Free Motion for Leave to File Excess Pages - District Court of Arizona - Arizona

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Don P. Martin (AZ Bar No. 004232) [email protected] Edward A. Salanga (AZ Bar No. 020654) [email protected] QUARLES & BRADY STREICH LANG LLP One Renaissance Square Two North Central Avenue Phoenix, Arizona 85004-2391 (602) 229-5200 Kevin A. Russell (admitted pro hac vice) David S. Foster (admitted pro hac vice) Michael J. Faris (admitted pro hac vice) Nicholas B. Gorga (admitted pro hac vice) LATHAM & WATKINS LLP Sears Tower, Suite 5800 Chicago, Illinois 60606 (312) 876-7700 Attorneys for Defendants GTCR Golder Rauner, LLC, GTCR Fund VI, LP, GTCR VI Executive Fund, LP, GTCR Associates VI, Joseph P. Nolan, Bruce V. Rauner, Daniel Yih, David A. Donnini and Philip A. Canfield 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. Case No.: CIV-02-2099-PHX-RCB GTCR DEFENDANTS' REPLY IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT ON JOINT VENTURE-RELATED CLAIMS (Assigned to the Honorable Robert C. Broomfield) ORAL ARGUMENT REQUESTED

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1 I. 2

THERE ARE NO GENUINE ISSUES OF MATERIAL FACT IN DISPUTE Although plaintiffs repeatedly assert otherwise, their response to GTCR's

3 statement of uncontested facts plainly shows that no material facts are genuinely disputed 4 here. Nor could they be, given that GTCR's motion relies on facts that can be determined 5 from the testimony and interrogatory responses of plaintiffs themselves, the testimony of 6 plaintiffs' former lawyers, and the uncontested contents of relevant documents. 7 8 9 A. The Undisputed Facts

The following brief list of facts is wholly undisputed and dispositive: From the fall of 1998 through at least August 30, 1999, Kirk and GTCR discussed

10 forming a corporation to carry on a BPO business with GTCR funding. Meanwhile, Kirk 11 was talking to other Andersen employees about the opportunity and developing a 12 business plan, which she furnished to GTCR. See SOF ¶¶ 1-6; Ex. 2.1 13 On August 18, 1999, GTCR sent Kirk a draft Summary of Understanding "SOU"

14 regarding their potential business, which stated, among other things, that no agreement 15 would be binding until after the completion of due diligence and the execution of 16 definitive written agreements. See SOF ¶ 7; Ex. 3. 17 Between August 30, 1999 and September 14, 1999, Kirk and her attorney, Jeff

18 Schumacher of Sachnoff & Weaver, negotiated with GTCR over the terms of the SOU. 19 After exchanging numerous drafts and making a number of changes, the parties executed 20 the final version dated September 14, 1999, the same day the individual plaintiffs 21 resigned their positions at Andersen. See SOF ¶¶ 8-9; Ex. 4. 22 23 24 25 26 27 28
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On September 16, 1999, a corporation called Kirkco, Inc. was formed, whose name

References to "SOF ¶ __" are to paragraphs 1-41 in GTCR Defendants' Statement of Uncontested Facts, submitted with GTCR's opening brief. References to exhibits take the form "Ex. __" and refer to Exhibits 1-35 to the Declaration of Michael J. Faris submitted with GTCR's opening brief, or to Exhibits 36-38 to the Supplemental Declaration of Michael J. Faris submitted herewith. References to plaintiffs' statement of facts take the form "Pltfs. Resp. SOF ¶ __ and references to plaintiffs' exhibits take the form "Pltfs. Resp. Ex. __."

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1 was later changed to Leap, Inc. and then LeapSource, Inc ("LeapSource"). See SOF ¶ 13; 2 Ex. 5. 3 On September 27, 1999, Kirk and GTCR executed the Kirk SMA, Purchase

4 Agreement, Stockholders Agreement, Registration Agreement, and Professional Services 5 Agreement. The other individual plaintiffs executed their Executive SMAs or 6 Employment Agreements on October 5, 1999. See SOF ¶¶ 31-41; Exs. 7-16. 7 At issue in the current motion is whether a joint venture arose as a result of the

8 individual plaintiffs' claimed reliance on representations allegedly made to them prior to 9 their decision to leave Andersen. As to this so-called "Kirk-GTCR Joint Venture," it is 10 undisputed that no one ever told GTCR ­ or anyone else ­ that such a joint venture was 11 being formed, and no document exists that would have alerted GTCR to such a claim. 12 See SOF ¶¶ 25-30. Moreover, after the creation of LeapSource, the alleged joint venture 13 did nothing. It had no revenues, profits, losses, clients, assets, books, records, bank 14 accounts, office, phone number, or website, and it issued no W-2s or 1099s. See SOF ¶¶ 15 14-23. 16 On these undisputed facts, for the reasons set forth in GTCR's opening brief and

17 this reply, the Court should grant summary judgment in GTCR's favor on the joint 18 venture-related claims. Plaintiffs claim to "dispute" some of these facts, and purport to 19 identify additional facts that preclude summary judgment. In fact, they do neither, but 20 instead obfuscate to the point of deliberately misleading. 21 22 B. Plaintiffs' Purported Factual Disputes

Plaintiffs claim a host of factual disputes, but as shown in the chart attached as

23 Annex A to this brief, plaintiffs have not identified any genuine issues with GTCR's 24 statement of facts. Some "disputes" relate entirely to immaterial details. See, e.g., Annex 25 A re SOF ¶ 5. Other "disputes" are with the legal significance of facts, not the facts 26 themselves. See, e.g., Annex A re SOF ¶ 12 (disputing GTCR's "categorization" of 27 terms in the SOU, not the terms themselves). Still other "disputes" relate to factual 28
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1 matters not at issue. See, e.g., Annex A re SOF ¶¶ 7-8, 10. Calling something a 2 "dispute" does not make it so, such as when plaintiffs "dispute" the fact that the alleged 3 joint venture "had no bank account," and go on to state "The joint venture did not keep its 4 own bank account." See Annex A re SOF ¶ 19; see also Annex A re SOF ¶¶ 14-17 5 (plaintiffs "dispute" the fact that the alleged joint venture did nothing without citing to 6 record evidence that it did anything). 7 Plaintiffs' purported "disputes" with SOF ¶¶ 25-30, relating to whether they told 8 anyone a joint venture existed, are particularly egregious. They fail to identify a single 9 instance in which anyone was told of the alleged joint venture. Instead, they obfuscate 10 with responses such as: "Although no document references the term `joint venture' as 11 such this does not negate the fact that a joint venture relationship was created" (see 12 Annex A re SOF ¶ 26); "The fact that Christine Kirk did not use the term `joint venture' 13 is misleading" (see Annex A re SOF ¶ 27); and, incredibly, "Gupta was a member of the 14 Kirk-GTCR Joint Venture. Although the term `joint venture' may not have been used or 15 understood by Gupta..." (see Annex A re SOF ¶ 30). 16 C. Plaintiffs' Additional Facts 17 Plaintiffs also add a lengthy statement of additional facts, which are more of the 18 same. Plaintiffs have not identified any "additional" fact that would preclude summary 19 20 judgment. To the contrary, the plaintiffs' alleged additional facts are all either: (1) 21 restatements of facts already asserted by GTCR (see Pltfs. Resp. SOF ¶¶ 44, 46, 12522 135); (2) facts that GTCR disputes but has assumed for purposes of the current motion 23 (see Pltfs. Resp. SOF ¶¶ 48-71, 73-81); (3) statements of "fact" that lack any record 24 support and/or merely assert plaintiffs' legal conclusions on the ultimate issues raised by 25 the current motion (see Pltfs. Resp. SOF ¶¶ 47, 79, 82-89, 92-93, 96-97, 100-01, 111, 26 122-23, 155); or (4) statements that are not material to the current motion (see Pltfs. 27 Resp. SOF ¶¶ 42-43, 45, 72, 90-91, 94-95, 98-99, 102-10, 112-21, 124, 136-154). 28
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D.

