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

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John J. Bouma (#001358) James R. Condo (#005867) Patricia Lee Refo (#017032) Joseph G. Adams (#018210) SNELL & WILMER L.L.P. One Arizona Center 400 E. Van Buren Phoenix, AZ 85004-2202 Telephone: (602) 382-6000 E-Mail: [email protected] Attorneys for Defendant Kirkland & Ellis IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Diane Mann, as Trustee for the Estate of LeapSource, Inc. et al., Plaintiffs, v. GTCR Golder Rauner, L.L.C.; a Delaware limited liability company, et al., Defendants. No. CIV 02-2099 PHX RCB KIRKLAND & ELLIS' MOTION FOR SUMMARY JUDGMENT REGARDING VICARIOUS LIABILITY (Assigned to Hon. Robert C. Broomfield) (Oral Argument Requested)

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In the Fourth Amended Complaint, plaintiffs allege that the law firm of Kirkland & Ellis ("K&E") is vicariously liable for the conduct of David Eaton, a lawyer who had a limited "of counsel" relationship with K&E, and AEG Partners, L.L.C. ("AEG"), the financial consulting firm that Eaton co-owned. On December 2, 2002, K&E filed a motion to dismiss all claims against it, including the claims seeking to impose vicarious liability on K&E for the acts of Eaton and AEG. In an order dated September 30, 2003 (docket #69) (the "Order"), the Court denied the motions. In the Order, the Court recognized that the authorities cited by K&E "tend to favor not finding K&E liable for Eaton's acts." (Order at 16.) However, the Court noted that it was hesitant to dismiss these claims on a motion to dismiss and that "K&E's arguments are more appropriate after discovery has more fully revealed the relationships between the parties." (Order at 17.)

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The extensive fact discovery conducted in this case has confirmed the Court's initial view of the facts. There is no evidence that would justify the imposition of vicarious liability on K&E for the acts of Eaton or AEG. No reasonable jury could find that Eaton or AEG was an actual or apparent agent for K&E. Summary judgment is warranted on the issue of whether K&E is vicariously liable for the conduct of Eaton or AEG.1 This motion is supported by the following Memorandum of Points and Authorities and the separately-filed Statement of Facts in Support of Motion for Summary Judgment. MEMORANDUM OF POINTS AND AUTHORITIES I. FACTUAL BACKGROUND. A. Eaton's Background with K&E.

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David Eaton is a businessman and attorney. He practiced law at various law firms in Chicago from 1978 through 1990 in the field of bankruptcy law. (Statement of Facts in Support of Motion for Summary Judgment ("SOF") ¶ 1.) In 1990, he became head workout and bankruptcy counsel for Continental Bank of Illinois, and in 1991 he joined K&E as a partner. He worked as a full-time lawyer at K&E until 1997, when he resigned from the partnership. Id. When he left K&E, he joined an insurance company, Attorneys Liability Assurance Society ("ALAS"). (SOF ¶ 2.) At ALAS, he served as vice president of member services, and his duties included acting as a liaison between ALAS and its members, strategic planning, and marketing. Id. While working at ALAS, Eaton joined the board of directors of L.A. Gear. (SOF ¶ 3.) In 1999, K&E approached Eaton to return to the firm as a partner. Eaton declined because he "wanted to be a businessman" and "did not want to practice law full-time." (SOF ¶ 4.) Eaton eventually agreed to return to K&E "on a part-time basis, of-counsel," 1 This motion is directed to: (a) Counts One, Three, and Twenty-One of the Fourth Amended Complaint, all of which purport to be directed at K&E but allege misconduct only on the part of Eaton, AEG, and others; (b) the portion of Count Ten, which alleges professional negligence/malpractice against K&E, that pertains to the alleged actions of Eaton; and (c) any other claims of vicarious liability.
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so that he "could be involved in other businesses." (SOF ¶ 5.) B. Eaton's "Of Counsel" Agreement.

