Free Order on Motion for Summary Judgment - District Court of Arizona - Arizona

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

Diane Mann, as Trustee for the Estate of LeapSource, Inc., et al. Plaintiffs, vs. GTCR Golder Rauner, L.L.C., a Delaware limited liability company., et al., Defendants.

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No. CIV 02-2099-PHX RCB O R D E R

On October 21, 2002, Defendants GTCR Golder Rauner, L.L.C., et al., filed their notice of removal in this action, attaching Plaintiffs' (Diane Mann, as Trustee for the Estate of LeapSource, Inc., et al.) First Amended Complaint. Notice (doc. 2). On

November 20, 2002, Plaintiffs filed a motion to remand (doc. 8) this action to the Superior Court of Arizona in Maricopa County. On February 7, 2003, that motion was denied. Order (doc. 51).

Thereafter, on June 11, 2004, Plaintiffs filed their Fourth Amended Complaint ("FAC"). (doc. 121).

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On August 22, 2005, Defendants GTCR Golder Rauner, L.L.C., GTCR Fund VI, L.P., GTCR VI Executive Fund, L.P., GTCR Associates VI, Joseph P. Nolan, Bruce V. Rauner, Daniel Yih, David A. Donnini and Philip A. Canfield ("GTCR") filed a motion for summary judgment on all joint venture-related claims (Counts 11, 12, 14, 15, 16, and 22). Motion (doc. 239). On August 23, 2005, Defendant Kirkland &

Ellis ("K&E") joined GTCR's motion and filed their own motion for summary judgment on Counts 12 and 14 of Plaintiffs' Fourth Amended Complaint. K&E Joinder and Motion (doc. 242). GTCR's motion was

fully briefed and argued orally, however, Plaintiffs did not respond to K&E's motion. For this reason, on October 18, 2005, K&E

moved for entry of judgment in their favor on Counts 12 and 14. Mot. Entry of Judg. (doc. 269). Having carefully considered the

arguments presented by the parties, the court now rules. I. Background Facts As noted above, 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. a Chicago-based venture capital firm. GTCR Golder Rauner, LLC, is 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. -2Document 356 Filed 03/29/2006

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Individual Plaintiff Christine Kirk was recruited by Defendants 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 opportunity to acquire shares of LeapSource. On August 18, 1999, GTCR sent Kirk a draft Summary of Understanding ("SOU") that stated some of the terms on which GTCR would be willing to provide funding to a corporation to be formed with Kirk and her management team. After considering another venture capital proposal from Bank of America, it is alleged that on August 30, 1999, the GTCR entities and Plaintiffs engaged in a joint venture to make preparations for LeapSource to commence operations (the Kirk-GTCR Joint Venture). Plaintiffs assert that

the alleged terms of the Kirk-GTCR Joint Venture were: (1) that GTCR would provide the financing required to successfully establish the new venture, with the understanding that the amounts required would be in the range of $50-100 million; (2) that GTCR's commitment was a long-term commitment to the success of the new venture, and that the new venture would be supported through a start up period that was expected to take two years, until it was successfully established as a leading provider of BPO services, and ready to go public or to be acquired when it would be advantageous to the new venture; (3) that the new venture would be expected to lose substantial amounts of money during its start up period (operating with negative EBITDA), that GTCR understood the magnitude of the financial commitment required to support the new venture during its start up period (because GTCR actually had similar loss experiences with other start-up companies), was "well equipped" to handle such losses, and was willing to finance the new venture through the start up period; (4) that GTCR's funding commitment was not conditioned upon the new venture's losses reaching -3Document 356 Filed 03/29/2006

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or exceeding any particular amount over the first two years; (5) that GTCR would not financially abandon the new venture, but would stick by the new venture even during bad times, in a way that other venture capital firms would not (in one meeting expressed by Rauner that, if Kirk would agree to leave Andersen and join GTCR in this new BPO joint venture, GTCR would be her "partner for life," and in another conversation with Nolan, when the possibility of obtaining financing from another firm was mentioned, that "They won't stick by you in bad times like we will."; (6) that the purpose of the new venture would be to create and develop a new BPO firm, to pursue related opportunities, and to grow the business of the new BPO firm through acquisitions, alliances, and operations, as contemplated in the business plan prepared by Chris Kirk and others, and provided to GTCR; (7) that Chris Kirk would be permitted to assemble a management team to implement the business plan and to manage the new venture, with the understanding that a qualified team of professionals and others would have to be brought into the management teams to provide and to sell the outsourcing services; (8) that the new venture would need to hire and train scores of employees even before outsourcing contracts were signed (with Joe Nolan suggesting that the appropriate number of people to bring on board at the outset would be 100); (9) that the new venture would have to be equipped to provide the same level and depth of outsourcing services that Andersen provided to its clients; (10) that the management team put together by Chris Kirk would be permitted to manage the new venture (also expressed in other words that GTCR did not get involved in management and would adopt a "hands off" policy toward the management of the new venture); (11) that the members of the management team would have an ownership interest in the new venture, with common stock in a new entity to be formed pursuant to the new venture divided equally between GTCR and the management team, and with GTCR receiving preferred stock in return for its financial investment; -4Document 356 Filed 03/29/2006

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (16) that Kirk's $400,000 annual salary had been accepted by the GTCR's Board of Directors, that GTCR would make Kirk whole for any bonus distribution withheld by Andersen, and would pay her a one-year's severance package if she was terminated without cause; (17) that GTCR would make Hartmann whole with respect to any compensation that she expected to receive from Andersen but did not receive because she left before October 1999, up to $1 million, and that GTCR would pay Hartmann a one-year severance package equal to her annual salary of $300,000; and (18) that McCollum would be made whole on any earned but unpaid bonus she would have received had she stayed at Andersen (with the understanding that McCollum expected to receive a bonus from Andersen in the amount of $80,000), and that GTCR would provide McCollum with a one-year severance package equal to her salary of $360,000. Resp. (doc. 253) at 11-13. -5Document 356 Filed 03/29/2006 (15) that a new company would be formed to provide outsourcing services, and would be a "standard GTCR play," intended to replicate the AnswerThink experience, which meant to start the business with a substantial number of experienced employees from Andersen so that the new venture could stake out a leading position in the BPO services industry; (14) that, because of the non-competitive provisions in the management team's agreements with Andersen, the new venture would not be permitted to start selling outsourcing services for a period of months after their departure from Andersen, which would further extend the start up period discussed previously (when the new venture would be losing money and requiring continuing financial support from GTCR); (12) that the members of the management team would be assured of compensation at levels comparable to the compensation that they had been receiving at Andersen (and Chris Kirk, Kim Hartmann, and Julie McCollum specifically discussed their individual compensation as described below); (13) that GTCR would indemnify the management team against the costs of any action that might be taken by Andersen as a result of the management team's departure from Andersen;

