Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_02-cv-02099/USCOURTS-azd-2_02-cv-02099-8/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 granting those motions. Order (doc. 457). 

Plaintiffs now seek reconsideration of that order. Having

carefully considered the arguments raised, the Court now rules.

I. Background Facts

On June 11, 2004, Plaintiffs filed their Fourth Amended

Complaint ("FAC") (doc. 121), asserting claims against K&E for 

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tortious interference with contract, tortious interference with

prospective economic advantage, breach of fiduciary duties, aiding

and abetting breach of fiduciary duty, and professional

malpractice. FAC (doc. 121) ¶¶ 320-23, 332-37, 384-88, 403-09,

414-22, 450-53, 467-73, 481-86. Many of Plaintiffs' claims against

K&E were based at least in part on a theory of vicarious liability

for the actions of Defendant David Eaton, who at the time of the

events in question maintained an "of counsel" relationship with

K&E. See id.; Defs.' Statement of Facts for Vicarious Liability

("DSOFVL") (doc. 251) ¶ 6.

A. Creation of LeapSource

This action was originally filed in the Superior Court of

Arizona in Maricopa County, alleging numerous state law based

claims arising out of the financial demise of LeapSource, Inc.

(“LeapSource”). LeapSource was a Phoenix-based “business process

outsourcing” ("BPO") company, formed to provide accounting and

employee benefit services to mid-sized businesses. The defendants

in this action include a number of individuals and companies who

were involved in various transactions related to the start-up and

operation of LeapSource. GTCR Golder Rauner, LLC, is a Chicagobased venture capital firm. Beginning in September 1999, three

partnerships (GTCR Fund VI, L.P., GTCR VI Executive Fund, L.P.,

GTCR Associates VI) in which GTCR was a general partner made a

series of investments by purchasing stock in LeapSource.

Individual Plaintiff Christine Kirk was recruited by GTCR from

her prior position as a partner with Arthur Andersen. She then

recruited fellow Andersen employees to work for LeapSource,

including fellow partners, some of whom were also given the

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opportunity to acquire shares of LeapSource. Between August 30,

1999 and September 14, 1999, Kirk negotiated with GTCR over the

terms of the parties' Statement of Understanding. After exchanging

numerous drafts and making a number of changes, the parties

executed the final version, dated September 14, 1999. Thereafter,

on September 16, 1999, LeapSource was incorporated--then named

“Kirkco, Inc.” At this time, LeapSource had no employees, and its

only shareholder other than the above-mentioned GTCR entities was

Christine Kirk, LeapSource’s start-up CEO. The parties, plus the

other individual Plaintiffs in this action, worked to gradually

grow the LeapSource business; however, the company eventually

failed and filed for chapter 7 bankruptcy liquidation. 

As an introductory matter, the FAC alleges Plaintiffs’ claims

against Defendants. These claims are made by different plaintiffs

and groups of plaintiffs against various groups of defendants. For

purposes of this order only, plaintiff-subgroups are referred to as

the "Trustee” (the bankruptcy trustee), and the "Plaintiffs" or

“individual Plaintiffs” referring to Christine Kirk (“Kirk”),

Kimberly Hartmann, Julie B. McCollum, Kelly Powers, Indu Gupta,

Bobby D. Scott, and Patrice E. Walker, and Thomas Gilman. 

Defendant-subgroups are referred to as "GTCR" to indicate GTCR

Golder Rauner, LLC, GTCR Fund VI, LP, GTCR VI Executive Fund, LP,

GTCR Associates VI, Joseph P. Nolan, Bruce V. Rauner, Daniel Yih,

David A. Donnini and Philip A. Canfield, and "K&E" to refer to

Kirkland and Ellis.

B. K&E

K&E is a law firm organized as a limited liability partnership

with its principal office located in Illinois. K&E has represented

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GTCR in private equity transactions and investments for well over

two decades. During the time when GTCR began negotiating with Kirk

over the possibility of forming a BPO company, K&E provided legal

advice and assistance to GTCR. In August and September 1999, Kirk

understood that GTCR was a long-standing client of K&E. 