Eaton became "of counsel" to K&E effective June 11, 1999 pursuant to the terms of a letter agreement. (SOF ¶ 6.) The agreement provided that while serving as "Of Counsel," Eaton would "not be a partner or employee of Kirkland & Ellis, but an independent contractor/consultant with a close relationship to Kirkland & Ellis as described in ABA Opinion 90-357." (SOF ¶ 7.) The purpose of Eaton's consultancy was "to assist Kirkland & Ellis attorneys in the bankruptcy area, to work in close cooperation with them and to continue to serve Kirkland & Ellis clients." (SOF ¶ 8.) Under the terms of the agreement, Eaton was an independent contractor, not a salaried employee, and he retained the ability to determine the times when he would "work on Firm business and attend to personal interests." (SOF ¶ 9.) There was no minimum number of hours that K&E was required to offer him or that Eaton was required to work, and the agreement provided that Eaton would be compensated at a rate of $230 for each hour that he billed to K&E clients in his "of counsel" capacity. As an "of counsel" attorney for K&E, Eaton never worked on any business for GTCR, its principals, or its portfolio companies. (SOF ¶ 11.) All of his "of counsel" work for the relevant time period was limited to a single matter for one client unrelated to this dispute. (SOF ¶ 12.) C. Eaton's Involvement with Other Businesses.

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When he started his part-time "of counsel" position with K&E, Eaton resigned as an officer of ALAS. (SOF ¶ 2.) However, he continued to serve on the board of L.A. Gear, and in late 1999 or early 2000, he became the chairman of the board of directors. In addition to this executive role, he served as the acting CEO of L.A. Gear and oversaw the operations of the company. (SOF ¶ 3.) His affiliation with L.A. Gear continued until early 2001. (SOF ¶ 3.) In January 2000, Eaton and two other businessmen formed AEG to provide "financial advisory and crisis management for financially distressed companies." (SOF ¶
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14.) The other partners in AEG, Larry Adelman and Michael Goldsmith, are not attorneys. (SOF ¶ 15.) AEG had its offices in Highland Park, Illinois, where Eaton maintained a regular office. (SOF ¶ 16.) D. Initial Contact With GTCR and LeapSource.

In February 2001, Kevin Evanich, a partner at K&E, called Eaton at his AEG office. (SOF ¶ 17.) Evanich told him that "GTCR had a portfolio company that was in financial trouble and that [Eaton] may get a call from someone at GTCR." Eaton testified that Evanich was calling him "as an AEG partner" and "a crisis manager and financial advisor," not a K&E "of counsel" lawyer. (SOF ¶ 18.) Evanich referred Eaton to GTCR because "he was an expert in the financial restructuring advisory business." (SOF ¶ 19.) As Eaton understood things, the company "needed financial advisory services and crisis management services, meaning working very closely with existing management, as opposed to providing legal advice to the company." (SOF ¶ 20.) Within a week of this phone call, Eaton met with representatives of GTCR at GTCR's offices in Chicago regarding LeapSource. (SOF ¶ 21.) At the meeting, GTCR did not offer the engagement, nor did Eaton accept it on behalf of AEG. (SOF ¶ 23.) Before settling on Eaton and AEG, GTCR interviewed and considered several potential crisis managers. (SOF ¶ 22.) E. AEG's Engagement Was Approved by the LeapSource Board of Directors.

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On February 27, 2001, the LeapSource board of directors voted to retain AEG to offer financial advisory services to LeapSource. (SOF ¶ 24.) According to the board minutes, the directors voting in favor of retaining AEG were Bruce Rauner, Dan Yih, and Joe Nolan, who were GTCR principals, as well as plaintiff Chris Kirk, who was LeapSource's outgoing CEO.2 (SOF ¶ 25.) Plaintiff Tom Gilman was also present at the meeting but abstained from the vote. Id. At that meeting, Kirk was terminated as CEO. She remained a board member until March 15, 2001. At her deposition, Kirk for the first time claimed that the minutes were wrong and that she had abstained from voting.
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At the time of the board meeting, Kirk understood that AEG was "supposed to be a crisis manager" but did not know anything about AEG's experience. (SOF ¶ 26.) She understood that AEG was not a law firm. (SOF ¶ 27.) As to the board's vote, she testified as follows: Q: A: Q: A: Did you believe that that vote was a vote to retain Kirkland & Ellis? I don't believe so. Did you believe that by the vote to retain AEG, LeapSource retained Kirkland & Ellis? I don't believe so.