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Between August 30, 1999 and September 14, 1999, Kirk negotiated with GTCR over the terms of the SOU. 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 V. Kirk ("Kirk"), LeapSource's start-up CEO. This group

(which is composed primarily of the individual Plaintiffs in this action) worked to gradually grow the LeapSource business; however, for reasons which are highly contested in this action, the company failed and filed for chapter 7 bankruptcy liquidation. The plaintiffs in this action include the LeapSource bankruptcy trustee, as well as eight individuals who served in principal positions with LeapSource (including Kirk). of Rem. (doc. 1) Exbt. A, Amended Complaint. See Notice

Plaintiffs' complaint

alleges various causes of action against the various defendants both collectively and individually. On September 30, 2003, the

Court granted in part and denied in part a motion to dismiss filed by GTCR. Order (doc. 72) at 68. The Court granted dismissal of

Counts 1, 2, 3, 5, 13, 26, 27, and 29, and partial dismissal of Counts 7, 8, 24 and 25. Id. at 68-71. Id. The Court denied dismissal Now, the Court reviews

of all the other contested claims.

GTCR's motion for summary judgment, which seeks summary judgment on all of Plaintiffs' joint venture-related claims (Counts 11, 12, 14, 15, 16, and 22). Motion (doc. 239).

As an introductory matter, the FAC obviously alleges plaintiffs' claims against the defendants. These claims are made

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by different plaintiffs and groups of plaintiffs against various groups of defendants. For purposes of this order only, plaintiff-

subgroups are referred to as "Mann," (the bankruptcy trustee), and the "individual Plaintiffs" or "Plaintiffs" referring to Christine Kirk, ("Kirk"), Kimberly Hartmann, Julie B. McCollum, Kelly Powers, Indu Gupta, Bobby D. Scott, and Patrice E. Walker.1 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. II. Standard of Review To grant summary judgment, the Court must determine that the record before it contains "no genuine issue as to any material fact" and, thus, "that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In determining whether to

grant summary judgment, the Court will view the facts and inferences from these facts in the light most favorable to the nonmoving party. See Matsushita Elec. Co. v. Zenith Radio Corp.,

475 U.S. 574, 587 (1986). Summary judgment is appropriate "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." 317, 322 (1986). Celotex Corp. v. Catrett, 477 U.S.

"In such a situation, there can be 'no genuine

issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case

Plaintiffs do not claim that individual Plaintiff Thomas Gilman joined the alleged joint venture. FAC (doc. 121) at ¶¶ 159-162. -7Case 2:02-cv-02099-RCB Document 356 Filed 03/29/2006 Page 7 of 41

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necessarily renders all other facts immaterial."

Id. at 323.

In

such a case, the moving party is entitled to a judgment as a matter of law. Id.

The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. A material fact is any factual dispute that

242, 247-48 (1986).

might affect the outcome of the case under the governing substantive law. Id. at 248. A factual dispute is genuine if the

evidence is such that a reasonable jury could resolve the dispute in favor of the nonmoving party. Id.

A party opposing a motion for summary judgment cannot rest upon mere allegations or denials in the pleadings or papers, but instead must set forth specific facts demonstrating a genuine issue for trial. See id. at 250. Finally, if the nonmoving party's

evidence is merely colorable or is not significantly probative, a court may grant summary judgment. See, e.g., California

Architectural Build. Prods., Inc. v. Franciscan Ceramics, 818 F.2d 1466, 1468 (9th Cir. 1987). III. Discussion In its motion, GTCR asks the Court to grant summary judgment on all of Plaintiffs' joint venture-related claims. Specifically,

GTCR requests summary judgment on Counts 11, 12, 14, 15, 16, and 22 of the FAC. GTCR argues that all of these claims fail because no "What plaintiffs

joint venture ever existed between the parties.

have labeled the 'Kirk-GTCR Joint Venture' for purposes of this litigation is nothing more than negotiations that resulted in the -8Document 356 Filed 03/29/2006

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parties' definitive written agreements governing LeapSource." Motion (doc. 239) at 15. A. Existence of a Joint Venture Individual Plaintiffs allege claims against GTCR based on its alleged breach of a joint venture agreement. Under Arizona law, a

joint venture is formed when two or more parties agree to pursue a particular enterprise in the hope of sharing a profit. Public Service Co. v. Lamb, 84 Ariz. 314, 317 (1958). Arizona To establish

a joint venture, there must be: "(1) an agreement; (2) a common purpose; (3) a community of interest; (4) an equal right of control; and (5) participation in profits and losses." Hernandez v. Flavio, 187 Ariz. 506, 509 (1997). Estate of

Where there is a

question as to the existence or nature of a joint venture, each case must be resolved upon its own facts. Ariz. 280, 286 (1959). Plaintiffs allege that they engaged in two separate business relationships to carry out the business of LeapSource. The first See Mercer v. Vinson, 85

relationship was a joint venture between the individual Plaintiffs and GTCR. The other relationship was formed later when LeapSource

was incorporated, in order to carry out the purposes of the joint venture. Plaintiffs claim that they engaged in separate agreements The FAC first claims:

governing each of these relationships.

¶ 146. . . . On August 30, 1999, [Kirk] notified Nolan that, in reliance on the representations and promises made by GTCR, she would leave Anderson [her former employer] and join the new BPO joint venture with GTCR. In response, Nolan said that GTCR would send to Kirk a written agreement of their understanding. ¶ 147. At this point, a joint venture came into existence (the "Kirk-GTCR Joint Venture"). FAC (doc. 121). As a result, on August 30, 1999, Plaintiffs allege -9Document 356 Filed 03/29/2006

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that the joint venture came into existence which created legal rights and obligations between the parties. "In reliance upon the

representations and promises made by GTCR[,] Kirk, Hartmann, McCollum, Walker, Powers, Scott and Gupta left their positions at Andersen and began work on the new joint venture with GTCR." (doc. 253) at 4. Thereafter, as contemplated, a new company was created in order to carry out the objectives of the Kirk-GTCR Joint Venture. The complaint makes clear that this new company, originally named KirkCo, was incorporated in Delaware on September 16, 1999, and renamed "LeapSource." Id. at ¶ 170. Hence, LeapSource was formed Id. at ¶ Resp.

as an instrumentality of the Kirk-GTCR Joint Venture. 171.