In April 1999 or earlier, Kirk spoke with Jeff Gilbert, a

partner at the Sachnoff & Weaver law firm. The parties dispute

whether Sachnoff & Weaver represented Kirk at that time, however,

they agree that by late August and early September, Gilbert's

partner, Jeff Schumacher, was advising her in connection with the

negotiations with GTCR.

In connection with GTCR's investment in LeapSource, K&E

prepared documents related to the formation of the company. Kirk's

lawyer provided comments to K&E about the draft agreements,

including the Purchase Agreement. K&E prepared revised drafts of

these documents based on the comments received from Schumacher. In

the course of these negotiations, Schumacher explained the

agreements to Kirk and answered all of her questions. It is

undisputed that Kirk's lawyers at Sachnoff & Weaver understood that

K&E represented GTCR only, however Kirk claims that she understood

that K&E represented GTCR and LeapSource, concurrently.

During negotiations, Kirk's lawyers raised objections to the

language drafted in the documents because they wanted a firmer

commitment from GTCR. Specifically, Schumacher contested the use

of the words "up to" that described the funding commitment of GTCR

in the Purchase Agreement, and was involved in negotiations with

GTCR on whether that language should be deleted or replaced with

other language that would remove the conditional aspect associated

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with the words. Kirk's lawyers fully explained the Purchase

Agreement to her before she signed it.

Kirk does not recall meeting any of the K&E attorneys who were

representing GTCR on the LeapSource transaction. However, during

the negotiations, Kirk spoke with Richard Clyne, a K&E associate,

who told her that he would be faxing her materials to sign and

return, requested that she provide information for registration

forms for the company, advised Kirk that K&E would be forming

LeapSource, and that K&E would complete the tax filings required

for the corporation. Kirk spoke with Steve Ritchie, a K&E partner,

sometime in September 1999, but does not recall any conversations

with him thereafter.

A legal assistant or paralegal at K&E prepared and filed the

necessary paperwork to form Kirkco as a Delaware corporation on

September 16, 1999. However, there is no retainer letter between

K&E and LeapSource. Kirk was responsible for retaining counsel for

the company, but she cannot identify any conversation or writing in

which she officially retained K&E to serve as LeapSource's counsel

during the period between September 16 and 27, 1999. 

In the fall of 1999, LeapSource retained the law firm Osborn

Maledon as its principal outside counsel for transactional and

corporate work. In addition to Osborn Maledon, LeapSource hired

other law firms to perform legal work, such as the Weinberg Legal

Group, for intellectual property matters. 

Under Section 7(A) of the Purchase Agreement, Kirkco (later

LeapSource) was obligated to pay, among other things, the

reasonable fees and expenses incurred by GTCR in connection with

the negotiation and execution of the Purchase Agreement and the

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consummation of the transactions contemplated by the Agreement. 

See Exbt. 24 (doc. 329) § 7(A). K&E asserts that, for this reason,

it sent certain bills jointly to LeapSource and to GTCR. 

Additionally, K&E associate Clyne communicated with LeapSource

in regard to his preparation of supplements to the Purchase

Agreement, and printed out related board consents and stock

certificates. Clyne confirmed with LeapSource's counsel at Osborn

Maledon that K&E would continue to perform this work after Osborn

Maledon was hired. Clyne also communicated with Kirk in early

October 1999 about a draft offer letter and employment agreement

checklist for LeapSource. K&E performed additional work for

LeapSource relating to the company's Harris Bank line of credit,

potential WARN Act violations, and the termination of LeapSource

officers and employees. Based on these and other acts, Plaintiffs

assert that K&E held an attorney-client relationship with

LeapSource.