Plaintiffs' Fabrication About Reliance

A central tenet of plaintiffs' joint venture and promissory estoppel theories is that

3 they relied to their detriment on GTCR promises by leaving Andersen on September 14, 4 1999. In their response brief, plaintiffs repeatedly suggest to this Court that it was GTCR 5 that required them to leave Andersen before any written funding agreement was in place. 6 See Pltfs. Resp. Br. at 1 ("GTCR would not sign any written funding agreements until 7 after the plaintiffs had resigned from Arthur Andersen. ")(emphasis in original); Pltfs. 8 Resp. Br. at 4 ("The plaintiffs were also told that they had to resign from Andersen before 9 GTCR would sign any written documentation committing funding to the new business 10 11 venture"). 12 This claim is an outright fabrication and is based exclusively on a misleadingly

13 drafted set of affidavits. Kirk, Hartmann and McCollum have submitted affidavits 14 stating: 15 16 I was told I had to resign from Arthur Andersen before GTCR, Joe Nolan and Bruce Rauner would sign any written documentation committing their funding to us.

17 Pltfs. Resp. Exs. 29 (Kirk), 33 (McCollum) and 34 (Hartmann). 2 Carefully framed in the 18 passive voice, these statements leave two questions unanswered: (1) Who told them they 19 had to resign first? (2) Why were they told they had to resign first? The Kirk, Hartmann 20 and McCollum affidavits are silent on those two issues. The other individual plaintiffs ­ 21 who admit that they never spoke to GTCR directly prior to the creation of LeapSource ­ 22 tell it substantially differently. Scott, for example, says: 23 24 25 26 27 28
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Christine Kirk told me GTCR, Joe Nolan and Bruce Rauner required me to resign from Arthur Andersen before they would sign any written documentation committing their funding to us. Pltfs. Resp. Ex. 31 (Scott); see also Pltfs. Resp. Exs. 30 (Walker), 32 (Gupta); 35
2

Emphasis in quotes is supplied throughout this brief, unless otherwise noted.

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1 (Powers). While Walker, Scott, Gupta and Powers all claim that it was GTCR who 2 initiated the requirement that they resign before documents were executed, their 3 testimony is hearsay as they admit the only source for that information was Kirk. 4 The truth here was straightforwardly explained in the deposition testimony of both

5 Kirk and her attorney. Kirk testified that she informed GTCR, based upon her 6 attorney's advice, that she would not sign the SOU until after she had resigned from 7 Andersen. According to Kirk, she told Nolan this in late August 1999, before she and her 8 colleagues had decided whether to resign from Andersen: 9 10 11 12 13 14 15 16 17 18 Q. A. A. Q. A. Q. Do you remember Joe [Nolan] saying anything else in your presence during that meeting at Sachnoff & Weaver [in late August, 1999]? That's all I can remember right now. What did you say to him during that meeting? I gave him information on Jeff Gilbert's recommendations for us as we left Andersen. I told him we were still in the process of making a decision whether we would leave. I encouraged him to meet with Julie and Kim. What information did you give Mr. Nolan during that meeting about leaving? That Jeff Gilbert had told us that we, for example, could not sign the memo of understanding until after we had left; that we could not sell -- or Jeff Gilbert at that time believed that we would not be able to do any selling until January 1 of 2000, based upon our partnership agreements.

19 Kirk Dep. (Ex. 37) at 187:5-189:9. Jeff Gilbert, one of Kirk's attorneys during her 20 negotiations with GTCR over the SOU and final written agreements, testified that he 21 gave this advice to Kirk to put her in the best possible position in any future litigation 22 with Andersen over her resignation: 23 24 I recall being concerned from a litigation perspective that as much as possible in terms of documentation be deferred or not begun until after Chris had left Arthur Andersen.

25 Gilbert Dep. (Ex. 36) at 58:13-60:14. Kirk may well have told her colleagues that GTCR required them to resign from 26 27 Andersen before GTCR would sign written funding agreements, but GTCR never had 28 such a requirement. The requirement was Kirk's, as advised by her litigation counsel.
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1 Plaintiffs' suggestion to the contrary is disingenuous at best. 2 Once again plaintiffs seek to create the appearance of factual disputes where there

3 are none. According to plaintiffs, "A jury will not believe that the plaintiffs left their 4 positions and employment at Andersen without having any agreement with GTCR 5 concerning the formation of the new business venture." Pltfs. Resp. Br. at 14. No one 6 has suggested that the jury should believe they did. The fact is that Kirk left Andersen on 7 September 14, 1999 knowing that the terms of her transaction with GTCR were set forth 8 in a non-binding SOU that she and her lawyers had extensively negotiated with GTCR 9 over the past weeks, which she and Nolan were to sign ­ at Kirk's insistence ­ only after 10 Kirk's resignation was complete. Crafty affidavit writing cannot change the fundamental 11 facts shown by plaintiffs' own testimony and the clear documentary record. 12 II. 13 THE PARTIES' INTEGRATED AGREEMENTS ARE DISPOSITIVE Under the well-established Illinois "four corners" rule, if the terms of a contract

14 are unambiguous, the court may not refer to any evidence or allegations outside of the 15 contract itself. See Manor Healthcare Corp. v. Soiltest, Inc., 549 N.E.2d 719, 724 (Ill. 16 App. Ct. 1989); see also Bourke v. Dun & Bradstreet Corp., 159 F.3d 1032, 1036 (7th 17 Cir. 1998). Under the Illinois parol evidence rule, unless a court determines that a 18 writing is incomplete or ambiguous, evidence of other agreements or understandings is 19 inadmissible even "to show additional consistent terms of a contract." Eichengreen v. 20 Rollings, Inc., 757 N.E.2d 952, 956 (Ill. App. Ct. 2001). While written agreements are 21 presumed to be complete even absent an integration clause, this presumption is even 22 stronger where ­ as here ­ such a clause is present. Bock v. Computer Assocs. Int'l, 257 23 F.3d 700, 707 (7th Cir. 2001). A written agreement that is complete on its face 24 "supersedes all prior agreements on the same subject matter and bars the introduction of 25 evidence concerning any prior term or agreement on that subject matter." Barille v. Sears 26 Roebuck and Co., 628 N.E.2d 118 (Ill. App. Ct. 1997) (citing Magnus v. Lutheran 27 General Health Care System, 601 N.E.2d 907 (Ill. App. Ct. 1992). These fundamental 28 legal principles, none of which plaintiffs contest, make the parties' integrated written
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1 agreements dispositive of their joint venture-related claims. 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 A. The Unambiguous Written Documents Form An Integrated Set Of Agreements

