Reynolds v. Lyman, Case No. 14–cv–7995
| Decision Date | 15 November 2016 |
| Docket Number | Case No. 14–cv–7995 |
| Citation | 220 F.Supp.3d 889 |
| Parties | Brian REYNOLDS, Plaintiff, v. Henderson & LYMAN and Douglas Arend, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Paul Gordon, Gordon & McWhirter, LLC, Stephen Francis McWhirter, Chalat Hatten Koupal & Banker, P.C., Denver, CO, for Plaintiff.
Christina Diane Harrison, Caruso & Roeder LLC, Alyssa Mara Reiter, Brigid E. Kennedy, Williams, Montgomery & John, Ltd., Chicago, IL, for Defendants.
Brian Reynolds ("Plaintiff") brought this diversity suit against Defendants Henderson & Lyman ("H & L") and Douglas Arend ("Arend") (collectively, "Defendants") for negligence, breach of contract, and breach of fiduciary duty. Before the Court is Defendants' motion for summary judgment [57]. For the reasons stated below, Defendants' motion [57] is granted.
The Court takes the relevant facts primarily from Defendants' Local Rule 56.1 Statement of Material Facts [59] and Reply [63] in support thereof. Plaintiff failed to respond to Defendants' Local Rule 56.1 Statement of Material Facts, and therefore admitted all facts set forth therein. See Local Rule 56.1(b)(3)(C) (); Friend v. Valley View Cmty. Unit Sch. Dist. 365U , 789 F.3d 707, 710 (7th Cir. 2015) (); Mintjal v. Prof'l Benefit Trust , 146 F.Supp.3d 981, 985 (N.D. Ill. 2015) ().
Plaintiff also failed to file his own Statement of Additional Facts. See Local Rule 56.1(b)(3)(C) (). Instead, Plaintiff cites in his response brief to certain "relevant evidence" supporting his case. [62] at 5–7. While this does not comply with the Local Rules, the Court will exercise its discretion in the direction of leniency and consider those additional fact statements that otherwise meet the requirements of the local and federal rules. Modrowski v. Pigatto , 712 F.3d 1166, 1169 (7th Cir. 2013) ().
Plaintiff is a citizen of Colorado and is not an attorney. Defendant H & L was a law firm and general partnership organized under the laws of Illinois with its principal place of business in Illinois. One of the areas in which H & L provided legal services was financial services. Defendant Arend was a partner at H & L and a licensed Illinois attorney.
In 2005, Plaintiff and Spencer Montgomery ("Montgomery") entered into a joint back office ("JBO") arrangement with Goldman Sachs Execution and Clearing ("GSEC"). A series of LLCs were formed to take advantage of the JBO arrangement: Paradigm Capital Markets, LLC, the broker-dealer; Paradigm Capital Markets Fund LLC, the pool; and Paradigm Capital Futures LLC, the operator of the pool (collectively, the "Paradigm LLCs"). Plaintiff was a managing member of and had an ownership interest in Paradigm Capital Markets LLC. He and Montgomery handled the day-to-day operation of the Paradigm LLCs.
The Paradigm LLCs were closed down in 2005. In 2006, Paradigm Capital Markets, LLC retained H & L to perform legal services, such as preparing a private placement memorandum. Montgomery made the initial contact with H & L. Montgomery and Plaintiff decided to hire Defendants as counsel for Paradigm Capital Markets, LLC.
In 2007, the Paradigm LLCs' assets and debts were rolled into a new group of LLCs: Arjent Capital Markets LLC, the broker-dealer; Arjent Capital Markets Fund LLC, the pool; and Arjent Capital Advisors LLC, the operator of the pool (collectively, the "Arjent LLCs"). Plaintiff was one of the managing members of and had an ownership interest in Arjent Capital Markets, LLC. Plaintiff and Montgomery handled the day-to-day operations of the Arjent LLCs. Defendants performed the same type of legal services for Arjent Capital Markets LLC that they performed for Paradigm Capital Markets, LLC.
