Free Response in Opposition to 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] Kevin Breger/021004 ­ [email protected] Attorneys for Individual Plaintiffs and Trustee

STEVE BROWN & ASSOCIATES, LLC
1440 EAST MISSOURI, STE. 185 PHOENIX, ARIZONA 85014-2412 TELEPHONE (602) 264-9224

Steven J. Brown/010792 Co-Counsel for Trustee UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA 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' RESPONSE TO KIRKLAND & ELLIS STATEMENT OF FACTS AND PLAINTIFFS' STATEMENT OF ADDITIONAL FACTS PRECLUDING SUMMARY JUDGMENT

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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 Response: This is disputed, if it is meant to suggest that Sachnoff & Weaver represented LeapSource or Ms. Kirk in her capacity as LeapSource CEO, or that Ms. Kirk was represented in "these negotiations" with respect to each of the five written agreements referred to in paragraph 1.
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Pursuant to Local Rule 56.1, and Federal Rule of Civil Procedure Rule 56, the plaintiffs submit the following (1) Response to Kirkland & Ellis' Statement of Facts (Docket No. 256) and (2) Plaintiffs' Statement of Additional Facts Precluding Summary Judgment in support of Plaintiffs' Response to Kirkland & Ellis' Motion For Summary Judgment regarding Aiding and Abetting and Tortious Interference Claims. RESPONSE TO KIRKLAND & ELLIS STATEMENT OF FACTS 1. Five written agreements were executed on September 27, 1999 to implement GTCR's funding of LeapSource and to launch LeapSource's operations. K&E assisted in the drafting and negotiation of the agreements. (4th Am. Compl. ¶¶ 175, 178.) Response: Not disputed, although this description of the purpose of the written

agreements is obviously very general and vague, and is in no way a complete description of the agreements or of their purpose(s). 2. Plaintiff Christine Kirk, who would become LeapSource's CEO, was represented in these negotiations by her lawyers at the firm of Sachnoff & Weaver. (Excerpts of Deposition Transcript of Christine Kirk ("Kirk Deposition"), attached as Exhibit 1, at 588:23 - 589:6; Excerpts of Deposition Transcript of Jeffrey Schumacher, attached as Exhibit 2, at 28:17-21; Plaintiffs' Response to GTCR Defendants' Statement of Uncontested Facts (delivered to chambers on 9/28/2005) at p. 4 ¶ 9.)

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3. Plaintiff Thomas Gilman never had any conversations with any attorney, representative, or employee from K&E (excluding David Eaton) during the times relevant to this case. (T. Gilman's Response to K&E's Interrogatory, dated March 18, 2005, attached as Exhibit 3.) Response: Not disputed.

4. Plaintiff Kimberly Hartmann never had any conversations with any attorney, representative, or employee from K&E (excluding David Eaton) during the times relevant to this case. (K. Hartmann's Response to K&E's Interrogatory, dated March 23, 2005, attached as Exhibit 4.) Response: Not disputed.

5. Plaintiff Julie McCollum never had any conversations with any attorney, representative, or employee from K&E (excluding David Eaton) during the times relevant to this case. (J. McCollum's Response to K&E's Interrogatory, dated March 18, 2005, attached as Exhibit 5.) Response: Not disputed.

6. Plaintiff Kelly Powers never had any conversations with any attorney, representative, or employee from K&E (excluding David Eaton) during the times relevant to this case. (K. Powers' Response to K&E's Interrogatory, dated March 18, 2005, attached as Exhibit 6.) Response: Not disputed.

7. Plaintiff Indu Gupta never had any conversations with any attorney, representative, or employee from K&E (excluding David Eaton) during the times relevant to

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this case. (I. Gupta's Response to K&E's Interrogatory, dated March 18, 2005, attached as Exhibit 7.) Response: Not disputed.

8. Plaintiff Bobby Scott never had any conversations with any attorney, representative, or employee from K&E (excluding David Eaton) during the times relevant to this case. (B. Scott's Response to K&E's Interrogatory, dated March 18, 2005, attached as Exhibit 8.) Response: Not disputed.

9. Plaintiff Patrice Walker never had any conversations with any attorney, representative, or employee from K&E (excluding David Eaton) during the times relevant to this case. (P. Walker's Response to K&E's Interrogatory, dated March 18, 2005, attached as Exhibit 9.) Response: Not disputed.

10. Kirk's deposition testimony made clear that the claims against K&E for tortiously interfering with contracts or prospective economic advantage arise solely from K&E service as GTCR's legal counsel: Q: And on what do you base your belief that Kirkland & Ellis provided legal advice to those persons [representatives of GTCR] that caused GTCR to breach the purchase agreement? A: Q: Conversations that I had with them. What conversations?

A: Where they would say, you know, "We need to get back and talk to K&E about this," or "We need to call K&E about this." Q: About the breach of the purchase agreement? 4
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A:

About LeapSource.

Q: And my question is: What do you base your belief on that Kirkland & Ellis provided legal advice to those persons that caused GTCR to breach the purchase agreement? A: I don't have any specifics on that.

(Kirk Deposition, Ex. 1, at 687:6-21.) Response: This is disputed. The quoted testimony does not admit, imply, or even support the point for which it is cited. The first question quoted above assumed a claim that K&E provided legal advice to representatives of GTCR that caused GTCR to breach the Purchase Agreement, but none of the questions asked whether that was the basis and the only basis for the tortious interference claims against K&E. In fact, the claims against K&E for tortious interference do not arise solely from K&E service as GTCR's legal counsel. 11. The draft letter to Kirk that reclassified her termination as "for cause" was prepared by the firm of Jennings Strouss & Salmon, which served as counsel for LeapSource on employment matters. (Excerpts of Deposition Transcript of Tina Rhodes, attached as Exhibit 10, at 245:14 - 246:12). The letter was not prepared by K&E. (Id.; Excerpts of Deposition Transcript of Richard Clyne, attached as Exhibit 11, at 53:4 - 54:3; Excerpts of Deposition Transcript of Kevin Evanich, attached as Exhibit 12, at 31:12 - 33:10.) Response: This is disputed if it is meant to suggest that K&E had no part in

