat a properly supported motion for summary judgment; instead,

the nonmoving party must introduce some 'significant probative

evidence tending to support the complaint.'" Fazio v. City &

County of San Francisco, 125 F.3d 1328, 1331 (9th Cir. 1997)

(quoting Anderson, 477 U.S. at 249, 252, 106 S.Ct. 2505). Thus,

in opposing a summary judgment motion it is not enough to "simply

show that there is some metaphysical doubt as to the material

facts." Matsushita, 475 U.S. at 586, 106 S.Ct. 348 (citations

omitted). 

By the same token though, when assessing the record to

determine whether there is a "genuine issue for trial," the court 

must "view the evidence in the light most favorable to the

nonmoving party, drawing all reasonable inference in his favor." 

Horphag, 475 F.3d at 1035 (citation omitted). The court may not

make credibility determinations; nor may it weigh conflicting

evidence. See Anderson, 475 U.S. at 255, 106 S.Ct. 2505. With

these standards firmly in mind that the court has examined, at

length, the present record, and the parties' respective arguments. 

II. Tortious Interference with Contract Counts

A. Count 1 - Purchase Agreement

The plaintiff trustee designates count one of the FAC, 

"Tortious [sic] Interference with Contract Against: Makings, Eaton,

AEG and K&E[.]"3

 FAC (doc. 121) at 74. The "contract" which forms

the basis for this count is the Purchase Agreement between the

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 4 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4 The GTCR VI Entities are comprised of the three defendant private

equity funds, GTCR Fund VI, L.P., GTCR VI Executive Fund and GTCR Associates VI.

- 5 -

GTCR VI Entities4 and LeapSource. Although the designation

explicitly names defendant Makings, his name is conspicuously

absent from any substantive allegations in count one. 

In any event, defendant Makings advances three arguments as to

why the court should grant summary judgment in his favor on this

count. First, Makings notes that there "are no allegations in the

FAC that [he] acted in . . . a capacity other than as an officer or

director of LeapSource[]" with respect to the Purchase Agreement. 

Mot. (doc. 340) at 2 (emphasis added). Second, Makings accurately

points out that this court has previously held that there was no

breach of the Purchase Agreement when the GTCR Entities decided to

stop funding LeapSource. See Order (D.Ariz. Sept. 30, 2003) (doc.

72) at 5-11; and 32. Thus, Makings reasons, the law of the case

doctrine mandates summary judgment because absent a breach, there

can be no tortious interference with contract as a matter of law. 

Third, according to Makings, plaintiffs cannot establish that he

had knowledge of the Purchase Agreement – an essential element of a

tortious interference with contract cause of action. 

Plaintiffs' response overlooks the law of the case argument,

and instead focuses on the capacity in which defendant Makings is

being sued. In essence plaintiffs counter that Makings is trying

to "have his cake and eat it too." Plaintiffs assert that at other

times in this litigation, Makings has taken the position that "he

was not an officer or director of LeapSource when he purchased the

ICG asset from LeapSource[.]" Resp. (doc. 418) at 5. Now,

plaintiffs believe that Makings is claiming he was a LeapSource

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 5 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5 To support this contention plaintiffs cite only to the FAC and not to

any record evidence. This is a significant oversight given the procedural posture

of this case. At this summary judgment stage, plaintiffs cannot rely upon mere

conclusory allegations in the complaint. See Taylor v. List, 880 F.2d 1040, 1045

(9th Cir. 1989) ("[A] summary judgment motion cannot be defeated by relying solely

on conclusory allegations unsupported by factual data.") 

6 Defendant Making's motion to dismiss this count and others was the

subject of a separate order. See Doc. 70.

- 6 -

officer or director. This "contradiction," as plaintiffs describe

it, shows that there are disputed facts rendering summary judgment

improper. See id. What is more, plaintiffs maintain that "there

are allegations and 

. . . evidence that Makings was acting purely for his personal

benefit and not as an officer or director of LeapSource." Id.5

Then, as they did in opposing the GTCR defendants' summary

judgment motion, plaintiffs assert that a breach of contract is not

a prerequisite to maintaining a cause of action for tortious

interference with contract. "[I]t is enough," in plaintiffs'

opinion, "if the Agreement was terminated, even without a

breach[.]" Id. at 6. Here, plaintiffs contend that that

"termin[ation]" took the form of GTCR's decision to cease funding

under the Purchase Agreement. 

1. Law of the Case Doctrine

Earlier in this litigation the court granted, inter alia, the

GTCR defendants' Rule 12 motion to dismiss count two of the First

Amended Complaint.6 See Doc. 72 at 5-11. Among other things,

count two alleged that the GTCR Entities breached the Purchase

Agreement by "failing to fully fund LeapSource" under the terms of

that Agreement. See id. at 5 (internal quotation marks and

citation omitted). The court held that there was no breach of the

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 6 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7 That count is nearly identical to count one of the FAC, which is the

subject of this motion, except that in its earlier form plaintiffs named a broader

range of defendants.

- 7 -

Purchase Agreement because the "language [wa]s perfectly clear that

it imposed a conditional funding obligation on GTCR." Id. at 11. 

In fact, the court explicitly found that "[t]he allegation to this

effect [i.e. an obligation to fully fund LeapSource] [wa]s simply

erroneous[.]" Id. at 6-7. 

That prior order also granted the GTCR defendants' motion to

dismiss the related claim for tortious interference with Purchase

Agreement.7

 See id. at 31-33; and 69. In dismissing that count,

at the outset this court stressed that "[o]f primary importance to

the resolution" of whether plaintiffs stated such a claim was "the

fact that the court has already ruled that no breach of the

Purchase Agreement occurred[.]" Id. at 32 (citation omitted). The

court continued in a similar vein, noting that as it "ha[d] fully

explained in its Order related to [K&E's] Motion to Dismiss, an

actual breach of the underlying contract is a prerequisite to

liability for tortious interference." Id. (emphasis added). Then,

after listing the elements of tortious interference with contract,

the court reiterated that "a breach of the underlying agreement

must occur in order to find liability for tortious interference." 

Id. (emphasis added). In fact, "[b]ecause the court ha[d] held 

. . . that this preliminary requirement [breach of the underlying

agreement] [wa]s not met," it found no "need to discuss the other"

bases for dismissal urged by the GTCR defendants. Id. 

In another order issued that same day, the court likewise

granted K&E's motion to dismiss the tortious interference with

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 7 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 8 -

Purchase Agreement count. Employing the same reasoning as it did

in the GTCR defendants' dismissal motion, the court held that "a

claim for tortious interference with the Purchase Agreement [could]

not stand[]" because "the Purchase Agreement was not breached[.]" 

Doc. 69 at 23. 