In order to implement the joint venture through LeapSource, a As stated

number of agreements were entered between the parties. in the FAC:

¶ 175. . . . on September 27, 1999, LeapSource and/or Individual Plaintiffs entered into five major agreements in order to implement GTCR's $65 million funding commitment to the Kirk-GTCR Joint Venture, and to launch the operations of the Company under Kirk as CEO. These agreements included the "Purchase Agreement," "Stockholders Agreement," "Senior Management Agreement," "Registration Agreement," and "Professional Services Agreement" (collectively, the "Agreements"). FAC (doc. 121). While the FAC alleges that GTCR breached the joint venture agreement, GTCR contends that there was no joint venture to be breached. GTCR asserts that no joint venture existed between the

parties because (1) the parties never intended to associate as joint venturers, (2) the parties never agreed to an equal right of control, and (3) the parties never agreed to participate in profits and losses. Motion (doc. 239) at 16. In their motion, GTCR does

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not challenge the existence of "an agreement," a "common purpose," or a "community of interest" between the parties; the first, second and third elements required to establish a joint venture. 1. The Parties' Intentions GTCR asserts that no joint venture ever existed between itself and Plaintiffs because the parties did not "intend" to form a joint venture. In their motion, GTCR argues that, based on the SOU, the First, GTCR

parties did not intend to create a joint venture.

contends that the Kirk-GTCR Joint Venture could not have come into existence on August 30, 1999, because the terms of the alleged joint venture remained under negotiation until September 14, 1999, when Defendant Nolan signed the SOU on behalf of GTCR. (doc. 239) at 16; FAC (doc. 121) at ¶ 159. Motion

Second, GTCR argues

that the SOU itself demonstrates that the purpose of the parties' on-going negotiations was to form a corporation that would provide BPO services. Motion (doc. 239) at 16. GTCR notes that neither

the SOU nor any other document exchanged between the parties referenced a "joint venture." Id. at 16-17. Third, GTCR argues

that the SOU itself made clear that its terms were not independently binding, and that they served only to memorialize terms that would ultimately be included in definitive agreements. Id. at 17. This agreement is not binding until the execution of a definitive legal agreement and completion of due diligence (including reference checks). GTCR and Management will hold terms in confidence. DSOF (doc. 240) at Exbt. 4. Finally, GTCR asserts that Plaintiffs' testimony is insufficient to prove that they had the requisite intent to form a - 11 Filed 03/29/2006

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joint venture.

Motion (doc. 239) at 17.

GTCR notes that Kirk

never told anyone that she intended to create a joint venture that would exist throughout the life of LeapSource. Id. In addition,

GTCR contends that the individual Plaintiffs' testimony indicates that each of them knew "virtually nothing about the terms of the alleged joint venture and had little if any communication with GTCR." Id. at 18. Regardless, GTCR asserts that it never heard of

nor joined a joint venture with the individual Plaintiffs, but if any joint venture were ever formed, it did not survive the execution of the five written agreements dated September 27, 1999. Id. at 18-19. In response, Plaintiffs assert that intent is not an element required to form a joint venture. Resp. (doc. 253) at 9. Citing

the Uniform Partnership Act, Plaintiffs contend that such a partnership may be formed despite the intent of the parties involved. Id.

Except as otherwise provided in subsections B and C, the associations of two or more persons to carry on as co-owners of a business for profit forms a partnership, whether or not the persons intended to form a partnership. A.R.S. § 29-1012(A). Plaintiffs also cite numerous sections from

the individual Plaintiffs' depositions where they spoke about certain aspects of the joint venture, indicating that they did know of its existence. Resp. (doc. 253) at 10-11. Moreover, Plaintiffs

assert, and GTCR does not dispute, that it is inappropriate to resolve issues of credibility, motive, and intent on motions for summary judgment. Id. at 6-7. Under Arizona law, a joint venture, which "arises out of express or implied contract, is founded upon mutual understanding - 12 Filed 03/29/2006

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and agreement between the adventurers...and arises only where they intend to associate themselves as such." Helfenbein v. Barae Generally, it is

Investment Co., 19 Ariz. App. 436, 439 (1973).

inappropriate to resolve issues of credibility, motive, and intent on motions for summary judgment. See Box v. A & P Tea Co., 772

F.2d 1372, 1378 (7th Cir. 1985); Hardin v. Pitney-Bowes, Inc., 451 U.S. 1008 (1981) (dissenting opinion of Justice Rehnquist); State v. Ashton Co., 4 Ariz. App. 599, 602 (1967). Thus, the Court

concludes that the parties' intent remains a genuine issue of material fact. 2. Equal Right of Control Under Arizona law, parties to a joint venture must have an equal right of control over the venture. 187 Ariz. at 509. See Estate of Hernandez,

Here, GTCR argues that no such right existed

between the parties, thus indicating that there was no Kirk-GTCR Joint Venture. Motion (doc. 239) at 19. On December 4, 2002, GTCR moved to dismiss Plaintiffs' joint venture claims on this same basis. Mot. to Dismiss (doc. 16). At

that time, GTCR argued that under the Senior Management Agreement ("SMA") each of the individual Plaintiffs was an at-will employee of LeapSource, and, therefore, was subject to termination at any time, even without cause. Id. at 9. They asserted that such a Id., citing

relationship is inconsistent with a joint venture.

North Am. Van Lines v. Emmons, 50 S.W.3d 103, 117 (Tex. App. 2001); Glynn v. Roy Al Boat Mgmt. Corp., 57 F.3d 1495, 1499 (9th Cir. 1995). For example, even though Kirk was the company's CEO, she

reported to LeapSource's board of directors (a majority of which were appointed by the GTCR entities), she could be terminated - 13 Filed 03/29/2006

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without cause, and the board could override her management decisions. Mot. to Dismiss (doc. 16) at 9. As a result, since the

Plaintiffs could be fired without cause, and even the CEO's decisions could be overridden by the board, GTCR contended that there was no equal right of control over the purported joint venture. Id. at 9.

In their response, Plaintiffs asserted that GTCR's argument confused the terms of the Kirk-GTCR Joint Venture with the LeapSource agreements. Mot. to Dismiss Response (doc. 48) at 15.

