Free Reply in Support of Motion - District Court of Arizona - Arizona

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BEUS GILBERT PLLC
ATTORNEYS AT LAW

4800 NORTH SCOTTSDALE ROAD SUITE 6000 SCOTTSDALE, ARIZONA 85251 TELEPHONE (480) 429-3000

Leo R. Beus / 002687 ­ [email protected] Scot C. Stirling / 005757 ­ [email protected] Steven E. Weinberger / 015349 ­ [email protected] Attorneys for Individual Plaintiffs and Trustee

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STEVE BROWN & ASSOCIATES, LLC
1414 E. INDIAN SCHOOL ROAD, SUITE 200 PHOENIX, ARIZONA 85014-2412 TELEPHONE (602) 264-9224

Steven J. Brown/010792 ­ [email protected] Co-Counsel for Trustee UNITED STATES DISTRICT COURT

12 DISTRICT OF ARIZONA 13 14 15 16 17 18 19 20 21 22 23 24 25
Case 2:02-cv-02099-RCB Document 466 Filed 01/16/2007 Page 1 of 20

DIANE MANN, as Trustee for the Estate of LeapSource, Inc., CHRISTINE V. KIRK, et al., Plaintiffs, vs. GTCR GOLDER RAUNER, L.L.C.; et al., Defendants.

Case No.: CIV-02-2099-PHX-RCB

PLAINTIFFS' MEMORANDUM IN SUPPORT OF MOTION FOR RECONSIDERATION (Assigned to Hon. Robert C. Broomfield)

MICHAEL MAKINGS, Counterclaimant, vs. LEAPSOURCE, INC., et al., Counterdefendants.

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Pursuant to the Court's Order dated 4 December 2006, Plaintiffs submit the following Memorandum in response to the Kirkland & Ellis ("K&E") Response to Plaintiffs' Motion for Reconsideration. As further instructed by the Court, Plaintiffs will focus primarily on the issues discussed in Part II.B of the Court's Order. Plaintiffs filed a Motion for Reconsideration of the Court's Order granting K&E's Motions for Summary Judgment. Remarkably, K&E has attached to its Response

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 In January 2001, K&E billed time to LeapSource for a "conference regarding WARN 24 25 Act issues and liabilities relating to employee terminations; telephone conferences regarding Memorandum (Docket No. 464) a seven page "Appendix" summarizing K&E's responses to sixteen of the Plaintiffs' factual assertions, and has argued that the Motion for Reconsideration should be denied because fourteen of those sixteen factual assertions are "Disputed." That is precisely why the Motion for Reconsideration should be granted, and why summary judgment should have been denied. I. K&E'S RESPONSE DEMONSTRATES GENUINE ISSUES OF MATERIAL DISPUTED FACTS CONCERNING CONDUCT THAT AIDED AND ABETTED BREACHES OF FIDUCIARY DUTIES, TORTIOUSLY INTERFERED WITH LEAPSOURCE AND INDIVIDUAL PLAINTIFFS' RIGHTS, AND BREACHED PROFESSIONAL DUTIES TO LEAPSOURCE A. K&E Participated In Decisions Regarding The Reductions In Force And Terminations of Employees at LeapSource

K&E does not deny that it was involved in decisions to force employee terminations at LeapSource, and consulted about the WARN Act issues and other potential claims resulting from those terminations. Nevertheless, K&E attempts to deflect its responsibility for those decisions and actions by claiming that the documents and testimony do not really mean what they say.

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the foregoing; and various related matters."

Plaintiffs' Statement of Additional Facts

(Docket No. 202) (hereafter "PSOAF") ¶ 30. K&E claims, however, that "the cited invoice does not reflect that K&E performed any services for LeapSource. K&E's Response to Plaintiffs Motion for Reconsideration (doc. 464) (hereafter "RPM") at 3:16-17, and goes on to argue its interpretation of the evidence concerning a fact that it admits is "Disputed." RPM Appendix at 1.