It is undisputed that, on September 27, 1999, Kirk, GTCR and the corporation they created, Kirkco, executed a number of documents containing agreements governing various aspects of their business relationship. Of central importance was the Purchase Agreement, executed by GTCR and Kirkco (through Kirk as CEO), which provided that GTCR's obligation to purchase LeapSource stock (and thus fund LeapSource) was subject to certain express conditions. See 9/30/03 Order re GTCR Defts. 12(b)(6) Motion ("Order") at 5-11. In addition, the Purchase Agreement was to be effective only after: (1) execution by Kirk, Kirkco and GTCR of the Kirk SMA, (2) execution by GTCR and Kirk of the Stockholders Agreement, (3) execution by GTCR and Kirk of the Registration Agreement, and (4) execution by GTCR and Kirkco of the Professional Services Agreement. See Purchase Agmt. (Ex. 10) at 3 (§§ 2B-2F). Execution of all five agreements was a condition precedent to GTCR providing any funding. See id. at 2 (§ 2). As GTCR noted in its opening brief, where two or more instruments are executed in the course of a single transaction, the instruments will be construed together and with reference to one another because they are, in the eyes of the law, one contract. Labor World, Inc. v. Just Parts, Inc., 725 N.E.2d 149, 152 (Ill. App. Ct. 2000); Tepfer v. Deerfield Savings and Loan Ass'n., 454 N.E.2d 676, 679 (Ill. App. Ct. 1983); see also Republic Steel Corp. v. Pennsylvania Engineering Corp., 785 F.2d 174, 180 (7th Cir. 1986). Plaintiffs do not contest this fundamental legal principle. They ignore it. On their face, these five documents form a single, fully integrated, complete agreement between GTCR, LeapSource and Kirk. Taken together, these five documents govern all aspects of the business the parties were establishing, including funding, management, and stock ownership.

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Indeed, the Kirk SMA expressly states as much: 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.

7 Kirk SMA (Ex. 6) at 17. On its face, this provision states that there is one "complete 8 agreement," which consists of the Kirk SMA, those documents expressly referred to in 9 the Kirk SMA (i.e., the Purchase Agreement (see Kirk SMA (Ex. 6) at 1) and 10 Stockholders' Agreement (see id. at 15)), and other documents of even date (i.e., the 11 Registration Agreement and Professional Services Agreement dated September 27, 12 1999). These documents "supersede and preempt any prior understandings, agreements 13 or representations" among any of the parties to the "complete agreement" that may have 14 related to the subject matter of the "complete agreement" in any way. 15 Plaintiffs' only response to the above seeks to render the Kirk SMA integration

16 clause meaningless. See Pltfs. Resp. Br. at 24-27. But as shown below, unambiguous 17 contract terms cannot be ignored in this fashion. 18 19 B. Plaintiffs' Challenge To The Integration Clause Is Unavailing

Plaintiffs contend that the phrase "by or among the parties" limits the integration

20 clause to prior understandings and agreements between Kirk and LeapSource. See Pltf. 21 Resp. Br. at 25-26. Plaintiffs also contend that the phrase "subject matter hereof" limits 22 the provision to prior understandings and agreements on the subject matter of the Kirk 23 SMA. See id. In both respects, plaintiffs are incorrect. 24 First, the phrase "by or among the parties" is a clear reference to the parties to the

25 documents ­ plural ­ described immediately above in the same sentence ­ that is, "[this] 26 Agreement [the Kirk SMA], those documents expressly referred to herein and other 27 28
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1 documents of even date herewith." The "parties" to those agreements include Kirk, 2 LeapSource, and GTCR. It does not refer to Kirk and LeapSource alone.3 Indeed, 3 common rules of construction demonstrate that the phrase "among the parties" must not 4 refer to Kirk and LeapSource alone, because the word "among" generally refers to more 5 than two persons, whereas "between" is used to refer to two persons. See, e.g., WILLIAM 6 STRUNK, JR. AND E.B. WHITE, THE ELEMENTS OF STYLE 40 (4th ed. 2000). That usage is 7 borne out throughout the September 27, 1999 agreements. Compare Purchase 8 Agreement at 1 ("among" four named parties), Stockholders Agreement at 1 ("by and 9 among" numerous named parties), and Registration Agreement at 1 ("by and among" 10 numerous named parties) with Professional Services Agreement at 1 ("between" two 11 named parties). 12 Second, the phrase "subject matter hereof" is an equally clear reference to the

13 subject matter of the "complete agreement," which includes those matters addressed in 14 the Purchase Agreement, Stockholders Agreement, Registration Agreement and 15 Professional Services Agreement. It is not limited to the subject matter of the Kirk 16 SMA.4 17 Any other interpretation of the Kirk SMA would render the description of the

18 "complete agreement" superfluous. If the parties had intended to integrate only 19 20 21 22 23 24 25 26 27 28
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Even if that were not the case, the Kirk SMA makes it clear that the GTCR entities (the "Investors") are parties: "Each of the parties to this Agreement (including the Investors) will be entitled to enforce its rights under this Agreement." See Kirk SMA (Ex. 6) at 18 (§ 11(h)). Even if "hereof" referred only to the Kirk SMA, this clause integrates not only understandings, agreements or representations that actually relate to specific terms "hereof," but rather all "understandings, agreements or representations ... which may have related to the subject matter hereof in any way." The Kirk SMA is a condition precedent to the execution of the Purchase Agreement, executed on the same day, and contains specific references to the Purchase Agreement, Stockholders' Agreement, and other Executive SMAs to be executed in the future. All these agreements are intimately related and all are related to "the subject matter" of Kirk's SMA. For this reason as well, therefore, the integration clause in Kirk's SMA expressly "supersedes and preempts" all of the alleged "understandings, agreements or representations" underlying the plaintiffs' joint venture claims.

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1 understandings, agreements and representations between Kirk and Kirkco on the subject 2 matter of the Kirk SMA, they could easily have done so by leaving out altogether the 3 phrase "those documents expressly referred to herein and other documents of even date 4 herewith." The reading advanced by plaintiffs squarely violates the "cardinal principle" 5 of contract construction that a document should be read to give effect to all of its 6 provisions. Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 63 (1995), 7 citing In re Halas, 470 N.E.2d 960, 964 (Ill. 1984); see also Coles-Moultrie Electric 8 Cooperative v. City of Sullivan, 709 N.E.2d 249, 253 (Ill. App. Ct. 1999). 9 The Professional Services Agreement graphically demonstrates that the parties

10 knew full well how to write an integration clause with the narrow effect that plaintiffs 11 now assert. The Professional Services Agreement expressly integrated only those prior 12 understandings between the two parties thereto ­ GTCR and the Company ­ and only 13 those understandings related to the subject matter thereof: 14 15 16 17 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.

18 PSA (Ex. 9) at 4 (§ 12). This provision proves that plaintiffs' cramped reading of the 19 significantly broader Kirk SMA integration clause is incorrect. Under Illinois law, when 20 parties use different language to address parallel issues, the inference is that they intended 21 that language to mean different things. Taracorp, Inc. v. NL Industries, Inc., 73 F.3d 738, 22 744 (7th Cir. 1996); see also id. at 746 ("If NL had wanted to limit its St Louis Park 23 obligation to real property contamination, it knew perfectly well how to do so"). 24 Plaintiffs' interpretation of the integration clause in Kirk's SMA does violence not

25 only to that provision, but to the entire scheme of integration throughout the September 26 27, 1999 documents and the later-executed Executive SMAs and Employment 27 Agreements. At issue are six separate documents or groups of documents. Four of these 28 (i.e., Kirk's SMA, the other Executive SMAs/Employment Agreements, Stockholders
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1 Agreement, and Professional Services Agreement) contain integration clauses. No two of 2 these integration clauses is identical. By requiring even the broadest of these provisions 3 ­ the Kirk SMA ­ to be read identically with the narrowest ­ the Professional Services 4 Agreement ­ plaintiffs' interpretation wipes out the differences between these integration 5 clauses, differences which must be respected under well-established Illinois law.5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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C.