In other words, Plaintiffs disputed that the SMA, a LeapSource governing document (which creates an employment at-will relationship for Plaintiffs), governs the separate joint venture. Id. Plaintiffs argued that the joint venture was formed before LeapSource and that the execution of the LeapSource documents came later. Order (doc. 72) at 21. In other words, Plaintiffs argued

that the at-will relationship created under the SMA only governed the relationship of the parties as far as the LeapSource entity was concerned, but that no at-will relationship existed under the joint venture agreement. Id. The Court, in its order, noted that this

description of the parties' relationship created an odd situation. Order (doc. 72) at 21-22. This rather odd situation presents the hypothetical question of what would occur if a Plaintiff were fired by the LeapSource board­would they continue as co-adventurers in the joint venture? It appears that LeapSource was intended to be the vehicle through which the joint venture was to be carried out. FAC ¶ 171 ("LeapSource was formed as an instrumentality of the Kirk-GTCR Joint Venture, to provide [BPO services] to clients"); ¶ 175 - 14 Document 356 Filed 03/29/2006

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(LeapSource agreements entered in order to implement GTCR's funding commitment and to launch the operations of the company under Kirk); see also ¶ 467-69. As a result, the court is unclear how the employees could have equal management responsibilities under the joint venture agreement, but not under the LeapSource agreements--especially when LeapSource was formed as the instrumentality for carrying out the joint venture agreement. However, the Court, finding that it could not sufficiently

evaluate the issue at that time, denied the dismissal of Plaintiffs' joint venture-related claims on this basis. Id. at 23.

In its current motion, GTCR argues that the evidence regarding the alleged Kirk-GTCR Joint Venture is now in and shows that the parties did not hold the requisite equal right of control. (doc. 239) at 20. Motion

First, GTCR cites Kirk's deposition testimony,

noting that she points to GTCR as the controller of the joint venture. Id. In addition, GTCR notes that Plaintiff Gupta,

Hartmann, and McCollum all testified that they had no control over the alleged joint venture. Id. at 21.

Second, GTCR asserts that the SOU, that Kirk contends embodied some of the terms of the joint venture agreement, relates solely to the corporation created from the alleged joint venture. Id.

Moreover, GTCR notes that the SOU "did not provide plaintiffs with an equal right of control." Id.

All corporate "financial and operating objectives" were to be decided by the corporation's Board of Directors, and "GTCR will have the right to control the Board." Motion (doc. 239) at 21, citing Exbt. 4 (doc. 240) at 1-2. In contrast, Plaintiffs assert that they have satisfied this element required to establish the existence of a joint venture. - 15 Filed 03/29/2006

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Resp. (doc. 253) at 16-19.

They argue that the law does not

require that the parties actually exercise equal control over the affairs of the joint venture. Id. at 17. "[T]hey are free by

their agreement to allow each of the parties to play a different role in the business venture, with more or less or no control over the operations of the venture." Id. In support of their argument,

Plaintiffs cite Ellingson v. Sloan, 22 Ariz. App. 383 (1974). In Ellingson, the court considered whether a joint venture existed between three parties involved in a real estate development project. Id. at 385. One of the three parties, Ellingson, refused

to execute a promissory note to another party, Sloan, arguing that no enforceable contract existed between them. Id. at 386.

Specifically, Ellingson contended that the arrangement between the parties could not be characterized as a joint venture, because it did not provide for Sloan's participation in any losses nor for mutual control of the enterprise. Id. On the issue of equal control, the court found that Sloan did have an equal right of control over the affairs of the parties. Ellingson, 22 Ariz. App. at 387. Listed among the acts that Sloan Id. The court did not agree.

conducted in relation to the real estate venture, the court noted that Sloan had: (1) changed architects; (2) engaged a new building contractor; (3) established that the site was suitable for a

library; (4) obtained on and off ramps to the freeway; (5) negotiated with the City of Tempe concerning the construction of cluster type apartments; (6) worked as manager of the joint venture; (7) met weekly with the First National Bank over a period of eighteen months to report on the joint venture's activities and - 16 Filed 03/29/2006

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prevent foreclosure of the delinquent mortgage; and (8) eventually found the ultimate purchaser of the property. Id. at 385-86.

"Indeed, he was the most active participant in managing both the direction and course of the joint venture." Id.

The requisite of equality in joint control does not render impossible the delegation of the duties of management to one of the participants in a joint venture. The rights of the parties with respect to the management and control of the enterprise may be fixed by agreement so as to effectively place control in the hands of one of the joint venturers, and, once having been fixed, may be changed by agreement. Id. at 387, n. 1. Thus, Plaintiffs assert that GTCR's citation of sections of some of the individual Plaintiffs' deposition testimony does not establish that Plaintiffs had no control or right of control over the joint venture under the standard defined in Ellingson. (doc. 253) at 17. Resp.

"[T]he fact that (as GTCR points out in its

Motion) GTCR had the right to control the board of LeapSource..., and the fact that GTCR in fact had substantial control over the fate of the venture because of its control of the purse strings, do not preclude the finding that a joint venture existed." Id.

Furthermore, Plaintiffs seem to assert that individual Plaintiffs Kirk and Hartmann exhibited the necessary equal control, because they were given the duties of assembling a management team to implement the business plan, and help build a leading practice BPO company, respectively. Id. at 18.

In addition, Plaintiffs assert that the SOU did not embody all of the terms of the joint venture. Id. at 18. According to

Plaintiffs, the SOU was merely the only document that Kirk could recall at her deposition as an example of one of the written - 17 Filed 03/29/2006

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documents that contained some of the alleged joint venture terms. Id. at 19. They note that her interrogatory responses, made under

oath six months earlier, provided additional detail of the joint venture terms. Id.

In determining whether the parties held an equal right of control, "[t]he test is whether there is a right of mutual control over the subject matter of the venture, that is, the means by which the parties intend to obtain their objective." App. at 386-87. Ellingson, 22 Ariz.