C. David Eaton and AEG Partners, LLC

David Eaton is a businessman and attorney residing in

Illinois. DSOFVL (doc. 251) ¶ 1; Def.'s Supplemental Statement of

Facts for Vicarious Liability ("DSSOFVL") (doc. 369) ¶ 8. AEG

Partners, LLC ("AEG") is an Illinois limited liability company

formed in January of 2000 by Eaton and two other businessmen to

provide "financial advisory and crisis management for financially

distressed companies." See id. ¶¶ 14, 16; DSSOFVL (doc. 369) ¶ 7.

In or about February 2001, K&E partner Kevin Evanich referred

Eaton, and Eaton's company, AEG, to GTCR. DSOFVL (doc. 251) ¶ 17;

Exbt. 1 (doc. 285) ¶ 17. At that time, Eaton held an "of counsel"

relationship with K&E pursuant to an agreement dated June 11, 1999. 

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1

 At oral argument, Plaintiffs raised the question as to whether

Kirk actually abstained from this vote. However, the board meeting

minutes, included as Exhibit 21 in Plaintiffs' response in opposition

to K&E's motion for summary judgement on the aiding and abetting

claims (doc. 292), reflect that Kirk voted in favor of retaining AEG.

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DSOFVL (doc. 251) ¶ 6; Exbt. 1 (doc. 285) ¶ 6. Both parties agree

that K&E suggested Eaton to GTCR as a "crisis manager" for

LeapSource. Resp. (doc. 292) at 2; Reply (doc. 303) at 3. Evanich

stated in his deposition that he referred Eaton to GTCR because

Eaton "was an expert in the financial restructuring advisory

business." Exbt. 4 (doc. 251) at 21:21-22:4. Thereafter, Eaton

met with GTCR at GTCR's offices in Chicago regarding LeapSource. 

DSOFVL (doc. 251) ¶ 21; Exbt. 1 (doc. 285) ¶ 21. On February 27,

2001, the LeapSource board of directors voted to retain AEG to

offer financial advisory services to LeapSource. Exbt. 21 (doc.

292) at 2. According to the LeapSource board minutes, the

directors voting in favor of retaining AEG were Bruce Rauner, Dan

Yih and Joe Nolan, all GTCR principals, and plaintiff Kirk.1 Id.

LeapSource and AEG formalized their relationship in an agreement

dated March 2, 2001 (the "Letter Agreement"). Id. ¶ 35. In that

agreement, LeapSource and AEG agreed that their relationship would

be governed by Illinois law. DSSOFVL (doc. 369) ¶ 1. Thereafter,

Eaton worked on the LeapSource transactions in both Illinois and

Arizona. Id. ¶ 2.

Plaintiffs assert that Eaton, being "of counsel" with K&E, was

obligated to avoid taking any position or action that was adverse

to K&E's client, GTCR, and, thus, caused the eventual demise of

LeapSource by dissipating LeapSource's assets "in order to

accomplish GTCR's objectives of shutting down LeapSource[.]" Resp.

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(doc. 292) at 13-16. Additionally, Plaintiffs contend that Eaton

"served GTCR's interests with respect to LeapSource, which included

(a) limiting GTCR's downside, (b) avoiding embarrassment, and (c)

protecting its interest in other investments, including COMSYS,

another company funded by GTCR and a customer of LeapSource." Id.

at 15.

D. K&E's Motions for Summary Judgment

Plaintiffs' complaint alleges various causes of action,

including claims against K&E based on theories of both direct and

vicarious liability, as well as against Eaton and AEG. On 

December 2, 2002, K&E filed a Rule 12(b)(6) motion to dismiss

arguing, inter alia, that it cannot be vicariously liable for

Eaton's conduct, as Eaton did not act in his "of counsel" role with

K&E during the provision of AEG's services to LeapSource. Mot.

(doc. 10) at 15. While observing that the relevant cases favored

K&E's position, the Court determined that dismissal prior to an

adequate opportunity for fact discovery would be premature, and

denied the motion on September 30, 2003. See Order (doc. 69) at

12-17. Discovery was conducted and, on September 8, 2005, K&E

filed its Motion for Summary Judgment Regarding Vicarious

Liability. Mot. Vicarious Liability (doc. 250).