7 8 9 10 11 12 13 14 15 16 practice with other GTCR-funded companies (PSOAF ¶ 22), and Ms. Kirk's belief that K&E 17 18 19 20 21 22 23 24 25
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K&E's Response ignores all of the evidence cited in the Plaintiffs' Statement of Additional Facts in opposition to the original motions for summary judgment (PSOAF), including for example paragraphs 20-24. Ms. Kirk was told that K&E would be doing legal work "for LeapSource" (PSOAF ¶ 20); Ms. Kirk asked about using another law firm to do some of that work, and was told by Mr. Nolan that "they [K&E] would be LeapSource's counsel." PSOAF ¶ 20. K&E sent bills to LeapSource and LeapSource paid them. PSOAF ¶ 23. Therefore, Ms. Kirk understood that K&E was LeapSource's counsel (PSOAF ¶ 21), what Ms. Kirk was told was consistent with what Mr. Nolan described as GTCR's past

was acting as counsel for LeapSource was objectively reasonable. In fact, GTCR's principal Mr. Yih ­ who was formerly an attorney with K&E ­ testified that when he became involved in LeapSource he also believed that K&E had been acting as LeapSource's counsel. PSOAF ¶ 24. All of that evidence supports Ms. Kirk's testimony that she reasonably believed that K&E had been retained to act as counsel for LeapSource, which is plainly relevant to the fact ­ "disputed" by K&E ­ that K&E billed LeapSource for work "regarding WARN Act issues and liabilities relating to employee terminations," etc.

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K&E continues to argue disputed evidence by arguing with PSOAF ¶ 69 that "The five-sentence e-mail is not evidence of any consultation between Stephenson and Eaton. The e-mail merely attached three WARN notices unrelated to LeapSource." (RPM Appendix at 2.) That is nonsense, and in any case K&E admits that it is "Disputed." Id. In fact, the email was sent to Mr. Eaton to provide a "quick answer to your question" (PSOAF ¶ 69, and see PSOAF Ex. 17 at AEG001567) (emphasis added), and was produced

7 8 9 10 11 12 13 14 15 16 Stephenson. The e-mail is dated 26 February 2001, when David Eaton began working full 17 18 19 20 21 22 23 24 25 "Attached are three WARN notices I did last fall for a closing facility that ALSO had questions about whether WARN would be triggered. ..."
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from the files of AEG, with Mr. Eaton's handwritten note "LeapSource Memoranda" in the upper left-hand corner. The fact that the attachments used to provide the "quick answer to your question" were from documents originally prepared for another client1 has nothing to do with the fact that the documents were sent to Mr. Eaton in response to a question relating to LeapSource. That is the fact that K&E has "disputed," but K&E's attempts to deny a fact that the document itself clearly supports is a reason to deny summary judgment. All of the circumstances surrounding the email support the Plaintiffs' claim. The email itself indicates that it was prompted by a question posed by David Eaton to Timothy

time for LeapSource. Joe Nolan's calendar entry for 22 February also supports the Plaintiffs' interpretation of this evidence. PSOAF ¶ 71 and PSOAF Ex. 19. It appears that K&E claims this evidence is "disputed" because the PSOAF refers to Eaton's "K&E partners," when Mr. Eaton was not a partner at the time. That detail is not relevant to the basic facts cited in PSOAF ¶ 71, and if

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it is disputed that the WARN Act research was initiated by Mr. Eaton (as is plainly suggested by Mr. Stephenson's email to Mr. Eaton providing a "quick answer to your question") (emphasis added), that is another reason to deny summary judgment. This evidence, and other evidence cited in PSOAF ¶¶ 137 and 143 (the next facts "Disputed" by K&E), all support the Plaintiffs' claim that K&E was participating in decisions regarding reductions in force and employee terminations at LeapSource. Richard