Reasoning that it is now the law of the case that there was no

breach of the Purchase Agreement, defendant Makings contends that

he is entitled to summary judgment on the claim that he tortiously

interfered with that Agreement. "Law-of-the-case rules have

developed to maintain consistency and avoid reconsideration of

matters once decided during the course of a single continuing

lawsuit.'" Sathianathan v. Smith Barney, Inc., 2004 WL 3607403, at

*3 (N.D.Cal. May 28, 2004) (quoting, inter alia, Wright & Miller,

Federal Practice and Procedure, § 4478). "Under the 'law of the

case' doctrine, a court is ordinarily precluded from reexamining an

issue previously decided by the same court, or a higher court, in

the same case." Hydrick v. Hunter, 466 F.3d 676, 687 (9th Cir.

2006) (internal quotation marks and citation omitted) (emphasis

added). "For the law of the case doctrine to apply, the issue in

question must have been decided explicitly or by necessary

implication in [the] previous disposition." Id. (internal

quotation marks and citations omitted). This doctrine "of practice

promotes the finality and efficiency of the judicial process by

protecting against the agitation of settled issues." Christianson

v. Colt Industries Operating Corp., 486 U.S. 800, 816, 108 S.Ct

2166, 100 L.Ed.2d 811 (1988). 

In the present case, this court has explicitly held that there

was no breach of the Purchase Agreement when the GTCR Entities

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 8 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8 Given this court's prior rulings that a breach of contract is necessary

to prevail on a tortious interference with contract claim, it is possible to read

plaintiff's contrary assertion, i.e. "[t]he law does not require a breach[,]" as

urging a departure from the law of the case. Plaintiff has not provided a

sufficient basis warranting such a departure however; nor has she expressly urged

such a departure. 

To support her argument, plaintiff relies upon three cases (two outside of

this jurisdiction) involving the termination of at-will employees. See Wallace v.

Casa Grande Union High Sch. Dist. No. 82 Bd. of Governors, 184 Ariz. 419, 909 P.2d

486 (Ariz. Ct. App. 1995); Sterner v. Marathon Oil Co., 767 S.W.2d 686 (Tex. 1989);

and Cronk v. Intermountain Rural Electric Ass'n, 765 P.2d 619 (Colo. Ct. App.

1988). Plaintiff's reliance upon these employment cases is misplaced from both a

legal and factual standpoint. Factually, there is a clear difference between atwill employee relationships, with no written contracts, and a written Purchase

Agreement such as the one which has been the subject of this litigation. 

There is also a significant legal distinction between each of those at-will

employee cases and this action. In sharp contrast to the present case, in each of

the cited cases there was a breach of the at-will employee relationship. As the

discussion above makes clear, plaintiff has not, and indeed cannot, show a similar

breach here. Hence, to the extent plaintiff is implying that the court should

revisit the issue of whether the Purchase Agreement was breached, and thus in turn,

whether such a breach is necessary to state a claim for tortious interference with

- 9 -

decided to discontinue funding LeapSource. Moreover, not once but

twice before, this court has also explicitly held that without a

breach of that underlying Agreement, a claim of tortious

interference with that Agreement cannot be sustained. In light of

those prior rulings, the issue of the underlying breach, as well as

the issue of requiring a breach as a predicate to liability for

tortious interference with contract are not open to relitigation. 

The court hastens to add that none of the reasons for deviating

from the law of the case doctrine apply here. See Minidoka

Irrigation Dist. v. Department of Interior of U.S., 406 F.3d 567,

573 (9th Cir. 2005) (internal quotation marks and citation omitted)

("The law of the case doctrine is subject to three exceptions that

may arise when (1) the decision is clearly erroneous and its

enforcement would mark a manifest injustice, (2) intervening

controlling authority makes reconsideration appropriate, or (3)

substantially different evidence was adduced at a subsequent

trial.")8 Consequently, the court finds that the law of the case

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 9 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

contract, the court declines to do so. 

9 Hereinafter in this section "employment contracts" shall be read as

referring to these Agreements as well as to the Senior Management Agreements,

because there is no need to distinguish between the two for the present motion.

- 10 -

doctrine dictates granting defendants Makings' summary judgment

motion as to count one of the FAC, alleging tortious interference

with the Purchase Agreement. Because the law of the case doctrine

is determinative, there is no need to consider defendant Making's

alternative arguments, i.e. the capacity in which he was sued and

whether he had knowledge of the Purchase Agreement. 

B. Count 21 - Senior Management Agreements and Employment

Agreements

The thrust of count 21 is that allegedly defendant Makings,

along with other defendants, tortiously interfered with the Senior

Management Agreements and the Employment Agreements9 which the

individual plaintiffs had with LeapSource. Due to that alleged

interference, plaintiffs claim that they did not receive the

severance payments ("and in some cases other . . . mon[ies]") to

which they believe they were entitled under those contracts. Resp.

(doc. 418) at 11. 

Several times over the course of this litigation, the court

has enumerated the elements which are necessary to establish

intentional interference with a contract under Arizona law. Most

recently this court indicated:

The tort of intentional interference 

with contractual relations requires a 

plaintiff to prove: (1) existence of a 

valid contractual relationship,(2) 

knowledge of the relationship on the 

part of the interferor,(3) intentional 

interference inducing or causing a breach,

(4) resultant damage to the party whose 

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 10 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 11 -

relationship has been disrupted, and (5)that 

the defendant acted improperly.

Mann, 351 B.R. at 701 (quoting Safeway Insurance Company, Inc. v.

Guerrero, 210 Ariz. 5, 106 P.3d 1010, 1025 (2005)) (other citation

omitted). 

As to the third element, the interference must be "'both

intentional and improper.'" Safeway, 106 P.3d at 1026 (quoting

Restatement (Second) of Torts § 767 cmt. a (1979)). Thus, "[i]f

the interferer is to be held liable for committing a wrong, his

liability must be based on more than the act of interference

alone." Id. (internal quotation marks and citation omitted). As

the Arizona Supreme Court explained in Snow v. Western Savings &

Loan Association, 152 Ariz. 27, 730 P.2d 204 (1987), "[t]he tort is

intentional in the sense that [defendant] must have intended to

interfere with the [plaintiffs'] contract or have known that this

result was substantially certain to be produced by its conduct." 

Id. at 33, 730 P.2d at 211 (citations omitted). Consequently,

Arizona case law "emphasizes that a plaintiff must show more than

the defendant's knowledge that his or her conduct would induce a

breach to establish intentional interference with contractual

relations." Safeway, 106 P.3d at 1026 (citing cases). 

Improper conduct, the fifth element, is analyzed by

considering the following seven factors previously recited by this

court:

(a) the nature of the actor's conduct,

(b) the actor's motive,(c) the interests of the 

 other with which the actor's conduct interferes,

(d) the interests sought to be advanced by the 

 actor,(e) the social interests in protecting 

 the freedom of action of the actor and the 

 contractual interests of the other,(f) the 

 proximity or remoteness of the actor's conduct

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 11 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 12 -

 to the interference and (g) the relations between 

 the parties.