preparing the "for cause" letter, that Jennings Strouss alone was responsible for preparing the letter, or that Jennings Strouss alone was consulted as counsel for LeapSource on employment matters. The cited testimony by Mr. Clyne says only that he did not "draft" the letter, and otherwise did not remember it. In fact, the evidence suggests that Mr. Clyne was consulted about the draft letter before it was finalized and sent to Ms. Kirk, just as he was
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consulted about other legal claims involving LeapSource, including severance claims by Christine Kirk, Kim Hartmann, and Julie McCollum (cited in the following Statement of Additional Facts Precluding Summary Judgment). A copy of the draft "for cause" letter was found on his computer at Kirkland & Ellis, and the version of the draft letter found on his computer was not the final form of the letter that was subsequently sent to Ms. Kirk. See the draft and final "for cause" letters, including the "DRAFT LETTER TO CHRIS KIRK," produced from K&E files, Bates KE003880, and bearing the footer "shared rclyne kirkco kirk cause letter de 509 doc/99999-8." SOAF Exhibit 1.1 PLAINTIFFS' STATEMENT OF ADDITIONAL FACTS PRECLUDING SUMMARY JUDGMENT 12. K&E was aware of the existence and terms of the five written agreements

referred to in the K&E Statement of Facts ¶ 1, above. ("Five written agreements were executed on September 27, 1999 to implement GTCR's funding of LeapSource and to launch LeapSource's operations. K&E assisted in the drafting and negotiation of the agreements.") 13. Those agreements included the Purchase Agreement, the Stockholders'

Agreement, a Senior Management Agreement with Christine Kirk, a Registration Agreement, and a Professional Services Agreement. Copies of these agreements were

attached as Exhibits 6 through 10 to the Statement of Facts in support of GTCR's Motion for Summary Judgment on Joint Venture-Related Claims [Docket No. 271].

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Exhibits to the Plaintiffs' Statement of Additional Facts Precluding Summary Judgment are attached and cited as "SOAF Exhibit __"; deposition testimony is cited by the last name of the witness followed by page and line references in the following format ­ ___ Deposition, page:line (e.g., Yih Deposition 31:21-32:12). 6
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14.

The GTCR Fund VI entities were the majority shareholders in LeapSource.

See SOAF Exhibit 23 (action by majority shareholders to remove Mr. Gilman from the LeapSource board of directors). 15. GTCR principals Bruce Rauner and Joseph Nolan were directors of

LeapSource no later than the beginning of December 1999. Board Minutes, December 2, 1999, SOAF Exhibit 2. 16. GTCR Portfolio Principal Daniel Yih was made a member of the LeapSource

board of directors on February 16 2001. Board Minutes, February 16, 2001, SOAF Exhibit 3. 17. Rauner, Nolan, and Yih remained directors of LeapSource in 2001, during the

time that AEG Partners was retained and when David Eaton was made Chief Restructuring Officer of LeapSource. Board Minutes, March 29 and May 10, 2001, SOAF Exhibit 4. 18. In the years 1999 to 2001, GTCR was a substantial client of Kirkland & Ellis,

and had been a client since 1979: Q. How long has GTCR been a client of Kirkland & Ellis?

A. Their first fund was formed in 1979. They've been a client since. Evanich Deposition. 9; 17-20. Q. In terms of the size of client GTCR is to Kirkland & Ellis, going back in the 1999-2001 timeframe, can you give me an estimate of Kirkland & Ellis' annual billings to GTCR? MS. REFO: During that time period? MR. WEINBERGER: Yes. A. I really don't know the answer to that.

BY MR. WEINBERGER:
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Q. A. Q. A.

Is it more or less than $1 million? More. More or less than $5 million? Some years less; some years more.

Evanich Deposition 10:24­11:12. 19. David Eaton considered GTCR to be K&E partner Kevin Evanich's client.

Eaton Deposition at 35:12-21: Q. Okay. At the time that you were given this particular GTCR portfolio client assignment, do you recall if there was a Kirkland & Ellis partner whose responsibility was the GTCR companies? A. I think the partner responsible for the GTCR compa -GTCR relationship was Kevin Evanich. Q. A. To your knowledge, GTCR is still Kevin Evanich's client? To my knowledge, yes.

Between September 1999 and July 2001, Kirkland & Ellis were also acting as

the attorneys for Kirkco, Inc. and LeapSource. Among other things, Kirkland & Ellis formed the company, maintained the stock ledger for LeapSource, issued common and preferred stock on behalf of LeapSource, and prepared Board consents and resolutions for the company. K&E was chosen to provide those services for LeapSource by GTCR: Q. Is it your testimony that you retained Kirkland & Ellis to represent the company between September 16 and September 27 [1999]? A. I was told by GTCR that I would use Kirkland & Ellis.

Q. Is it your testimony that you, as the sole director, retained Kirkland & Ellis to represent the company between September 16 and September 27? A. Yes, I believe so. 8
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**** Q. How did you retain Kirkland & Ellis on September 16 to represent the company? A. I had a number of conversations with Kirkland & Ellis. They formed the company. They did the tax filings. **** Q. Do you remember any conversation with anyone from Kirkland & Ellis between September 16 and September 27 in which you, as the sole director, said in substance, "I would like to retain Kirkland & Ellis to represent LeapSource"? A. I recall a conversation with Richard Clyne where he said, "We will be doing all of the work for LeapSource. I am going to be faxing you things. You need to sign them and fax them back to me." **** Q. Was Mr. Schumacher aware that Kirkland & Ellis would be preparing the incorporation documents? A. Well, there was a point at which Mr. Schumacher wanted to do that. He and Jeff Gilbert had said that it would be cheaper, that they were ­ their rates were significantly less. I asked Joe Nolan about that, and Joe said, no, that Kirkland & Ellis handled all of the companies that GTCR invested in, that they would be LeapSource's counsel. Kirk Deposition 613:5-620:4. 21. Ms. Kirk also testified as follows about K&E's role in forming LeapSource: Q. A. Q. Did you participate in the incorporation of LeapSource? Yes. What did you do?

A. Kirkland & Ellis, as counsel for the company, asked me to execute requests for tax I.D. numbers, both, I believe, federal and state. There were other regulatory items that they asked me to execute. They would draft them, send them to me. I would sign them, and then, depending on what their instructions were, I
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would either, for example, fax it to the regulatory body or send it back to them. Kirk Deposition 209:18-210:4. Q. .... Did LeapSource have counsel between September 16 and September 27, 1999? A. Well, Kirkland & Ellis formed LeapSource. They did the work for LeapSource, so I would say, yes, Kirkland & Ellis was LeapSource's counsel. Kirk Deposition 612:10-14. 22. Mr. Nolan testified that GTCR "frequently" used K&E to "do work for our

companies," referring to the companies in which GTCR funds made equity investments: Q. Do you remember having any conversation with Chris Kirk about what law firm would be used to form the company that became LeapSource? A. I don't remember that specifically, no.

