Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_02-cv-02099/USCOURTS-azd-2_02-cv-02099-9/pdf.json

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

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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. ) )

On July 31, 2006, the Court heard oral argument on three

motions for summary judgment (doc. 250, 255, 457) filed by Kirkland

& Ellis ("K&E"). (doc. 415). On August 28, 2006, the Court

entered an order (doc. 457) granting those motions, and, on

September 12, 2006, Plaintiffs filed a motion for reconsideration

(doc. 462) of that order. On December 4, 2006, the Court denied

Plaintiffs' motion in part as it related to one of the three

underlying motions for summary judgment, but maintained the balance

of the motion under advisement pending further briefing by the 

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1

 The Court has already denied Plaintiffs' motion (doc. 462) to

the extent that it sought reconsideration of the order granting K&E's

supplemented motion for summary judgment regarding vicarious

liability (doc. 250, 368). Order (doc. 463) at 12-16.

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parties. Order (doc. 463). The briefing is now complete. See

Resp. (doc. 464); Reply (doc. 466). Having carefully considered

the arguments raised, the Court now rules.

I. Standard of Review

The decision to grant or deny a motion for reconsideration is

left to the sound discretion of the trial court. See Sch. Dist.

No. 1J, Multnomah County v. ACandS, Inc., 5 F.3d 1255, 1263 (9th

Cir. 1993). Such motions are disfavored and, absent exceptional

circumstances, are generally only appropriate "if the district

court (1) is presented with newly discovered evidence; (2)

committed clear error or the initial decision was manifestly

unjust; or (3) if there is an intervening change in controlling

law." Id. In order to prove that the Court committed clear error,

Plaintiffs must demonstrate that the Court's action fell clearly

outside the bounds of its authority. See McDowell v. Calerdon, 197

F.3d 1253, 1256 (9th Cir. 1999). If the propriety of the Court's

judgment is a debatable question, there is no clear error and the

motion to reconsider is properly denied. Id.

II. Discussion

Plaintiffs seek reconsideration of the Court's August 28, 2006

order (doc. 457) granting K&E's motions for summary judgment on the

aiding and abetting and tortious interference claims (Counts 1, 18,

21, 23) (doc. 255) and on the malpractice and professional

negligence claim (Count 10) (doc. 328).1 Mot. (doc. 462). The

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2

 In their response to K&E's motion for summary judgment,

Plaintiffs suggested that their claim in Count 18 encompassed K&E's

aiding and abetting of alleged wrongdoing not only by GTCR, but also

by Makings, Eaton, and the GTCR principals who were members of the

LeapSource board. See Resp. (doc. 404) at 4:3-20. That is not what

Plaintiffs pled in their Fourth Amended Complaint, which speaks only

of K&E's aiding and abetting GTCR's alleged breaches of fiduciary

duty. See FAC (doc. 121) at 97.

3

 Under Arizona law, a claim for aiding and abetting tortious

conduct requires proof of three elements: (1) the primary tortfeasor

must commit a tort that causes injury to the plaintiff; (2) the

defendant must know that the primary tortfeasor's conduct constitutes

a breach of duty; and (3) the defendant must substantially assist or

encourage the primary tortfeasor in the achievement of the breach.

See Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons

Local No. 395 Pension Trust Fund, 38 P.3d 12, 23 (Ariz. 2002).

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relevant facts are set forth in great detail in the Court's recent

order of October 17, 2006. See Order (doc. 463) at 1-11.

A. K&E's Motion for Summary Judgment Regarding Aiding and 

 Abetting and Tortious Interference Claims

In the Fourth Amended Complaint ("FAC"), Plaintiffs claim that

K&E aided and abetted GTCR in breaching its fiduciary duties to

LeapSource (Count 18),2 and tortiously interfered in the

performance of the Purchase Agreement between GTCR and LeapSource

(Count 1), the Senior Management Agreements and Employment

Agreements of the individual Plaintiffs (Count 21), and the

Stockholders Agreement and Purchase Agreement (Count 23). FAC

(doc. 121) at 74-75, 97, 100-01, 103.