Between December 26, 2005 and January 6, 2006, the Trustee and

Plaintiffs entered into an agreement with Eaton and AEG for the

settlement and release of all their claims (the "Settlement

Agreement"). See Exbt. 1 (doc. 404). A choice of law provision in

that agreement indicated the parties' intent that the agreement

"shall be governed, construed and enforced according to the laws of

the State of Arizona without regard to conflicts of laws

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2

 The paragraph of the Settlement Agreement entitled "Release

of AEG" provides in pertinent part as follows:

[T]he Trustee . . . and Plaintiffs, hereby

release, acquit, and forever discharge AEG, . .

. and each and every one of their past and

present . . . shareholders, members, officers,

directors, partners, principals, agents, . . .

and attorneys from any and all claims, causes of

action, . . . that the Trustee's bankruptcy

estate and Plaintiffs may have had or claimed to

have had in the past . . . against AEG . . . ;

provided, however, that the Trustee and

Plaintiffs do not release and expressly reserve

any Claims that she (in her capacity as Trustee)

and Plaintiffs might have or claim to have

against any person or entity other than AEG,

including, without limitation, the various

persons and entities named as defendants or

adverse parties in the Litigation or in any

adversary proceeding in which the Trustee is or

has been the plaintiff or other party asserting

a Claim, that currently is pending in the U.S.

District Court or the Bankruptcy Court, and that

arises from or relates to the Litigation or the

Debtor, including without limitation, the Other

Defendants, regardless of whether AEG on the one

hand, and any one or more of the Other

Defendants, on the other hand, are or may be

alleged to be principals, agents, or joint

tortfeasors as to one or more of the Trustee's

reserved alleged Claims.

Exbt. 1 (doc. 404) (emphasis added).

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principles." Exbt. 3 (doc. 369) ¶ 14. Of particular relevance to

K&E's motion for summary judgment regarding vicarious liability

(doc. 250, 368), the parties also included language in the

Settlement Agreement by which the Trustee and Plaintiffs purported

to reserve their claims against K&E based on the firm's vicarious

liability for Eaton's conduct, notwithstanding their release of

Eaton.2

After the settlement, the following events unfolded in the

LeapSource bankruptcy proceedings. On January 13, 2006, the

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Trustee and Plaintiffs filed a motion in the bankruptcy court

requesting the bankruptcy judge to enter an order authorizing and

approving their settlement with Eaton and AEG. In re LeapSource,

Inc., No. B 01-09020 PHX JMM (Bankr. D. Ariz. 2001) (doc. 159). On

February 2, 2006, K&E filed a Notice of Reservation of Rights,

agreeing to the terms of the proposed settlement in the bankruptcy

proceedings, but "specifically reserv[ing] all of its rights,

claims, defenses, and/or other interests regarding the

interpretation of th[e] settlement agreement by the District

Court." Id. (doc. 162). On April 6, 2006, the bankruptcy court

entered an order authorizing and approving the settlement on the

terms of the Trustee's motion. Id. (doc. 172).

On October 7, 2005, during the briefing of K&E's motion for

summary judgment regarding vicarious liability (doc. 250),

Plaintiffs filed notice of their settlement with Eaton and AEG. 

Notice (doc. 259). Thereafter, on April 17, 2006, K&E filed a

supplement to its motion for summary judgment (doc. 250), arguing

that Plaintiffs' release of Eaton also operated as a release of K&E

from any vicarious liability for Eaton's conduct. Supplement (doc.

368).

Additionally, on October 3, 2005, K&E filed a motion for

summary judgment on the aiding and abetting and tortious

interference claims (Counts 1, 12, 14, 18, 21, and 23). Mot. Aid.