Mann, 351 B.R. 700-701 (quoting Restatement (Second) of Torts § 767

(1979)) (other citations omitted). "If the plaintiff is unable to

show the impropriety of the defendant's conduct based on an

examination of these factors, the conduct is not tortious." Id. at

701 (citation omitted). Of these seven factors, the two "deserving

the most weight are the nature of the actor's conduct and the

actor's motive." Wells Fargo Bank v. Arizona Laborers, Teamsters

and Cement Masons Local No. 395 Pension Trust, 201 Ariz. 474, 494,

38 P.3d 12, 32 (2002) (citation omitted). 

Initially Makings took the position that because the

plaintiffs were "at-will" employees, he could not be held liable

for tortiously interfering with their employment contracts when, as

LeapSource CEO, he signed their termination letters. This argument

was quickly laid to rest, however, by plaintiffs' opposition

emphasizing that they are not asserting any form of "'wrongful

termination[.]'" See Resp. (doc. 418) at 11. Once again,

plaintiffs' theory of liability comes back to their fervent belief

that the ICG asset sale to defendant Makings was fraudulent and

constitutes a breach of fiduciary duties. This purported breach of

fiduciary duties, from plaintiffs' standpoint, supports a claim for

tortious interference with contract. In any event, the alleged

tortious interference is not plaintiffs' termination from

LeapSource, but rather the ICG asset sale.

Viewed through this lens, Makings argues that summary judgment

in his favor on count 21 is mandated because the plaintiffs cannot

show either that he acted with the requisite intent, or that he

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 12 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 13 -

"improperly interfere[d] with" their employment contracts. See

Mot. (doc. 340) at 11. The court agrees. It does so for the

simple reason that, as will be more fully discussed below,

plaintiffs have not met their burden of proof with respect to

either of these elements. Nor, for that matter, as will also be

more fully discussed below, have plaintiffs met their burden of

proof with respect to the knowledge element of this tortious

interference claim. 

Plaintiffs assert that Makings "knew" that they were entitled

to severance payments "and in some cases other amounts of money[]"

under the terms of their employment contracts. See Resp. (doc.

418) at 11. According to plaintiffs, Makings gained that knowledge

"because he was personally involved in attempts to negotiate

reductions in those [contractual] obligations." Id. The noticeable

absence of cites to the record is fatal to plaintiffs' opposition. 

Plaintiffs cannot defeat this summary judgment motion by relying

upon blanket, unsupported assertions declarations in their opposing

memorandum of law. See Smith v. Mack Trucks, 505 F.2d 1248, 1249

(9th Cir. 1974) (citation omitted) ("[A] [l]egal memorand[um] . . .

, in the summary-judgment context, [is] not evidence, and do[es]

not create issues of fact capable of defeating an otherwise valid

motion for summary judgment.") That is so in part because "the

arguments and statements of counsel are not evidence and do not

create issues of material fact capable of defeating an otherwise

valid motion for summary judgment." Barcamerica Intern. v. Tyfield

Importers, Inc., 289 F.3d 589, 593 n.4 (9th Cir. 2002) (internal

quotation marks and citation omitted). 

Plaintiffs' opposition is equally unavailing in terms of the

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 13 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 14 -

intent element. Plaintiffs accurately state, as noted earlier,

that one way in which to establish intent here is to show that a

defendant "'kn[ew] that this result was substantially certain to be

produced by [his] conduct." See Resp. (doc. 418) at 10 (quoting

Snow, 730 P.2d at 11) (other citation omitted) (emphasis added by

plaintiffs). Applying that rule to the present case would require

plaintiffs to show that defendant Makings knew that the ICG asset

sale was "substantially certain" to "result" in their not receiving

whatever severance and other monies they believe they are owed

under the employment contracts. Plaintiffs baldly assert that "the

evidence is overwhelming that [improper] interference with the

performance of [the] [employment] contract obligations was certain

to be the result of conveying" the ICG asset to Makings. Id. at

10. To defeat a summary judgment motion, it is not enough to

merely state that "the evidence is overwhelming[.]" See id. Nor is

it enough to say, as plaintiffs also do, that "[t]he question of

intent ordinarily is for the finder of fact." Id. (quoting Snow,

730 P.2d at 212) (other citation omitted).

Plaintiffs must demonstrate how that evidence is

"overwhelming." At the very least, as the party opposing summary

judgment, plaintiffs must "designate specific facts showing that

there is a genuine issue for trial." See Celotex, 477 U.S. at 324,

106 S.Ct. 2548 (internal quotation marks omitted) (emphasis added) 

Further, they must point to the evidence from which a jury could

find, or reasonably infer, the requisite intent. Plaintiffs have

not done that however. 

Plaintiffs did quote from the deposition of one of the

plaintiffs, Patrice Walker, wherein she testified about a breakfast

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 14 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10 Plaintiffs did not cite to where, if at all, this excerpt can be found

in the record. Thus, the court is unable to provide a complete citation.

- 15 -

meeting she had with defendant Makings in early January, 2001. 

When directly asked whether "Mr. Makings ever specifically sa[id]

anything about the company [LeapSource], quote, unquote, going

under[,]" plaintiff Walker responded: "He said there were

significant changes going on at LeapSource because of the increased

pressure from GTCR." Resp. (doc. 418) at 12-13 (quoting Walker

Deposition).10 Following up on that answer, Ms. Walker was then

asked whether Makings said "anything else on that issue[.]" Id. at

13 (citation omitted). She replied, "All he [Makings] wanted to do

was walk away with ICG." Id. (citation omitted). Pointedly asked

whether Makings "specifically sa[id] that[,]" Walker readily

agreed, "He specifically said that." Id. (citation omitted). 

Plaintiffs' reliance upon the foregoing is problematic. 

Plaintiffs have not explained (and it is not readily apparent) how

this testimony bears on the issue of whether Makings knew that if

he bought ICG, the plaintiffs would not receive severance payments

pursuant to their employment contracts. Therefore, as with the

knowledge component of tortious interference with contract,

plaintiffs have not shown a genuine issue of material fact so as to

preclude summary judgment on this count. 

Turning to the fifth element, improper conduct, plaintiffs

accurately state the law, listing the seven Restatement factors

which must be examined in resolving that issue. Resolution of this

issue, plaintiffs maintain, "requires a factual determination that

cannot be made in the context of this motion for summary

judgment[.]" Resp. (doc. 418) at 9. Denial of this aspect of

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 15 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 16 -

Makings' motion is mandated, plaintiffs suggest, because "there is

more than enough evidence to support a jury verdict that, . . . ,

the sale of the ICG assets was harmful to the interests of the

creditors of LeapSource, and prevented LeapSource from performing

its contract obligations to creditors, including to . . .

Plaintiffs who were owed substantial severance payments by

LeapSource." Id. 