Q. You don't remember a discussion with her about reasons that Kirkland & Ellis should be used to form the company because of its familiarity with GTCR's business? A. I don't remember that specifically but that's quite possible.

Q. Do you remember having a discussion with Chris Kirk about K&E being retained to provide services to LeapSource, including maintaining the minutes, the stock ledger for the company? MR. FOSTER: Object to the form. MS. REFO: Object to the form. A. I don't remember that specifically, no.

BY MR. STIRLING: Q. Is that something that you have required for other companies funded by LeapSource -- by GTCR? MR. FOSTER: Objection -- I object to the form. [-] in there.
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A. We use K&E a lot. They're familiar with our documents, and a lot of times it's -- they do work for our companies. That makes it easier to get the equity documents done. MR. STIRLING: Q. When you say "they do work for our companies," do you mean the companies in which GTCR equity funds make investments? A. Yes.

Nolan Deposition 153:17-154:23. 23. K&E billed LeapSource for those services from September 1999 through

January 2001, and LeapSource paid K&E for the work performed and billed by K&E, with the exception of the January 2001 statement, which apparently remained unpaid at the time of the LeapSource bankruptcy petition. See K&E Statements and evidence of payment, SOAF Exhibit 5. 24. Mr. Yih, a former Kirkland & Ellis attorney and GTCR Portfolio Principal,

appointed by GTCR to act as LeapSource's "Crisis Manager" and then made a member of the LeapSource board of directors, also believed that Kirkland & Ellis was counsel for LeapSource. Mr. Yih testified as follows: Q. Were you aware that Kirkland & Ellis had provided professional services to LeapSource? MS. REFO: Objection to the form. A. I believed, yes, at the time, that it was also company's counsel. BY MR. STIRLING: Q. A. Kirkland & Ellis was? Yes.

Yih Deposition 334:20 - 335:3.
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25.

Tina Rhodes described her working relationship with Kirkland & Ellis, the

nature of the work they handled and for which they billed LeapSource. Her testimony on this subject includes the following description of services provided by Kirkland & Ellis to LeapSource: Q. In connection with your responsibilities at LeapSource, did you have occasion to interact with attorneys from the law firm of Kirkland & Ellis? A. Yes.

Q. Who were the attorneys that you interacted with while you were at LeapSource? A. In the beginning of my employment, primarily Richard Clyne, and it was for minutes, board of directors minutes. Q. When you say "minutes," how do you mean that?

A. Managing the minutes. Whenever there was a board of directors meeting, being the secretary, I'd work with him to get them drafted up. Also, stock certificates, as well. He issued those for LeapSource in the beginning. Rhodes Deposition 10:18 ­ 11:8. Q. On the next to the last line of that paragraph there is a clause that refers to, "prepare resolutions and stock certificates." Do you see that? A. Yes.

Q. Are those the corporate minutes or, rather, corporate acts that you referred to earlier in your testimony? A. Yes.

Rhodes Deposition 13: 19- 14:1 Q. BY MR. STIRLING: What was your understanding with respect to Kirkland & Ellis' representation of LeapSource during the period of time that Kirkland & Ellis was maintaining the stock ledger for the corporation? 12 Filed 11/14/2005

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MR. CONDO: Object to the form of the question. Q. BY MR. STIRLING: You can answer.

A. That they created organization documents for the company as well as handled administrative -- what I would call administrative matters including the resolutions and the stock certificates. Q. By "administrative matters," you're referring to - - well, what might also be described as corporate maintenance? A. Correct, yes.

Rhodes Deposition 16:16- 17:6. 26. Michelle Matiski, another of LeapSource's outside counsel with the Phoenix

law firm of Osborn & Maledon, testified that she was told that LeapSource had retained Kirkland & Ellis when it hired David Eaton for the restructuring of the company. She said: Q. Did anyone from LeapSource ever tell you during that time that they believed they had retained Kirkland & Ellis rather than AEG in connection with their retention of Mr. Eaton? A. Q. A. Yes. Who said that? I don't remember.

Q. What do you remember about someone from LeapSource saying that? A. I remember being told that Dave Eaton was of counsel to Kirkland & Ellis and that GTCR required LeapSource to hire him and therefore Kirkland & Ellis to work on the restructuring ­ or the work out, to work on the work out ­ work with the company. Q. A. Do you remember who said that? No.

Matiski Deposition, 49:21-50:11.

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27.

Daniel Yih was asked to work on LeapSource matters beginning in December

Q. ... Are you aware of, other than in his capacity as a member of the board of directors, any services that Mr. Nolan provided to LeapSource? A. Again, my involvement with the company was almost zero prior to my involvement in the end of December, so I don't know specifically again. Q. Other than the information that you had obtained from these voice-mail messages, what did you know about LeapSource before you traveled to Arizona at the end of December, 2000? A. I had heard that there was discussions about an initial public offering or another transaction of that sort, a financing transaction, but that's all I had heard. Yih Deposition 31:21-32:12. 28. The interests of GTCR and LeapSource were adverse when Mr. Yih first

became involved in the business of LeapSource in December 2000: Q. You don't recall any discussion about whether GTCR had honored its agreements with LeapSource? A. I remember from the very beginning of my involvement in the company, there was a question of whether or not we had ­ GTCR had fulfilled a commitment. Yih Deposition 326:18-23. Q. At any time in 2001 do you remember there being a discussion about whether GTCR had met its obligations to LeapSource under the professional services agreement? A. There were a number of concerns raised, I believe, in a letter from Tom Gilman at some point in the first quarter. I don't remember specifically if it raised questions about the professional services agreement. Q. Do you recall there being any discussion among the principals of GTCR about the letter written by Tom Gilman
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concerning whether GTCR had performed its obligations to LeapSource? A. Yes. There was conversations around Tom Gilman's letter and the allegations that were made. Yih Deposition, 328:17-329:8. 29. In January 2001, Dan Yih told Chris Kirk that GTCR had effectively "cut off

her arms and legs to operate the business" and was prepared to liquidate LeapSource: Q. Okay. Do you remember any -- anytime in January of 2001 having a conversation with Christine Kirk where you told her that you had cut off her arms and legs to operate the business of LeapSource? A. There was a conversation on January 30th where we had met with ADP, and we were scheduled to meet with Chris and Tom Gilman after that meeting. January 30th followed our having tried to work with the company to effect cost reductions and having been disappointed what -- with what she presented to us. And then there was a fairly, I think, contentious relationship with respect to me at that point in time because I had told her that we were disappointed with the cost-reduction effort that she had put forth. She had kept us waiting for a long time after the ADP meeting, and I remember being very upset because I think the tenor of the conversation with us was -- I think someone mentioned bobbing and weaving and delaying and trying to avoid direct conversations with respect to some of the issues that I was raising, so I was very upset. And I remember that in that conversation in particular, I said that we were not afraid -- GTCR was not afraid of trying to figure out whether or not we should liquidate the company, stop funding and liquidate the company, not that -- that we would but that we weren't afraid to address that issue if she wasn't prepared to respond to us with our questions and work with us.