(SOF ¶ 28.) Nothing changed after the board meeting: Q: After February 27, 2001, did anyone at Kirkland & Ellis tell you that David Eaton was acting on behalf of Kirkland & Ellis in the services he was providing through AEG to LeapSource? I don't believe so. After February 27, 2001, did anyone tell you that David Eaton was acting on behalf of Kirkland & Ellis in connection with the services he was providing . . . through AEG to LeapSource? I don't believe so.

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Gilman also testified that there was no discussion at the board meeting that Eaton should be hired because of any relationship with K&E. (SOF ¶ 30.) At the time of the vote, Gilman was unaware that Eaton had any relationship to K&E. (SOF ¶ 31.) Instead, Gilman assumed that Eaton was a member of GTCR. Id. This testimony is consistent with the recollection of other board members. Yih recalls that Eaton "was with AEG Partners," not K&E. (SOF ¶ 32.) He knew that Eaton used to work with K&E, but did not recall being aware of Eaton's "of counsel" status. (SOF ¶ 32.) Nolan does not recall being informed of Eaton's "of counsel" status, but does remember that the board focused on the experience of both Eaton and AEG in handling "turnaround and workouts and distressed situations." (SOF ¶ 33.) Similarly, Rauner focused on Eaton's "expertise in restructuring, refinancing, cutting costs, dealing with

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seriously troubled financial situations." (SOF ¶ 34.) Rauner did not recall any discussion of the fact that Eaton had an "of counsel" relationship with K&E. (SOF ¶ 34.) F. AEG and LeapSource Execute a Written Agreement.

LeapSource formally retained AEG through a letter agreement dated March 2, 2001. (SOF ¶ 35.) The agreement was prepared on AEG letterhead and was addressed to, and signed by, Michael Makings as Chief Executive Officer of LeapSource. (SOF ¶ 36.) K&E was not a party to the agreement. Id. The agreement stated that the company was seeking AEG's advice in the following areas: "a) developing and assessing restructuring alternatives that address the Company's current liquidity crisis; and b) assisting the Company, as requested in its negotiations with potential financing sources, creditors and other financial stakeholders to build consensus for a restructuring that meets the Company's financing needs." (SOF ¶ 37.) The agreement provided that LeapSource would pay AEG for Eaton's services. The agreement also contained the following acknowledgement: Company acknowledges that it has been advised that David Eaton has an "Of Counsel" relationship with the law firm of Kirkland & Ellis ("K&E") and that he may, from time to time, provide legal services to clients of K&E on matters wholly unrelated to this engagement. (SOF ¶ 39.) Robert Mignanelli, LeapSource's in-house counsel, reviewed the proposed agreement with AEG and prepared a memorandum with detailed comments regarding the letter. (SOF ¶ 40.) Neither K&E nor Eaton's relationship with K&E is mentioned in Mignanelli's memo. Id. Both before and after the agreement between AEG and LeapSource was executed, Eaton met with LeapSource's senior management then in place: Michael Makings, who was the "ranking senior officer of the company," Tina Rhodes, the controller, and Matt Appel, who was "second in command to Mike Makings." (SOF ¶ 41.) According to Eaton, this group was "the management team that I was reporting to." (SOF ¶ 41.) Rhodes testified that she learned of Eaton's "prior history" with K&E but that she "knew him as AEG Partners." (SOF ¶ 42.) Makings stated that Eaton never told him anything

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about his background "until he came on board," though Eaton later explained that K&E was part of "his background." (SOF ¶ 43.) G. Eaton's Work for LeapSource.

While Eaton was working for LeapSource, he had two law firms at his disposal: Osborn Maledon, which represented LeapSource "on general corporate and insolvency matters," and Jennings Strouss & Salmon, which handled employment issues. (SOF ¶ 44.) Eaton did not consult with K&E on behalf of LeapSource. (SOF ¶ 45.) However, he sometimes gave "periodic status reports" to K&E "because they worked for GTCR," LeapSource's majority shareholder. (SOF ¶ 45.) Eaton's work for LeapSource was billed LeapSource by AEG on AEG invoices. (SOF ¶ 46.) LeapSource's payments for Eaton's work were sent to AEG, not K&E. Id. K&E received no money for Eaton's work at LeapSource. II. LEGAL STANDARD Summary judgment is appropriate if the evidence shows that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party is entitled to summary judgment by demonstrating that "the nonmoving party's evidence is insufficient to establish an essential element of the nonmoving party's claim." Celotex Corp. v. Catrett, 477 U.S. 317, 331 (1986). To avoid summary judgment, the nonmoving party must produce evidence and "set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). Allegations in the complaint, unsupported speculation, and conclusory statements cannot defeat summary judgment. Hernandez v. Spacelabs Medical, Inc., 343 F.3d 1107, 1112 (9th Cir. 2003); Nelson v. Pima Community College, 83 F.3d 1075, 108182 (9th Cir. 1996). III. AN "OF COUNSEL" LAWYER MUST ACT WITH ACTUAL OR APPARENT AUTHORITY TO BIND A LAW FIRM. All parties agree that Eaton had an "of counsel" relationship with K&E for the times relevant to this case. "A lawyer is of counsel if designated as having that