Again, the deficiency in plaintiffs' response is their failure

to cite to relevant record evidence. As the Ninth Circuit permits,

this court has "limit[ed] its review to the documents submitted for

purposes of summary judgment and those parts of the record

specifically referenced therein." Carmen v. San Francisco Unified

Sch. Dist., 237 F.3d 1026, 1030 (9th Cir. 2001) (emphasis added). 

Here, plaintiffs "specifically referenced" a few selected quotes,

some of which are set forth above, from the deposition of plaintiff

Walker. However, the fact that defendant Makings purportedly

"wanted to walk away with ICG[]" does not create a genuine issue of

material fact as to "improper conduct." See Doc. 418 at 13

(citation omitted). 

The remainder of Walker's deposition testimony from which

plaintiffs quote does not advance their argument that Makings

engaged in improper conduct of the type which is necessary to

support tortious interference with contract. To illustrate, Ms.

Walker testified that Makings asked her if she had "ever considered

ICG[.]" Id. at 12 (citation omitted). As Walker recalls it,

Makings then asked her what she would "do personally if these

changes occurred at LeapSource[.]" Id. (citation omitted). And

Makings wondered if she "could . . . take his cell phone [number]

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 16 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 17 -

if [she] wanted to discuss this in the future." Id. (citation

omitted). The court is at a loss to see how this testimony creates

a factual issue as to Makings' supposed improper conduct. If

plaintiffs had analyzed, with cites to relevant record evidence,

"the nature of [Making's] conduct and [his] motive" (the two

factors "deserving the most weight[]" in deciding whether conduct

is improper), Wells Fargo, 38 P.3d at 32 (citation omitted),

perhaps the court could have overlooked their lack of discussion as

to the other six Restatement factors which are germane to improper

conduct inquiry, but the court cannot. Plaintiffs do "not have

enough evidence of" not just one but three "essential elements" of

this tortious interference with contract claim "to carry [their]

ultimate burden of persuasion[.]" See Nissan Fire & Marine Ins. Co.

v. Fritz Cos., Inc., 210 F.3d 1099, 1106 (9th Cir. 2000). 

Therefore, summary judgment in favor of defendant Makings as to

count 21 is proper. 

C. Count 23 - Stockholders Agreement and Purchase Agreement

In count 23 of the FAC, the plaintiffs alleged that defendant

Makings and other defendants "intentionally caused the GTCR VI

Entities to breach the Stockholders Agreement and the Purchase

Agreement[.]" FAC (doc. 121) at 103, ¶ 485. To the extent

plaintiffs are alleging that defendant Makings tortiously

interfered with the Purchase Agreement, for the reasons set forth

in section II(A) above, the court grants defendant's motion for

summary judgment. 

In moving for summary judgment on count 23, defendant Makings

focused solely on the Purchase Agreement. As the moving party,

Makings had the burden of "either produc[ing] evidence negating an

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 17 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11 The first way is through "discussions [Makings] was allegedly having

with the GTCR Defendants[.]" Mot. (doc. 340) at 18. Second, Makings allegedly

breached his fiduciary duties by "developing cost projections and reduction in work

force[.]" Id. The third alleged breach arises out of the ICG asset sale to ICG

Group.

- 18 -

essential element of" this claim as it pertains to the Stockholders

Agreement, or "show[ing] that the nonmoving party does not have

enough evidence of an essential element to carry its ultimate

burden of persuasion at trial." See Nissan Fire & Marine, 210 F.3d

at 1102. Defendant Makings did neither. Accordingly, the court

denies defendant Making's summary judgment as to count 23 to the

extent the Stockholders Agreement is a basis for that count. 

III. Breach of Fiduciary Duty Counts

Defendant Makings also is moving for summary judgment on the

breach of fiduciary duty counts, both those brought by the trustee

and those brought by the individual plaintiffs. Primarily because

there is a significant standing issue with respect to the

individual plaintiffs, the court will separately analyze these

breach of fiduciary duty counts.

A. Count 5 - "Breach of Fiduciary Duties by Directors and 

Officers"

In count 5 the trustee alleges that defendant Makings, along

with other defendants, breached a wide range of fiduciary duties. 

From the extensive discovery, defendant Makings surmises that he

allegedly breached those duties in three different ways.11 In

opposing this aspect of defendant Making's motion, however, the

trustee focuses upon the ICG assets sale to the exclusion of other

possible bases for a breach of fiduciary. The court will similarly

limit its analysis. 

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 18 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12 As a result, all three counts are still pending in the adversary

proceeding: (1) fraudulent transfer pursuant to 11 U.S.C. § 548 against defendants

ICG Group, Inc. and Makings; (2) aiding and abetting a fraudulent transfer against

defendant Makings; and (3) preferential transfer against ICG Group, Inc. and

Makings. 

13 The trustee is mistaken. That motion did not pertain to the fraudulent

conveyance count. The trustee moved for summary judgment only as to count III,

alleging a preferential transfer. See Mann, 351 B.R. at 709 (citing doc. 312).

14 Given the court's holding in the GTCR defendants' related summary

judgment motion that the individual plaintiffs lack standing to pursue their

separate breach of fiduciary duty claims against defendant Makings, there is no

need to address the issue of whether, as they contend, Makings owed a separate

fiduciary duty to the individual plaintiffs as LeapSource creditors. 

- 19 -

A prior ruling in the consolidated adversary proceeding

further limits the scope of count five vis-a-vis the present

motion. When the trustee filed her opposition to the present

motion, her summary judgment motion as to count III, alleging a

preferential transfer in violation of 11 U.S.C. § 547, was still

pending in the adversary proceeding. However, in an August 28,

2006, decision, the court found that defendant Makings was not an

"insider" within the meaning of that statute. See Mann, 351 B.R.

at 714. Accordingly, the court denied the trustee's motion for

summary judgment as to count III.12 

That prior ruling directly impacts the present motion because

the trustee asserts that "[a]s a matter of law, the same conduct

that [was] described in [her] Motion for Summary Judgment Re Count

III (fraudulent transfer and preferential transfer of the assets of

an insolvent company13) constitutes a breach of fiduciary duty to

LeapSource[.]"14 Resp. (doc. 418) at 14 (footnote and emphasis

added). The conduct which the trustee identified in that motion,

and which she incorporated by reference herein, is her belief that

Makings had "inside information that [LeapSource] was failing and

on its way to bankruptcy[.]" Mot. (doc. 374) at 2. As further

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 19 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 20 -

support for her view that Makings was an "insider," the trustee

pointed out that he "negotiated for payment of his own debt[,]"

that is the $2.5 million note; he then resigned as the CEO and a

director of LeapSource. See id. From the trustee's perspective,

adding to Makings' purported status as an "insider" is that days

after his resignation, the ICG asset was transferred to him. See

id. 

To the extent the trustee contends that Makings breached his

fiduciary duties because he engaged in a preferential transfer in

violation of section 547, the law of the case doctrine, discussed

herein, forecloses this argument. The trustee therefore is left 

with her argument that defendant Makings engaged in a fraudulent

transfer in violation of 548 of the Bankruptcy Code, which in turn

results in a breach of fiduciary duty. 