The Alleged "18 Commitments" By GTCR Relate Directly To The Subject Matter Of The Parties Integrated Written Agreements

In its opening brief, GTCR demonstrated that plaintiffs could not base their alleged joint venture claims ­ as Kirk had done in her deposition ­ on the terms of the September 14, 1999 SOU plus alleged oral terms such as that GTCR would be Kirk's "partner for life." See GTCR Opening Br. at 5-7, 11-14, 24-27. Plaintiffs now evidently wish to run away from Kirk's deposition testimony, and instead rely on the lengthy list of 18 purported "commitments" set out in Kirk's interrogatory response. See Pltfs. Resp. Br. at 11-13. But this shift by plaintiffs helps them not at all. As GTCR noted in its opening brief (see GTCR Opening Br. at 9 n.5), and demonstrates in greater detail below, the "18 commitments" were extinguished by the parties' written agreements just as surely as was the SOU. These 18 purported "understandings, agreements or representations" claimed to form the basis of the joint venture are unambiguously barred because they "may have related to the subject matter" of those agreements. Funding. The first five alleged joint venture terms all relate directly to funding, and correspond directly with ­ and in many cases directly contradict ­ terms in the Purchase Agreement:

As for plaintiffs' bizarre concluding argument that GTCR is somehow relying on ambiguity or parol evidence to interpret the Kirk SMA (see Pltfs. Resp. Br. at 25-27), GTCR is doing nothing of the sort. Throughout this case, GTCR has uniformly argued that the parties' written agreements are absolutely unambiguous. Here, as always, GTCR is relying solely on the plain meaning of express contract terms. Plaintiffs' assertion to the contrary is nonsense.

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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 5 4 3 2 1

Joint Venture Term GTCR would provide "financing required to successfully establish the new venture," understood to be $50-100 million.

Written Agreement Term GTCR agreed to provide up to $15 million to finance the company's working capital and related start-up expenses, and up to another $50 million to finance company and customer acquisitions. See Purchase Agmt. (Ex. 10) at 1-2 (§ 1B(b)). GTCR agreed to provide working capital and start-up expense funding "so long as the Company is meeting the objectives in the business plan." Id. GTCR agreed to provide financing through the startup period "so long as the Company is meeting the objectives in the business plan" and subject to the conditions set forth below. Id. GTCR's funding was conditioned upon (1) the Company not being in default under any material Agreement, (2) adequate debt financing, and (3) the Company's operations, acquisitions and use of proceeds being satisfactory to GTCR. Id.

GTCR's commitment would be "long-term," expected to be two years.

GTCR understood the new venture would lose "substantial amounts of money" but was "willing to finance the new venture through that start up period." GTCR's commitment was "not conditioned on the new venture's losses reaching or exceeding any particular amount over the first two years."

GTCR would not "financially The terms and conditions of abandon the new venture" and GTCR's funding are set forth above. would stick by the new venture Id. even during bad times in a way that other venture capital firms would not. Management. The next five alleged joint venture terms relate generally to

22 management of the venture, and correspond with provisions of the Purchase Agreement 23 and/or the Kirk SMA: 24 25 26 27 28
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Joint Venture Term 6 The new venture would develop a new BPO firm and related opportunities, and grow according to the business plan provided to GTCR.

Written Agreement Term "The Company has been organized for the purpose of owning and operating a business providing business process outsourcing in the areas of accounting and finance and related services." See Purchase Agmt. (Ex. 10) at 1-2 (§ 1B(b)).

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7

Kirk would be permitted to assemble a management team to implement the business plan and manage the new venture.

Kirk "shall serve as the Chief Executive Officer of the Company" with the "normal duties, responsibilities and authority" of a CEO, including "the responsibilities associated with all aspects of the daily operations of the Company." See Kirk SMA (Ex. 6) at 9 (§ 6(b)). The written agreements provided no limit on the number of employees, and Kirk was responsible for "negotiation and establishment of executive and other employee compensation," all subject to Board approval. Id. Kirk was responsible for the "identification, negotiation, completion and integration of" any expansion through acquisition and any contract acquisition. Id. Kirk's authority as CEO was "subject to the power of the Board to expand or limit such duties, responsibilities and authority and to override actions of the Chief Executive Officer," and GTCR was entitled to majority representation on the Board. Id.; see also Stockholders Agmt. (Ex. 7) at 1-2 (§ 1).

8

The new venture would need to hire and train "scores" of employees before outsourcing contracts were signed.

9

The new venture would have to be equipped to provide the same level and depth of outsourcing services that Andersen provided to its clients. GTCR would take a "hands off" policy toward management.

10

Employment. The final alleged joint venture terms relate to various aspects of the individual plaintiffs' employment and other relationships with the venture, and correspond to various provisions of their individual SMAs or Employment Agreements: Joint Venture Term 11 Members of the management team would have an ownership interest in the new venture. Written Agreement Term At closing, of the 20 million shares of common stock issued and outstanding, 14 million shares were issued and outstanding to GTCR, 1,384,615 shares were issued and outstanding to Kirk, and 4,615,385 were reserved for issuance to other members of management. See Purchase Agmt. (Ex. 10) at 1 (§ 1A and recitals).

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12

Members of management would receive compensation comparable to what they received from Andersen.

Each member of management's salary was fixed by his or her SMA or Employment Agreement. See Kirk SMA (Ex. 6) at 9 (§ 6(c)); Hartmann SMA (Ex. 11) at 8 (§ 6(c)); McCollum SMA (Ex. 12) at 8 (§ 6(c)); Gupta Empl. Agmt (Ex. 13) at 7 (§ 6(c)); Powers Empl. Agmt (Ex. 14) at 7 (§ 6(c)); Scott Empl. Agmt (Ex. 15) at 7 (§ 6(c)); Walker Empl. Agmt (Ex. 16) at 7 (§ 6(c)). Executives and employees had all legal expenses in connection with claims by Andersen reimbursed by the Company. See Kirk SMA (Ex. 6) at 16-17 (§ 11(a)); Hartmann SMA (Ex. 11) at 15 (§ 11(a)); McCollum SMA (Ex. 12) at 15 (§ 11(a)); Gupta Empl. Agmt (Ex. 13) at 12 (§ 10(a)); Powers Empl. Agmt (Ex. 14) at 12 (§ 10(a)); Scott Empl. Agmt (Ex. 15) at 12 (§ 10(a)); Walker Empl. Agmt (Ex. 16) at 12 (§ 10(a)). Each member of management warranted and represented that he or she "has not and will not take any action that will conflict with, violate or cause a breach of any noncompete, nonsolicitation or confidentiality agreement" and that he or she is not in violation of the Andersen partnership agreement. See Kirk SMA (Ex. 6) at 4 (§ 1(e)(vi)); Hartmann SMA (Ex. 11) at 3 (§ 1(e)(vi)); McCollum SMA (Ex. 12) at 3 (§ 1(e)(vi)); Gupta Empl. Agmt (Ex. 13) at 2 (§ 1(e)(vi)); Powers Empl. Agmt (Ex. 14) at 2 (§ 1(e)(vi)); Scott Empl. Agmt (Ex. 15) at 2 (§ 1(e)(vi)); Walker Empl. Agmt (Ex. 16) at 2 (§ 1(e)(vi)). "The Company has been organized for the purpose of owning and operating a business providing business process outsourcing in the areas of accounting and finance and related services." Purchase Agmt. (Ex. 10) at 1 (§ 1B(b)).