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relationship with a firm or when the relationship is regular and continuing although the lawyer is neither a partner in the firm nor employed by it on a full-time basis." Restatement (Third) of Law Governing Lawyers § 123, cmt. c(ii).3 As the Court recognized in its Order, law firms are liable for the conduct of attorneys who have an "of counsel" relationship only when they do firm work. The Restatement provides: "The firm and its principals are ordinarily liable for acts of lawyers who have an of-counsel relationship with the firm . . . while they are doing firm work." Restatement (Third) of Law Governing Lawyers § 58, cmt. c. As the Court held, the scope of liability will depend on "the terms of the of-counsel relationship and the extent of the lawyer's affiliation to the firm apparent to the lawyer's clients." (Order at 14, quoting Restatement § 58, cmt. c.) For an "of counsel" lawyer to be an agent for a law firm, there must be facts establishing the agency between the lawyer and the firm. In its previous Order, the Court cited with approval two cases specifically addressing the agency of an "of counsel" attorney. See Homa v. Friendly Mobile Manor, Inc., 612 A.2d 322, 333 (Md. Ct. Spec. App. 1992) (applying agency principles to determine liability of firm for actions of "of counsel" attorney); Trimble-Weber v. Weber, 695 N.E.2d 344, 347 (Ohio Ct. App. 1997) (resolving liability of law firm for an "of counsel" attorney "through traditional agency law principles"). In each of these cases, the courts reviewed the relationship between the law firm and the "of counsel" attorney and applied common law principles of agency to determine if vicarious liability existed. As the Court noted in its Order, the allegations of plaintiffs' complaint suggest that K&E is not liable for Eaton's acts. (Order at 16.) The evidence produced in discovery confirms the Court's initial impression. Plaintiffs have not identified sufficient evidence to raise a genuine issue for trial that Eaton or AEG served as K&E's agent regarding LeapSource. "In the absence of statutory and case authority that directly speaks to an issue, Arizona courts look to the Restatement for guidance." Cunningham v. Goettl Air Conditioning, Inc., 980 P.2d 489, 492 (Ariz. 1999).
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IV.

PLAINTIFFS CANNOT IDENTIFY ANY EVIDENCE THAT EATON OR AEG WAS AN AGENT OF K&E FOR THE LEAPSOURCE ENGAGEMENT. It is well-settled that "the party asserting the agency relationship has the burden of

proving the agency." Gulf Ins. Co. v. Grisham, 613 P.2d 283, 286 (Ariz. 1980) (citing Salt River Valley Water Users' Ass'n v. Giglio, 549 P.2d 162 (Ariz. 1976)).4 Because plaintiffs bear the burden of proving that Eaton or AEG was an agent of K&E, they must produce admissible evidence of agency to avoid summary judgment. Under Arizona law, there are two main types of agency: actual (express) and ostensible (apparent). Id. Plaintiffs cannot produce evidence that either type of agency existed. A. K&E Never Granted Actual Authority to Eaton or AEG Regarding the LeapSource Work.