7 8 9 10 11 12 13 14 15 16 January 26, 2001, and were also produced from AEG's LeapSource files. See PSOAF ¶ 137, 17 18 19 20 21 22 23 24 25
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Clyne, a former K&E associate, testified that he participated in a telephone conference between K&E lawyers, GTCR, and David Eaton regarding the WARN Act. The Plaintiffs also cited an e-mail message and a handwritten note from Sean Cunningham (a GTCR employee) pertaining specifically to the WARN Act, and a printout from the U.S. Department of Labor ("DOL") which summarizes the provisions of the WARN Act ­ this printout has Tim Stephenson's direct dial phone number at K&E's Washington D.C. office on the face sheet (along with the name and extension of his assistant, Bernadette), in Sean Cunningham's handwriting. Mr. Cunningham's e-mail and his DOL printout are both dated

143 and the exhibits cited in those paragraphs.

If all of these communications and

documents were "unrelated to LeapSource," as K&E now argues (RPM Appendix at 2, disputing PSOAF ¶¶ 69 and 86), it is certainly curious that they all turned up in AEG's LeapSource file. It is not clear why K&E thinks it important that Exhibits 49 and 50 "contain no information about Eaton" (RPM Appendix at 3, disputing PSOAF ¶ 143) (emphasis added) ­ there is no reason why they should ­ but the fact is that they were

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produced from AEG's LeapSource file. In any case, the facts are disputed, and that is another reason to deny summary judgment. B. The Evidence Supports Plaintiffs' Claim That K&E Was Involved In Advising LeapSource On The Termination Of The Individual Plaintiffs And Their Claims For Severance

On March 10, 2001 Tina Rhodes (LeapSource's controller) faxed to Richard Clyne (K&E attorney) letters received from Kimberly Hartmann and Christine Kirk, former employees of LeapSource. These letters pertained to unpaid wages and notes receivable and

8 9 10 11 12 13 The salutation on the fax cover sheet addressing the recipient as "Richard" Obviously 14 15 16 17 18 19 20 21 22 23 McCollum was responding to correspondence from CEO Mike Makings and from Ms. 24 25 Rhodes proposing an amendment to her Senior Management Agreement. The circumstances suggests that Ms. Rhodes and Mr. Clyne were on a first name basis. Moreover, Ms. Rhodes indicates that she has "many items to discuss." Unfortunately the items that were discussed were not specifically recollected by either witness at their depositions, but the document itself provides evidence of the subject of their communications, and the document was created in the context of other events that would allow the jury to draw inferences about the subjects of their communications. The next sentence begins with the statement that "Julie also sent a response," which suggests that the recipient already knows what Julie is responding to ­ in fact, Julie were sent in response to demand letters sent to them by Michael Makings, the CEO of LeapSource. Ms. Rhodes note to Richard Clyne read as follows: "Richard ­ I will call tomorrow. I have many items to discuss. Julie also sent a response, but I will have to forward Monday. It does not concern me, however, as she is not speaking with counsel."

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surrounding the execution of the letters to which Ms. McCollum was responding, the fact that other correspondence relating to the same subjects was also shared with K&E ­ sometimes directly but also through Mr. Eaton, who was asked to "please call to discuss" potential treble damage claims and who then forwarded the request to attorneys at K&E (PSOAF ¶ 102) ­ and the fact that another letter relating to the termination of another one of the Plaintiffs (Ms. Kirk) was found on Mr. Clyne's computer at K&E, all support the