In its motion for summary judgment, K&E asserted that

Plaintiffs could not meet their burden on the aiding and abetting

and tortious interference claims because they had failed to present

evidence that K&E rendered substantial assistance3 enabling GTCR to

breach its fiduciary duties, acted improperly to interfere with any

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of the written agreements, or intentionally interfered at all. 

Mot. (doc. 255) at 5-8. The Court agreed, holding that the primary

conduct complained of-- K&E's act of recommending Eaton and AEG to

GTCR-- did not substantiate Plaintiffs' aiding and abetting and

tortious interference claims, and accordingly granted summary

judgment on those claims. Order (doc. 457) at 24-29.

Plaintiffs do not argue that the Court should reconsider the

grant of summary judgment on the basis of a change in controlling

law or any newly discovered evidence. Rather, they maintain that

the Court committed clear error in evaluating K&E's liability by,

among other things, not considering (1) Eaton's conduct, (2) the

circumstances surrounding K&E's recommendation of Eaton and AEG to

GTCR, and (3) K&E's other conduct apart from that recommendation. 

Mot. (doc. 462) at 4-9. Plaintiffs raise the same arguments

simultaneously with respect to both the aiding and abetting claim

as well as the tortious interference claims. Id. As such, the

following discussion resolves those arguments for purposes of both

sets of claims. 

1. Eaton' Conduct

As Plaintiffs see it, Eaton's conduct must still be considered

in determining K&E's liability notwithstanding their settlement

with and release of Eaton, which the Court has already held to

extinguish K&E's vicarious liability under applicable Illinois law. 

See id. at 4; Order (doc. 457) at 19. Plaintiffs believe that the

Court, in discussing Faberberg in its August 28, 2006 order (doc.

457), "conflated two distinct issues [joint and vicarious

liability] into one," and therefore erred when it deemed Eaton's

conduct irrelevant to determining K&E's joint liability for aiding

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and abetting. Mot. (doc. 462) at 4.

The Court does not share Plaintiffs' perception that it

conflated any issues in its discussion of Faberberg. Although

Faberberg dealt with the circumstances under which joint liability

would be severed by the settlement and release of a joint

tortfeasor, it was Plaintiffs who attempted unsuccessfully to

extend that holding to support their position on vicarious

liability. See Resp. (doc. 404) at 9. The Court's explanation of

the holding in Faberberg, by necessity, had to include a discussion

of the joint liability issue involved in the case. By all

appearances, it may be Plaintiffs who have conflated the issues,

but it is not necessary to speculate whether that is the case. To

the extent that it is of any vital concern, the Court is aware that

Plaintiffs' aiding and abetting claim essentially articulates a

theory of joint liability. See RESTATEMENT (SECOND) OF TORTS § 876(b)

(1979). For purposes of the present motion (doc. 462), however,

the fact remains that the severance of K&E's vicarious liability

for Eaton's conduct by virtue of his release focuses the inquiry

into K&E's liability solely on K&E's conduct-- even if based on a

theory of joint liability.

In other words, if K&E is to be jointly liable for any

tortious acts allegedly undertaken together with other defendants,

e.g., aiding and abetting breaches of fiduciary duty by the

majority shareholder of a corporation or tortiously interfering

with contracts, there must be some proof of K&E's conduct in that

joint enterprise. Moreover, because Eaton's release extinguished

K&E's vicarious liability for his conduct, K&E's joint liability

must be proven based on its conduct irrespective of whatever Eaton

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4

 As noted before, the Court has not been provided a full

transcript of the Evanich deposition or the specific pages on which

this testimony lies, and, therefore, is unable to independently

verify the testimony relied upon by Plaintiffs. See Order (doc. 457)

at 37 n.7.

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did. Thus, it is correct to say that Eaton's conduct is irrelevant

to the claims of aiding and abetting and tortious interference

against K&E. Plaintiffs have not demonstrated clear error in the

Court's judgment on this point, and reconsideration is not

warranted.