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"If there is evidence that the principal has delegated authority by oral or written words which authorize him to do a certain act or series of acts, then the authority of the agent is express." Id. (citing Canyon State Canners v. Hooks, 243 P.2d 1023 (Ariz. 1952)). There is no evidence that K&E ever delegated authority to Eaton or AEG to do any of the acts alleged in the Complaint for K&E. None of the witnesses in this case testified to any "oral or written words" by any K&E representative that would delegate any authority to Eaton or AEG. There are no documents that reflect any such delegation of authority. To the contrary, the written "of counsel" agreement between K&E and Eaton establishes that Eaton was to be an independent contractor, not a partner or employee. (SOF ¶ 7.) Further, the evidence shows that Kevin Evanich, a K&E partner, recommended Eaton to GTCR solely in Eaton's capacity as a managing director of AEG. (SOF ¶¶ 18-19.) After that point, Eaton followed up directly with GTCR and LeapSource. There is no evidence that K&E directed or delegated any authority to Eaton or AEG.
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The Court previously held that it would consider and apply Arizona state law in evaluating the tort claims at issue in this case. See Order dated 9/30/2003 (docket #69) at 11 n.2
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B.

K&E Never Performed Any Acts That Could Lead to the Establishment of Apparent Authority.

"Apparent authority exists where a third person reasonably believes an agent has the authority of the principal." Max of Switzerland, Inc. v. Allright Corp. of Delaware, 930 P.2d 1010, 1014 (Ariz. Ct. App. 1997) (quoting Hartford v. Industrial Comm'n, 870 P.2d 1202, 1206 (Ariz. Ct. App. 1994)). For apparent authority to exist, "the principal must make some manifestation to the third party which could reasonably be relied upon to indicate that the agent had the alleged authority." Id. "`Ostensible authority' can never be derived from the acts of the agent alone." Koven v. Saberdyne Systems, Inc., 625 P.2d 907, 911 (Ariz. Ct. App. 1981). To show ostensible or apparent authority, there must be evidence showing "that the alleged principal not only represented another as his agent, but that the person who relied upon the manifestation was reasonably justified in doing so under the facts of the case." Id. Plaintiffs cannot establish apparent authority because the record is devoid of any representation or action by K&E that would lead third parties to conclude that Eaton or AEG was acting as K&E's agent in performing work for LeapSource. Indeed, except for Chris Kirk, the individual plaintiffs never had any conversations with any attorney or representative from K&E, except Eaton.5 (SOF ¶¶ 47-55.) As for Kirk, she admitted that no one from Kirkland & Ellis told her that Eaton was acting on behalf of K&E. (SOF ¶ 29.) Under Arizona law, apparent agency must derive from the acts of the alleged principal, which is K&E. Plaintiffs have not produced any evidence that K&E made any "manifestation" to anyone that Eaton or AEG had authority to act for K&E in their work for LeapSource. This omission is fatal to plaintiffs' claim that Eaton or AEG was acting as K&E's apparent agent.

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Of the seven individual plaintiffs, only McCollum, Gilman, and Hartmann contend that they ever spoke to Eaton. (SOF ¶¶ 55, 56.) McCollum and Hartmann admit that their contact with Eaton was limited to telephone conversations about their severance agreements with LeapSource after they were terminated. (SOF ¶ 55.) Gilman claims that his conversation with Eaton concerned his severance agreement and his subsequent request to review the company's books and records. (SOF ¶ 56.)
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In depositions and in previous briefing, plaintiffs nonetheless contend that Eaton was acting on behalf of K&E. But plaintiffs have failed to identify any evidence that K&E ever represented to anyone at LeapSource that Eaton or AEG was acting with K&E's authority. For instance, plaintiffs have pointed to an alleged comment by a GTCR principal at a LeapSource board meeting that Eaton was a "K&E type of guy." However, this comment was made by a third party and, as a matter of law, cannot create a genuine issue of fact on the questions of express or apparent authority. Plaintiffs have not identified any evidence that K&E authorized the statement or knew that it was made. To establish apparent authority, there must be evidence that the alleged principal did something to lead third parties to conclude that an agency relationship existed. Koven, 625 P.2d at 911. In addition, this statement has no clear meaning and does not indicate any obvious agency relationship between Eaton and K&E. The reference was not to a "K&E guy" but rather a "K&E type of guy." This label suggests that the person was not an agent of K&E. Finally, the term is utterly ambiguous. What is a "K&E type of guy?" Professional? Competent? Hardworking? The term has no clear meaning. Plaintiffs may attempt to save their agency argument by pointing to occasional contact between Eaton at LeapSource and K&E lawyers representing GTCR. However, these periodic communications cannot establish apparent authority. Arizona law is clear that apparent authority derives from conduct by the alleged principal on which a third party relies. See Koven, 625 P.2d at 911. If the third party (in this case, LeapSource) does not rely upon the conduct by the alleged principal (K&E) to reach a conclusion about agency, there is no apparent authority. Here, plaintiffs have not identified any evidence that anyone at LeapSource relied on communication between Eaton and K&E. For instance, plaintiffs have cited a single e-mail message that Eaton received from Tim Stephenson, a K&E attorney, regarding a legal issue facing LeapSource. But there is no evidence that anyone at LeapSource knew about this isolated communication or relied upon it to reach any conclusion about Eaton or AEG. Further, LeapSource subsequently obtained a detailed legal analysis of this issue (the WARN Act) from its principal outside
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counsel, Osborn Maledon. In the absence of evidence that LeapSource relied on the conduct of K&E, there can be no apparent authority. C. The Evidence in the Record Overwhelmingly Shows That LeapSource Retained AEG and Eaton, not K&E.