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I don't remember if the discussion about the, quote, "cutting off the arms and legs" was part of that conversation or a previous conversation. She alleged that my interviewing members of her management team below her was undermining her authority, and I said, "Yes, it is effectively cutting off your arms and legs within the organization." I certainly never, ever threatened her physically to cut off her arms and legs. I did agree with her that interviewing management members below her was effectively cutting off her arms and legs. Yih Deposition, 158:7- 160:5. Q. You're reading -- I'm sorry. This is from GTCR 002315; correct? A. Yes.

Q. This is the second bullet point in the -- in the middle of that page? A. Q. Yes. All right.

A. I think that -- I don't recall that statement. I do recall, at the end of January, that we said that we would not -- we would certainly consider liquidation, we would be prepared to liquidate if necessary, in the context of the management team not cooperating with us in trying to determine the various different funding requests, and -- I'm sorry -- the different cost-reduction efforts. And so I do recall that at the end of January. Yih Deposition, 357:3-20. 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

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services rendered ... from January 1, 2001 through January 31, 2001," KE000365. SOAF Exhibit 5. 31. When K&E was performing legal research in preparation for a LeapSource

RIF at the request of GTCR and contrary to LeapSource corporate officers, K&E was on notice that the interests of LeapSource and GTCR were adverse. 32. Thomas Gilman spent 27 years of his career rising through the ranks of

Chrysler. Gilman Deposition, 16:6-18:21, SOAF Exhibit 18. 33. Thomas Gilman served in various positions at Chrysler. He served: as Head of

Financial Planning; in various executive level financial management roles until he became Controller of Chrysler Financial; he then became CFO of Chrysler Financial and finally served on the Daimler Benz Chrysler Merger Team until he retired from Chrysler in 2000. Gilman Deposition, 16:6-21, SOAF Exhibit 18. 34. Thomas Gilman, prior to retiring from Chrysler served as Controller of

Chrysler for 3 years, as CFO of Chrysler Financial for 1 year and on the Daimler Benz Chrysler Merger Team for 2 years. Gilman Deposition, 16:6-18:15, SOAF Exhibit 18. 35. Thomas Gilman was a Vice President of Chrysler Corporation and Chief

Integration Officer for the Daimler Benz Chrysler Merger Team. Gilman Deposition, 16:618:21, SOAF Exhibit 18. 36. On February 24, 2001, Tom Gilman sent a memorandum to the members of

LeapSource board reciting a history of questionable and wrongful acts by the representatives of GTCR. Confidential Memorandum from Tom Gilman to the LeapSource board dated February 24, 2001 (the "Gilman Memorandum"). SOAF Exhibit 6.

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37.

The Gilman Memorandum was addressed to all LeapSource Board of Directors

members because it concerned a number of issues relating to the status of LeapSource and several alternatives for consideration by the board. This document was faxed to the board members, including the principals of GTCR who were on the LeapSource board, Bruce Rauner, Joe Nolan, and Dan Yih. SOAF Exhibit 6. 38. The Gilman Memorandum described the history of several disputes with

GTCR and the GTCR members of the board of directors, and itemized numerous acts by GTCR and by principals of GTCR that were harmful to LeapSource and have been alleged as breaches of fiduciary duties in this action. SOAF Exhibit 6. 39. The Gilman Memorandum complained that "GTCR representatives contributed

to the creation of an abnormal operating environment, the breakdown of authority, the compromising of the chain of command, the subversive undermining of the CEO." Gilman Memorandum at page 4, SOAF Exhibit 6. 40. The Gilman Memorandum complained that GTCR began negotiating directly

with Mike Makings on his $2.5 million Note that was then in default. Gilman Memorandum at pages 4-5, SOAF Exhibit 6. 41. The Gilman Memorandum complained that GTCR exposed LeapSource to

significant financial and legal risk by demanding that LeapSource negotiate down its contractual severance obligations. Gilman Memorandum at page 5, SOAF Exhibit 6. 42. The Gilman Memorandum complained that GTCR had told LeapSource

representatives that they would fund the Cargill contract if LeapSource executed its first reduction in force and then, after the reduction in force, GTCR refused to fund the Cargill

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transition. Gilman Memorandum at pages 5-6, SOAF Exhibit 6; Kirk Deposition 310:21311:3, SOAF Exhibit 7. 43. The reduction in force demanded by GTCR caused the loss of the Computer

Horizons business, and damaged the company. Gilman Memorandum at page 7, SOAF Exhibit 6; Gilman Summary of Opinions SOAF Exhibit 8. 44. Tom Gilman's efforts to work with GTCR in the interests of LeapSource led to

the conflict described in the Gilman Memorandum in late February 2001. Letter from Tom Gilman to Dan Yih, Sean Cunningham and Joe Nolan dated January 26, 2001, SOAF Exhibit 9; Gilman Memorandum at page 7, SOAF Exhibit 6. 45. The GTCR members of the board reacted very strongly to Mr. Gilman's

suggestion that GTCR and the GTCR members of the LeapSource board were not acting in the best interests of LeapSource. Q. Thank you. What was your reaction to that memorandum from Mr. Gilman? A. Q. A. That I was charitable when I said that he was misguided. You're referring to your testimony yesterday? Yes.