& Abett. (doc. 255). This motion was fully briefed on December

12, 2005. Reply (doc. 303). Thereafter, on March 28, 2006, the

Court granted summary judgment in favor of K&E on Counts 12 and 14. 

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3 The Court notes that the order language of its March 28, 2006

Order mistakenly states that K&E's motion for summary judgment on

"Counts 12 and 13" was granted, however, within the body of the order

it is clear that the subject motion and the Court's decision were in

relation to Counts 12 and 14. Order (doc. 356) at 2, 40-41. 

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Order (doc. 356).3 Thus, the Court indicated that it would

consider K&E's motion for summary judgment on the aiding and

abetting and tortious interference claims only in regard to Counts

1, 18, 21 and 23.

On February 27, 2006, K&E also filed a motion for summary

judgment on the malpractice and professional negligence claim

(Count 10). Mot. Malprac. (doc. 328). This motion was fully

briefed on May 22, 2006. Reply (doc. 406).

The Court heard oral argument on K&E's motions on July 31,

2006. (doc. 415). On August, 28, 2006, the Court issued an order

granting those motions.

II. DISCUSSION

Plaintiffs argue that the Court, on reconsideration of its

August 28, 2006 order (doc. 457), should deny K&E's supplemented

motion for summary judgment regarding vicarious liability (doc.

250, 368), K&E's motion for summary judgment on the aiding and

abetting and tortious interference claims (Counts 1, 18, 21, 23)

(doc. 255), and K&E's motion for summary judgment on the

malpractice and professional negligence claim (Count 10) (doc.

328). Mot. (doc. 462).

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

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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. 

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

Liability

On its motion for summary judgment, K&E maintained that

Plaintiffs' release of Eaton also released K&E from any vicarious

liability for Eaton's conduct-- this notwithstanding language in

Plaintiffs' Settlement Agreement with Eaton purporting to reserve

claims based on K&E's vicarious liability. K&E argued, and the

Court agreed, that the attempted reservation of rights was invalid

under Illinois law. Plaintiffs insisted that under Arizona law,

adopted by the Settlement Agreement's choice of law provision, the

release of the agent does not release the principal from vicarious

liability for the agent's conduct. Applying conflicts of laws

principles, the Court found that Illinois law should apply

notwithstanding the choice of law provision. Alternatively, the

Court pointed out that even under Arizona law, as presented in

Plaintiffs' response to K&E's motion, the result appeared to be the

same as K&E had argued it would be under Illinois law. Thus, the

Court concluded that Plaintiff's release of Eaton also released

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Eaton's principal, K&E, from any vicarious liability for Eaton's

conduct, and granted K&E's motion for summary judgment regarding

vicarious liability.

Plaintiffs argue that the Court's ruling was clearly

erroneous, chiefly because Plaintiffs still believe that K&E's

motion for summary judgment constituted a collateral attack on the

bankruptcy judge's order approving the Settlement Agreement. Mot.

(doc. 462) at 2-4. The Court rejected this argument the first time

Plaintiffs' raised it in their response to K&E's motion for summary

judgment. See Order (doc. 457) at 19 n.5. As the Court explained

then, K&E's notice of reservation of rights sufficiently informed

Plaintiffs of K&E's objection to the Settlement Agreement's

purported affect on its rights in this litigation, and properly

reserved its right to have those issues decided by this Court,

rather than the bankruptcy judge. Id. In concluding that K&E's

motion did not constitute an impermissible collateral attack, the

Court noted that it had not been asked to disturb the bankruptcy

court's decision with regard to the claims in the bankruptcy case,

but only to determine the effect of the Settlement Agreement on the

claims in this case. Id.

Nowhere in their motion do Plaintiffs directly challenge the

Court's reasons for rejecting their collateral attack argument. 

Rather, Plaintiffs seem to believe that K&E's reservation of rights

was either not explicit enough, or that this Court exceeded its

authority in interpreting the terms of the agreement as it did. 

