On Sept. 25, 2013, Chicago partner Paul Gamboa and associate Meghan Dalton won the dismissal with prejudice of a third-party complaint against Fort Dearborn Partners, Inc., a management consulting firm specializing in turnaround services to financially troubled companies.
The litigation had its roots in a guaranty suit originally brought by First Midwest Bank in 2012 against Robert Trainor, the CEO and majority shareholder of Trainor Glass Co. (TGC), at one time the third-largest construction glass company in the country. First Midwest had extended TGC more than $37 million in financing, with Trainor personally guaranteeing $18.5 million of the loans. As a pre-condition for additional financing, TGC was to bring in a financial consultant to assist with management of the company’s cash flow, among other things. TGC selected Fort Dearborn Partners in March 2011. Despite the efforts of all involved, TGC filed for bankruptcy on March 9, 2012.
On Jan. 31, 2013, Trainor filed a 40-page Answer, Counterclaim (against First Midwest) and Third-Party Complaint (against Fort Dearborn Partners) alleging fraud, misrepresentation, negligence, breach of contract and breach of fiduciary duties related to an alleged conspiracy between First Midwest and Fort Dearborn Partners to ensure TGC failed. Trainor sought to void the $18.5 million in personal guaranties and recover more than $25 million in compensatory and punitive damages related to the failure of TGC.
In Fort Dearborn Partners’ Motion to Dismiss the Third-Party Complaint, Gordon & Rees argued that the exculpatory clause contained in Fort Dearborn Partners’ engagement letter served as a complete bar to Trainor’s claims. In addition, Trainor’s alleged damages were akin to those suffered by any other shareholder, and therefore derivative of TGC’s rights. G&R also argued that Trainor could not maintain an action against Fort Dearborn Partners because TGC had executed waivers of any and all claims or causes of action against First Midwest and any of its agents to obtain additional debtor-in-possession financing in 2011. (Emphasis added.)
After extensive briefing, the court heard oral argument on Sept. 25, 2013. Following nearly two hours of oral argument, the court agreed with both points advanced by Gordon & Rees and determined that Trainor’s complaint failed as a matter of law. The court denied Trainor’s counsel’s request to replead, instead dismissing the counterclaim and third-party complaint with prejudice after noting that Trainor had been given ample opportunity to make his arguments against First Midwest and Fort Dearborn Partners.