7 8 9 10 11 12 13 14 15 16 from Mr. Makings directly to Mr. Clyne at K&E. RPM Appendix at 4, responding to 17 18 19 20 21 22 23 24 25 K&E made essentially the same argument about these same facts in its Statement of Facts ¶ 11 that it has now summarized at RPM Appendix at 3, where it now admits that the PSOAF ¶ 97 is "Disputed." The Plaintiffs demonstrated why these facts were disputed in their response to the K&E SOF ¶ 11 (Docket No. 202).
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inference that K&E was involved in the decisions to terminate the Individual Plaintiffs' employment (in addition to the more general reductions in force at LeapSource already discussed above). See Plaintiffs' Response to K&E's SOF (Docket No. 202) ¶ 11.2 At the time the letters referred to in PSOAF ¶¶ 97-98 were faxed to K&E by Ms. Rhodes, Mr. Clyne obviously thought their content was important enough to immediately fax copies of the correspondence to Steve Ritchie, Kevin Evanich, and Jim Munson (all shareholders at K&E) at their homes, on a Sunday afternoon. K&E does not dispute that

Ms. Rhodes also forwarded a copy of Julie McCollum's March 9 response to a demand letter

PSOAF ¶ 99. The next correspondence on this topic was a March 13, 2001 letter from Tina Rhodes to David Eaton which is unambiguously seeking advice about the potential liability of LeapSource to terminated employees (including Individual Plaintiffs) for unpaid wages and

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for the non-payment of severance. David Eaton forwarded the Tina Rhodes e-mail to Richard Clyne at K&E who, in turn, immediately forwarded the e-mail to Jim Munson. A jury may reasonably conclude from this evidence ­ notwithstanding the Defendants' obviously biased and conclusory denials ­ that Tina Rhodes and David Eaton continued to consult with K&E on behalf of LeapSource about the subjects of these communications, after K&E was clearly on notice of the conflicts of interest between GTCR

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 In this voice mail message, David Eaton said that "GTCR has now indicated that they are not interested in entering into any mutual release unless Tom Gilman is also involved in his own release with the company and them." Eaton's message concluded by saying "as of right now, the deal is off unless you can deliver Tom Gilman's release, and if we are not able to get that in the next couple of days then we'll issue the for cause letter and just proceed down
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and LeapSource.

See, for example, PSOAF ¶¶ 31, 50 ("1. Limit downside, 2. Avoid

embarrassment, 3. Protect COMSYS, other investment[s]). and 100. Although K&E insists that these facts are "Disputed" (RPM Appendix at 4), that only emphasizes the importance of allowing these factual disputes and inferences to be resolved by a jury. C. K&E's Involvement In "Attempts To `Intimidate' Or `Coerce' Kirk And Gilman" Into Releasing Claims Against GTCR

The evidence supports an inference that K&E was involved with GTCR's attempts to intimidate or coerce Christine Kirk and Tim Gilman into releasing claims against GTCR. An April 26, 2001 file memorandum transcribing a voice mail message to Stephen M. Savage of Fennemore Craig from David Eaton ­ purportedly on behalf of LeapSource, but demanding a release for GTCR ­ made a threat that was subsequently acted upon with a letter that attempted to retroactively characterize Ms. Kirk's termination by LeapSource as "for cause."3

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A draft of that letter (PSOAF ¶ 123, Exhibit 1) was produced in this lawsuit by K&E. The draft letter had been saved in a folder on the K&E computer system belonging to K&E attorney Richard Clyne, and was saved with a file name containing a number (509) which corresponds with the date on which the letter was sent to Ms. Kirk (May 9, 2001). It is also undisputed that the final version of this letter was changed from the draft contained in Richard Clyne's K&E system folder; some notes on the top of the printout of the Clyne draft

7 8 9 10 11 12 13 14 15 16 following: 17 18 19 20 21 22 23 24 25 that path." The "for cause" letter threatened in this April 26, 2001 voice mail was actually sent to Ms. Kirk on May 9, 2001.
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have been redacted pursuant to a K&E claim of privilege. K&E admits having received the letter but claims there is "no evidence that anyone at K&E either contributed to the letter or advised anyone regarding the letter." This statement is not entirely true, and a jury could reasonably draw a different conclusion from the facts surrounding the preparation of the letter and its use to follow up on a threat delivered by Mr. Eaton to take this action unless Ms. Kirk and Mr. Gilman agreed to release GTCR from any claims. The differences between the K&E "DRAFT" of this letter and the final include the