Mot. (doc. 462) at 2-4. As Plaintiffs see it, K&E only reserved

the right to have this Court interpret the Settlement Agreement,

the "express provisions" of which they believe were so clear as to

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defy any need for interpretation by this Court. Id. 

These arguments have no merit. As the Court explained before,

K&E's notice of reservation of rights put Plaintiffs on notice that

(1) K&E agreed to the terms of the Settlement Agreement only in the

bankruptcy proceedings, and (2) that the purported effect of the

Settlement Agreement's terms on K&E's rights in this litigation

would be decided by this Court. Order (doc. 457) at 19 n.5. 

Moreover, the Court's interpretation of the choice of law provision

was not only within the bounds of its authority, but also in

accordance with the Supreme Court of Arizona's view that courts

should apply conflicts of laws principles even in the face of

contractual choice of law provisions, as the one employed by

Plaintiffs here, which purport to preclude the courts from engaging

such analysis. See id. at 13-15 (citing Jackson v. Chandler, 61

P.3d 17 (Ariz. 2003), Swanson v. Image Bank, Inc., 77 P.3d 439, 441

n.2 (Ariz. 2003), and Magellan Real Estate Inv. Trust v. Losch, 109

F. Supp. 2d 1144, 1155 (D. Ariz. 2000)). In short, Plaintiffs have

not demonstrated that the Court exceeded its authority or rendered

a clearly erroneous decision.

While Plaintiffs have not argued for reconsideration based on

newly discovered evidence or an intervening change in controlling

law, they do raise one argument based on newly discovered law. 

This is where counsel fails to make a legal argument during the

briefing of the underlying motion, and later attempts to bring new

authority to the Court's attention when asking for reconsideration. 

In their motion for reconsideration, Plaintiffs for the first time

bring Ariz. Rev. Stat. § 12-2504 to the fore to tell the Court that

it was in error for its citation to Faberberg v. Phoenix Flour

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4

 Plaintiffs cited Faberberg for the proposition that

"[c]ovenants not to sue should be construed in harmony with the

intent of the parties." Plaintiffs suggested that the same principle

should guide the Court to honor the intent of Plaintiffs and Eaton,

as expressed in their Settlement Agreement, to preserve Plaintiffs

claims against K&E based on its vicarious liability for Eaton's

conduct notwithstanding Eaton's release. On reviewing Faberberg, the

Court discovered that the case actually held that a settlement

agreement releasing one joint-tortfeasor was an effective release of

all, and that the covenant not to sue, presumably entered into prior

to any litigation, was an exception to that general rule. Because

Plaintiffs had entered into a settlement agreement, rather than a

covenant not to sue, it occurred to the Court that the general rule

would be more applicable to the situation at hand, i.e., that the

attempted preservation of claims would be invalid.

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Mills Co., 71 P.2d 1022 (Ariz. 1937), for the proposition that the

release of one joint tortfeasor is a release of all. Plaintiffs

claim that the statute, enacted in 1984, changed the rule of

Faberberg. It is worth remembering the reason for the Court's

citation to Faberberg. Plaintiffs relied on Faberberg, not Ariz.

Rev. Stat. § 12-2504, in opposing K&E's motion for summary

judgment. If Faberberg is so sadly out of date, as Plaintiffs now

suggest, they would have been well advised to eschew that case and

simply cite the statute. Had they done so, they might have avoided

the fact that the Court discovered on its own that the case went

against their position.4 In any event, Arizona law is of no

consequence here, as the Court has explained twice now why K&E's

motion for summary judgment did not constitute a collateral attack

on the bankruptcy judge's order, and why conflicts of laws

principles dictate that Illinois law must apply in this situation. 

The arguments presented have not demonstrated clear error in the

Court's judgment. Therefore, Plaintiffs' motion for

reconsideration of the Court's order granting K&E's supplemented

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motion for summary judgment regarding vicarious liability will be

denied.