Yih Deposition, 355:12-17. 46. When asked what was incorrect about the Gilman Memorandum, the first point

that Mr. Yih identified as "incorrect" ­ that he had ever said that GTCR was prepared to liquidate LeapSource today ­ was revealed to be a minor quibble, as he actually admitted making the statement in the same answer: ("A. I think that -- I don't recall that statement. I do recall, at the end of January, that we said that we would not -- we would certainly

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consider liquidation, we would be prepared to liquidate if necessary ..."). See SOAF ¶ 29, above. 47. When GTCR received the Gilman Memorandum to the LeapSource board

dated February 24, 2001 GTCR immediately consulted with Kirkland & Ellis, and discussed the issues raised in the Gilman Memorandum with K&E. Yih Deposition at 329:3-331:8 and 439:8-18, SOAF Exhibit 10: Q. You don't remember there being any discussion among the principals of GTCR, in the absence of counsel, about what Mr. Gilman has alleged? A. I don't know what to say. It was all discussions with counsel. Q. Your answer, then, is, to your knowledge, there were no discussions about the allegations made by Mr. Gilman except in the presence of counsel? A. There was ­ initially we received the information. We were very concerned. We wanted to make sure that ­ collectively, everyone wanted to make sure that we ... understood the issues and addressed the issues, and we immediately contacted counsel. Yih Deposition, 329:19-330:8. Q. At the time that you were consulting with Kirkland & Ellis about the allegations made by Mr. Gilman, was it your understanding that Kirkland & Ellis was also counsel for LeapSource? A. I don't think I particularly thought about it. I thought that Kirkland was counsel for the company at some point in time. When I was consulting them on this particular issue, I was assuming they were representing GTCR. Yih Deposition, 335:7-15. 48. GTCR Portfolio Principal and LeapSource board member Dan Yih forwarded

Mr. Gilman's memorandum to litigation partner James Munson at Kirkland & Ellis by email
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on February 25, 2001. See Gilman Memorandum with attached email, SOAF Exhibit 6, at KE010472. 49. David Eaton also received a copy of the Gilman Memorandum dated February

24, 2001. Gilman Memorandum produced by AEG, Bates AEG000651 to 000661, SOAF Exhibit 11. 50. Sean Cunningham's notes of a meeting in late January 2001 identified GTCR's

objectives with respect to LeapSource as follows: "1. Limit downside, 2. Avoid embarrassment, 3. Protect COMSYS, other investment(s)." Notes of Sean Cunningham at Bates GTCR012260-012261, Deposition Exhibit 196, SOAF Exhibit 12: Q. Okay. The following page bears a date, "January 22, Monday," at the top of the page and, in parentheses, the names begin of Tom, Dan, Joe, Chris, and your initials; correct? A. That's correct.

Q. Do you know whether these are notes of a meeting between those people on January 22? A. Yes, I believe that it was a meeting in person in Phoenix on January the 22nd. *** Q. If you could read out loud the . . . the sentence -- or, well, the words and then the three bullet points that follow -- or the three numbered points, I should say -- that follow on that page and the top of the following page. A. Yes. I -- I appear to be taking notes at a meeting about a - a sale or merger of the business. And I write, "GTCR has one objective," colon, and then, off to the right, I appear to have three points, numbered 1 through 3, and No. 1 circled is "Limit downside." No. 2 circled is "Avoid embarrassment." And No. 3 circled on the next page says, "Protect COMSYS, comma, other investment, parentheses, S," closed parentheses.
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Cunningham Deposition 64:17-66:8. 51. At the time those notes were taken, Mr. Cunningham was recently employed

by GTCR and was taking his direction primarily from Joe Nolan and Dan Yih: Q. Who would have told Sean Cunningham that these were GTCR's objectives? MR. FOSTER: Objection. BY MR. STIRLING: Q. And --

MR. FOSTER: Object to the form; Calls for speculation, no foundation. A. I don't know who would have said that to Sean.

BY MR. STIRLING: Q. Okay. Sean Cunningham, at the time, had just become employed by GTCR; is that correct? A. Yes.

Q. He -- he was not in a position to be deciding what GTCR's objectives were; correct? A. Q. A. Q. A. Q. A. are. Absolutely. Absolutely you're agreeing with me? Absolutely -Okay. -- you're correct. I just wanted -He would not determine what GTCR's object -- objectives

Q. To your knowledge, at the time, January 22, 2001, Mr. Cunningham was taking direction from either you or Joe Nolan; correct?
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A.

Correct.

Yih Deposition 324:21-325:22. 52. David Eaton has been licensed to practice law since 1978. Eaton Deposition at

12:3-5, SOAF Exhibit 13. 53. David Eaton's practice of law began to focus exclusively on financial

reorganizations and bankruptcy in 1985. Eaton Deposition at 28:21-29:6, SOAF Exhibit 13. 54. David Eaton was a partner at Kirkland & Ellis between 1991 and 1997

working in the field of financial restructuring, corporate reorganization and bankruptcy in the firm's corporate reorganization and bankruptcy department. Eaton Deposition at 13:16-18 and 25:2-8, SOAF Exhibit 13. 55. While David Eaton worked as an attorney at K & E he was involved in the

financial restructuring of one of GTCR's portfolio companies: Q. Going back now to your position at Kirkland & Ellis between '91 and '97, at any point during that time did you ever work on or consult on any business of GTCR? A. I believe I consulted on one matter relating to a GTCR portfolio company. Q. A. When, approximately, was that? Sometime between 1991 and 1997. *** Q. A. What was your assignment on this particular client? Pardon me.

I was involved in the financial restructuring of that company. Eaton Deposition 34:1-8, 35:4-8.

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56.

David Eaton's relationship as an "of counsel" attorney with Kirkland & Ellis

began in the summer of 1999. Eaton Deposition at 23:3-6, SOAF Exhibit 13; Letter from Kirkland & Ellis to David Eaton dated June 11, 1999, Bates KE000293 to 295, SOAF Exhibit14. 57. David Eaton's relationship as an "of counsel" attorney with Kirkland & Ellis

ended on June 30, 2001. Eaton Deposition at 112:7-9, SOAF Exhibit 13. 58. David Eaton a. Was handling financial reorganization and bankruptcy matters for Kirkland clients; b. For most of that time, had an office at K&E; c. Had two floating secretaries; d. Maintained a direct-dial phone number at K & E; e. Had access to the K & E voice mail system; and f. Was covered on the K & E errors and omissions insurance policy: Q. During the roughly two years of this of-counsel relationship, did you maintain an office at Kirkland & Ellis? A. For most of it -- I'm not sure I did for all of it, but for most of it I did. Q. Okay. Is there a specific period of time when you can think that you did not? A. I might not have had an office during the last few months of this relationship but I'm not sure. Q. Okay. But prior to that time you're -- you're fairly confident that you did have an office there? A. Yes. I know I had an office there. 24 Filed 11/14/2005
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While he was an "of counsel" attorney for K & E between 1999 and 2001,

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Q. Okay. And did you have a regular assigned secretary to you? A. I had two floating secretaries. I did not have one regular secretary. Q. Okay. You had a specific direct-dial phone number, voice-mail access for -A. Q. Yes. -- yourself?

Were you covered, to your knowledge, on the Kirkland & Ellis errors-and-omissions policy? A. I believe I was.

Q. And I believe it's mentioned on the second page of this document. The second full paragraph down, it -- it -- it appears that Kirkland & Ellis' E & O carrier was through ALAS? A. Yes.

