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Reynolds v. Henderson & Lyman

United States District Court, N.D. Illinois, Eastern Division

November 15, 2016

BRIAN REYNOLDS, Plaintiff,
v.
HENDERSON & LYMAN and DOUGLAS AREND, Defendants.

          MEMORANDUM OPINION AND ORDER

          Robert M. Dow, Jr. United States District Judge

         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.

         I. Background

         A. Local Rule 56.1

          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) (“All material facts set forth in the statement required of the moving party will be deemed to be admitted unless controverted by the statement of the opposing party.”); Friend v. Valley View Cmty. Unit Sch. Dist. 365U, 789 F.3d 707, 710 (7th Cir. 2015) (district court properly deemed admitted facts asserted by defendants as penalty for student’s noncompliance with Local Rule 56.1); Mintjal v. Prof’l Benefit Trust, 146 F.Supp.3d 981, 985 (N.D. Ill. 2015) (“the penalty for failing to properly respond to a movant’s 56.1(a) statement is usually summary judgment for the movant (at least if the movant has done his or her job correctly) because the movant’s factual allegations are deemed admitted” (internal quotation marks and citation omitted)).

         Plaintiff also failed to file his own Statement of Additional Facts. See Local Rule 56.1(b)(3)(C) (requiring non-movant to file a statement “of any additional facts that require the denial of summary judgment, including references to the affidavits, parts of the record, and other supporting materials relied upon”). 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) (recognizing that district courts have discretion to require strict compliance with Local Rule 56.1).

         B. Facts

         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 ...


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