· The addition of the language "from Company funds" in the paragraph beginning with the word "[s]econd," pertaining to the authorization of loans to Kim Hartmann and Julie McCollum. · The deletion of the sentence "[a]dditionally, you arranged for the distribution of approximately 1.9 million option grants to employees, including senior

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management, and repurchase of company stock from former employees without prior Board approval." This was the last sentence in same paragraph referred to above. When this K&E draft (JS0004-0006) was printed at Jennings, Strauss & Salmon ("JSS"), the JSS lawyer had apparently not yet spoken to David Eaton directly (handwritten notes attached to draft state "permission to contact Eaton directly"). Because this particular

7 8 9 10 11 12 13 14 15 16 a competent witness, within the reach of the Court's subpoena power (he is now a partner at 17 18 19 20 21 22 23 24 25
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"draft" version 99999-8 was saved on Richard Clyne's computer at K&E (KE003880KE003881), a reasonable inference can be drawn that K&E was involved in the decision to prepare and to send the "for cause" termination letter of Christine Kirk. K&E's argument that the facts stated in PSOAF ¶ 123 are "Disputed" claims that the letter was drafted by an attorney at JSS, but we are not concerned merely with the drafting of the letter. The evidence supports an inference that K&E was involved in the process and communications that led to the preparation and sending of the letter to Ms. Kirk, following up on the threat made by Mr. Eaton in his voice mail message to Mr. Savage. Mr. Savage is

the Ballard Spahr law firm in Phoenix), who can testify to his receipt of the voice mail message and to having it accurately transcribed. Moreover, the fact that the voice mail threat by Mr. Eaton was followed by the "for cause" letter from Mr. Eaton when the releases for GTCR were not forthcoming ­ just as was threatened in the voice mail message ­ is a circumstance that also supports the foundation for the transcription of the voice mail message.

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These fact issues and the inferences to be drawn from them are obviously disputed as K&E admits in RPM at 6, answering PSOAF ¶ 123. A jury should be permitted to hear this evidence and to draw the reasonable inference that K&E was involved in the use of the "for cause" letter to attempt to coerce or intimidate Mr. Gilman and Ms. Kirk into releasing claims against GTCR. D. K&E's Interference With Tom Gilman's Right To Inspect LeapSource Documents

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The record is undisputed that, after leaving LeapSource Tom Gilman retained counsel and made a shareholder request to inspect certain LeapSource documents. PSOAF ¶ 125. K&E claims that it did nothing with regard to Tom Gilman's shareholder request other than receive and then forward the document to David Eaton at LeapSource. In fact, Mr. Gilman's attorney delivered his request to LeapSource to the attention of

13 14 15 16 17 18 19 20 21 22 23 24 K&E did what Mr. Clyne suggested here, and ­ notwithstanding its conflict of interest ­ 25
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Tina Rhodes on April 30, 2001. Ms. Rhodes then faxed this letter to Richard Clyne at K&E only (not to Mr. Eaton) at 2:15 pm (Arizona time). Upon receiving the fax from Tina Rhodes, Richard Clyne apparently called David Eaton to inform him of the fax from Tina Rhodes and of Mr. Gilman's shareholder request, because Mr. Clyne then faxed the Gilman shareholder request to David Eaton with the following message: "David: Pursuant to your request, attached is the fax I received from Tina Rhodes. Let's try to touch base again tomorrow morning. I think we need to speak with GTCR before making any response. Rich" PSOAF ¶ 125, Exhibit 40 (emphasis added). It is reasonable to infer from the foregoing that

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consulted with GTCR before deciding how LeapSource should respond to this request. K&E asserts that the failure of interested witnesses to admit that they recall having the discussions that these documents reflect is fatal to the Plaintiffs' claims. There is no reason why a jury cannot infer from these facts that the parties to these communications actually did what they said they were going to do, even if they will not admit to it today. E. K&E's Participation In The Decision To Put LeapSource Into Bankruptcy