2. K&E's Recommendation of Eaton and AEG to GTCR

Plaintiffs assert that the Court, in its August 28, 2006

order, did not give adequate consideration or weight to the

circumstances in which K&E's recommendation of Eaton and AEG to

GTCR occurred. Mot. (doc. 462) at 6-8. Among those circumstances,

Plaintiffs complain that the Court did not appreciate the

significance of testimony by K&E partner Kevin Evanich to the

effect that he referred Eaton to GTCR for the purpose of discussing

the possibility of working for LeapSource,4

 the fact that the GTCR

members on the LeapSource board voted to retain AEG, and K&E's

knowledge of conflicting interests and ongoing disputes involving

GTCR. Id. at 6-8. Plaintiffs believe that "the nature of the

recommendation, the circumstances in which it was made, the people

to whom it was made, and the subsequent action on that

recommendation all support the inference . . . that Eaton was

recommended for a position of responsibility with respect to

LeapSource, and with obvious consequences for LeapSource." Id. at

8 (emphasis added).

Looking only at the facts and relevant portions of the record

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cited in support thereof, the Court does not see the "obvious

consequences" to which Plaintiffs so ominously refer. As the Court

indicated many times in its August 28, 2006 order, the connection

between K&E's recommendation and Plaintiffs' damages is tenuous. 

See Order (doc. 457) at 24, 28-29, 37-38. Plaintiffs' suspicions

concerning the "circumstances in which [the recommendation]

occurred," Mot. (doc. 462) at 6, do not fill that evidentiary void. 

The collective facts fail to support a finding that K&E's

recommendation amounted to "substantial assistance" or more than a

"little aid" to GTCR's alleged breaches of fiduciary duties, was

substantially certain or intended to lead to GTCR's breaches of the

various written agreements at issue, or proximately caused any of

Plaintiffs' damages. Order (doc. 457) at 24, 28-29, 37-38. This

is not enough to survive summary judgment. See Villiarimo v. Aloha

Island Air, Inc., 281 F.3d 1054, 1065 n.10 (9th Cir. 2002) (noting

that the party opposing summary judgment must come forward with

more than mere "speculation, conjecture, or fantasy") (internal

quotation and citation omitted).

Having again considered the surrounding circumstances, the

Court still finds that K&E's recommendation of Eaton and AEG to

GTCR fails to raise genuine issues of material fact with respect to

Plaintiffs' claims of aiding and abetting and tortious

interference. The Court's decision was not clearly erroneous, and

reconsideration is not warranted.

3. K&E's Other Conduct

In their statement of facts in opposition to K&E's underlying

motion for summary judgment and in their motion for reconsideration

Plaintiffs point to several instances of K&E's conduct apart from

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its recommendation of Eaton and AEG to GTCR. See Mot. (doc. 462)

at 8:10-21; Resp. (doc. 292) at 3:6-11, 5:2-6, 7:9-11; Pls.'

Statement of Additional Facts ("PSOAF") (doc. 292) ¶¶ 30, 69, 71,

86, 97-99, 102, 119, 123, 125, 127-28, 137, 143, 149. The Court's

previous order (doc. 457) granting K&E's motion for summary

judgment did not address those issues, because neither K&E's reply

(doc. 303) nor the parties' arguments at the July 31, 2006 hearing

touched significantly upon any of those issues. Rather, the

briefing and oral argument gave the appearance that the primary

conduct at issue was K&E's act of recommending Eaton and AEG to

GTCR. As the Court mentioned before, the parties may not have

anticipated the significance of K&E's other conduct when the

underlying motion for summary judgment was pending. Order (doc.

463) at 16. Because the Court had not yet ruled on K&E's motion

for summary judgment regarding vicarious liability, the parties

could not have known whether K&E's vicarious liability for Eaton's

conduct would be extinguished, and, therefore, whether greater

importance would attach to K&E's other conduct. Id. at 16-17. On

that understanding, the Court indicated that it did not fault

Plaintiffs for their failure to present those arguments more

forcefully in their original opposition to K&E's underlying motion,

or blame K&E for misunderstanding Plaintiffs as complaining only of

K&E's recommendation of Eaton and AEG to GTCR. Id. at 17.

