The Illinois First District Appellate Court recently affirmed a trial court’s dismissal of professional malpractice and fraud claims brought against Fort Dearborn Partners, Inc., a management consulting firm specializing in turnaround services to financially troubled companies. The Gordon & Rees team led by partner Paul Gamboa, with assistance from associates, Brian Roth and Christina Spiezia, successfully handled the appeal on behalf of Fort Dearborn Partners.
The litigation had its roots in a guaranty suit originally brought by First Midwest Bank in 2012 against Robert Trainor, CEO and majority shareholder of Trainor Glass Company (TGC), at one time the third largest construction glass company in the country. First Midwest had extended TGC more than $37M in financing, with Mr. Trainor personally guaranteeing $18.5M of these loans. As a pre-condition for receiving additional rounds of financing, TGC was to retain a financial consultant, and it selected Fort Dearborn Partners for that role in March, 2011. Despite the efforts of all involved, TGC filed for bankruptcy one year later.
Mr. Trainor subsequently filed a third-party complaint against Fort Dearborn Partners, bringing claims for fraud, misrepresentation, negligence, breach of contract and breach of fiduciary duties. Therein, Mr. Trainor sought to void the personal guaranties, enjoin the parties from enforcing certain other security interests, and recover compensatory and punitive damages related to the failure of TGC.
Before the trial court, Gordon & Rees successfully argued that the bulk of Mr. Trainor’s claims were akin to those suffered by any other shareholder, and were therefore derivative of TGC. Additionally, because TGC had executed waivers of any and all claims against First Midwest and its agents in order to obtain additional debtor-in-possession financing, Mr. Trainor’s claims (even assuming he had standing to assert them) against Fort Dearborn Partners, as its alleged agents, were waived. Finally, the exculpatory clause contained in Fort Dearborn Partners’ engagement letter served as a complete bar to all of Mr. Trainor’s claims.
Mr. Trainor subsequently appealed the trial court’s order dismissing his lawsuit with prejudice. On December 30, 2014, the Appellate Court affirmed the trial court’s “well-reasoned decision” in its entirety. A copy of its opinion can be accessed here.