In 2008, three funds were formed to funnel additional capital into the Arjent LLCs: Chicago Trading Managers, LLC, the operator of the pools; Chicago Trading Partners US LLC, the domestic pool; and Chicago Trading Partners International LLC, the offshore pool (collectively, the "Chicago Trading LLCs"). Plaintiff was the managing member, and subsequently a limited member, of Chicago Trading Managers LLC and had an ownership interest in the LLC. Plaintiff performed administrative tasks for the Chicago Trading LLCs. Defendants performed legal services for Chicago Trading Partners US LLC.
In the course of providing services to the broker-dealer LLCs identified above, Arend and an unidentified H & L attorney spoke over the phone with Plaintiff in his role as a representative of the LLCs about regulatory, compliance, and other issues, including disclosures by LLCs. All of the legal fees for Defendants' legal work were invoiced to and paid by the LLCs.
Plaintiff did not retain Defendants as his attorney personally or pay Defendants for any legal work. See [59–4] at 25 (Plaintiff's deposition). Plaintiff has produced no written contract, agreements, or promises between himself and Defendants. Further, H & L never provided or promised to provide legal services to Plaintiff, and no H & L attorney ever met in person with or indicated to Plaintiff that they were personally representing him. See [59–2] at 2–3 (Henderson declaration); [59–4] at 24–25; [59–7] at 11, (Arend deposition). Plaintiff also admitted at his deposition that no one from H & L ever said anything to him that indicated to him that they believed that they were personally representing him, see [59–4] at 25, and (beyond discussion of H & L's work for the LLCs) never made any promises to him personally with regard to legal services, see [59–6] at 1. At the end of the deposition, however, Plaintiff's attorney asked him, "[w]as there ever a point in time where you believed that Mr. Arend was giving you legal advice for you personally?" [62–1] at 11. Plaintiff responded: "Yes, I felt I was getting advice from him personally." Id. When further questioned by defense counsel, Plaintiff elaborated that he felt he was getting advice from Arend personally on a conference call when Plaintiff asked whether certain debits and other accounts in which there were losses needed to be disclosed on the LLC's statements. [59–6] at 18. Plaintiff also testified that he was acting as managing member for the LLC when he asked Arend about the disclosures. Id.
The Arjent LLCs and the Chicago Trading LLCs ceased operations in 2010. In 2012, the Commodity Futures Trading Commission ("CFTC") filed a complaint against Plaintiff, Montgomery, Chicago Trading Managers, LLC, and Arjent Capital Markets LLC. Plaintiff believes that allegedly faulty advice from Defendants led to the CFTC action. Specifically, Plaintiff alleges in his complaint that Defendants erroneously advised him that federal law did not require the LLCs to disclose debits in capital accounts, that the LLCs issued confidential offering memoranda that did not disclose debits in capital accounts, and that this led to the CFTC filing a complaint against Plaintiff alleging that he defrauded investors by issuing or causing to be issued false account statements for three commodity pools. In March 2013, a Judgment and Consent Order was entered in the CFTC action that permanently enjoined Plaintiff from trading or associating with anyone who traded futures.
In 2013, Plaintiff brought suit against Defendants for professional negligence (i.e. , legal malpractice), breach of contract, and breach of fiduciary duty. All three claims arise out of the legal services that Arend provided to some of the LLCs, are based on the same factual background, and seek the same damages. Currently before the Court is Defendants' motion for summary judgment on all three claims. In his response, Plaintiff stipulates to the dismissal of his breach of fiduciary duty claim. See [62] at 11.
Summary judgment is proper where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "A party asserting that a fact cannot be or is genuinely disputed must support the assertion by ... citing to particular parts of materials in the record" or "showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1). A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party."
Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The party seeking summary judgment has the burden of establishing the lack of any genuine issue of material fact. See Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Court "must construe all facts and draw all reasonable inferences in the light most favorable to the nonmoving party." Majors v. Gen. Elec. Co. , 714 F.3d 527, 532–33 (7th Cir. 2013) (citation omitted).
To avoid summary judgment, the nonmoving party must go beyond the...
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