Holden v. Deloitte and Touche Llp, No. 00 C 7488.

CourtUnited States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
Writing for the CourtFilip
Citation390 F.Supp.2d 752
Decision Date28 September 2005
Docket NumberNo. 00 C 7488.
PartiesJames HOLDEN, et al. Plaintiffs, v. DELOITTE AND TOUCHE LLP, et al. Defendants.
390 F.Supp.2d 752
James HOLDEN, et al. Plaintiffs,
v.
DELOITTE AND TOUCHE LLP, et al. Defendants.
No. 00 C 7488.
United States District Court, N.D. Illinois, Eastern Division.
September 28, 2005.

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COPYRIGHT MATERIAL OMITTED

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Jean K. Janes, Much, Shelist, Freed, Denenberg, Ament & Rubenstein, P.C., Chicago, IL, John Hester Ward, Harvey Joel Barnett, for Plaintiffs.

David Andrew Gordon, Sidley Austin Brown & Wood, Julie Diane Bailey, Latham & Watkins Illinois LLC, Katherine Louise Haennicke, Tressler, Soderstrom, Maloney, Priess, Alison L. Miner, Bollinger, Ruberry and Garvey, Alison S. Talbert, Novack & Macey, Steven Howard Gistenson, Richard G. Schultz, Schwartz, Cooper, Greenberger, Krauss, Chicago, IL, Michael H. Diamond, Milbank, Tweed, Hadley & McCloy, Los Angeles, CA, Lisa Maria Cipriano, David F. Graham, Linton Jeffries Childs, Janet Malloy Link, Nancy Scheurwater Hunter, John P. Lynch, Gloria C. Conn, Julie Diane Bailey, Janet Malloy Link, Nancy Scheurwater Hunter, Howard K. Priess, II, Daniel Richard Formeller, Michael L. Hahn, Clay H. Phillips, Edward F. Ruberry, Donald A. Tarkington, Eric Neal Macey, for Defendants.

MEMORANDUM OPINION AND ORDER

FILIP, District Judge.


Plaintiffs, James Holden and Christine Holden (collectively, the "Holdens"), filed an action in this Court against Deloitte & Touche LLP ("Deloitte"), Jefferies & Company ("Jefferies"), EPS Solutions Corp. ("EPS"), and others in November 2000. The case was assigned to District Judge Robert W. Gettleman, and on June 1, 2001, Judge Gettleman issued a memorandum opinion and order compelling arbitration of the Holdens' respective claims against Deloitte and Jefferies. See Hoffman v. Deloitte & Touche LLP, 143 F.Supp.2d 995 (N.D.Ill.2001). Thereafter, in late 2001, the Holdens entered into an arbitration agreement (the "Arbitration Agreement") with Deloitte, Jefferies, and certain other named defendants. This Arbitration

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Agreement modified the procedures for the arbitration from those specified in the Holden/EPS Stock Purchase Agreement — for example, it substantially expanded the scope of discovery available for the parties, adopted extended time frames in which discovery could be completed, and redesignated the manner by which the arbitrators were selected. The Arbitration Panel thereafter held nineteen pre-hearing conferences, with written orders resulting from each, between July 31, 2002 and June 8, 2004. (D.E. 98, Ex. 4 ("Award" or "Arbitration Award") at 2.) The parties conducted the arbitration in the Summer of 2004, and it involved some fourteen days of hearings, at which the testimony of some thirty-plus witnesses and hundreds of exhibits were introduced. (Award at 2; D.E. 97 at 4.) On October 26, 2004, the Panel issued a ten-page single-spaced Award in which the three-member Panel unanimously rejected the Holdens' claims. (See Award.)

In January 2005, Deloitte filed a motion to confirm the Arbitration Award. (D.E.97.) The Holdens also filed an objection to confirmation and motion to vacate the Award, as well as a motion to reconsider Judge Gettleman's arbitration order. (D.E.89.) For the reasons stated below, the motion to reconsider Judge Gettleman's order and objection to confirmation of the Arbitration Award are respectfully rejected. The motion to confirm the Arbitration Award is granted.

I. Background

The Holdens filed an action in this district court against Deloitte, Jefferies, EPS, and others in November 2000. The complaint alleges a complex fraudulent scheme conducted by Deloitte, Jefferies, and other named defendants acting in concert with them, to form and operate EPS. The complaint alleges that Deloitte, together with the other defendants, amassed stock to cash-in once EPS instituted its initial public offering ("IPO"). To raise funds, Deloitte and others allegedly sought to attract successful businesses to provide cash to keep EPS afloat until they could cash-in on the IPO. Specifically, the complaint alleges that Deloitte, acting in concert with the other defendants, induced the Holdens to sell their company to EPS, pursuant to a stock purchase agreement (the "SPA"), by making false statements about EPS's financial future and publicizing the public offering, even though they knew that EPS was short $10 million in earnings before interest, taxes, depreciation and amortization ("EBITDA") and in need of cash.