K&E did nothing that would lead third parties to believe that Eaton or AEG was acting with K&E's authority in their work for LeapSource. Further, the record evidence reflects the fact that LeapSource understood that it had retained AEG and Eaton, not K&E. In particular, the evidence shows the following: The minutes of the February 27, 2001 meeting of the LeapSource board of directors reflect a vote to retain AEG, not K&E. (SOF ¶ 24.) AEG is a financial management and restructuring company. The two other partners in AEG are not lawyers. (SOF ¶¶ 14-15.) None of the LeapSource board of directors (including plaintiff Chris Kirk) believed that their vote to retain AEG was a vote to retain K&E. (SOF ¶¶ 25, 28, 30-34.) The agreement governing the work that Eaton performed for LeapSource is on AEG letterhead and signed by Eaton as Managing Director of AEG. (SOF ¶ 36.) The AEG agreement provides that AEG is being hired to render financial advisory and management services. (SOF ¶ 37.) The AEG agreement specifically discloses that Eaton has an "of counsel" relationship with K&E and that he may provide legal services to K&E clients on matters unrelated to LeapSource. (SOF ¶ 39.) Before the AEG agreement was signed, Eaton met with the existing senior management of LeapSource: Mike Makings, Tina Rhodes, and Matt Appel. None of them thought that LeapSource was retaining K&E instead of AEG. (SOF ¶¶ 41-43.) AEG sent invoices to LeapSource for Eaton's work, and LeapSource paid AEG for Eaton's work. (SOF ¶ 46.) AEG maintained its own offices that were separate from K&E, and Eaton had his own office in that location. (SOF ¶ 16.) LeapSource continued to rely on counsel from other law firms (Osborn Maledon and Jennings Strouss & Salmon) and made these firms available to Eaton. (SOF ¶ 44.)

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This evidence confirms that LeapSource knew that Eaton and AEG were not acting as agents for K&E.

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D.

Courts Have Granted Summary Judgment in Similar Cases with Far Less Compelling Evidence.

Faced with less conclusive evidence, other courts have not hesitated to grant summary judgment on the alleged agency of lawyers with an "of counsel" relationship. In Homa, the court upheld the granting of a motion for summary judgment and determined that an "of counsel" attorney was not an actual or apparent agent of a law firm. 612 A.2d at 332. In that case, a client retained a lawyer who had an "of counsel" relationship with a law firm. Although the engagement letter was prepared on the law firm letterhead, the engagement letter provided that the agreement was with the lawyer personally and not the law firm. However, there was evidence that the lawyer claimed to have access to various people in the law firm who could provide advice on a variety of issues. The client argued that these facts made the "of counsel" lawyer an agent of the law firm. The court held that the engagement letter precluded a finding of actual authority, and that there was no basis for apparent authority because the plaintiff presented no evidence of any contact with or reliance upon any conduct by the law firm. Id. at 335. The facts in this case provide an even greater basis for determining that Eaton or AEG was not an agent of K&E. As in Homa, the relevant agreement was between LeapSource and AEG, and it provided that LeapSource should pay AEG, not K&E. In this case, unlike Homa, the agreement was on AEG letterhead and there was no mention of K&E other than a disclosure of Eaton's "of counsel" relationship with the firm. In this case, too, there is no evidence that K&E led anyone to believe that Eaton or AEG was acting on behalf of K&E. The case against apparent agency is even stronger because LeapSource retained AEG to provide financial advisory services, not legal services. Even plaintiff Chris Kirk conceded in her deposition that she knew AEG was not a law firm. (SOF ¶ 27.) Similarly, the court in Trimble-Weber held that an "of counsel" lawyer was not an agent of a law firm. In that case, the plaintiff argued that a lawyer's "of counsel" relationship with a law firm was sufficient to impose vicarious liability on the law firm.

