Free Response to Motion - District Court of Arizona - Arizona

Appendix A: Relevant Excerpts from Plaintiffs' Statement of Additional Facts re Aiding and Abetting Mot. ("Aiding and Abetting SOAF") and K&E's Responses
Pls' Mot. for Recons. (Doc. #462) 1. Evidence of K&E's alleged participation in decisions regarding the reductions in force at LeapSource. Aiding and Abetting SOAF (Doc. #292) SOAF ¶ 30: In January 2001, K&E billed time to LeapSource for a "conference regarding WARN Act issues and liabilities relating to employee terminations; telephone conferences regarding the foregoing; and various related matters." See Kirkland & Ellis bill for "Legal services rendered ... from January 1, 2001 through January 31, 2001," KE000365. SOAF Exhibit 5. K&E's Resp. to Aiding and Abetting SOAF (Doc. #304) and Other Responses Disputed. The cited invoice does not reflect that K&E "billed time to LeapSource." Instead, K&E performed services for its client GTCR, and LeapSource agreed to pay for those services pursuant to the Purchase Agreement. (Resp. to Aiding and Abetting SOAF ¶ 30.) Kirk and her lawyers at Sachnoff understood that K&E represented GTCR, which they knew to be a long-standing client of K&E. Kirk knew throughout her time at LeapSource that K&E had GTCR as its client. No lawyer involved in negotiating the deal documents thought K&E represented LeapSource in any aspect of the transaction. Schumacher's contemporaneous time entries -- sent to LeapSource in invoices -- refer to K&E as the "attorneys for GTCR." Early in the representation in 1999, Matiski told Kirk that K&E was representing GTCR. Tina Rhodes, LeapSource's controller responsible for managing relations with legal counsel, stated that LeapSource's payment of GTCR's legal fees did not make K&E counsel for LeapSource. Rhodes, the person at LeapSource who "managed relations" with legal counsel, never went to K&E for substantive legal advice for LeapSource during her entire tenure with the company, though she was aware that K&E performed certain ministerial tasks related to GTCR's investments in LeapSource. She did not believe that performing these minor tasks made K&E counsel for LeapSource. Rhodes wrote to LeapSource's counsel at Osborn Maledon that K&E's Richard Clyne was "GTCR's counsel." The Purchase Agreement required that LeapSource pay GTCR's legal fees incurred in connection with LeapSource. Kirkland sent its bills jointly to LeapSource and to GTCR. (Kirkland & Ellis' Statement of Facts in Supp. of Mot. for Summ. J. Re Malpractice and Professional Negligence ("SOF re Malpractice") (Doc. #329) at ¶¶ 10, 12, 32-33, 47, 51, 52, 60-61.)

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Pls' Mot. for Recons. (Doc. #462)

Aiding and Abetting SOAF (Doc. #292) SOAF ¶ 69: David Eaton, even before he was engaged by LeapSource, consulted with K&E partner Timothy Stephenson about WARN Act issues at LeapSource. In an email dated February 26, 2001, and addressed to David Eaton at his Kirkland & Ellis email address, Mr. Stephenson said, among other things:
Attached are three WARN notices I did last fall for a closing facility that ALSO had questions about whether WARN would be triggered. The quick answer to your question is that "conditional" WARN notices can be issued - indeed should be issued - if a specific condition can be identified and disclosed to employees, IF the occurrence (or nonoccurrence) of that condition will result in a triggering (or on-triggering) of WARN.

K&E's Resp. to Aiding and Abetting SOAF (Doc. #304) and Other Responses Disputed. 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. (Resp. to Aiding and Abetting SOAF ¶ 69.)