B. K&E's Motions for Summary Judgment Regarding Aiding and 

Abetting and Tortious Interference Claims, and Malpractice and

Professional Negligence

Upon careful review of the arguments raised, the Court has

determined that further briefing may be beneficial to the

resolution of Plaintiffs' motion to the extent that Plaintiff seeks

reconsideration of the Court's order (doc. 457) granting K&E's

motions for summary judgment regarding aiding and abetting and

tortious interference claims (doc. 255), and malpractice and

professional negligence (doc. 328).

Of particular interest to the Court are Plaintiffs' arguments

concerning K&E's conduct beyond its recommendation of David Eaton's

services to LeapSource, Inc. ("LeapSource"). See id. at 8:10-21

(citing Pls.' Statement of Additional Facts ("PSOAF") (doc. 292) ¶¶

30, 69, 71, 86, 97-99, 102, 119, 123, 125, 127-28, 137, 143, 149). 

Although raised initially in Plaintiffs' response to K&E's

underlying motion for summary judgment, see Resp. (doc. 292) at

3:6-11, 5:2-6, 7:9-11, neither K&E's reply (doc. 303) nor the

parties' arguments at the July 31, 2006 hearing touched

significantly upon any of those issues. While it would have been

desirable for these issues to have been fully developed in the

earlier briefing and hearing, the Court understands that the

parties may not have anticipated their significance at that time. 

Not knowing then whether the Court would grant K&E's motion for

summary judgment regarding vicarious liability, thereby

extinguishing the firm's vicarious liability for Eaton's conduct,

the parties might not have known the importance that would attach

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to K&E's other conduct-- apart from its recommendation of Eaton and

apart from the actions of Eaton himself. Thus, the Court does not

fault Plaintiffs for not presenting those arguments more forcefully

in their response, or blame K&E for misunderstanding Plaintiffs as

complaining only of K&E's recommendation of Eaton, see Reply (doc.

303) at 2:2-4, 3:5-6, 5:7-8. Of course, in light of Plaintiffs'

present motion, it would be helpful to know the parties' positions

now.

The Court will therefore allow K&E to file a response to

Plaintiffs' motion for reconsideration (doc. 462). If K&E files a

response, Plaintiffs may file a reply. In their briefing, the

parties are advised to focus primarily on the issues discussed in

this order. See Mot (doc. 462) at 8:10-21 (citing PSOAF (doc. 292)

¶¶ 30, 69, 71, 86, 97-99, 102, 119, 123, 125, 127-28, 137, 143,

149); Resp. (doc. 292) at 3:6-11, 5:2-6, 7:9-11.

Therefore,

IT IS ORDERED that Plaintiffs' motion for reconsideration

(doc. 462) is DENIED in part. Plaintiffs' motion for

reconsideration is denied with respect to the Court's order (doc.

457) granting K&E's supplemented motion for vicarious liability

(doc. 250). To the extent that Plaintiffs' motion also seeks

reconsideration of the Court's order (doc. 457) granting K&E's

motions for summary judgment regarding aiding and abetting and

tortious interference claims (doc. 255), and malpractice and

professional negligence (doc. 328), the motion shall remain under

advisement pending further briefing contemplated by this order.

IT IS FURTHER ORDERED that K&E shall have until no later than

twenty (20) days after the date of entry of this order to serve and

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file a response in opposition to Plaintiffs' motion for

reconsideration (doc. 462), such response to focus primarily on the

issues discussed in Part II.B of this order.

IT IS FURTHER ORDERED that, in the event that K&E files a

response to Plaintiffs' motion for reconsideration (doc. 462),

Plaintiffs shall have until no later than twenty (20) days after

the date such response is filed to serve and file a reply in

support of their motion, such reply to focus primarily on the

issues discussed in Part II.B of this order.

DATED this 1st day of December, 2006.

Copies to counsel of record.

Case 2:02-cv-02099-RCB Document 463 Filed 12/04/06 Page 18 of 18