Q. And that's the company that you had previously worked for; correct? A. Yes.

Q. And during this of-counsel relationship, the type of work that you would have been doing for Kirkland & Ellis clients was -- was that, again, in the financial reorganization and bankruptcy area? A. Yes.

Eaton Deposition 47:13-49:2. 59. While acting as an "of counsel" lawyer for K&E, David Eaton spent the great

majority of his time working on K&E business. Q. During the duration of the of-counsel relationship, can you estimate for me the amount of your time you spent working on Kirkland & Ellis business? A. Until -- from the inception of the relationship until early 2001, it would have been the great majority of my time.
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Thereafter I spent more time working on -- relatively more time working on AEG matters and on LA Gear. I'm sorry. During the year 2000 . . . Kirkland would still have been -- the of-counsel position would have been the majority of my time. I -- I -- I -- I did take on more of the LA Gear role and some AEG matters during the year 2000. Q. So during the time of your LA Gear assignment and as AEG came into form, the amount of time that you devoted to Kirkland & Ellis business, percentage-wise, decreased? A. It decreased somewhat and -- and particularly starting in early 2001. Eaton Deposition, 50:3-22. 60. While acting as an "of counsel" lawyer for K & E David Eaton had

contractually estimated at least 1,000 to 1,200 hours as the minimum amount of time he would bill to K & E matters. Letter from Kirkland & Ellis to David Eaton dated June 11, 1999, SOAF Exhibit 14. 61. Today, David Eaton is again practicing law as a partner in Kirkland & Ellis'

corporate reorganization and bankruptcy department. Eaton Deposition at 13:16-18, SOAF Exhibit 13. 62. Kevin Evanich, a partner with Kirkland & Ellis, contacted David Eaton

concerning LeapSource sometime in February of 2001. Eaton Deposition at 35:12-21 and 55:1-22, SOAF Exhibit 13.. 63. Eaton was recommended to become involved in a matter in which K&E was

already involved on behalf of GTCR. David Eaton was referred to GTCR by Mr. Evanich at K&E.

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Q. Was there an occasion when you referred Mr. Eaton to LeapSource? MS. REFO: Object to the form. A. No.

And to short-circuit this, maybe I -- I should jump in, which counsel tells me I should never do, but I actually believe in the American system of justice. I think openness is a good thing. I referred David Eaton to GTCR, to represent G -- to talk to GTCR about working for LeapSource, but I don't think I ever talked to anyone at LeapSource. Evanich Deposition 21:2-14. Q. Is it -- is it your memory that Mr. Eaton was recommended to GTCR by Kirkland & Ellis? A. Yes, that is correct.

Q. Were you aware that Mr. Eaton was an attorney ofcounsel to Kirkland & Ellis at the time of this engagement? A. I don't recall specifically.

Yih Deposition 430:9-14. 64. Eaton was advised before he was engaged that GTCR had been funding and

had suspended funding of LeapSource, and he admitted learning at some point that there was a dispute between GTCR and the LeapSource "former management" about the GTCR funding obligation: Q. Okay. Going back now to your first meeting at GTCR's offices, prior to the engagement -A. Uh-huh.

Q. -- dealing with LeapSource, you mentioned that you were told that -- that GTCR had been funding and had suspended funding. That -- what were you told about that?
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A. Q. A. Q.

I don't recall any specifics -Were you told --- other than what I have already told you. I'm sorry. Thank you.

Were -- were you told that there was any dispute between GTCR and LeapSource with regard to GTCR's funding obligations? A. At some point I was advised that there was a dispute between the former management of LeapSource and GTCR regarding GTCR's funding obligations, but I don't -- I don't know when I became aware of that dispute. Eaton Deposition 86:21- 87:15. 65. When Eaton was hired, Kirk and Gilman were still members of the LeapSource Ms. Kirk and Mr. Gilman were subsequently removed from the

board of directors.

LeapSource board by GTCR entities as majority shareholders in LeapSource. SOAF Exhibit 15. 66. Eaton did not bother to find out, or did not remember, that "former

management" Kirk and Gilman were still members of the board of directors in March 2001: Q. At the time you heard of this dispute between former management and GTCR over their funding obligations, were you aware of whether or not the former management were still members of the LeapSource board of directors? A. Q. A. I . . . I don't know whether they were or not. Did -- did you look into that? I don't know.

Q. Were you aware that there was a time when former management -- that -- when -- just so we're clear, when you're speaking of "former management," are you speaking of whom you now know to be Chris Kirk and Tom Gilman? A. Yes, those are the names. 28 Filed 11/14/2005
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Q. All right. Were you aware that there was a time when Chris Kirk and Tom Gilman, though no longer officers of LeapSource, were members of the board of directors? A. I am aware of that. I don't know the circumstances under which I became aware of that or when. Q. Okay. Were you aware of that during the tenure of your engagement with LeapSource? A. I don't know.

Eaton Deposition 88:24-89:23. 67. Mr. Evanich admitted that the interests of GTCR and LeapSource were

adverse, but testified that he did not remember when or how that came to be the case: Q. To your knowledge, at any time in the year 2001 were the interests of LeapSource and GTCR adverse? A. You've asked the question in a very precise way, and I want to make sure I answer the question that you've asked. I have no clear recollection of the timing of any of these events, so I can only answer it in a general way to say that at some point in the history of GTCR's investment in LeapSource, its interests became adverse. When that happened, how that happened, I don't know. Evanich Deposition 24:23-25:11. 68. Eaton was originally consulted to advise GTCR about what course of action

was in GTCR's best interests: Dan Yih: We have a K&E kind of advisor on us that we need for GTCR's perspective and he's gonna plan on being there on Monday to talk through things with you. Tom Gilman: Ok.

Bruce Rauner: Yeah, GTCR is gonna hire a crisis manager/expert, you know, on troubled financings, etc. He's gonna come in on Monday. 29 Filed 11/14/2005

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Tom Gilman:

Down here?

Bruce Rauner: Yeah. It's hard to get educated on what's going on and that can help because depending on what we as a Board recommend to GTCR tomorrow night that this guy's information can help GTCR make a decision on what it ought to do from a funding point of view. Transcript of Tape Recording from Conference Call, Deposition Exhibit 77, SOAF Exhibit 16, at Bates BOD/CALL-0014 (emphasis added). 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 non-occurrence) of that condition will result in a triggering (or on-triggering) of WARN. The email was produced from the files of AEG, and bears the handwritten notation "LeapSource Memoranda" in the upper left hand corner. AEG001567 (emphasis added). 70. Tom Gilman and Chris Kirk, both LeapSource Directors, were not informed SOAF Exhibit 17, Bates

that AEG was David Eaton, or that David Eaton was "of counsel" to Kirkland & Ellis. Gilman Deposition at 90:5-13, SOAF Exhibit 18, Kirk Deposition at 669:5-670:21, SOAF Exhibit 7.