The email was produced from the files of AEG, and bears the handwritten notation "LeapSource Memoranda" in the upper left hand corner. SOAF Exhibit 17, Bates AEG001567 (emphasis added).
SOAF ¶ 71: Prior to being engaged by LeapSource, David Eaton had already met with GTCR and initiated legal research on the WARN Act through one of his K&E partners. See Joe Nolan calendar entry for February 22, 2001, Bates No. GTCR 013558, SOAF Exhibit 19. SOAF ¶ 86: Timothy Stephenson of Kirkland & Ellis gave David Eaton of Kirkland & Ellis, advice concerning the WARN Act on February 26, 2001. Email from Timothy Stephenson to David Eaton dated February 26, 2001, Bates AEG 001567, SOAF Exhibit 17; Eaton Deposition at 23:3-6, SOAF Exhibit 13. Case 2:02-cv-02099-RCB Disputed. LeapSource retained David Eaton's company AEG Partners, LLC, not Eaton personally, pursuant to a written agreement. In addition, Eaton's only affiliation with K&E was through a part-time "of counsel" relationship. He had no partners at K&E for the times relevant to this case. There is no record support for the statement that Eaton "initiated legal research on the WARN Act." (Resp. to Aiding and Abetting SOAF ¶ 71.) Disputed. Stephenson sent Eaton a five-sentence e-mail attaching three WARN notices unrelated to LeapSource. (Resp. to Aiding and Abetting SOAF ¶ 86.)

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Pls' Mot. for Recons. (Doc. #462)

Aiding and Abetting SOAF (Doc. #292) SOAF ¶ 137: Kirkland & Ellis consulted with GTCR and LeapSource about the WARN Act. Clyne Deposition at 50:16-24, SOAF Exhibit 24. SOAF ¶ 143: Kirkland & Ellis, GTCR and David Eaton were sharing information concerning the WARN Act. US Department of Labor Fact Sheet, Bates AEG 001359 to 1363, SOAF Exhibit 49; Email from Sean Cunningham dated January 26, 2001, Bates AEG 001358, Deposition Exhibit 431, SOAF Exhibit 50; Clyne Deposition at 49:22-51:18, SOAF Exhibit 24.

K&E's Resp. to Aiding and Abetting SOAF (Doc. #304) and Other Responses Disputed. There is no evidence that K&E "consulted" with anyone at LeapSource regarding the WARN Act. (Resp. to Aiding and Abetting SOAF ¶ 137.) Disputed. Exhibits 49 and 50 contain no information about Eaton. In his deposition, Clyne testified only that he could recall "one or two" conversations regarding the WARN Act in which Clyne was "a listener or a participant." (Resp. to Aiding and Abetting SOAF ¶ 143.)

2. Evidence of K&E's alleged conduct regarding the termination of individual plaintiffs and opposing their claims for severance.

SOAF ¶ 97: After Chris Kirk was terminated as CEO, Tina Rhodes at LeapSource looked to K&E for advice about the termination of Individual Plaintiffs and their claims against the company:
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.

Disputed. The cited paragraph does not mention any advice. In fact, Rhodes testified that she "never went to Kirkland & Ellis for any type of substantive legal advice." She also understood that K&E lawyers were representing GTCR, not LeapSource. (Resp. to Aiding and Abetting SOAF ¶ 97.) Tina Rhodes testified that she never talked to Clyne about the "many items" referenced in the letter. (Rhodes Dep. at 154:4-10, Ex. 1 to Adams Decl. (Doc. #408).)

Tina Rhodes's facsimile to Richard Clyne of K&E, March 10, 2001, Deposition Exhibit 262, KE000215, SOAF Exhibit 28.
SOAF ¶ 98: On March 11, Mr. Clyne forwarded Ms. Rhodes' March 10 facsimile and the attached letters from Chris Kirk and Kim Hartmann to his partners at K&E, Steve Ritchie, Kevin Evanich, and Jim Munson. Deposition Exhibit 301, KE009281-9286; SOAF Exhibit 29. Not disputed for purposes of this motion that Clyne faxed the letters to Ritchie, Evanich, and Munson. Disputed that these individuals were "his partners at K&E." For all relevant times, Clyne was an associate attorney at K&E. (Resp. to Aiding and Abetting SOAF ¶ 98.)