With this clarification, the court next considers defendant's

argument that summary judgment is proper as to count 5 because he

did not owe any fiduciary duties to LeapSource on the date of the

ICG assets sale. Makings asserts that he did not owe any fiduciary

duties to LeapSource at that time because he had resigned as

LeapSource's CEO and as one of its directors before the sale date. 

Defendant Makings correctly acknowledges that Delaware law applies

to this fiduciary duty claim. See Mot. (doc. 340) at 18. Despite

that, he then incongruously relies upon Arizona law to argue that

he did not owe any fiduciary duties when the ICG assets sale

occurred. See id. at 19 (citing Master Records, Inc. v. Backman,

133 Ariz. 494, 652 P.2d 1017 (1982)). Master Records applies

Arizona law, and thus is not controlling on the issue of whether

under Delaware law defendant Makings owed a fiduciary duty to

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 20 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 21 -

LeapSource at the time of the ICG asset sale. This is a

significant omission. It was incumbent upon defendant Makings to

support his argument with the applicable law, i.e. Delaware. That

he did not do. Therefore, the court denies Makings' summary

judgment motion insofar as he grounds it on the theory that as a

matter of law he did not owe a duty to LeapSource when the ICG

asset sale occurred.

Shifting to the time frame prior to the ICG assets sale,

Makings readily concedes that he was a LeapSource employee and

director while at least some of the negotiations for that sale took

place. Nonetheless, Makings contends that, as a matter of law, he

cannot be held liable for breach of fiduciary duties during that

time because he was entitled to engage in what he terms "mere

preparations" to compete with LeapSource. See Mot. (doc. 340-2) at

22. Makings believes that he was entitled to engage in those

"preparations" (which he does not identify or explain) even though

he was still an employee and director of LeapSource.

Defendant Makings provides no legal argument to support his

position. Instead, he cites to a string of five cases from

jurisdictions as varied as the Tennessee Court of Appeals to the

Kansas Supreme Court. In fact, even though it is undisputed that

Delaware law governs this breach of fiduciary duty count, only one

of the five cases to which Makings cites even mentions Delaware

law, and then just in passing. See Bancroft-Whitney Co. v. Glen,

64 Cal.2d 327, 345, 411 P.2d 921 (Cal. 1966) (quoting from a 1939

Delaware case as to the "general rules applicable to the duties of

a corporate officer[]"). What is more, Bancroft-Whitney, like the

other cases to which Makings cites, is readily distinguishable on

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 21 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 22 -

its facts. There, the defendant, while still employed by the

plaintiff company, provided company information to a competitor,

thus enabling that competitor to enter into employment contracts

with plaintiff's co-workers. Clearly there are no such allegations

in the present case. 

Finally, defendant Makings' reliance upon Bancroft-Whitney is

all the more curious because in that case the court expressly held

that "as a matter of law" the defendant' did not breach his

fiduciary duties given that his conduct fell "demonstrably short of

the most scrupulous observance of an officer's duty to his

corporation." Bancroft-Whitney, 411 P.2d at 936 and 937. In sum,

because none of the cases to which defendant Makings cites are

binding on this court, once again, Makings has not met his burden

in terms of showing that as a matter of law, he did not breach any

fiduciary duties when he engaged in "preparations" for the ICG

assets sale prior to resigning from LeapSource. 

Even in the face of these weaknesses, defendant Makings

persists in arguing that summary judgment is warranted as to this

breach of fiduciary duty count. That is so, Makings asserts,

because the testimony of Ms. Matiski, whom he portrays as "an

expert in the area of officer fiduciary duties (and the attorney

that LeapSource relied on for these issues)[,] . . . effectively

ends Plaintiffs' claims that [he] breached his fiduciary duties." 

Mot. (doc. 340-2) at 23. In this regard, defendant Makings offers

the following excerpt from Ms. Matiski's deposition:

Q. Are you familiar with the fiduciary responsibilities

that officers owe to companies such as LeapSource?

A. Yes.

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 22 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 23 -

Q. And that is a field you have been practicing in for 

approximately 25 years?

A. 25 years, thank you.

Q. After observing Mr. Makings' conduct during the time 

he was COO and CEO, did you observe any breaches of 

fiduciary duties?

A. No.

Id. (quoting SOF 96). 

This snippet of deposition testimony is not dispositive of the

fiduciary duty issues which this motion raises though. The trustee

has countered with additional testimony by Ms. Matiski showing that

this opinion is not as unequivocal as it might appear at first

glance. As to possible breaches of fiduciary duties, later in her

deposition Ms. Matiski testified:

Q. Did you provide any advice to Chris Kirk 

as to whether Mike Makings had breached his 

fiduciary duties to LeapSource?

A. I don't remember. The context was GTCR is 

a member --. . . of the board of directors . . . 

of this company through its representatives. 

They have fiduciary obligations. They are 

refusing to fund. That is a breach of their 

fiduciary obligations. That is the kind of research 

we were doing. That is not a breach of fiduciary 

obligations. I don't . . . believe -- I don't think 

-- no, we were not -- I was not thinking about Mike 

Makings in that context, and we didn't do an 

independent review of his actions.

PSOF (doc. 419) at 50 (emphasis added by plaintiffs). It is

possible to read the foregoing as meaning that Ms. Matiski's law

firm, Osborn Maledon, did not do "an independent review" of

Makings actions in connection with the funding decision. On the

other hand, an equally reasonable inference can be drawn that the

Osborn firm did not "do an independent review of [Makings']

actions[]" as to whether he breached any fiduciary duties

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 23 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 24 -

generally. Given these competing inferences, taken together with

the flaws in defendant's argument outlined above, summary judgment

is not appropriate with respect to count five. Thus, the court

denies defendant Makings' summary judgment motion as to count five

of the FAC. 

B. Count 7 -"Aiding and Abetting Breach of Fiduciary Duties

By Professional Advisers and Consultants"

Count three of the FAC alleges a "Breach of Fiduciary Duties

By Professional Advisers and Consultants: Against Eaton, AEG, and

K&E[.]" FAC (doc. 121) at 76. Among other things, in an August 28,

2006, order this court granted K&E's motion for summary judgment as

to that count. See Mann v. GTCR Golder Rauner, L.L.C., 351 B.R.

685, 707 (D.Ariz. 2006) Furthermore, Eaton and AEG entered into a

stipulation of dismissal with prejudice as to all claims against

them, including count three. See id. 