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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

695 N.E.2d at 347. The court upheld the granting of a motion for summary judgment. First, the court held that the title "of counsel" was not enough to create an express or implied agreement that the lawyer would act as an agent of the law firm. Next, the court rejected plaintiff's argument that the lawyer was an apparent agent because the lawyer was listed as "of counsel" on the law firm's letterhead and included in the firm's Martindale-Hubbell listing. Id. The court noted that there was no evidence that the plaintiff ever relied on the letterhead or Martindale-Hubbell listing, or the alleged injury was caused by the letterhead or Martindale-Hubbell listing. 695 N.E.2d at 347. The same holds true in this case. Plaintiffs have failed to produce evidence that K&E did anything to cause anyone at LeapSource to conclude that Eaton or AEG acted for K&E. This is consistent with Arizona law, which will not find apparent authority unless the supposed principal makes "some manifestation to the third party which could reasonably be relied upon to indicate that the agent had the alleged authority." Max of Switzerland, 930 P.2d at 1014. Here, there is no evidence that K&E made any manifestation to anyone at LeapSource regarding Eaton's authority. V. CONCLUSION. Plaintiffs have not met their burden of proof to demonstrate that either Eaton or AEG acted as an agent for K&E while working for LeapSource. To establish an agency relationship, plaintiffs must come forward with admissible evidence that would establish that Eaton or AEG was acting with actual or apparent authority. Plaintiffs have not even come close to raising a genuine issue of material fact. The overwhelming evidence shows that K&E did nothing to establish an agency relationship. K&E respectfully requests that the Court grant its motion for summary judgment on the issue of vicarious liability.

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Snell & Wilmer L.L.P.

Case 2:02-cv-02099-RCB

Document 250- 14 Filed 09/08/2005

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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

DATED this 8th day of September, 2005. SNELL & WILMER L.L.P.

By

s/ Joseph G. Adams John J. Bouma James R. Condo Patricia Lee Refo Joseph G. Adams Attorneys for Kirkland & Ellis

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Case 2:02-cv-02099-RCB Document 250- 15 Filed 09/08/2005 Page 15 of 16

Snell & Wilmer L.L.P.

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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

CERTIFICATE OF SERVICE I hereby certify that on September 8, 2005, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Leo R. Beus Richard R. Thomas Scot C. Stirling Beus Gilbert, PLLC 4800 North Scottsdale Road Scottsdale, AZ 85251 Attorneys for Plaintiffs Don P. Martin Edward A. Salanga Quarles & Brady Streich Lang, LLP Two North Central Phoenix, AZ 85004-2391 Attorneys for GTCR Defendants and Defendants Nolan, Rauner, Yih, Donnini and Canfield David S. Foster Latham & Watkins, LLP Sears Tower, Suite 5800 233 South Wacker Drive Chicago, IL 60606 Attorneys for GTCR Defendants and Defendants Nolan, Rauner, Yih, Donnini and Canfield Merrick B. Firestone Ronan & Firestone, P.L.C. 649 North Second Avenue Phoenix, AZ 85003 Attorneys for Michael Makings Foster Robberson Richard A. Halloran Lewis and Roca LLP 40 N. Central Avenue Phoenix, AZ 85004-4429 Attorneys for David L. Eaton and AEG Partners LLC Steven J. Brown Steve Brown & Associates, L.L.C. 1440 E. Missouri, Suite 185 Phoenix, AZ 85014-2412 Attorneys for Plaintiff Diane Mann, as Trustee for the Estate of LeapSource, Inc. s/ Joseph G. Adams
1701697

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Snell & Wilmer L.L.P.

Case 2:02-cv-02099-RCB

Document 250- 16 Filed 09/08/2005

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