Of course, the Court's hypotheses as to how and why certain

arguments were made do not reflect a judgment that reconsideration

is warranted. On further reflection, the Court finds that

Plaintiffs' arguments regarding K&E's other conduct were not fairly

presented in the first instance. Although the particular conduct

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5

 In their 19-page response to K&E's underlying motion for

summary judgment, the closest Plaintiffs come to suggesting that

conduct other than K&E's recommendation of Eaton to GTCR may form a

basis for liability are two passing references to (1) "K&E's

continuing relationship with Mr. Eaton and its continuing role in the

work he was doing at LeapSource to protect GTCR's interests" and (2)

K&E's consultation and working with Eaton to represent GTCR's

interests. See Resp. (doc. 292) at 3:6-11, 7:9-11. From these

generalities, Plaintiffs apparently expected K&E and the Court to

sift through their 56-page statement of facts and 546 pages of

exhibits to miraculously locate those particulars highlighted in

there motion for reconsideration (doc. 462) that would most help

their position. Such expectations are unrealistic for the burden

they would impose on the Court, the movant, and on other litigants

who would be deprived of scarce judicial resources. Going forward,

Plaintiffs should take note that the local rules now require that

"[m]emoranda of law filed in support of or in opposition to a motion

for summary judgment, including reply memoranda, shall include

citations to the specific paragraph in the statement of facts that

supports factual assertions made in the memoranda." LRCiv 56(e).

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described in Plaintiffs' motion for reconsideration (doc. 462) was

nestled in their 56-page, 151-paragraph statement of facts, PSOAF

(doc. 292) ¶¶ 30, 69, 71, 86, 97-99, 102, 119, 123, 125, 127-28,

137, 143, 149, nowhere in their original responsive memorandum to

the K&E's underlying motion did they cite to those specific

paragraphs that would support the factual assertions relating to

K&E's other conduct. See Resp. (doc. 292) at 2-16. Indeed, any

factual assertions implicating K&E's other conduct are notably

absent from their response (doc. 292) altogether.5 Having reviewed

the additional briefing on Plaintiffs' motion for reconsideration

in conjunction with the original briefing of K&E's underlying

motion for summary judgment, the Court is struck by the markedly

different arguments put forth by Plaintiffs in each instance. 

While they may certainly have posited alternative theories in

opposing K&E's motion for summary judgment, Plaintiffs did not, and

instead adhered to a singular line of argument which ultimately

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failed. It would be unfair to allow Plaintiffs, with the benefit

of hindsight, to sandbag K&E and the Court by culling the choicest

paragraphs from their statement of facts for new arguments that

could easily have been articulated in their opposition to the

underlying motion. Compare Resp. (doc. 292) at 2-16 with Mot.

(doc. 462) at 8:10-21.

To prevail on their motion for reconsideration, Plaintiffs

must show that the Court committed clear error in granting K&E's

motion for summary judgment. Because the Court was under no duty

to sift through the record for the facts most beneficial to

Plaintiffs when K&E's underlying motion was pending, see Carmen v.

S.F. Unified Sch. Dist., 237 F.3d 1026, 1030-31 (9th Cir. 2001), it

was not clear error for the Court to grant K&E's motion without

considering Plaintiffs' newly conceived or articulated arguments

concerning K&E's other conduct. A party cannot prevail on

arguments raised for the first time in a motion for

reconsideration. See 389 Orange St. Partners v. Arnold, 179 F.3d

656, 665 (9th Cir. 1999). Therefore, Plaintiffs' motion for

reconsideration (doc. 462) will be denied with respect to the

aiding and abetting and tortious interference claims.

B. K&E's Motion for Summary Judgment Regarding Malpractice and

 Professional Negligence

In the Fourth Amended Complaint, the Trustee asserts a

malpractice claim against K&E (Count 10) alleging that (1) K&E

represented GTCR in early 2001 concerning GTCR's relationship with

LeapSource, and (2) K&E had a conflict because it simultaneously

represented LeapSource in early 2001, or alternatively, because it

had represented LeapSource during the September 1999 formation

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negotiations during which it learned that Kirk wanted a firmer

funding commitment from GTCR. K&E filed a motion for summary

judgment (doc. 328) that the Court granted, noting the lack of

evidence establishing the essential element of causation. See

Order (doc. 457) at 30-39.