"Either expressly or impliedly, the agreement must

indicate that 'each of the parties to such a joint adventure has authority to act for all in respect to the control of the means or agencies employed to execute such a common purpose.'" Estate of

Hernandez, 187 Ariz. at 509, citing West v. Soto, 85 Ariz. 255, 262 (1959). Each party to the joint venture must have an "equal right

to direct and govern the movements and conduct of each other with respect thereto. Each must have some voice and right to be heard in its control or management." Estate of Hernandez, 187 Ariz. at 509,

citing Maloy v. Taylor, 86 Ariz. 356, 359 (1959). In the case at bar, Plaintiffs assert that there were two independent business activities that occurred between the parties; the Kirk-GTCR Joint Venture and LeapSource. Plaintiffs argue that

the Kirk-GTCR Joint Venture was created between all the parties on August 30, 1999 and continued on after LeapSource was incorporated on September 16, 1999. However, upon review of the parties'

arguments and evidence, the Court does not agree. Plaintiffs have not sufficiently shown that each of them held an equal right of control over the alleged joint venture. Although

Plaintiffs are correct in their assertion that Ellingson allows - 18 Filed 03/29/2006

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joint venturers to delegate the duties of management to one participant, such facts are not clearly on par with those in this case. Plaintiffs, in response to GTCR's motion for summary

judgment, assert that the fact that GTCR had the right to control the board of LeapSource, and had substantial control of the purse strings, do not preclude the finding that a joint venture existed. This conclusory statement is not enough to establish the existence of an equal right of control, and survive summary judgment. A

party opposing a motion for summary judgment cannot rest upon mere allegations or denials in the pleadings or papers, but instead must set forth specific facts demonstrating a genuine issue for trial. See Anderson, 477 U.S. at 250. Plaintiffs attempt to show such evidence by noting that individual Plaintiffs Kirk and Hartmann exhibited equal control when they were given the duties of "assembling a management team" and "helping build a leading BPO company," respectively. Such

evidence may call into question whether Kirk held an equal right of control over the alleged venture, as "assembling a management team" is a precise, tangible service she could provide. Without a management team, it is arguable that the alleged joint venture would not continue. In addition, Kirk clearly acted at the For example, the record

forefront of all negotiations with GTCR.

indicates that she was the main individual Plaintiff that participated in negotiations with GTCR. DSOF (doc. 240) at ¶¶ 1, 2, 4, 5, 7, 9; PSOF (doc. 271) at ¶¶ 1, 2, 4, 5, 7, 9. Moreover, Kirk

indicated her influence upon the joint venture when, in early September 1999, she threatened to withdraw from the negotiations with GTCR if their commitment to fund the future BPO was not - 19 Filed 03/29/2006

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clarified.

FAC (doc. 121) at ¶ 155.

Providing such services that

would likely determine the future of the alleged joint venture seems to fall within the context of Ellingson and its idea of "mutual control." 22 Ariz. App. at 386-87.

On the other hand, Hartmann's claimed duty of "helping build a leading BPO company" is not as tangible and does not establish that Hartmann had a right of "mutual control" or "management" over the subject matter of the venture. Moreover, Plaintiffs do not point

to any evidence in the record that indicates that Hartmann provided this service to any entity other than LeapSource. Plaintiffs

provide no evidence that any of the other individual Plaintiffs provided any service or management to the alleged joint venture that would equate to an equal right of control. Summary judgment is appropriate "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." 317, 322 (1986). Celotex Corp. v. Catrett, 477 U.S.

In determining whether to grant summary judgment,

the Court will view the facts and inferences from these facts in the light most favorable to the nonmoving party. See Matsushita Here,

Elec. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

the Court finds that Plaintiffs have failed to make a showing sufficient to establish that the individual Plaintiffs, except possibly Kirk, held an equal right of control in the alleged KirkGTCR Joint Venture. Accordingly, the Court concludes that only

Kirk's equal right of control in the alleged Kirk-GTCR Joint Venture remains a genuine issue of material fact. . . . - 20 Filed 03/29/2006

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3. Participation in Profits and Losses GTCR further argues that the sharing of profits or losses was never contemplated nor did it occur within the alleged joint venture. Motion (doc. 239) at 22. Again, GTCR cites statements

made by the individual Plaintiffs indicating that the alleged joint venture had no profits or losses of which they could share, nor did they consider themselves as sharing in any such profits or losses. Id., citing Exbt. 19 (doc. 240) at 122; Exbt. 21 (doc. 240) at 96; Exbt. 23 (doc. 240) at 298; Exbt. 24 (doc. 240) at 124. Again, Plaintiffs respond to this argument by asserting that GTCR has misinterpreted this element of a joint venture. (doc. 253) at 19. Resp.

Plaintiffs contend that under both the current

and prior versions of the Uniform Partnership Act, the division of profits and losses does not require equal sharing of monetary profits and losses. Id. Instead, Plaintiffs assert that the

contribution of services by one or more of the parties is sufficient to satisfy the requirement of "participation" in profits and losses of the venture. Id.

The term 'losses' is not limited to monetary losses, but includes time expenditures and out-ofpocket expenses, especially where one party in a joint venture furnishes property and the other only services. Id., citing Ellingson, 22 Ariz. App. at 386. In Ellingson, the

court concluded that "[b]y agreeing to an exchange of services for a share of the profits to be derived from the joint venture, the parties provided for Sloan's participation in any losses." Ariz. App. at 386. Here, Plaintiffs compare the facts in Ellingson with those in the case at bar. "[T]he plaintiffs who resigned from Arthur - 21 Filed 03/29/2006 22

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Andersen to join GTCR in building an industry-leading BPO generally provided services to the joint venture, although some of them also paid expenses of creating the new business venture, while GTCR committed to provide the money required[.]" Resp. (doc. 253) at 20. As previously stated, Kirk provided services to the alleged Kirk-GTCR Joint Venture. Specifically, Kirk agreed to assemble a

management team and acted as the main negotiator with GTCR regarding the future BPO. The Court believes that such an

agreement may fall within the context of the rule defined in Ellingson. Thus, the Court concludes that Plaintiffs have

established that Kirk's participation in the profits and losses of the alleged Kirk-GTCR Joint Venture remains a genuine issue of material fact. 4. Effect of the Creation of LeapSource on the Alleged Joint Venture Next, GTCR argues that the joint venture ended when LeapSource was incorporated and the alleged joint venture did nothing after such date of incorporation. Motion (doc. 239) at 22. First, GTCR

argues that under Arizona law, "a joint venture agreement terminates when 'the purposes of the agreement have been accomplished.'" 503-04 (1978). Id., citing Marmis v. Solot Co., 117 Ariz. 499, They also cite an opinion issued by the

Pennsylvania Supreme Court holding that "where the 'sole business' of the parties was carried on by the corporation, and where '[n]o such business was previously carried on by...the stockholders acting as individuals or as partners,' the employee could not sustain his claims that the parties were concurrently operating as partners.'" Id. at 23, citing Schuster v. Largman, 162 A. 305, - 22 Filed 03/29/2006

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305-06 (Pa. 1932).