13

GTCR would indemnify the management team against the consts of any action that might be taken by Andersen as a result of the management team's departure from Andersen.

14

Management would honor their non-competition agreements with Andersen and not begin sales efforts "for a period of months."

15

A new company would be formed to provide outsourcing services to clients.

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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

Kirk would receive a salary of $400,000 and GTCR would make Kirk whole with respect to any bonus distributions withheld by Andersen and would pay her severance if she were terminated without cause. Hartmann would receive a salary of $300,000 and GTCR would make her whole with respect to any compensation she would forgo as a result of leaving Andersen and would pay her severance if she were terminated without cause. McCollum would receive a salary of $360,000 and GTCR would make her whole on any earned but unpaid bonus she would have received had she stayed at Andersen and would pay her severance if she were terminated without cause. D.

Kirk received a salary of $400,000 plus a bonus and severance package, along with various loans and payments related to her former partnership with Andersen. See Kirk SMA (Ex. 10) at 1-2 (§§ 1(c)(e)), 9 (§ 6(c)). Hartmann received a salary of $300,000 plus a bonus and severance package, along with Andersen-related payments in the event of a spin-off of Andersen Consulting. See Hartmann SMA (Ex. 11) at 1-2 (§ 1(c)), 8 (§ 6(c)). McCollum received a salary of $360,000 plus a bonus and severance package, along with Andersen-related payments in the event of a spin-off of Andersen Consulting. See McCollum SMA (Ex. 12) at 1-2 (§ 1(c)), 8 (§ 6(c)).

17

18

Kirk's Integrated Agreement Bars Her Joint Venture Claims

As demonstrated above, the Kirk SMA, Purchase Agreement, Stockholders' Agreement, Registration Agreement and Professional Services Agreement form a single "complete agreement" that is fully integrated. By signing the Kirk SMA, with its unambiguous integration clause, Kirk agreed that those documents together "supersede and preempt any prior understandings, agreements or representations" that she may have had with GTCR related to the subject matter of those agreements. Plaintiffs concede, as

they must, that the alleged Kirk-GTCR Joint Venture is based on understandings, agreements or representations from prior to September 27, 1999. Indeed, plaintiffs contend that the joint venture came into being when plaintiffs informed GTCR that they were going to leave Andersen in reliance on those understandings, agreements or representations, which they say occurred on August 30, 1999, or, in any event, no later than their actual resignation on September 14, 1999. Furthermore, as shown above (see pages 12-15 above), each of the 18 alleged joint venture terms not only relates to the very same topics that are exhaustively covered by the parties' integrated written agreements,

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1 in many cases the joint venture terms directly contradict the terms of the written 2 agreements. 3 Therefore, under the parol evidence rule and the unambiguous terms of Kirk's fully

4 integrated agreement with GTCR, Kirk is barred from asserting any of the 5 understandings, agreements or representations that allegedly created the Kirk-GTCR 6 Joint Venture. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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6

E.

The Other Individual Plaintiffs' Integrated Agreements Bar Their Joint Venture Claims As Well

Nor can any of the other individual plaintiffs base a claim on these alleged prior understandings, agreements or representations. Each individual plaintiff is a party, along with GTCR, to an integrated agreement consisting of his or her Executive SMA or Employment Agreement, the Purchase Agreement, and the Stockholders' Agreement.6 By signing their respective Executive SMAs or Employment Agreements, with their unambiguous integration clauses, each of the other individual plaintiffs agreed that those documents together "supersede and preempt any prior understandings, agreements or representations" that he or she may have had with GTCR related to the subject matter of those agreements. Because the Kirk-GTCR Joint Venture is based on "understandings, agreements or representations" from prior to September 27, 1999 that relate to the same topics in the parties' integrated written agreements, the other plaintiffs are barred from asserting a joint venture based thereon.

Plaintiffs' only response is that GTCR did not execute the Executive SMAs or Employment Agreements. That makes no difference. As demonstrated above, these documents clearly integrate all understandings, agreements or representations among the parties to the "complete agreement," which includes GTCR as a party to the Purchase Agreement and the Stockholders Agreement. In any event, as with the Kirk SMA, each of these agreements makes it clear that the GTCR entities (the "Investors") are parties: "Each of the parties to this Agreement (including the Investors) will be entitled to enforce its rights under this Agreement." See Hartmann SMA (Ex. 11) at 16 (§ 11(h)); McCollum SMA (Ex. 12) at 16 (§ 11(h)); Gupta Empl. Agmt. (Ex. 13) at 13 (§ 10(h)); Powers Empl. Agmt. (Ex. 14) at 13 (§ 10(h)); Scott Empl. Agmt. (Ex. 15) at 13 (§ 10(h)); Walker Empl. Agmt. (Ex. 16) at 13 (§ 10(h)).

Page 17 of 33

1 III. 2

THERE WAS NO "KIRK-GTCR JOINT VENTURE" In its opening brief, GTCR showed that no joint venture agreement ever existed.

3 See GTCR Opening Br. at 15-22. Plaintiffs' own testimony was hopelessly inconsistent 4 on crucial elements of the claim ­ including the joint venture's terms, membership, and 5 operations ­ and it plainly demonstrates that the parties lacked the requisite intent: (1) to 6 combine together to form a joint venture, (2) to share an equal right of control, and (3) to 7 share profits and losses. 8 Plaintiffs respond that none of this matters. According to them, the Kirk-GTCR

9 Joint Venture isn't an entity at all, but rather a "term of convenience to describe the legal 10 relationship" created by plaintiffs' resignation from Andersen in alleged reliance on 11 GTCR's supposed promises. See Pltfs. Resp. Br. at 8. Citing the Uniform Limited 12 Partnership Act, plaintiffs contend that they can prevail on their joint venture claim by 13 showing nothing more than "the association of two or more persons as co-owners of a 14 business for profit, whether or not the persons intend to form a partnership." Id. Indeed, 15 plaintiffs go on to insist that they have "never claimed that the parties did anything more" 16 than that to create the alleged Kirk-GTCR Joint Venture. Id.. 17 Under this logic, it doesn't matter that plaintiffs never told GTCR or anyone else of

18 the joint venture. Nor indeed does it matter whether any plaintiffs in fact intended to 19 create such a joint venture. Nor does it matter that GTCR never knew about or agreed to 20 join such a joint venture, or for that matter that Indu Gupta, another alleged co-venturer, 21 neither heard nor understood that a joint venture was being formed. According to 22 plaintiffs, a joint venture sprang up automatically when plaintiffs told GTCR they 23 intended to leave Andersen to become co-owners of a business for profit. Plaintiffs' 24 argument suffers from at least five flaws. 25 First, it proves too much. If it were true that a joint venture was automatically

26 created any time two or more persons associated to co-own a business for profit, then 27 every corporation with more than one shareholder would also give rise to a parallel joint 28 venture. So, too, with every limited liability company with more than one member.
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1

Second, it is simply not the law. The Arizona Supreme Court has made clear that

2 there are five specific elements to the creation of a joint venture: (1) an agreement 3 between the parties to associate themselves as joint venturers, (2) a common purpose, (3) 4 a community of interest, (4) an equal right of control, and (5) participation in profits and 5 losses. Estate of Hernandez v. Flavio, 187 Ariz. 506, 509 (1997). Contrary to plaintiffs' 6 assertion, in Arizona a joint venture may arise only where both parties specifically intend 7 to associate in a joint venture. Helfenbein v. Barae Investment Co., 19 Ariz. App. 436, 8 439 (1973). Where, as here, there is no evidence of any such intent, a joint venture claim 9 must fail.7 10 Third, as shown in GTCR's opening brief, there is no evidence supporting the