As before, Plaintiffs do not seek a different result based on

an intervening change in controlling law or newly discovered

evidence. Rather, the motion for reconsideration (doc. 462) is

based on Plaintiffs' view that the Court's decision was clearly

erroneous for two reasons.

First, Plaintiffs argue that "[t]he same evidence of facts and

circumstances showing K&E's knowing and substantial assistance in

the breaches of duty to LeapSource . . . also supports the

inference that the conduct of K&E was a proximate cause of damage

to LeapSource. Mot. (doc. 462) at 9. This argument fails for the

reasons discussed above.

Second, Plaintiffs suggest that the Court may have

misunderstood their argument with respect to the issue of

causation, and maintain that Plaintiff Tom Gilman's February 24,

2001 memorandum to the LeapSource board of directors ("Gilman

Memorandum") and an expert report by Professor Geoffrey Hazard

("Hazard Report") collectively establish sufficient evidence that

K&E's alleged conflict of interest was a proximate cause of injury

to LeapSource. Mot. (doc. 462) at 9-10; see also Resp. (doc. 375)

at 9-10. At issue is the Hazard Report's central assumption that

LeapSource would have survived as a going concern rather than

liquidating had it been properly advised and assisted. See Exbt.

28 (doc. 329) at 5. Assuming the existence of such evidence,

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Professor Hazard opined that "it was reasonably foreseeable to

Kirkland and Eaton that their course of conduct . . . would have a

material adverse effect on LeapSource and Ms. Kirk and her

associates," and on that basis concluded that K&E's alleged

conflict of interest was a "substantial cause of [Plaintiffs']

injury." Id. Plaintiffs contend that the Gilman Memorandum fills

that gap by providing the necessary evidence that LeapSource would

have survived if properly advised and assisted, and argue that the

Court did not address this aspect of the Gilman Memorandum when it

concluded that Plaintiffs had not demonstrated a genuine issue of

material fact on the issue of causation. Mot. (doc. 462) at 10. 

As before, Plaintiffs' responsive memorandum (doc. 375) as well as

motion for reconsideration (doc. 462) provide scarcely a glimmer as

to the real facts in the Gilman Memorandum that would support their

contentions and furnish the final link in the causal chain.

Plaintiffs apparently do not appreciate that the Court must

rely on facts if it is to deny what otherwise appears to be a

facially meritorious motion for summary judgment. Generally, it is

the opposing party's responsibility to direct the Court's attention

to those specific facts that would preclude summary judgment, Fed.

R. Civ. P. 56(e), and conclusory allegations are insufficient to

establish a triable issue, see Newman v. County of Orange, 457 F.3d

991, 995 (9th Cir. 2006). Plaintiffs may feel strongly that the

Gilman Memorandum and Hazard Report provide "more than a sufficient

basis to support a jury verdict that K&E's . . . conduct . . . was

a proximate cause of" their injury, Resp. (doc. 375) at 9-10, but

simply saying so does not make it so. On their motion for

reconsideration, Plaintiffs insist that "the Gilman Memorandum

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supports the claim that the business of LeapSource, if properly

assisted, could have survived," but still fail to explain the

concrete particulars of that contention. Mot. (doc. 462) at 10. 

It is not the Court's duty to scour the record to marshal the best

facts to fit the broad contours of Plaintiffs' unsupported

assertions. Given the paucity of the factual arguments and

references to the record in Plaintiffs' response to the underlying

motion for summary judgment, as well as in their present motion to

reconsider, the Court did not exceed the bounds of its authority in

granting K&E's motion for summary judgment. Because Plaintiffs

have not demonstrated clear error in the Court's judgment, the

motion for reconsideration (doc. 462) will be denied with respect

to the malpractice and professional negligence claim (Count 10).

III. Conclusion

In light of the foregoing analysis,

IT IS ORDERED that Plaintiffs' motion for reconsideration

(doc. 462) is DENIED.

DATED this 30th day of March, 2007.

Copies to counsel of record

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