After the suit was filed, Deloitte and Jefferies each moved to stay the action, or in the alternative, for dismissal, and to compel arbitration pursuant to § 7.13 of the Stock Purchase Agreement ("SPA") between EPS and the Holdens. Section 7.13 of the SPA provides in relevant part that:

(a)(i) Any controversy or claim arising out of or relating to this Agreement shall be solely and finally settled by arbitration administrated by the American Arbitration Association (the "AAA")....

(D.E. 95, Ex. 1 (SPA § 7.13) (the "Arbitration Clause").)

After extensive briefing from the parties with respect to the requested relief, on June 1, 2001, the Honorable Judge Robert W. Gettleman issued a memorandum opinion and order compelling arbitration of the Holdens' claims against Deloitte and Jefferies. See Hoffman v. Deloitte & Touche LLP, 143 F.Supp.2d 995 (N.D.Ill.2001) ("Hoffman" or the "Arbitration Order"). In the Arbitration Order, Judge Gettleman noted that Deloitte and Jefferies were not signatories to the Holden/EPS SPA, but acknowledged and followed a substantial body of federal precedent teaching that non-signatories to agreements that contain

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arbitration clauses may invoke those clauses as against signatories under certain circumstances. See Hoffman, 143 F.Supp.2d at 1003-05 (discussing various federal circuit precedents). Judge Gettleman found that the essence of the allegations against Deloitte and Jefferies is that they fraudulently induced the Holdens to enter into the SPA. See, e.g., id. at 1004 (stating that the Holdens'"principal claims against these defendants... pre-date and are directly related to and arise out of the contracts in question. Thus, ... [Deloitte] and Jefferies have standing to compel arbitration."). He found that the Holdens were properly required to arbitrate their claims on multiple, independent bases, including common law agency and related principles, equitable estoppel, and third-party beneficiary law. Hoffman, 143 F.Supp.2d at 1004-05.

Thereafter, on or about December 19, 2001, the Holdens entered into the Arbitration Agreement with Deloitte, Jefferies, and certain other named defendants. The Arbitration Agreement modifies the arbitration procedures set forth in § 7.13 of the SPA. For example, the agreement requires an arbitral panel consisting of three neutral arbitrators, rather than two party-selected arbitrators who thereafter would select the third member of the panel. (D.E. 98, Ex. 2 ¶ 4; see also id. ¶ 5 (specifying that the three neutral arbitrators shall each be "a practicing attorney or a retired or former judge with at least fifteen (15) years experience with and knowledge of securities law, complex business transactions, and mergers and acquisitions").) The Arbitration Agreement also substantially expanded the scope of discovery available to the parties and the time period in which the parties and their counsel could complete such discovery. (Id. ¶¶ 7-9, 15.)1 The parties also waived the right to seek attorneys' fees based on any judgment, order, ruling, or award entered in the arbitration. (Id. ¶ 19.) The Arbitration Agreement also provides that, by "entering into this Agreement," the Holdens "do not waive any objections to the [Arbitration Order]." (Id. ¶ 2.)

On December 20, 2001, the Holdens filed an arbitration demand with the American Arbitration Association. (D.E.97, Ex. F.) There were nineteen pre-hearing conferences held, with written orders resulting from each, between July 31, 2002 and June 8, 2004. (Award at 2.) The panel of three neutral arbitrators (the "Panel") presided over an extensive evidentiary hearing with respect to the Holdens' claims, which took place over fourteen days from June 18, 2004 to August 2, 2004. (Id.) The parties introduced testimony from over thirty witnesses (whether live or by deposition) and they introduced several hundred exhibits. At the conclusion of the arbitration, each party submitted seventy pages of post-hearing briefs and response briefs, and the parties orally argued their respective positions to the Panel. (Id.) Ultimately, on October 26, 2004, the Panel issued a ten-page statement of Awards and Reasons, in

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which the Panel unanimously ruled that, because the Holdens failed to prove an essential element of loss causation, Deloitte was not liable with respect to any of the Holdens' claims. (See Award.)

Several months prior to issuing the Arbitration Award with respect to Deloitte, the same Panel dismissed Jefferies from the arbitration proceedings as a result of a settlement reached between the Holdens and Jefferies. The Holdens and Jefferies sought the assistance of the Panel and the district court in effectuating that settlement. (D.E.97, Ex. A.)

The case is currently before this Court on Deloitte's motion to confirm the Arbitration Award. The Holdens have filed an objection to confirmation of the Arbitration Award, a motion to vacate the Arbitration Award, and a motion to reconsider Judge Gettleman's Arbitration Order and to set the case for a jury trial. As explained below, the reconsideration motion concerning the Arbitration Order and motion to vacate the Arbitration Award are denied, and the motion to confirm the Award is granted.