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Pls' Mot. for Recons. (Doc. #462)

Aiding and Abetting SOAF (Doc. #292) SOAF ¶ 99: Ms. Rhodes also forwarded a copy of Julie McCollum's March 9, 2001 response to a demand letter from Mr. Makings directly to Mr. Clyne at K&E on March 12, 2001. Facsimile from Ms. Rhodes to Mr. Clyne with attached letter from Ms. McCollum, Deposition Exhibit 263, SOAF Exhibit 30.

K&E's Resp. to Aiding and Abetting SOAF (Doc. #304) and Other Responses Not disputed for purposes of this motion. (Resp. to Aiding and Abetting SOAF ¶ 99.)

SOAF ¶ 102: James Munson was also consulted, along Disputed. The cited e-mail does not support the contention that any with Richard Clyne and David Eaton, regarding Arizona consultation took place. Not disputed that Clyne forwarded the e-mail to Wage Act issues raised with respect to LeapSource on Munson and Foster. (Resp. to Aiding and Abetting SOAF ¶ 102.) or about March 13 and 14, 2001. Tina Rhodes at LeapSource wrote by email to David Eaton on March 13 regarding "Wage Act Statutes," with the message (in part) "David ... Please call to discuss... Following are the provisions of AZ state law on treble damages for unpaid wages." Eaton forwarded the mail to Richard Clyne at his K&E email address on March 14, and Richard Clyne in turn forwarded the email to litigation partner James Munson and litigation associate (now partner) Michael Foster at their K&E email addresses. See KE009165-9168, SOAF Exhibit 32.

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Pls' Mot. for Recons. (Doc. #462) 3. Evidence of K&E's alleged attempts to intimidate or coerce Christine Turk and Tom Gilman into releasing GTCR of any claims.

Aiding and Abetting SOAF (Doc. #292) SOAF ¶ 119: K&E was consulted by David Eaton regarding the termination of former CEO Chris Kirk as being "for cause." KE003880-3881, SOAF Exhibit 1. One of the reasons for David Eaton's determination to treat Ms. Kirk's termination as being "for cause" - an action since reversed by the Bankruptcy Trustee - was that Ms. Kirk and Mr. Gilman would not execute agreements to release GTCR from liability for its misconduct toward LeapSource and the Individual Plaintiffs. In a telephone voice mail message to Stephen Savage at Fennemore Craig (who was representing Chris Kirk), Mr. Eaton said:
Steve, it's David Eaton. When I tried to get ahold of you yesterday, it wasn't to ask you for the document, it was to let you know that we have a new problem. We received another SCUD missile from Tom Gilman yesterday, who has, I believe I had mentioned to you, retained counsel, and is now acting as a shareholder who is pursuing rights against the company and the majority shareholder and it is just a bunch of nastiness. 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. I just think, frankly, Tom is acting like a jerk as well. I think everybody believes that Tom and Chris are very close and that, whether she denies it or not, Chris is somehow involved in this or has some influence over Tom. So 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 that path.

K&E's Resp. to Aiding and Abetting SOAF (Doc. #304) and Other Responses Disputed to the extent that the statement suggests that the refusal of Gilman and Kirk to enter into releases was the basis for the issuance of a "for cause" termination letter to Chris Kirk. Kirk's termination was classified as "for cause" because of her failure to repay money owed to LeapSource and improper forgiveness of company loans to her friends, not the refusal of Gilman or Kirk to sign a release. (Eaton Dep. at 229:7 - 230:5, attached as Ex. 10 to Adams Decl. (Doc. #305.).) Further disputed on the ground that the transcription of the voicemail message lacks foundation and is not authenticated. (Resp. to Aiding and Abetting SOAF ¶ 119.)