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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. 72. LeapSource formally retained AEG through a letter agreement dated March 2,

2001. AEG Financial Advisory Engagement dated March 2, 2001, Deposition Exhibit 108, SOAF Exhibit 20. 73. The same GTCR members of the board who hired David Eaton fired Christine

Kirk, LeapSource's CEO and one of its founding members, without cause. Minutes of February 27, 2001 Board Meeting, Bates LS-91-0289 to 0290, SOAF Exhibit 21. 74. The remaining LeapSource founders (and Individual Plaintiffs) were fired

without cause on March 2, 2001. Hartmann Deposition at 393:17-20; McCollum Deposition at 239:9-10; Gupta Deposition at 149:5-7; Scott Deposition at 126:2-6; Walker Deposition at 52:3-7; and Powers-Weekes Deposition at 172:21-24, SOAF Exhibit 22. 75. The AEG engagement letter recites that one of the "resources" available to

LeapSource as a result of hiring David Eaton was the fact that he was formerly the comanaging partner of Kirkland & Ellis' workout and bankruptcy practice. AEG Financial Advisory Engagement dated March 2, 2001 SOAF Exhibit 20. 76. The Minutes of a Special Meeting of the LeapSource Board on March 20, 2001

purported to "accept" Tom Gilman's "verbal resignation" from the LeapSource board of directors. Bates LS-13-1356, SOAF Exhibit 15. 77. In fact, Mr. Gilman had not resigned from the board, and was later removed

from the board by GTCR Fund VI and other GTCR entities in their capacity as majority shareholders on April 19, 2001. SOAF Exhibit 23.
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78.

Mr. Eaton and others participated in a presentation to GTCR "shortly after our

engagement, our formal engagement, when the management of LeapSource and me made a presentation to ­ in GTCR's offices of different alternatives available -- financial alternatives available for the company." Eaton Deposition at 78:4-9, SOAF Exhibit 13. 79. Mr. Eaton testified that he knew LeapSource was insolvent at that time: Q. Could LeapSource -- at the time of that presentation, could LeapSource have survived without funding from GTCR? A. Q. A. Not for very long. How long could they have survived? Very short period of time.

Q. Okay. At the time of that presentation that you made to GTCR, was LeapSource insolvent? A. Without additional funding, I -- I believe it was insolvent.

Q. Okay. And even before going to that meeting, you were told by GTCR that they weren't going to fund anymore, weren't you? A. I was told that the funding was suspended.

Eaton Deposition 81:6-19. Q. So if I understand you correctly, it was your view, from the time of the engagement with LeapSource till the time the engagement ended, that LeapSource, during the entirety of that time, was insolvent. Insolvency never changed; is that correct? A. Without substantial additional funding, LeapSource was and remained insolvent during the time I was involved. Eaton Deposition 85:11-19. 80. Mr. Cunningham's notes in Deposition Exhibit 196, after three pages redacted

for attorney-client privilege, include "FILE FOR BANKRUPTCY MONDAY" (see GTCR

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012333), then "TUESDAY ­ BOARD * FIRE CHRIS [Kirk] * HIRE D. EATON ­ CHIEF RESTRUCTURING OFFICER" (see GTCR 012334). SOAF Exhibit 12. 81. Contrary to his deposition testimony, David Eaton did provide legal opinions

and advice both to GTCR and to LeapSource during his time at LeapSource. In notes of a conversation between Sean Cunningham, a GTCR analyst, and David Eaton taken on February 27, 2001, Cunningham noted: 2/27 D. EATON WE SHOULD FILE IN PHOENIX DELAWARE IS TROUBLE (ALL LAWYERS DAVID HAS TALKED W/ AGREE) The notes were clearly contemplating a bankruptcy filing, as the following lines begin TIME 0 (FILE FOR BANKRUPTCY) and the rest of the notes on the page concern DIP (debtor in possession) financing, employee claims, and priority of claims to proceeds from asset sales. Notes of Sean Cunningham at Bates GTCR 012336, SOAF Exhibit 12. 82. Mr. Cunningham testified about those notes as follows: Q. Mr. Cunningham, if we go back to the Exhibit 196, which is your - - notebook, if you'll turn to page 12336, it has the date "February 27" and the initial "D. Eaton" in the upper left hand corner. Do you see that? A. Q. Yes I do. Are these notes of a ­ a conversation with David Eaton? 33 Filed 11/14/2005
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A.

They appear to be, yes.

Q. And are these notes you took on or ­ on February 27, 2001? A. They appear to be.

Q. Did you have a meeting with Mr. Eaton? Was this a telephone call? Do you know? A. I believe so.

Q. Okay. In talking about, quote, "We should file in Phoenix," closed quote, is that referring to filing for a petition in - - in bankruptcy? MR. FOSTER: Object to the form.

A. I ­ I don't recall, other than that's what's in the note, but bankruptcy. . . I know, during this period, was discussed, so - Cunningham Deposition 124: 9-125:15. Q. Well, you see below that there is another note. It says, "Time --" looks like either "zero" or "0," and then -A. Q. A. Q. A. Q. A. Q. A. Right. -- below that, "File for bankruptcy"; right? Right. Correct. Below that there is a note, "D I P" -Right. -- correct? Correct. Which is referring to debtor-in-possession; right? Yes, that's correct.

Q. And the note to that, about D I P financing or DIP financing, is referring to financing of a debtor in bankruptcy in possession of its assets; correct?

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A.

Yes, it appears to be.

Cunningham Deposition 125:17-126:10. 83. David Eaton advised about the board and management avoiding litigation:

"2/27 D. Eaton ... If DIP exceeds value of assets, bankruptcy & DIP financing may yet be of value in helping to avoid litigation against board/management." Notes of Sean Cunningham at Bates GTCR 012336, SOAF Exhibit 12; Clyne Deposition at 51:4-11, SOAF Exhibit 24. 84. David Eaton gave GTCR advice concerning its exposure on the guarantees for

various leases LeapSource had entered into: "2/27 D. Eaton ... Landlords cannot call on guarantor to make payment on guarantee if lessee is in bankruptcy and continues to pay lease. Notes of Sean Cunningham at Bates GTCR 012336-012337, SOAF Exhibit 12. 85. GTCR was going to use David Eaton to advise them about their funding

obligation to LeapSource. Yih Deposition at 298:9-23, SOAF Exhibit 10. 86. Timothy Stephenson of Kirkland & Ellis gave David Eaton of Kirkland & Email from Timothy

Ellis, advice concerning the WARN Act on February 26, 2001.