7 Richard Clyne testified that he participated in conversations with David Eaton (on 8 9 10 11 12 13 14 15 16 17 that is worthy of jury determination. PSOAF ¶ 149 is a material fact that is in dispute. 18 19 20 21 22 23 24 25
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behalf of LeapSource) where the subject of bankruptcy was discussed. PSOAF ¶ 149. According to Mr. Clyne, the subject of bankruptcy was discussed in the same conversation as the various "restructuring alternatives" proposed by David Eaton. Because the bankruptcy of LeapSource was one of the alternatives proposed by David.Eaton, and because K&E lawyers (Steve Ritchie, Richard Clyne, and possibly Jim Munson) were on the phone discussing these alternatives with David Eaton and GTCR, it would be reasonable to conclude that K&E participated in the discussion regarding the decision to put LeapSource into bankruptcy. Whether K&E participated in the decision to put LeapSource into bankruptcy is another fact

F.

David Eaton's Periodic Status Reports To K&E

PSOAF ¶¶ 127 and 128 document David Eaton's periodic status reports as to what was happening at LeapSource to Richard Clyne, Stephen Ritchie, and Jim Munson (all K&E attorneys), even though he knew (1) GTCR was LeapSource's largest shareholder, (2) GTCR had adverse interests to LeapSource, and (3) K&E attorneys was concurrently representing both GTCR and LeapSource. K&E's response that Eaton gave period status reports to K&E

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because they represented GTCR, LeapSource's controlling shareholder, returns to K&E's earlier denial of the facts cited in PSOAF ¶¶ 20-24, discussed earlier in this Memorandum, and its denial that K&E had ever represented LeapSource. K&E's decision to dispute those facts and the inferences to be drawn from those facts is a reason to deny summary judgment. II. THE DISPUTED FACTS AND THE APPLICABLE LAW DO NOT SUPPORT SUMMARY JUDGMENT FOR K&E A. Aiding And Abetting Claims

Plaintiffs thoroughly briefed the law on "aiding and abetting" liability in their original response to the K&E summary judgment motion on this issue. However, with regard to the current motion for reconsideration the following bears repeating. Whether a defendant has provided "substantial assistance" to the breach of another's fiduciary duties is a question of fact, and it is important to remember the admonition from Wells Fargo Bank v. Arizona Laborers, Teamsters and Cement Masons, 201 Ariz. 474, 38

14 15 16 17 18 19 20 21 22 23 for the violation to occur, not whether the assistance was necessary." Id. at ¶ 54. 24 25
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P.3d 12 ¶ 47 (2002) that, "[a]lthough the facts ... are unremarkable taken in isolation, ... taken together, they present what should have been a jury issue on the question of aidingand-abetting liability" (quoting Metge v. Baehler, 762 F.2d 621, 630 (8th Cir. 1985)). "Moreover, `if [a] ... method or transaction is atypical or lacks business justification, it may be possible to infer the knowledge necessary for aiding and abetting liability." Id. at ¶ 51, quoting Woodward v. Metro Bank of Dallas, 522 F.2d 84, 97 (5th Cir. 1975). Finally, "substantial assistance does not mean assistance that is necessary to commit the fraud [or, in this case, breach of fiduciary duty]. ... The test is whether the assistance makes it `easier'

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In defense of this claim K&E states that there is no evidence that they did anything other than communicate with their client GTCR. That is simply not true; the evidence shows K&E communications with Tina Rhodes and with Mr. Eaton, and shows K&E involved in the process that led to the termination of Individual Plaintiffs, discussions about how to respond to correspondence concerning potential claims for non-payment of wages and severance, the attempt to coerce releases for GTCR from Mr. Gilman and Ms. Kirk, and