11 element of an equal right of control. To the contrary, each of the individual plaintiffs 12 who testified about it had to admit that the alleged joint venture was controlled by GTCR. 13 In their response, plaintiffs ignore the Arizona Supreme Court's 1997 decision in Estate 14 of Hernandez in favor of the 30-year-old Arizona Court of Appeals decision in Ellingson 15 v. Sloan, 22 Ariz. App. 383 (1974), which states that joint venturers with an equal right of 16 control may agree to the "delegation of duties" to one or the other. Ellingson, 22 Ariz. 17 App. at 387 n.1. They then attempt to explain away their own admissions that GTCR 18 controlled the joint venture by suggesting that an Ellingson-like delegation of duties 19 occurred here. But plaintiffs have not identified any facts ­ no testimony, no documents, 20 nothing ­ to support the notion that any such delegation ever took place. 21 Fourth, again as shown in the opening brief, there is no evidence supporting the

22 element of participation in profits or losses. Plaintiffs respond by identifying three ways 23 in which they purportedly shared in profits and losses: by providing services to 24 25 26 27 28
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7

It is no answer for plaintiffs to claim that summary judgment is not appropriate where intent is an issue. See Pltfs. Resp. Br. at 6-7. In addition to the inescapable contradictions in plaintiffs' testimony on their own intent, plaintiffs have identified absolutely no evidence to create a genuine issue of fact with respect to GTCR's intent. GTCR could not have intended to join a joint venture that plaintiffs acknowledge GTCR didn't know about.

Page 19 of 33

1 LeapSource, by receiving an ownership interest in LeapSource, and by incurring 2 expenses before plaintiffs committed to join in the alleged GTCR venture. See Pltfs. 3 Resp. Br. at 20. None of these supports the existence of a joint venture, however. 4 Plaintiffs' services were not given to the joint venture, but rather to LeapSource. 5 Moreover, they were compensated for those services not with a share of profits of any 6 joint venture, but with stock ownership and handsome salaries from LeapSource. 7 Similarly, plaintiffs have not attempted to identify what, if any, ownership interest any of 8 them had in the joint venture separate from LeapSource. Ownership of LeapSource 9 stock does not show sharing of (joint venture) profit and loss. Finally, the fact that some 10 of the individual plaintiffs may have incurred expenses during the "Freedom Group" 11 period shows nothing, given that by plaintiffs' own account, the joint venture had not 12 even sprung into existence at the time. 13 The fifth flaw in plaintiffs' argument is that even if they had accurately stated the

14 law ­ which they haven't ­ they still would have failed to establish a joint venture. Even 15 under plaintiffs' characterization, a joint venture requires two or more parties to associate 16 in a "business for profit." Here, there is no evidence that the alleged Kirk-GTCR Joint 17 Venture was a business for profit. To the contrary, the supposed goal of this joint venture 18 was not to have its own clients or to generate its own profits, but rather to create a 19 corporation that would have clients and generate profits. It is undisputed that, once the 20 corporation was formed, the alleged joint venture did nothing separate and apart from the 21 corporation. In fact, as currently formulated, plaintiffs admit the Kirk-GTCR Joint 22 Venture is not an entity at all, but merely a "term of convenience" to describe the 23 promises that plaintiffs seek to engraft upon the written agreements that they entered into 24 with GTCR. 25 Plaintiffs have not established that a joint venture ever existed. Plaintiffs cannot so

26 easily avoid the terms of their written contracts. 27 IV. 28 THE PROMISSORY ESTOPPEL CLAIM (COUNT 16) Per GTCR's opening brief, Count 16 for promissory estoppel fails for four
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1 reasons: (1) the parties' express contract documents cover the same subject matter as the 2 supposed promises relied upon; (2) the parol evidence rule and the integration clause also 3 bar the claim; (3) reasonable reliance cannot be shown, given the express written terms of 4 the SOU and the later definitive agreements; and (4) the alleged promises were part of a 5 bargained-for exchange leading to definitive agreements, as in the Ninth Circuit's Walker 6 v. KFC decision. Plaintiffs do not coherently answer any of these points. 7 Same subject matter. Plaintiffs' response on this point simply ignores the

8 controlling question of law ­ whether the "same subject matter" is addressed by the 9 parties' express contract and the implied contract being claimed. Citing to the alleged 10 promise to take a "hands off" approach to management, plaintiffs admit that this subject 11 is addressed by the Kirk SMA and the Stockholders Agreement, but nonetheless claim 12 that these express contracts "do[ ] not protect GTCR from liability for interference with 13 management." Pltfs. Resp. Br. at 29. That is a non sequitur. As this Court already 14 noted in its prior ruling on promissory estoppel, the issue here is whether the parties have 15 "an express contract ... in reference to the same subject matter." Order at 29, quoting 16 Chenay v. Chittenden, 115 Ariz. 32, 35 (1977). Plaintiffs certainly do not dispute that 17 Kirk's SMA and the Stockholders Agreement address the "same subject matter" as the 18 alleged "hands off" promise ­ board oversight of Kirk's CEO role, and GTCR's 19 representation on that board. Given that, no claim of promissory estoppel can be 20 maintained. 21 The same holds true of the other alleged promise cited by plaintiffs ­ that Kirk,

22 Hartmann and McCollum would be "made whole" on severance and Andersen-related 23 payments. Pltfs. Resp. Br. at 29. Plaintiffs assert without explanation that the claimed 24 "make whole" promise is "not contradicted" by their SMAs. Id. Even if that were 25 correct, the relevant question here is not "contradiction," but instead whether the SMAs 26 involve the "same subject matter" as the alleged promise. Severance and Andersen27 related payments are most certainly addressed by the parties' express contract documents, 28 and under controlling law, that is the end of it.
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1

Finally, though plaintiffs assume otherwise, they cannot avoid this result because

2 they left Andersen on September 14, 1999, and did not enter into definitive agreements 3 until a few weeks later. Nothing in the cases suggests that a promissory estoppel claim 4 survives the existence of an express contract on the same subject simply because the 5 contract was executed later. If the express and implied contracts address the same 6 subject matter, then the rule applies and promissory estoppel is barred. 7 Parol evidence rule and integration clause. On this point, plaintiffs claim (as

8 elsewhere) that there is no "fully integrated agreement." Pltfs. Resp. Br. at 28-29. But 9 under unambiguous Illinois authority, this is a pure question of law, one on which this 10 Court can readily determine the answer from the face of the contract documents ­ i.e., 11 that the various 9/27/99 agreements defined an integrated contract as to Kirk, and that the 12 10/5/99 SMAs and Employment Agreements defined an integrated contract as to the 13 other plaintiffs. Moreover, the explicit terms of the integration clauses could not state 14 more clearly that the parties agreed to extinguish precisely the type of pre-contract 15 discussions that are now being presented as enforceable promises: "any prior 16 understandings, agreements or representations by or among the parties, written or oral" 17 were expressly superseded and preempted when the definitive agreements were signed. 18 No reasonable reliance. Plaintiffs baldly assert that GTCR "has made no effort"