Count seven relates to count three in that the former alleges

"Aiding and Abetting Breach of Fiduciary Duties by Professional

Advisers and Consultants[.]" FAC (doc. 121) at 81. "A claim for

aiding and abetting a breach of fiduciary duty requires . . . (1)

the existence of a fiduciary relationship; (2) a breach of that

duty; (3) knowing participation by the non-fiduciary; and (4)

damages." In re American Business Financial Services, Inc., 2007

WL 510094, at *6 (Bankr. D.Del. Feb. 13, 2007) (citation omitted)

(emphasis added). Given that the underlying breach of fiduciary

duty claim has not survived, defendant Makings is entitled to

summary judgment as to count seven because a critical element of

this aiding and abetting claim is missing – the breach of a

fiduciary duty by Eaton, AEG, or K&E. See McGowan v. Ferro, 859

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 24 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 25 -

A.2d 1012, 1041 (Del. Ch. 2004) (granting summary judgment as to

aiding and abetting breach of fiduciary duty count after granting

summary judgment as to the underlying breach of duty of loyalty

count), aff'd without pub'd opinion, 873 A.2d 1099 (Del. 2005). 

Accordingly, the court grants summary judgment in defendant

Makings' favor as to count seven of the FAC.

C. Count 18 – "Aiding and Abetting Breach of Fiduciary Duty"

and Count 19 - "Breach of Fiduciary Duty"

The plaintiffs are bringing counts 18 and 19 against defendant

Makings, along with several other defendants. Count 18 alleges

aiding and abetting the breach of fiduciary duty against defendant

Makings as well as others. Count 19 alleges that defendant Makings

breached a host of fiduciary duties. 

Defendant Makings is taking the position that because these

fiduciary duty based claims are derivative in nature, they may only

be pursued by the plaintiff trustee, and not by these individual

plaintiffs. Plaintiffs did not respond to this argument. 

Regardless, whether the individual plaintiffs have standing to

pursue these breach of fiduciary duty counts is thoroughly

discussed in the order being issued contemporaneously herewith

granting the GTCR defendants' summary judgment motion. For those

same reasons, the court finds that the individual plaintiffs lack

standing to pursue counts 18 and 19 against defendants Makings. 

Thus, the court grants defendant Makings summary judgment motion

with respect to counts 18 and 19. 

IV. Other Remaining Counts

The remaining causes of action, counts eight and nine, are

being brought solely by the trustee. The court will address these

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 25 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

15 That statute provides, inter alia that a bankruptcy "estate is

comprised of . . . all legal or equitable interests of the debtor[.]" 11 U.S.C. §

541(a)(1) (West 2004).

- 26 -

counts seriatim.

A. Count 8 - "Aiding and Abetting Fraudulent Transfers"

Count eight of the FAC alleges that defendant Makings, among

others, aided and abetted a fraudulent transfer, that is the ICG

assets sale to Makings. Defendant Makings seeks summary judgment

as to this count on three separate grounds. First he argues that

the trustee lacks standing. Second, as did the GTCR defendants in

moving for summary judgment motion, Makings argues that Arizona

does not recognize a cause of action for aiding and abetting a

fraudulent transfer. Third, even if Arizona did recognize such a

cause of action, Makings contends that the trustee has not come

forth with evidence to establish each of the elements necessary to

sustain that cause of action. 

Emphasizing that she is not bringing this claim on behalf of

any specific creditor, relying upon 11 U.S.C. § 541(a)(1),15 the

trustee retorts that she does have standing "to bring pre-petition

claims" on behalf of LeapSource, the bankrupt estate. Resp. (doc.

418) at 19. As to the viability of an aiding and abetting a

fraudulent transfer claim, the trustee makes the identical argument

which she did in opposing the GTCR defendants' summary judgment

motion. More specifically, the trustee reiterates her view that

"if there is liability for conspiring to assist a fraudulent

transfer," as the New Jersey Supreme Court held in Banco Popular

North American v. Gandi, 184 N.J. 161, 876 A.2d 253 (2005), "a

fortiori . . . there may also be liability for aiding and abetting

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 26 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 27 -

a fraudulent transfer." Resp. (doc. 418) at 20. Insofar as the

elements of this cause of action are concerned, plaintiff asserts

that as to the underlying transfer itself "at best" there are

disputed factual issues as to whether it was "for reasonable

value." Id. at 22. Thus, in plaintiff's opinion, the court must

deny summary judgment as to count eight. 

Given the jurisdictional nature of standing, the court will

address this defense argument first. See Allen v. Wright, 468 U.S.

737, 750, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984) (Standing "is

perhaps the most important of [the jurisdictional] doctrines.") If

defendant Makings' standing argument is sound in that the trustee

lacks standing, then the court would not have jurisdiction to

consider this particular claim.

 1. Standing

The central premise of defendant Making's standing argument is

that "[t]he trustee cannot hold [him] liable for aiding and

abetting a fraudulent transfer since no such claim exists[.]" Mot.

(doc. 340-2) at 25 (emphasis added). The existence of a claim is

not the focus of a standing inquiry, however. "The standing

doctrine determines 'whether the litigant is entitled to have the

court decide the merits of the dispute or of particular issues.'"

U.S. v. Lazarenko, 476 F.3d 642, 649 (9th Cir. 2007) (quoting

Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343

(1975)). Thus, while the merits and standing often are closely

related, "[s]tanding ensures that, no matter the academic merits of

the claim, the suit has been brought by a proper party." Arakaki

v. Lingle, 477 F.3d 1048, 1059 (9th Cir. 2007) (emphasis added). 

Given this distinction between standing and the merits, for the

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 27 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 28 -

moment, the court will disregard whether a cause of action exists

for aiding and abetting a fraudulent transfer. Instead, the court

will focus on the narrower issue of whether, assuming the existence

of such a cause of action, the trustee is the proper party to

pursue it. 

 In Hamilton Taft & Company v. Howard, Weil, Labouisse,

Friedrichs Inc., 176 B.R. 895 (Bankr. N.D.Cal.), aff'd on other

grounds, 196 B.R. 532 (N.D.Cal. 1995), aff'd, 114 F.3d 991 (9th

Cir. 1997), the bankruptcy court indicated that "[t]he Ninth

Circuit has squarely held that a trustee's power to avoid

fraudulent transfers does not enable a trustee to recover damages

for aiding and abetting a fraudulent transfer." Id. at 902

(emphasis added). Relying strictly upon that language, with no

other analysis, defendant Makings contends that "[t]he [plaintiff]

trustee simply does not have standing[.]" See Mot. (doc. 340-2) at

25 (citation omitted). 

 The court agrees that the trustee does not have standing here,

but for reasons more nuanced than defendant Makings suggests. A

careful reading of Elliott v. Glushon, 390 F.2d 514 (9th Cir.

1967), the case which the Hamilton court relied to support its lack

of standing argument, reveals that the Ninth Circuit in Elliott did

not "squarely" hold that a trustee does not have standing to bring

a claim for aiding and abetting a fraudulent transfer. 

Nonetheless, as will be seen, Elliott is somewhat instructive on

the standing issue presently before the court. 