Dep. Exhibit 143, LS-CK2-2516, SOAF Exhibit 37 (emphasis added).
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Pls' Mot. for Recons. (Doc. #462)

Aiding and Abetting SOAF (Doc. #292) SOAF ¶ 123: David Eaton worked on a termination "for cause" letter to be sent to Christine Kirk. A draft of this "for cause" letter was shared with K&E. Voice Mail from David Eaton to Stephen Savage dated April 26, 2001 SOAF Exhibit 37; fax from David Eaton to Steven Savage dated May 11, 2001, Bates FC-CK-0116-0118, Deposition Exhibit 111, SOAF Exhibit 39; draft "for cause" letter, Bates KE003880, Deposition Exhibit 146, SOAF Exhibit 1; and Clyne Deposition at 53:4-7, SOAF Exhibit 24.

K&E's Resp. to Aiding and Abetting SOAF (Doc. #304) and Other Responses Disputed. The letter was prepared by an attorney at Jennings Strouss & Salmon, which represented LeapSource in employment matters. (Resp. to Aiding and Abetting SOAF ¶ 123; Kirkland & Ellis' Statement of Facts in Supp. of Mot. for Summ. J. Re Aiding and Abetting and Tortious Interference Claims (Doc. #256) at ¶ 11.)

4. Evidence of K&E's purported attempts to prevent Tom Gilman from inspecting LeapSource documents.

SOAF ¶ 125: Kirkland & Ellis, David Eaton and GTCR worked together with respect to Tom Gilman's request to inspect certain LeapSource documents. Fax from Richard Clyne of K&E to David Eaton dated April 30, 2001, Bates KE003278-3279, Deposition Exhibit 142, SOAF Exhibit 40, with Mr. Clyne advising Mr. Eaton "I think we will need to speak with GTCR before making any response". SOAF ¶ 149: K&E partner Richard Clyne and David Eaton participated in conversations together where the potential bankruptcy of LeapSource was one of the topics. Clyne Deposition at 55:16-56:1, SOAF Exhibit 24.

Disputed. Exhibit 43 is merely a copy of a letter from Tom Gilman's attorney to LeapSource that Clyne received from LeapSource and then forwarded to Eaton. The forwarding of a single letter does not show that K&E, Eaton, and GTCR "worked together." Eaton testified that he did not recall ever discussing the letter with Clyne. (Resp. to Aiding and Abetting SOAF ¶ 125.)

5. Evidence of K&E's involvement in the decision to put LeapSource into bankruptcy. 6. General evidence of K&E's involvement.

Disputed. For all relevant times, Clyne worked as an associate attorney at K&E and has never been a partner of the firm. There is also no evidence Clyne actively participated in any such conversations. Clyne testified that he "participated in conversations primarily as a listener." (Resp. to Aiding and Abetting SOAF ¶ 149.)

SOAF ¶ 127: David Eaton reported what was going on Disputed. Eaton testified only that he sometimes gave "periodic status at LeapSource to Kirkland & Ellis. Richard Clyne, updates" to K&E because they worked for GTCR, the company's Stephen Ritchie and Jim Munson were among the K&E majority shareholder. (Resp. to Aiding and Abetting SOAF ¶ 127.) attorneys who participated in conversations with David Eaton. Eaton Deposition at 101:3-12, SOAF Exhibit 13; Ritchie Deposition at 42:23-43:4, SOAF Exhibit 42; Clyne Deposition at 47:22-51:18, SOAF Exhibit 24.

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Pls' Mot. for Recons. (Doc. #462)

Aiding and Abetting SOAF (Doc. #292) SOAF ¶ 128: Eaton reported what was going on at LeapSource to Kirkland & Ellis even though he knew that GTCR was LeapSource biggest shareholder. Eaton Deposition at 101:3-12 and 67:13-68:7, SOAF Exhibit 13; Ritchie Deposition at 42:23-43:4, SOAF Exhibit 42.

K&E's Resp. to Aiding and Abetting SOAF (Doc. #304) and Other Responses Disputed. Eaton gave "periodic status reports" to K&E because they represented GTCR, the company's controlling stockholder and the guarantor of its leases and debt. (Resp. to Aiding and Abetting SOAF ¶ 128.)

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