7 8 9 10 11 12 13 14 15 16 abettor `had general awareness that his role was part of an overall activity that is improper,'" 17 18 19 20 21 22 23 24 25
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preparation of a "for cause" termination letter to Ms. Kirk, and the decision to resist Mr. Gilman's demand to inspect the books and records of LeapSource (obviously for the purpose of attempting to frustrate Mr. Gilman's attempt to determine what the Defendants were doing to LeapSource while they were still doing it ­ including the decision to put the company into bankruptcy). The facts and the inferences concerning what K&E did and for whom they did it are disputed and should be resolved by a jury. K&E's knowledge of impropriety does not require that it have specific knowledge of particular acts of wrongdoing. Instead, that "may be demonstrated by proof that the aider-

and "such knowledge could come through circumstantial evidence." FDIC v. First Interstate Bank of Des Moines, 885, F.2d 423, 431 (8th Cir. 1989). See also Brock v. Hendershott, 840 F.2d 339, 342 (6th Cir. 1988) ("knowledge of the breach can be inferred from surrounding circumstances raising a reasonable inference of knowledge"). The disputed material facts described in the PSOAF demonstrate that K&E was on notice of the disputes and conflicts of interest between LeapSource and GTCR, and substantially assisted and/or encouraged the Defendants' breaches of fiduciary duty by

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taking sides and assisting the Defendants in executing a plan to dismantle LeapSource and attempt to drive away the Plaintiffs and their claims so that GTCR could bankrupt LeapSource with impunity. B. Tortious Interference Claims

The law applicable to Plaintiffs' tortuous interference claims was also briefed for the underlying motion for summary judgment. The critical point bearing upon the tortious interference claims is that Arizona has rejected the formalistic analysis implicit in K&E's

8 9 10 11 12 13 14 15 16 17 verdict that K&E acted improperly by assisting GTCR and the other Defendants (including 18 19 20 21 22 23 24 25
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arguments. Instead, under Arizona law, whether an agent may be held liable for interfering with the contracts of his principals or client depends upon whether the agent's interference was "improper" in light of all of the factors listed in Restatement § 767. The answer to that question requires a factual determination that cannot be made in the context of a motion for summary judgment where the basic facts and inferences to be drawn from the facts are disputed, as is illustrated by K&E's own RPM Appendix. In light of K&E's conflicts of interest and knowledge of the disputes and conflicts between LeapSource and GTCR, there is more than enough evidence to support a jury

Makings) in implementing a plan to dismantle and to bankrupt LeapSource, and in attempting to drive away or fend off efforts by the Individual Plaintiffs to prevent that from happening. C. Professional Malpractice Claim

The causation element of Plaintiffs' malpractice claim is not missing. K&E's support for and participation in the Defendants' misconduct, notwithstanding its conflicted interests,

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contributed to the Defendants' ability to implement their plans for dismantling and bankrupting LeapSource. The acts of the Defendants, and K&E's role in supporting those acts, should be considered in the context of their overall objectives and plans for achieving their objectives. The work "regarding WARN Act issues and liabilities relating to employee terminations ..." were part of the process of dismantling LeapSource and driving away the

7 8 9 10 11 12 13 14 15 16 Defendants' plans to dismantle and bankrupt LeapSource, because the reductions in force, 17 18 19 20 21 22 23 24 25
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Individual Plaintiffs, who ­ as K&E knew ­ had just accused certain GTCR members of the LeapSource board of directors of breaching their duties to the Company, and K&E was immediately involved in discussions with principals of GTCR about how to respond to Mr. Gilman's accusations and to the "Gilman Memorandum." See PSOAF ¶¶ 31-50. Everything that the Defendants did from that point forward, with K&E's substantial assistance, was done for a purpose, and the Defendants' purpose was adverse to the interests of LeapSource (and of its creditors) and of the Individual Plaintiffs. K&E's liability should not be determined without reference to the overall effect of the

termination of Individual Plaintiffs, attempts to coerce releases from Mr. Gilman and Ms. Kirk, and attempts to prevent Mr. Gilman from examining the records of the Company to determine what the Defendants were doing while they were still doing it, were all part of an overall plan to accomplish GTCR's objectives4 at the expense of LeapSource and its

"1. Limit downside, 2. Avoid embarrassment, 3. Protect COMSYS, other investment(s)." PSOAF ¶ 50, Notes of Sean Cunningham at Bates GTCR012260-012261, Deposition Exhibit 196, PSOAF Exhibit 12.