II. Reconsideration of the Arbitration Order

A. Standard of Review

The Court first addresses the Holdens' motion to reconsider Judge Gettleman's June 2001 order finding that arbitration was appropriate (also, "Reconsideration Motion"). The Reconsideration Motion implicates two lines of teaching regarding the applicable...

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20 practice notes
  • Crowley Maritime v. Boston Old Colony Ins., No. A116710.
    • United States
    • California Court of Appeals
    • January 11, 2008
    ...(Sweet Dreams Unlimited, v. Dial-A-Mattress Intern. (7th Cir.1993) 1 F.3d 639, 643; Holden v. Deloitte and Touche LLP (N.D.Ill.2005) 390 F.Supp.2d 752, 767; Gulf Guar. Life Ins. v. Connecticut Gen. Life Ins. (S.D.Miss.1997) 957 F.Supp. 839, 842; Metalclad Corp. v. Ventana Environmental Orga......
  • In re Raymond Professional Group, Inc., Bankruptcy No. 06 B 16748.
    • United States
    • United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois
    • November 19, 2008
    ...limited." Carpenter Local 1027 v. Lee Lumber & Bldg. Material 2 F.3d 796 (7th Cir.1993). See also Holden v. Deloitte & Touche LLP, 390 F.Supp.2d 752, 772 (N.D.Ill.2005) (citing Yasuda Fire & Marine Ins. Co. v. Cont'l Cas. Co., 37 F.3d 345, 349 (7th Cir. 1994)). Further, there is a presumpti......
  • Machado v. System4 LLC, SJC–11681.
    • United States
    • United States State Supreme Judicial Court of Massachusetts
    • April 13, 2015
    ...allegations of concerted misconduct, courts frequently look to the face of the complaint. See Holden v. Deloitte & Touche LLP, 390 F.Supp.2d 752, 768 (N.D.Ill.2005).17 The plaintiffs have lumped the two defendants together, asserting each claim in their complaint against System4 and NECCS c......
  • General Elec. Co. v. Anson Stamping Co. Inc., No. Civ.A.3:04-CV-401-R.
    • United States
    • United States District Courts. 6th Circuit. United States District Court of Western District of Kentucky
    • March 30, 2006
    ...142 F.3d 188, 194 (4th Cir.), cert. denied, 525 U.S. 876, 119 S.Ct. 178, 142 L.Ed.2d 145 (1998); Holden v. Deloitte and Touche, LLP, 390 F.Supp.2d 752, 780-81 (N.D.Ill.2005) ("[I]f a district judge is satisfied that the arbitrators resolved the entire dispute and can figure out what that re......
  • Request a trial to view additional results
20 cases
  • Crowley Maritime v. Boston Old Colony Ins., No. A116710.
    • United States
    • California Court of Appeals
    • January 11, 2008
    ...(Sweet Dreams Unlimited, v. Dial-A-Mattress Intern. (7th Cir.1993) 1 F.3d 639, 643; Holden v. Deloitte and Touche LLP (N.D.Ill.2005) 390 F.Supp.2d 752, 767; Gulf Guar. Life Ins. v. Connecticut Gen. Life Ins. (S.D.Miss.1997) 957 F.Supp. 839, 842; Metalclad Corp. v. Ventana Environmental Orga......
  • In re Raymond Professional Group, Inc., Bankruptcy No. 06 B 16748.
    • United States
    • United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois
    • November 19, 2008
    ...limited." Carpenter Local 1027 v. Lee Lumber & Bldg. Material 2 F.3d 796 (7th Cir.1993). See also Holden v. Deloitte & Touche LLP, 390 F.Supp.2d 752, 772 (N.D.Ill.2005) (citing Yasuda Fire & Marine Ins. Co. v. Cont'l Cas. Co., 37 F.3d 345, 349 (7th Cir. 1994)). Further, there is a presumpti......
  • Machado v. System4 LLC, SJC–11681.
    • United States
    • United States State Supreme Judicial Court of Massachusetts
    • April 13, 2015
    ...allegations of concerted misconduct, courts frequently look to the face of the complaint. See Holden v. Deloitte & Touche LLP, 390 F.Supp.2d 752, 768 (N.D.Ill.2005).17 The plaintiffs have lumped the two defendants together, asserting each claim in their complaint against System4 and NECCS c......
  • General Elec. Co. v. Anson Stamping Co. Inc., No. Civ.A.3:04-CV-401-R.
    • United States
    • United States District Courts. 6th Circuit. United States District Court of Western District of Kentucky
    • March 30, 2006
    ...142 F.3d 188, 194 (4th Cir.), cert. denied, 525 U.S. 876, 119 S.Ct. 178, 142 L.Ed.2d 145 (1998); Holden v. Deloitte and Touche, LLP, 390 F.Supp.2d 752, 780-81 (N.D.Ill.2005) ("[I]f a district judge is satisfied that the arbitrators resolved the entire dispute and can figure out what that re......
  • Request a trial to view additional results

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