Thus, GTCR contends that once LeapSource was

formed and the written agreements dated September 27, 1999 were executed, any joint venture based on the terms of the SOU would have terminated. Motion (doc. 239) at 22.

Second, GTCR cites two cases, both of which are based on New York law, which hold that incorporation of a business is fundamentally inconsistent with continuing to do business as a joint venture. Motion (doc. 239) at 23, citing WMW Mach. v.

Werkzeugmaschinenhandel GmbH IM Aufbau, 960 F.Supp. 734, 746 (S.D.N.Y. 1997) (fiduciary obligations of co-adventurers cease when they agree to conduct business as a corporation); Sanders v. Boelke, 172 A.D.2d 1014, 1015 (N.Y. 1991). GTCR asserted this same argument in its motion to dismiss. Mot. to Dismiss (doc. 16). At that time, the Court concluded that Order (doc. 72) at 23-

dismissal on this basis was inappropriate. 24.

Despite the clear law in New York, cases in California, Florida, Illinois, Maryland, Massachusetts, Michigan, Montana, North Carolina, and Wisconsin hold the opposite. 8 FLETCHER CYCLOPEDIA CORPORATIONS §3997.10, n. 1 (2001 Rev.) at 302. Since Arizona has not squarely addressed this issue, in light of the overwhelming weight of authority which allows a pre-incorporation joint venture to survive incorporation, this court predicts that Arizona will follow this trend. However, the court notes that while these states hold that a joint venture can survive incorporation, this does not mean that the venture necessarily does survive. In MacDonald v. MacDonald, 192 N.W.2d 903 (Wis. 1972), for example, the court held that survival of the venture was a question of the parties' intent. Since it is impossible at this stage to determine whether the parties intended the joint venture to continue after the incorporation of LeapSource, the survival issue cannot be determined at this time. The court has noted that survival would present some rather odd results if - 23 Document 356 Filed 03/29/2006

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the terms of the joint venture and the LeapSource governing documents were inconsistent; however, that is not an issue appropriate for resolution at this time. The parties may argue the effects of the joint venture agreement on the LeapSource governing documents (and vice versa) at a later time if it can be shown that the venture was intended to survive incorporation.

As they did in their response to GTCR's prior motion to dismiss, Plaintiffs argue that a joint venture and a corporation can co-exist. Resp. (doc. 253) at 20-23. In addition to the case

law they cited in their previous briefs, Plaintiffs also cite Holmes v. Lerner, 74 Cal. App. 4th 442, 445 (1999), to support their argument. "[I]nterpreting the Uniform Partnership Act,...

[the court found] the existence of a joint venture where the parties' very first discussions about the business venture contemplated the formation of a corporation[.]" Resp. (doc. 253)

at 22, citing Holmes, 74 Cal. App. 4th at 453-57. As stated above, the Court, in its prior order, concluded that, although Arizona has not yet squarely addressed this issue, it will likely follow the overwhelming weight of authority which allows a pre-incorporation joint venture to survive incorporation. Order (doc. 72) at 23. However, the Court noted that although a

joint venture can survive incorporation, that does not mean that it necessarily does survive. intent. Id. at 24. Id. Survival depends on the parties'

Plaintiffs now assert that questions of intent

are inappropriate for summary judgement, thus, GTCR's motion on this issue should be denied. Resp. (doc. 253) at 23.

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is dependent upon the parties' intentions, the issue of intent need not be reached on this motion. Truly, it is unclear to the Court

whether Plaintiffs assert that the Kirk-GTCR Joint Venture survived after the incorporation of LeapSource as a separate entity. Beyond

asserting that such a situation could occur, Plaintiffs provide the Court with nothing to indicate that such a situation did occur here. Other than their claim that GTCR promised to "be [Kirk's]

'partner for life,'" Plaintiffs produce no arguments or evidence indicating that any of the elements of a joint venture existed after the parties effectuated the LeapSource agreements. (doc. 253) at 12. Resp.

Moreover, the alleged terms of the Kirk-GTCR

Joint Venture that Kirk listed in her interrogatory responses refer only to "the" new venture, not multiple new ventures. 271) at Exbt. 2. PSOF (doc.

Thus, without further evidence indicating that

the parties contemplated the creation of multiple businesses, it is logical to conclude that "the new venture" was LeapSource. Plaintiffs have submitted no arguments or evidence showing that the elements of a separate joint venture were manifested and satisfied in another capacity. Summary judgment is appropriate "against a

party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Corp. v. Catrett, 477 U.S. 317, 322 (1986). Celotex

Thus, the Court finds

that no genuine issue of material fact remains in regard to this issue. 5. Parole Evidence Rule GTCR argues that Plaintiffs' Counts 11, 12, 14 and 15 fail for the additional reason that the alleged Kirk-GTCR Joint Venture - 25 Filed 03/29/2006

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contradicts the terms of the parties' integrated written agreements and thus violates the Parol Evidence Rule. 24. Motion (doc. 239) at

In support of their argument, GTCR cites case law from

Illinois that explains the Four Corners rule for written contracts. Id. GTCR argues that these cases establish that if the terms of a

contract are clear and unambiguous, the court may not refer to any other evidence or allegations outside the contract itself. Id.

Moreover, GTCR contends that "Illinois law is clear that 'where parties formally include an integration clause in their contract, they are explicitly manifesting their intention to protect themselves against misinterpretations which might arise from extrinsic evidence." Id. at 24, citing Air Safety, Inc. v.

Teachers Realty Corp., 706 N.E.2d 882, 885 (Ill. 1999). In this case, on September 27, 1999, Kirk, GTCR and the corporation they created, Kirkco, entered into a series of agreements, which included integration clauses. Id. at 25. GTCR

cites language from the Kirk SMA, asserting that full integration of these agreements was intended to include all aspects of their relationship. Id. at 26.

Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. Id., citing Exbt. 6 (doc. 240) at 17. GTCR argues that the

parties' written agreements dated September 27, 1999, explicitly supercede and preempt the September 14, 1999 SOU that contains some of the joint venture terms. Motion (doc. 239) at 26. - 26 Filed 03/29/2006 Thus, they

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assert that Plaintiffs' attempt to establish a separate joint venture is foreclosed under the Parol Evidence Rule. Id. at 27.

In contrast, Plaintiffs first argue that only one of the documents executed on September 27, 1999 was signed by all the parties, and the integration clause in that agreement was selflimiting. Resp. (doc. 253) at 24. Plaintiffs assert that only the

Stockholders Agreement was signed by all of the individual Plaintiffs and GTCR. Id. Furthermore, Plaintiffs contend that the

integration clause within the Stockholders Agreement was selflimiting, making itself only relevant to the subject of "buying LeapSource stock" and nothing else. Id.