In Elliott an attorney served as the escrow holder and

attorney for those transferring property from the bankrupt. The

Court held that the trustee was not entitled to recover from that

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 28 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

16 The court is keenly aware that since Elliott the Bankruptcy Code has

been recodified. Regardless of which version of the Code the court looks to,

however, the common denominator is that the allegedly fraudulent transfer is

voidable. In other words, whether in its prior form or in its recodified form,

when dealing with potentially fraudulent transfers, the Code does not "creat[e]

liability for the consequences of the wrongful act." See Elliott, 390 F.2d at 516.

- 29 -

attorney for an allegedly fraudulent voidable transfer because the

attorney never received an interest in the property. Id. at 517. 

The Elliott Court provided the following justification for its

holding:

The [Bankruptcy] Act carefully speaks of 

conveyances of property as being 'null and 

void,' and authorizes suit by the trustee 

to 'reclaim and recover such property or 

collect its value.' The actions legislated 

against are not 'prohibited'; those persons 

whose actions are rendered 'null and void' 

are not made 'liable'; and terms such as 

'damages' are not used. The legislative 

theory is cancellation, not the creation of 

liability for the consequences of the wrongful 

act.

Id. (footnote omitted) (emphasis added).16 As the foregoing

demonstrates, standing was not an issue in Elliott. 

Despite the fact that Elliott did not involve standing, the

court in Hamilton adopted the Elliott Court's reasoning and applied

it in the standing context. Based in part upon the Elliott Court's

rationale, quoted above, the Hamilton court explicitly found that

the trustee did not have standing to assert a claim for aiding and

abetting a fraudulent transfer. Elliott was not the sole basis for

the court's holding in Hamilton though. At the outset, the

Hamilton court observed that in California a creditor may "recover

civil damages from those who conspire to transfer property of a

debtor to hinder, delay, or defraud creditors." Hamilton, 176 B.R.

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 29 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 30 -

at 902 (citations omitted). Regardless, the Hamilton court

hastened to add that the bankruptcy trustee "is not authorized to

pursue every action that creditors of the debtor might pursue." 

Id. (citations omitted). Implicit in the foregoing is the

recognition that a creditor, in contrast to a bankruptcy trustee,

may have standing to pursue such a state law based cause of action. 

 The bankruptcy court in Hamilton went on to explain that "[a]

trustee's only authority to assert creditor's state-law causes of

action related to fraudulent conveyances is found in section 544(b)

of the Bankruptcy Code[,]" which "only permits the trustee to avoid

a fraudulent transfer." Id. (footnote omitted). That section

"does not authorize [a] Trustee to assert a claim for aiding and

abetting a fraudulent transfer." Id. at 902. The foregoing

reasons, in combination with Elliott, left the Hamilton court to

conclude that the trustee "lack[ed] standing to sue Defendant for

aiding and abetting a fraudulent conveyance." Id.

For the reasons just discussed, the court is persuaded that

after Hamilton the trustee is hard-pressed to argue that she has

standing to assert a cause of action for aiding and abetting

fraudulent transfers. Moreover, it is no answer to Makings'

standing argument to assert, as the trustee does, that she has

standing to assert claims against him for breaches of fiduciary

duties. See Resp. (doc. 418) at 19. That is not the issue at

this juncture. Thus, the court finds that the plaintiff trustee

does not have standing to assert a claim for aiding and abetting a

fraudulent transfer as against defendant Makings. Consequently,

the court grants defendant Makings' summary judgment motion as to

count eight of the FAC. 

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 30 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 31 -

2. Existence of a Cause of Action for Aiding and 

Abetting Fraudulent Transfers?

Even if the court were to find that the trustee has standing

to pursue a claim for aiding and abetting fraudulent transfers,

defendant Makings still would be entitled to summary judgment on

count eight. Defendant Makings is entitled to that relief

because, as discussed in this court's order issued

contemporaneously herewith, granting summary judgment in favor of

the GTCR defendants, "the court is convinced that Arizona's Supreme

Court would adopt the majority view; there is no independent cause

of action for aiding and abetting a fraudulent transfer under the

UFTA [Uniform Fraudulent Transfer Act]." Mann v. GTCR Golder

Rauner, L.L.C., No. CIV 02-2099-PHX RCB (D.Ariz. March 30, 2007).

Because the court has found that the trustee lacks standing,

and because it is convinced that in any event, Arizona would not

recognize a cause of action for aiding and abetting a fraudulent

transfer, there is no need to address defendant Making's argument

that the trustee cannot meet her burden of establishing each of the

elements necessary to support such a cause of action.

B. Count 9 - "Trust Fund Doctrine"

In count nine of the FAC plaintiffs invoke the trust fund

doctrine, which "was judicially created to ensure that all

creditors' claims are first equitably satisfied before stockholders

may claim their rights upon the assets of an insolvent

corporation." A.R. Teeters & Associates, Inc. v. Eastman Kodak

Company, 172 Ariz. 324, 331, 836 P.2d 1034, 1041 (Ariz. Ct. App.

1992)(citations omitted). The trust fund doctrine provides that

"[i]ndependently of statute, if corporate officers divide the

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 31 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

17 "To prevail on its trust fund doctrine claim, Kodak first must prove

that (1) corporate assets were transferred to Teeters, (2) the transfer of

corporate assets occurred while the corporation was insolvent, and (3) the transfer

preferred Teeters to the disadvantage of other creditors of the same priority."

Teeters, 172 Ariz. at 331. 

- 32 -

assets among stockholders when the corporation is insolvent or

where the corporation is thereby rendered insolvent, such officers

are personally liable for corporate debts, or at least to the

extent of the amount of assets received by them." Realty Exchange

Corporation v. Cadillac Land and Development Company, 13 Ariz. App.

232, 234, 475 P.2d 522, 524 (Ariz. Ct. App. 1970) (internal

quotation marks and citation omitted); see also Southern Arizona

Bank and Trust Co. v. U.S., 386 F.2d 1002, 1005 (U.S. Ct. Cl. 1967)

(citation omitted) ("Arizona follows the . . . rule that where

stockholders of a corporation receive its assets on liquidation and

leave it without sufficient property to pay its creditors, then

those stockholders are required to respond to creditors up to the

full vale of the assets received.") The theory underlying the

trust fund doctrine "is that all of the assets of a corporation,

immediately on its becoming insolvent, exist for the benefit of all

of its creditors and that thereafter no liens nor rights can be

created either voluntarily by operation of law whereby one creditor

is given an advantage over others." Teeters, 836 P.2d at 1041

(internal quotation marks and citations omitted). After setting

forth the elements necessary for a plaintiff to successfully invoke

the trust fund doctrine,17 the Teeters court unequivocally stated,

"[l]iablity, if established, is limited to the value of the assets

received by the director, officer or stockholder." Id. citations

omitted).