19 to show the unreasonableness of plaintiffs' claimed reliance based on what they were told 20 "before they agreed to leave Andersen." Pltfs. Resp. Br. at 28. Plaintiffs are flatly 21 wrong. As of September 14, 1999 ­ the day plaintiffs left Andersen ­ Kirk and her 22 colleagues, with the assistance of counsel, had for weeks been negotiating the terms of a 23 written SOU with GTCR. That SOU was a step on the road to the final Purchase 24 Agreement, Stockholders Agreement and SMAs/Employment Agreements. While 25 plaintiffs suggest that they could not have known on September 14, 1999 what would be 26 in the September 27, 1999 agreements, that claim is false. The SOU contained the 27 essential terms found in the later agreements and, as GTCR showed in its opening brief, 28 the promises on which plaintiffs now base their promissory estoppel claim are as
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Page 22 of 33

1 inconsistent with the SOU as they are with the final written agreements. As the Arizona 2 Court of Appeals has stated, "One cannot close his eyes to a situation and then be heard 3 to say he had a right to rely." School Dist. No. 69 Of Maricopa County v. Altherr, 10 4 Ariz. App. 333, 339 (1969). Reasonable reliance is lacking as a matter of law. 5 Bargained-for exchange. Plaintiffs attack GTCR's citation to the Ninth Circuit's

6 Walker v. KFC decision as "misleading," claiming it turns on a "particular provision of 7 California law." Pltfs. Resp. Br. at 30. But as GTCR explained in its opening brief, the 8 basic principle underlying Walker ­ that promissory estoppel is a substitute for 9 consideration ­ is equally applicable in Arizona and California. See GTCR Opening Br. 10 at 31 & n. 4. The Delaware decision cited by plaintiffs (J-Squared Technologies v. 11 Motorola, 364 F. Supp. 2d 449 (D. Del. 2005)) does not show otherwise. It is a Rule 12 12(b)(6) dismissal case which rejects the overbroad argument that a written contract "will 13 always preclude" a claim for promissory estoppel. Id. at 452 n. 8. That is not the 14 argument GTCR is making here. The Ninth Circuit's Walker decision is useful guidance 15 for this Court. 16 V. 17 THE PURCHASE AGREEMENT CLAIM (COUNT 22) Plaintiffs do not dispute that if their joint venture theory fails, so too does

18 their claim in Count 22, a claim that rests on the alleged joint venture as the only basis for 19 standing. Given that the joint venture claim is barred as a matter of law, Count 22 is 20 barred as well. Summary judgment on Count 22 should be granted. 21 VI. 22 CONCLUSION For the foregoing reasons, the undersigned defendants respectfully request this

23 Court grant their Motion For Summary Judgment On Joint Venture-Related Claims, 24 disposing of Counts 11, 12, 14, 15, 16 and 22 as a matter of law. 25 26 27 28
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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

Dated: October 17, 2005 s/ Edward A. Salanga Don P. Martin Edward A. Salanga QUARLES & BRADY STREICH LANG LLP One Renaissance Square Two North Central Avenue Phoenix, Arizona 85004-2391 (602) 229-5200 Kevin A. Russell David S. Foster Michael J. Faris Nicholas B. Gorga LATHAM & WATKINS LLP Sears Tower, Suite 5800 Chicago, Illinois 60606 (312) 876-7700 Attorneys for Defendants GTCR Golder Rauner, LLC, GTCR Fund VI, LP, GTCR VI Executive Fund, LP, GTCR Associates VI, Joseph P. Nolan, Bruce V. Rauner, Daniel Yih, David A. Donnini and Philip A. Canfield

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1 2 3

ANNEX A (To GTCR Defendants' Reply In Support Of Their Motion For Summary Judgment On Joint Venture-Related Claims) The below chart is for the Court's convenience in assessing plaintiffs'

4 response to GTCR's Statement Of Uncontested Facts ("SOF") filed 8/22/05. The 5 "GTCR Fact" column quotes each statement in GTCR's SOF in full; the "Plaintiffs' 6 Response" column summarizes plaintiffs' response to each statement; and the "GTCR 7 Reply" column sets out, for those facts purportedly disputed by plaintiffs, why the 8 claimed dispute is not material and/or genuine. 9 10 1. 11 12 13 14 2. 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Case 2:02-cv-02099-RCB

3.

4.

5.

GTCR Fact Plaintiff Christine Kirk began to discuss leaving her employment at Arthur Anderson, LLP ("Andersen") to form a new Business Process Outsourcing ("BPO") firm in the fall of 1998. After an initial meeting with GTCR's Joseph Nolan in October of 1998, Kirk began assembling a group of fellow Andersen employees interested in starting such a BPO firm. By April of 1999, the group consisted of Kirk and three other Andersen colleagues, calling themselves "The Freedom Group." On May 14, 1999, after meeting in Chicago, Nolan sent Kirk a letter outlining GTCR's preliminary proposal to form and fund a corporation to carry on a BPO business. During the summer of 1999, Kirk asked other Andersen colleagues to join The Freedom Group, including plaintiffs Kimberly Hartmann and Julie McColIum.

Plaintiffs' Response Undisputed.

GTCR Reply

Undisputed.

Undisputed.

Undisputed.

Disputed because fact "misrepresents the deposition transcript. According [to] the deposition transcript referenced Kirk `talked' to Hartmann and McCollum about the group."

Asserted "dispute" is over interpretation of undisputed facts, and does not raise a genuine issue of material fact.

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1 6. 2 3 4 5 7.

Asserted "dispute" is not genuine. Plaintiffs do not 6 dispute that the SOU was sent or that it contained 7 some of the terms on which GTCR would be willing to 8 provide funding. GTCR has not asserted that the 9 SOU was an "agreement," let alone "the whole 10 agreement between the parties." 11 8. After considering another Disputed because "August Asserted "dispute" is not venture capital proposal 30, 1999 is when genuine. There is no 12 from Bank of America, Christine Kirk notified dispute that plaintiffs The Freedom Group Nolan that they had considered another 13 resolved on August 30, agreed to leave Arthur proposal from Bank of 1999 to pursue further Andersen to pursue the America, decided to reject 14 negotiations with GTCR. joint venture with it on August 30, 1999, and Plaintiffs cite this decision GTCR." then Kirk pursued further 15 as the beginning of the negotiations with GTCR Kirk-GTCR Joint (see undisputed SOF ¶ 9). 16 Venture. Plaintiffs also continue to assert August 30, 1999 as 17 the beginning of the alleged joint venture. 18 9. Between August 30, 1999 Undisputed and September 14, 1999, 19 Kirk and her attorney, Jeff Schumacher of Sachnoff 20 & Weaver negotiated with GTCR over the terms of 21 the SOU. After exchanging numerous 22 drafts and making a number of changes, the 23 parties executed the final version dated September 24 14, 1999. Disputed because "[t]he Asserted "dispute" is not 10. According to Kirk the 25 alleged terms of the joint terms of the SOU are not genuine. GTCR has not venture agreement are set all the terms of the Joint asserted that the SOU 26 forth in the final SOU, Venture Agreement. contained "all the terms of supplemented by GTCR's There were additional the Joint Venture." 27 alleged oral promise to be terms between the Kirk's "partner for life." parties." 28
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GTCR Fact The Freedom Group drafted a business plan, entitled Freedom Group Business Case Summary Presented To Potential Investors dated August 1999 (the "Business Plan"). On August 18, 1999, GTCR sent Kirk a draft Summary Of Understanding ("SOU") stating the terms on which GTCR would be willing to provide funding to a corporation to be formed with Kirk and her management team

Plaintiffs' Response Undisputed.