Stephenson to David Eaton dated February 26, 2001, Bates AEG 001567, SOAF Exhibit 17; Eaton Deposition at 23:3-6, SOAF Exhibit 13. 87. Additionally, in a voice mail message left by Joe Nolan for Dan Yih and Sean

Cunningham on March 2, 2001, Mr. Nolan said: ... one of the things Eaton is doing for us is helping us look at a lot of these payments, bonuses and things and whether we should be paying them to people or not or whether we should be just stiffing them and taking the risk of a litigation at this point. Deposition Exhibit 419, SOAF Exhibit 25.

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88.

David Eaton told the board at the March 20, 2001 board meeting that the only

major risks associated with shutting down LeapSource was to get the employees hired and to get the contracts assigned and to empty the company of the assets. It was not a priority to actually file Chapter 7 immediately. Minutes of March 20, 2001 Special Meeting of Board of Directors, Bates LS-95-0001.668 to 669, SOAF Exhibit 15. 89. Joe Nolan also left the following message for Dan Yih on March 27, 2001: David Eaton said we have absolutely no hand in kind of claiming we didn't sign the assignment. But, maybe it's good enough to bluff them with a little. SOAF Exhibit 26. 90. Kirkland & Ellis' "Of Counsel" Agreement with David Eaton expressly states: With respect to representing persons or entities outside the context of your `Of Counsel' relationship with the Firm, during your `Of Counsel' relationship with the Firm, you'll not undertake any employment, representation, or consultancy that is adverse to any Kirkland & Ellis client. Of Counsel Agreement dated June 11, 1999 at KE000294, SOAF Exhibit 14. 91. K&E partner Kevin Evanich testified that David Eaton, while performing work

for LeapSource, could not have taken a position adverse to GTCR absent a conflict waiver, and there is no evidence that he ever sought a conflict waiver: Q. As an of-counsel attorney at the time David Eaton was working for -- let me rephrase that. As an of-counsel attorney for Kirkland & Ellis at the time David Eaton was working for LeapSource, could he have taken a position adverse to GTCR absent a conflict waiver? MS. REFO: I'm sorry? Could you read that back. (Question from page 29, lines 19 through 22, read.) MS. REFO: I object to the form.
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THE WITNESS: May I answer? MS. REFO: Sure. A. I don't think he could have.

BY MR. WEINBERGER: Q. To your knowledge, at any time did David Eaton obtain any conflict waivers with regard to the work he was performing for LeapSource? A. I don't know.

Evanich Deposition, 29:17-30:11. 92. In an addendum to David Eaton's "of counsel" agreement it was agreed that

"retention letters between AEG and each of its clients will include express language provisions confirming that: ... c) with respect to Kirkland & Ellis' representation of clients adverse to the AEG client, the AEG client waives any conflicts of interests based upon [David Eaton's] Of Counsel relationship with Kirkland & Ellis. . ." Letter from Kirkland & Ellis to David Eaton dated July 6, 2000, Bates KE000292, SOAF Exhibit 27. 93. No such waiver of conflicts was obtained by David Eaton or Kirkland & Ellis

with respect to David Eaton's representation of LeapSource. AEG Engagement Letter, SOAF Exhibit 20: Q. All right. Does this document incorporate the language in the addendum to your Kirkland & Ellis of-counsel agreement that has been marked as Exhibit 119? MR. HALLORAN: It's 118. MR. WEINBERGER: 118. I'm off. A. No, it does not.

BY MR. WEINBERGER: Q. Okay. And -- and -- and why is that? 37 Filed 11/14/2005
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A.

Because apparently I forgot to put it in.

Eaton Deposition 117:19-118:4. 94. Kevin Evanich, a K&E partner, testified that he was "disappointed" that no

waiver was included in David Eaton's representation letter with LeapSource. Q. Do you know whether David Eaton included the language in the addendum, as shown in Exhibit 300, in his engagement letter with LeapSource? A. I have never seen the AEG engagement letter with LeapSource, but I'm told this language is not included. Q. Okay. Would -- would that be a breach of his of-counsel agreement? MR. WEISS: Object to the form. A. I hadn't thought of it in terms of a breach of the -- his ofcounsel agreement, but I am disappointed that it's not there. Evanich Deposition 28:9-21. 95. In an addendum to David Eaton's "of counsel" agreement it was agreed that

"retention letters between AEG and each of its clients will include express language provisions confirming that: ... c) with respect to Kirkland & Ellis' representation of clients adverse to the AEG client, the AEG client waives any conflicts of interest based upon [David Eaton's] Of Counsel relationship with Kirkland & Ellis ..." Letter from Kirkland & Ellis to David Eaton dated July 6, 2000 KE000292, SOAF Exhibit 27. 96. agreements: Q. Okay. And following the signing of this addendum to your of-counsel agreement with Kirkland & Ellis, did you incorporate any of the language of this second paragraph into your AEG engagement letters? 38 Filed 11/14/2005 David Eaton "sometimes" included that language in AEG's retention

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MR. HALLORAN: Object to the form. A. Sometimes.

BY MR. WEINBERGER: Q. What would it depend on?

A. It ... would have depended on whether or not we remembered to include it. Eaton Deposition, 53:6-16. 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. Tina Rhodes's facsimile to Richard Clyne of K&E, March 10, 2001, Deposition Exhibit 262, KE000215, SOAF Exhibit 28. 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. 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.

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100.

Ms. McCollum's letter was further notice to K&E of the claim that GTCR's

conduct with respect to LeapSource had exposed the company to treble damage claims for unpaid wages, and that GTCR's interest in "limiting its downside," "avoiding embarrassment," and protecting its investment in Comsys were not in the best interests of LeapSource. 101. Ms. Rhodes also shared with David Eaton other attorney-client

communications from Osborn Maledon, who immediately passed them on to Richard Clyne at K&E. David Eaton shared privileged information, provided to LeapSource by Osborn Maledon, with Richard Clyne of K&E concerning the Wage Act Statues. Email from David Eaton to Richard Clyne dated March 14, 2001, Deposition Exhibit 123, Bates KE003546 to 003548, SOAF Exhibit 31. 102. James Munson was also consulted, along with Richard Clyne and David Eaton,

regarding Arizona Wage Act issues raised with respect to LeapSource