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 32 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

18 In moving on count nine, defendant presumed that plaintiff was seeking

to invoke the trust fund doctrine as to three separate transactions: (1) "[t]he

transfer of the customer asset purchases[;]" (2) "[t]he compromising of debts to

LeapSource"[;] and (3) "[t]he transfer of the ICG assets[.]" See Mot. (doc. 340-2)

at 29. In opposing this aspect of Makings' motion, however, the trustee focused

exclusively upon the ICG asset sale; and so, too, will this court. 

- 33 -

Defendant Makings posits that the trust fund doctrine claim 

fails as a matter of law because he was not a LeapSource

stockholder or an officer at the time of the ICG asset sale.18 As

an aside, Makings notes that "[t]he transfer of the ICG assets was

to ICG Group, Inc.[,]" and not to him "individually." Mot. (doc.

340-2) at 29, n. 4 (citation omitted). Of course, as this court

has previously held, from the date of its inception forward,

Makings has been the ICG Group's "sole shareholder and sole

director." See Mann, 355 B.R. at 709 (citations omitted). 

According to Makings, "even if the ICG Group is deemed to be [him],

the trustee cannot show that the ICG asset sale "'disadvantage[d]'

any other creditors of the same priority." Mot. (doc. 340-2) at 29. 

The trustee completely disregards defendant Makings' argument

that the trust fund doctrine is not a viable theory of liability

because he was not a LeapSource director, officer or shareholder at

the time of the ICG asset sale. Yet, as with the GTCR defendants,

the court finds this argument determinative. Thus, it grants

summary judgment in defendant Making's favor as to count nine as

well. 

IV. Release

As part of the March, 2001, Purchase Agreement between

LeapSource and ICG Group, Inc., those two entities, and defendant

Makings, in his individual capacity, as well as in his capacity as

president of ICG Group, entered into a "Mutual Release" dated

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 33 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 34 -

March 30, 2001. See DSOF (doc. 341), exh. 19 thereto at 2. In

part, that Release states:

[I]n consideration of the covenants 

contained in the Purchase Agreement and 

other good and valuable consideration, the 

receipt and sufficiency of which is hereby

acknowledged by each of the Parties to this 

Mutual Release, the Parties agree as follows:

The Parties, . . . covenant not to sue or to 

cause others to sue one another . . . , on or 

from any and all claims, actions, causes of 

action, suits, debts, sums of money, accounts, 

covenants, contracts, agreements, representations, 

warranties, damages, injuries, liabilities and 

demands whatsoever, in law, equity, arbitration, 

administrative proceeding or otherwise[.]

Id. at 1-2. Based upon that language, which from Makings'

standpoint is "straightforward and unambiguous[][,]" he broadly

asserts that this Release "ends any and all liability questions on

[his] behalf . . . and ICG Group[.]" Mot. (doc. 340-2) at 30 and

29. According to defendant Makings this Release, which he claims

was "voluntarily entered into" by the parties, bars the present

action. See id. at 29. Further, Makings contends that this

Release operates as an "express[] waive[r]" by plaintiffs "of their

known rights." Id. at 31. Therefore, not only should the court

enforce this Mutual Release, but Makings urges the court to

sanction the plaintiffs "for filing this suit that is antithetical

to the very representations they made to Makings and ICG Group." 

Id.

Plaintiffs counter that "[a] mutual release given in a

transaction that constitutes a fraudulent transfer or preference 

. . . does not protect a 'released party' from liability for

engaging in the fraudulent transfer or preference because the

release is voidable along with the rest of the transaction." Resp.

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 34 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 35 -

(doc. 418) at 26. Put somewhat differently, because supposedly the

ICG asset sale was fraudulent, plaintiffs reason that the Mutual

Release, a part of that allegedly fraudulent transfer, is likewise

voidable. 

Plaintiffs continue, "[t]he 'release' argument fails for the

same reason that the Trustee is entitled to summary judgment

previously moved for under Count III." Id. at 27. Of course, as

mentioned earlier, the court denied this motion. One consequence

of that denial is that it is now the law of the case that the ICG

assets sale is not a preferential transfer within the meaning of

section 548. The law of the case doctrine thus precludes the

trustee's argument that the Mutual Release is invalid or voidable

because it was part of a preferential transfer.

To rebut plaintiffs' argument, Makings states that

"[p]laintiffs cannot prove any transfers were fraudulent, so their

argument that the fraudulent transfer 'invalidates' the release is

unsupported." Reply (doc. 447) at 18. 

Despite the relatively forceful language which he employs,

this is defendant Making's last summary judgment argument, not his

first. This suggests that Makings is likely aware of the inherent

weakness in this argument, at least at this point in the

litigation. As Makings impliedly concedes in his rebuttal, the

validity of the release is intertwined with the fraudulent transfer

issue under section 548 of the Bankruptcy Code. Thus, because in

all likelihood the resolution of the validity of the release turns

upon whether the ICG asset sale was a fraudulent transfer, the

court leaves that issue for another day. 

For all of the reasons set forth above,

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 35 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 36 -

IT IS ORDERED that defendant Michael Making's motion for

summary judgment pursuant to Fed. R. Civ. P. 56 (doc. 340) is

GRANTED IN PART and DENIED IN PART, as hereinafter ordered.

IT IS FURTHER ORDERED that defendant Makings' motion for

summary judgment as to count 1, "Tortious Interference with

Contract," is GRANTED.

IT IS FURTHER ORDERED that defendant Makings' motion for

summary judgment as to count 21, Tortious Interference with Senior

Management Agreements and Employment Agreements, is GRANTED.

IT IS FURTHER ORDERED that defendant Makings' motion for

summary judgment as to count 23, Tortious Interference with

Stockholders Agreement and Purchase Agreement, is DENIED as to the

Stockholders Agreement, but GRANTED as to the Purchase Agreement.

IT IS FURTHER ORDERED that defendant Makings' motion for

summary judgment as to count 5, "Breach of Fiduciary Duty By

Directors and Officers[,]" is DENIED.

IT IS FURTHER ORDERED that defendant Makings' motion for

summary judgment as to count 7, "Aiding and Abetting Breach of

Fiduciary Duties by Professional Advisers and Consultants," is

GRANTED.

IT IS FURTHER ORDERED that defendant Makings' motion for

summary judgment as to count 18, "Aiding and Abetting Breach of

Fiduciary Duty," is GRANTED.

IT IS FURTHER ORDERED that defendant Making's motion for

summary judgment as to count 19, "Breach of Fiduciary Duty," is

GRANTED.

IT IS FURTHER ORDERED that defendant Makings' motion for

summary judgment as to count 8, "Aiding and Abetting Fraudulent

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 36 of 37
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 37 -

Transfers," is GRANTED.

IT IS FINALLY ORDERED that defendants Makings' motion for

summary judgment as to count 9, "Trust Fund Doctrine," is GRANTED.

DATED this 30th day of March, 2007.

Copies to counsel of record

Case 2:02-cv-02099-RCB Document 472 Filed 03/30/07 Page 37 of 37