GTCR Reply

Disputed because "[t]he SOU did contain some of the terms of their agreements but it did not encompass the whole agreement between the parties."

1 11. The only members of the alleged Kirk-GTCR Joint 2 Venture who spoke directly with anyone from 3 GTCR prior to leaving Andersen were Kirk, 4 Hartmann and McCollum. Gupta, Powers, Scott, and 5 Walker never had any communications with any 6 of the GTCR defendants prior to leaving Andersen. 7 12. Kirk's interrogatory responses set out a list of 8 18 claimed joint venture terms, which covered the 9 same areas laid out in the SOU: funding (Terms 110 5), management (Terms 610), and employment 11 (Terms 11-18). A corporation, initially 12 13. called Kirkco, Inc. ("Kirkco"), was formed 13 on September 16, 1999. The name was 14 subsequently changed, first to Leap, Inc. and then 15 to LeapSource, Inc. (hereinafter "LeapSource" 16 refers to the corporation without regard for the 17 legal name in effect at any particular time). 18 14. After the creation of LeapSource, the Kirk19 GTCR Joint Venture did nothing. 20 21 22 23 24 25 26 27 28
Case 2:02-cv-02099-RCB

Undisputed

Disputed because "Defendants' categorization of the summary of understanding is not accurate" and the SOU "did not contain all the terms of the agreement." Undisputed

Asserted "dispute" is not genuine and goes to the interpretation of the SOU, not the document itself. GTCR has not asserted that the SOU contained "all the terms of the Joint Venture."

Disputed because "[t]he joint venture was created to form a BPO business based on the representations, promises and commitments of GTCR and based on the business plan prepared by Christine Kirk and others."

Asserted "dispute" is not genuine. Even if the alleged joint venture "formed" the LeapSource business, plaintiffs have not identified anything the joint venture did after that.

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1 15. If it existed, the KirkGTCR Joint Venture had 2 no revenues, profits or losses. 3 4 5 6 7 8 9 10 If it existed, the Kirk11 16. GTCR Joint Venture, had no clients. 12 13 If it existed, the Kirk14 17. GTCR Joint Venture owned no assets. 15 16 17 18 19 20 21 22 18. If it existed, the KirkGTCR Joint Venture had 23 no books and records. 19. If it existed, the Kirk24 GTCR Joint Venture had no bank account. 25 26 27 28
Case 2:02-cv-02099-RCB

Disputed because "[t]he joint venture did incur expenses and profits and losses."

Disputed because "one of the purposes of the joint venture was to create a corporation for the purpose of delivering BPO services to clients." Disputed because "the business plan along with the associated intellectual property and goodwill of the plaintiffs were part of the assets they contribute[d] to the venture."

Asserted "dispute" is not genuine. While Kirk testified that she personally incurred expenses "associated with the creation of the agreement," there is no evidence that any "joint venture" reimbursed or in any way shared in any of these personal expenses, or that they continued after the creation of LeapSource. To the contrary, Kirk testified that she wrote these expenses off on her personal income taxes that year. See Kirk Dep. (Ex. 18) at 249:22-250:20. Asserted "dispute" is not genuine. Plaintiffs have not identified any joint venture clients that were not clients of LeapSource. Asserted "dispute" is not genuine and is directly contradicted by: (1) the Fourth Amended Complaint, which asserts a cause of action for misappropriation of the same business plan and intellectual property on behalf of Kirk, Hartmann and McCollum individually (see Fourth Am. Cplt. Count 13 at ¶¶ 410-413), and (2) Kirk's testimony that the joint venture had no assets (see Kirk Dep. (Ex. 18) at 250:21-22).

Undisputed Disputed because"[t]he joint venture did not keep its own bank account. However there were expenses that were incurred on behalf of the plaintiffs with respect to the joint venture as well as profits and losses." Asserted "dispute" is not genuine. Indeed, immediately after denying it, plaintiffs admit "the joint venture did not keep its own bank account."

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1 20. 2 3 21.

If it existed, the KirkGTCR Joint Venture had no office. If it existed, the KirkGTCR Joint Venture had no phone number. 4 22. If it existed, the KirkGTCR Joint Venture had 5 no website. If it existed, the Kirk6 23. GTCR Joint Venture issued no W-2s or l099s. 7 24. If it existed, the KirkGTCR Joint Venture was 8 controlled by GTCR. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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Undisputed Undisputed Undisputed Undisputed Disputed because "Christine Kirk and the other plaintiffs controlled the day-to-day operations of the business and the business plan relative to same. The Plaintiffs participated in creating and organizing the business." Asserted "dispute" is not genuine. In their depositions, Kirk, McCollum, Gupta and Hartmann all admitted GTCR's control over the joint venture, and the documents plaintiffs cite establish that plaintiffs' employment was at will and their acts were subject to the control of the LeapSource board, which GTCR controlled. Plaintiffs' employment by LeapSource did not give them control over LeapSource or the alleged joint venture. See Stockholders Agmt. (Ex. 8) § 1 at 1-2 (GTCR controls board); Kirk SMA (Ex. 7) § 6(d) at 9 (employment at will); Hartmann SMA (Ex. 12) § 6(d) at 8 (same); McCollum SMA (Ex. 13) § 6(d) at 9 (same); Gupta Empl. Agmt. (Ex. 14) § 6(d) at 7; Powers Empl. Agmt. (Ex. 15) § 6(d) at 7 (same); Scott Empl. Agmt. (Ex. 16) § 6(d) at 7 (same); Walker Empl. Agmt. (Ex. 17) § 6(d) at 7 (same); Kirk Dep. (Ex. 18) at 252:25253:2; McCollum Dep. (Ex. 24) at 128:10-12; Gupta Dep. (Ex. 19) at 122:11-16; Hartmann Dep. (Ex. 23) at 300:18-20;

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1 25. No plaintiff ever told anyone, including GTCR, 2 that a joint venture existed. 3 4 5 6 7 26. No document exists referencing the joint 8 venture. 9 10 Throughout the 11 27. negotiation of the definitive LeapSource 12 agreements, Kirk never told her lawyers that she 13 and GTCR were parties to a joint venture. 14 Thereafter, until she was terminated as CEO of 15 LeapSource, Kirk never told LeapSource's lawyers 16 that she and GTCR were parties to a joint venture. 17 28. Nolan, the GTCR principal with whom Kirk 18 primarily negotiated, never heard of the alleged 19 Kirk-GTCR Joint Venture 20 21 29. Nolan never committed GTCR to join the alleged 22 Kirk-GTCR Joint Venture. 23 24 25 26 27 28
Case 2:02-cv-02099-RCB

Disputed "[a]lthough the plaintiffs did not use the term `joint venture'" because "they did communicate the facts establishing the existence of such a relationship, and GTCR did know that Plaintiffs would be relying on GTCR's promises and representations." Disputed "[a]lthough no document references the term `joint venture' as such" because "this does not negate the fact that a joint venture relationship was created." Disputed because "The fact that Christine Kirk did not use the term `joint venture' is misleading" and because "the reference to `definitive LeapSource agreements' misrepresents" certain unspecified deposition testimony.

Asserted "dispute" is not genuine. Plaintiffs admit the asserted fact and dispute only its legal significance.

Asserted "dispute" is not genuine. Plaintiffs admit the asserted fact and dispute only its legal significance. Asserted "dispute" is not genuine. Plaintiffs admit the asserted fact and dispute only its legal significance.

Disputed