4

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creditors, and of the Individual Plaintiffs, which K&E actively and substantially supported with knowledge of the conflicting interests of GTCR and of LeapSource. Similarly, K&E's advice and participation in the decision making process to place LeapSource into bankruptcy clearly caused damage to LeapSource and its creditors. The Plaintiffs' evidence will show that LeapSource, if properly assisted, could have survived as an independent business, or could have been sold for the benefit of LeapSource creditors.

7 8 9 10 11 12 13 14 15 16 conflicts of interest in my opinion were a substantial cause of injury to LeapSource and 17 18 19 20 21 22 23 24 25
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Instead, with the assistance and substantial participation of K&E, GTCR decided to put LeapSource into bankruptcy in a manner that destroyed any opportunity to realize the value created in the business ­ including, for example, the sale of the ICG assets to Makings for a fraction of their value. That is the context in which the Court should consider Professor Hazard's opinion that "it was reasonably foreseeable to Kirkland and Eaton that their course of conduct in the period from late 2000 through March 2001 would have material adverse affect on LeapSource and Ms. Kirk and her associates. On that basis, the inhibitions imposed by their

Ms. Kirk and her associates." (Hazard Report, SOAF Exhibit 45, ¶ 5(e), emphasis added.). III. CONCLUSION. K&E's RPM and its Appendix only highlight the existence of genuine issues of material fact that should have resulted in the denial of K&E's motions for summary judgment. The Plaintiffs respectfully ask the Court to reconsider its Order dated August 28, 2006, and to deny K&E's Motions for Summary Judgment Regarding Aiding and Abetting

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and Tortious Interference Claims (Docket No. 255), and on the Malpractice and Professional Negligence Claim (Docket No. 328). Dated this 16th day of January, 2007. BEUS GILBERT PLLC By s/ Scot C. Stirling Leo R. Beus Scot C. Stirling Steven E. Weinberger 4800 North Scottsdale Road Suite 6000 Scottsdale, AZ 85251 Attorneys for Individual Plaintiffs and Trustee

STEVE BROWN & ASSOCIATES, LLC Steven J. Brown 1414 E. Indian School Road, Suite 200 Phoenix, AZ 85014 Co-Counsel for Trustee

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Case 2:02-cv-02099-RCB

CERTIFICATE OF SERVICE I hereby certify that on 16 September 2007, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Kevin A. Russell David S. Foster Nicholas B. Gorga LATHAM & WATKINS LLP [email protected] [email protected] [email protected] Attorneys for Defendants 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 Don P. Martin Edward A. Salanga QUARLES & BRADY STREICH LANG, LLP [email protected] [email protected] Attorneys for Defendants 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 Merrick B. Firestone Veronica L. Manolio RONAN & FIRESTONE, PLC [email protected] [email protected] Attorney for Defendant Michael Makings

Document 466 19 Filed 01/16/2007

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Case 2:02-cv-02099-RCB Document 466 20 Filed 01/16/2007 Page 20 of 20

Richard A. Halloran Jon Weiss LEWIS & ROCA, L.L.P. [email protected] [email protected] Attorneys for Defendants David Eaton and AEG Partners LLC John Bouma James R. Condo Patricia Lee Refo SNELL & WILMER LLP [email protected] [email protected] [email protected] Attorneys for Kirkland & Ellis Steven J. Brown STEVE BROWN & ASSOCIATES, LLC Co-Counsel for Trustee [email protected]

__s/ Scot C. Stirling___