Entire Agreement. Except as otherwise expressly set forth herein, this document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supercedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter in any way. PSOF (doc. 271) at Exbt. 15. Thus, Plaintiffs argue that any other

representations made by the parties were not integrated into this written agreement. Resp. (doc. 253) at 25.

Second, with respect to the integration clause that GTCR cites in its motion and the clauses contained in the SMAs and Employment Agreements, Plaintiffs argue that such clauses also do not indicate an integration of all of the parties' representations. Id.

Plaintiffs initially note that the parties to the Employment Agreements were the individual Plaintiffs and Kirkco or Leap, Inc., not GTCR. Id. In addition, Plaintiffs assert that the integration

clauses within these documents were also self-limiting, containing their relevance to only "the terms of [the parties'] employment by - 27 Filed 03/29/2006

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LeapSource."

Id. at 26.

Plaintiffs argue that, at most, "GTCR can only attempt to extend the reach of these integration clauses by arguing that they are ambiguous." Id. Arguing that the law of Illinois clearly

holds that any ambiguities present in a written contract must be construed against the preparer of the document, Plaintiffs contend that the integration clauses here must be construed against GTCR. Id. However, Plaintiffs assert that if the Court finds the

language of the contract to be susceptible to more than one meaning, an ambiguity is present and interpretation of such language is a question of fact. Id. at 27. Moreover, Plaintiffs

contend that parole evidence should be admitted to determine the intent of the parties with regard to the subject of the ambiguity. Id. In reply, GTCR asserts that each of these arguments is incorrect. First, GTCR contends that common rules of construction

demonstrate that the phrase "among the parties" could not refer to Kirk and LeapSource alone, because "among" generally refers to more than two persons. Reply (doc. 265) at 9. Second, GTCR asserts

that the phrase "subject matter hereof" in the Kirk SMA is clear and unambiguous in its reference to the subject matter of the "complete agreement." Id. The "complete agreement" includes those

matters addressed in the Purchase Agreement, Stockholders Agreement, Registration Agreement and Professional Services Agreement. Id. GTCR argues that if the parties intended to limit

the meaning of the integration clause in the Kirk SMA to only include the subject matter of the Kirk SMA, they could have expressly done so. Id. at 10. GTCR contends that the integration - 28 Filed 03/29/2006

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clause contained in the Professional Services Agreement indicates that the parties "knew full well how to write an integration clause with the narrow effect that plaintiffs now assert." Id.

Entire Agreement; Modification. This Agreement (a) contains the complete and entire understanding and agreement of GTCR and the Company with respect to the subject matter hereof; and (b) supersedes all prior and contemporaneous understandings, conditions and agreements, oral or written, express or implied, respecting the engagement of GTCR in connection with the subject matter hereof. DSOF (doc. 240) at Exbt. 9. The integration clauses contained in the Kirk SMA and the other agreements executed on September 27, 1999, extinguished any existing Kirk-GTCR Joint Venture. At the outset, despite

Plaintiffs' assertions, it is clear that GTCR was intended as a party to such agreements. In a section of the Kirk SMA entitled

"General Provisions," the contract states that "[e]ach of the parties to this Agreement (including the investors) will be entitled to enforce its rights under this Agreement." (doc. 240) at §11(h). were GTCR. Exbt. 6

Neither party disputes that "the investors"

More specifically, GTCR signed the documents, above DSOF

which, in the Kirk SMA, is written "Agreed and Accepted." (doc. 240) at Exbts. 6-10.

Under Illinois law, the "four corners" rule for written contracts establishes that if the terms of a contract are clear and unambiguous, the court may not refer to any other evidence or allegations outside the contract itself. See Bourke v. Dun &

Bradstreet Corp., 159 F.3d 1032, 1036 (7th Cir. 1998); Manor Healthcare Corp. v. Soiltest, Inc., 549 N.E.2d 719, 724 (Ill. App. 1989); AZL Resources, Inc. v. Bromagen, 398 N.E.2d 292 (Ill. App. - 29 Filed 03/29/2006

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1979).

In such cases, extrinsic evidence will not be considered.

Berutti v. Dierks Foods, Inc., 496 N.E.2d 350, 352 (Ill. App. 1986). In the instant case, the Court does not find the contract language in the contested agreements to be ambiguous. The parties

agreed in the integration clauses included in the Kirk SMA, the Stockholders Agreement, and the Professional Services Agreement that the signed contracts embodied the "complete agreement" and that they "supersede[d] and preempt[ed] any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way." DSOF (doc. 240) at Exbts. 6, 7, 9. The parties do not

dispute that, in the eyes of the law, the five agreements executed on September 27, 1999, are seen as one contract. See Labor World,

Inc. v. Just Parts, Inc., 735 N.E.2d 149, 152 (Ill. App. Ct. 2000) ("The general rule is that in the absence of evidence of a contrary intention, where two or more instruments are executed by the same contracting parties in the course of the same transaction, the instruments will be considered together and construed with reference to one another because they are, in the eyes of the law, one contract."). Consequently, the integration clauses apply to Therefore, the Court may not review any

the entire agreement.

other evidence or allegations, outside the contracts, concerning an alleged separate agreement, and Plaintiffs' Counts 11, 12, 14 and 15 fail as a matter of law. B. Counts 11, 12, 14, 15 and 22 Count 11 of Plaintiffs' FAC alleges a breach of fiduciary duty claim against GTCR. See FAC (doc. 121) at 87. - 30 Filed 03/29/2006 Count 12 alleges

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aiding and abetting breaches of fiduciary duty claims against the GTCR entities, Nolan, Rauner, Makings, Yih, Donnini, Canfield, Eaton, AEG Partners and K&E. Id. at 89. Count 14 contains a claim

for tortious interference with prospective economic advantage against the GTCR entities, Nolan, Rauner, Makings, Yih, Eaton, AEG Partners, and K&E. Id. an 90. Count 15 alleges a breach of the Id. at 92. Finally, in

joint venture agreement against GTCR.

Count 22, individual Plaintiffs claim that GTCR breached the Purchase Agreement and duty of good faith and fair dealing arising from the Purchase Agreement. Id. at 102. On this claim,

Plaintiffs assert that, through the joint venture, they were made third party beneficiaries to the Purchase Agreement. 121) at ¶ 476. FAC (doc.

Thus, Count 22 exclusively relies on the existence

of a joint venture between the parties. In its motion for summary judgment, GTCR argues that each of these claims arise out of the alleged joint venture and, thus, must fail as no joint venture existed. Motion (doc. 239). The Court

has determined that Plaintiffs failed to sufficiently establish that each of the individual Plaintiffs, except possibly Kirk, had an equal right of control over the alleged joint venture. In

addition, the Court concluded that Plaintiffs have failed to produce any evidence that indicates that any joint venture continued after the incorporation of LeapSource. Finally, due to

the parole evidence rule, the Court concluded that the integration clauses contained within the Kirk SMA and other LeapSource documents extinguished any previously existing Kirk-GTCR Joint Venture agreement. Accordingly, the Court shall grant summary

judgment in favor of GTCR on Counts 11, 12, 14, 15 and 22. - 31 Filed 03/29/2006

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C. Promissory Estoppel: Count 16 Count 16 alleges a promissory estoppel claim against GTCR. FAC (doc. 121) at 94. The FAC claims that GTCR, Nolan and Rauner

made certain promises to individual Plaintiffs Kirk, Hartmann and McCollum between July and September 1999, which these parties relied upon to their detriment. Id. at ¶¶ 431-440.

In order to establish a claim for promissory estoppel, Plaintiffs must show that GTCR made a promise and should have reasonably foreseen that Plaintiffs would rely on that promise, and that Plaintiffs actually relied to their detriment. See A plaintiff

Higginbottom v. State, 203 Ariz. 139, 144 (App. 2002).

must additionally show that he or she had a "justifiable right to rely" on the promise. Id. However, as the Supreme Court of

Arizona has clarified, "[t]here can be no implied contract where there is an express contract between the parties in reference to the same subject matter." (1977); Chanay v. Chittenden, 115 Ariz. 32, 35

see also Sutter Home Winery, Inc. v. Vintage Selections,

Ltd., 971 F.2d 401, 408-09 (9th Cir. 1992). GTCR first challenged the viability of this claim in its motion to dismiss. Mot. to Dismiss (doc. 16). In its Order of

September 30, 2003, the Court declined to dismiss this claim until discovery illuminated the status of the alleged joint venture. Order (doc. 72) at 29. GTCR now offers the same challenges again,

asserting that discovery on the matter is closed and the evidence indicates that the promissory estoppel claim must fail. (doc. 239) at 27. First, GTCR argues that Plaintiffs' promissory estoppel claim fails because the same subject matter is addressed by an express - 32 Filed 03/29/2006 Motion

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contract between the parties.

GTCR defines the express contracts

as "the fully integrated agreements executed on September 27, 1999, plus the various employment agreements executed thereafter." Motion (doc. 239) at 28. In their motion, GTCR notes that "every

promise underlying the promissory estoppel claim is addressed in one or more of the parties' subsequent written agreements." Id.

(listing "Funding," "Management," and "Employment" as the three topics involved in Plaintiffs' promissory estoppel claim and citing sections of the parties' written contracts that address such agreements). Second, GTCR asserts that the Parole Evidence Rule and the integration clause bar Plaintiffs' promissory estoppel claim. at 29. Again, GTCR argues that due to the integration clauses Id.

included in the September 27, 1999 agreements, the agreements were fully integrated and expressly provided that they superseded all prior promises or representations "which may have related to the subject matter hereof in any way." DSOF (doc. 240) at Exbt. 6. Motion (doc. 239) at 29, citing

GTCR asserts that "[t]he alleged

promises (which pertain to funding, management and employment) all 'relate' to the subject matter of the parties' written agreements," and, consequently, foreclose Plaintiffs from making claims based on such alleged promises. Id.

Third, GTCR contends that Plaintiffs could not have justifiably relied on any of the aforementioned promises since they later entered into various written agreements which directly contradicted such promises. Motion (doc. 239) at 29-30. For

example, GTCR argues that any unqualified oral promise to fund the company was directly contradicted by the LeapSource Purchase - 33 Filed 03/29/2006

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Agreement.

Id.

Any promise as to the manner in which GTCR would

be involved in the company's management is contradicted by the Kirk SMA and the Stockholders Agreement. Id. In addition, GTCR

contends that any promises as to Andersen-related compensation and severance payments were expressly contradicted in Plaintiffs' SMAs. Id. Finally, GTCR asserts that the claimed promises regarding

funding, management and employment are also inconsistent with the SOU of September 14, 1999. Id. at 30. As a result, having entered

into these agreements, GTCR contends that Plaintiffs could not justifiably rely on the oral promises. Fourth, GTCR asserts that Plaintiffs' claim must fail because the alleged promises involved in Plaintiffs' promissory estoppel claim were merely negotiations. "[T]he promissory estoppel

doctrine is inapplicable where the alleged promises were bargained for during negotiation of a written agreement and the acts taken in reliance on those promises were part of the consideration supporting the written agreement." Motion (doc. 239) at 30. In

support of this argument, GTCR cites Walker v. KFC Corp., 728 F.2d 1215 (9th Cir. 1984), claiming that it is on all fours with the case at bar. In Walker, the plaintiff was a KFC franchisee who claimed to have leased space and otherwise prepared to operate franchised restaurants in reliance on promises made prior to the parties entering into their written franchise agreement. 728 F.2d at 1219.

The court found that the parties obligations were established in their negotiated written contracts and not the "promises made outside the written agreements." Id. at 1220.

In sum, either [the franchisor] was in breach of - 34 Document 356 Filed 03/29/2006

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the contract or it was not. ...Promissory estoppel is not a doctrine designed to give a party to a negotiated commercial bargain a second bite at the apple in the event it fails to prove a breach of contract.

Here, GTCR argues that Plaintiffs' promissory estoppel claim relies on alleged promises similar to those discussed in Walker. Although the Ninth Circuit applied California promissory estoppel principles in Walker, GTCR contends that such principles are the same under Arizona law and should be analyzed in the same manner. Motion (doc. 239) at 31. Thus, GTCR asserts that Plaintiffs'

alleged reliance on such promises was simply "the deal" and that they cannot now use promissory estoppel to take a "second bite at the apple" when their breach of contract claim fails. 32, citing Walker, 728 F.2d at 1220. Plaintiffs respond directly with three arguments. First, they Id. at 31-

contend that the LeapSource agreements were entered into by Plaintiffs after they agreed to form the joint venture and after they left their existing positions at Andersen. at 28. Resp. (doc. 253)

As a result, they claim that the