PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO 28 U.S.C. §157(c)(1) AND FED. R. BANKR. P. 9033(a)

Re: Docket Nos. 67, 68, 69, 70, 72, 73, & 74.

LAURIE SELBER SILVERSTEIN, Bankruptcy Judge.

Before the Court is Kirkland & Ellis LLP's ("Kirkland") motion for summary judgment1 on each count set forth in the complaint2 filed by the chapter 7 trustee (the "Trustee") of the above-captioned debtors (collectively, the "Debtors" or "Indalex")3 on May 14, 2012. Because the Court finds that each count in the Complaint is barred by the statute of limitations, the Motion is granted.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157(a) and (c)(1). Venue is proper in this Court pursuant to 28 U.S.C. § 1409. This is a non-core proceeding. In non-core proceedings, the bankruptcy court shall file proposed findings of fact and conclusions of law4 unless the parties consent to the entry of a final judgment by the bankruptcy judge. Neither the Motion nor any of the briefing address whether the parties have consented to entry of a final judgment. And, notwithstanding Federal Rules of Bankruptcy Procedure 7008 and 7012, neither the Complaint nor Kirkland's answer contain the required statements that a proceeding is core or non-core, and if non-core, whether the pleader does or does not consent to the bankruptcy judge entering a final judgment. Further, this action was filed before Local Rule 7012-1 was enacted, thus the lack of such statements in the pleadings does not automatically waive the pleader's right to contest the entry of a final judgment by the bankruptcy court.5 Under these circumstances and for this Motion, the Court will not find that either the Trustee or Kirkland has knowingly and voluntarily consented (expressly or impliedly)6 to the entry of a final judgment by the Court.

STATEMENT OF FACTS AND BACKGROUND

The essential facts are undisputed. On March 20, 2009 (the "Petition Date"), the Debtors7 filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (as amended, the "Bankruptcy Code"). By order8 entered on October 15, 2009, the Court converted these cases to cases under chapter 7, effective as of October 30, 2009. On the effective date, the Trustee was appointed to administer the remaining assets of the Debtors' estates.9 Prior to conversion, the Debtors were the world's largest independent producer of soft aluminum alloy extrusion products and North America's second largest aluminum extruder.10

A. Sun Capital Acquires the Indalex Operating Entities

In March 2005, Honeywell International, Inc. ("Honeywell") acquired debtor Indalex Inc. and its non-debtor affiliate Indalex Limited (collectively, the "Operating Entities") through Honeywell's purchase of Novar plc.11 Even then, Honeywell disclosed that it did not intend to keep the Operating Entities and expected to pursue strategic alternatives post-acquisition.12 Shortly after the Honeywell acquisition closed, an affiliate of the private equity firm Sun Capital Partners, Inc. ("Sun Capital") expressed Sun Capital's interest in acquiring all of the stock of the Operating Entities or all, or substantially all, of their assets.13 To facilitate a potential transaction, Sun Capital retained Kirkland as outside corporate counsel.14

Ultimately, Sun Capital decided to pursue a leveraged buyout of the stock of the Operating Entities and instructed Kirkland to form two holding companies, Indalex Holding Corp. ("Indalex Holding") and Indalex Holdings Finance, Inc. ("Indalex Finance," and together with Indalex Holding, the "Holding Entities"), to complete the transaction.15 On September 16, 2005, Indalex Holding entered into a stock purchase agreement with Honeywell.16 Once the deal closed, Sun Capital would control Indalex Finance, which would own 100% of Indalex Holding's stock, and Indalex Holding would, in turn, wholly own the Operating Entities.17

In connection with the acquisition, Kirkland performed a variety of legal services for Sun Capital including drafting certain key financing documents.18 Among those documents was a bond offering memorandum (the "Offering Memorandum"), by which Sun Capital, though the newly-formed Indalex Holdings, would offer up to $270 million in secured debt financing to partially fund the purchase.19 JP Morgan, Harris Nesbitt, Credit Suisse, Morgan Joseph and Piper Jaffray were the initial purchasers of the notes issued by Holdings (the "11.5% Notes due 2014") and were represented by Cravath, Swain & Moore LLP.20 The final Offering Memorandum was circulated to prospective investors on January 30, 2006.21 The debt offering raised about $268 million in capital22 and three days later, on February 2, 2006, the acquisition closed for a purchase price of approximately $425 million plus fees and expenses of $23 million (the "Acquisition").23 Sun Capital financed the remainder of the purchase price through a $111.3 million equity contribution and borrowings on a revolver.24

B. Investment in Sun Capital Funds

Relevant to the parties' briefing on the Motion, the Offering Memorandum disclosed in its "Legal matters" section that "[s]ome of the partners of Kirkland & Ellis LLP are partners in a partnership that is an investor in one or more of the investment funds affiliated with Sun Capital Partners that may purchase common stock of Indalex parent in connection with the Acquisition."25 While the Court cannot (and need not) determine why that disclosure was made, it reflects what will be referred to in these Proposed Findings as the "Alleged Investment Conflict."

Mr. Jack Levin, Kirkland's Rule 30(b)(6) designee, testified as follows. Since the 1980s, a group of Kirkland partners have created investment funds to make investments alongside Kirkland's private equity clients, such as Sun Capital. The firm, itself, has never invested in these funds, which it terms "PEFs" for Private Equity Funds. Each partner determines whether and in what amount he will invest in any given PEF, which invests only after a client invites it to do so. A management committee of Kirkland partners manages the PEFs. The management committee determines how the PEF will invest its committed capital. Once the capital is committed to a private equity fund, the management committee does not direct the fund or know what portfolio company its client's fund will acquire. Accordingly, when an individual partner commits capital to a PEF, he does not know in what client fund it will ultimately be invested.26

Two PEFs in which Kirkland Partners invested, namely: (i) K&E Investment Partners, LLC — 2003 PEF (the "2003 PEF") and (ii) K&E Investment Partners, LLC — 2005 PEF (the "2005 PEF") invested in Sun Capital Partners III, QP LP ("Sun III") and Sun Capital Partners IV, LP ("Sun IV") respectively. Sun Capital employed funds from Sun III and Sun IV as part of the $111.3 million equity investment in Indalex.27

C. Indalex Hires Kirkland

Upon the closing of the transaction, and at all relevant times following the Acquisition, Sun Capital controlled Indalex, which was now one of Sun Capital's portfolio companies.28 Contemporaneous with the closing of the Acquisition, Indalex retained Kirkland as its general outside counsel.29 The executed engagement letter contemplated Kirkland providing a variety of legal services to Indalex, including legal advice on corporate transactional matters.30 The letter also specifically informed Indalex that Kirkland represented Sun Capital—including with respect to Sun Capital's ongoing investment in Indalex—and that Kirkland anticipated it would continue to do so in the future.31 Kirkland also sought and obtained a purported waiver from Indalex of past, present, and future conflicts arising from Kirkland's representation of Sun Capital.32 Part of the agreement was an understanding that, in the event Kirkland or Sun Capital determined a conflict existed, Kirkland could terminate its representation of Indalex and continue that of Sun Capital.33 The engagement letter did not, however, disclose the Alleged Investment Conflict.

D. Indalex Issues a Significant Dividend to Its Ultimate Stockholders, Including Sun Capital

When Sun Capital acquired Indalex Limited, its non-operating subsidiary Indalex UK Limited ("Indalex UK") held an approximate 25% ownership interest in Asia Aluminum Group Limited ("AAG"), a Chinese aluminum extruder.34 At the time of the Acquisition, it was expected that Indalex UK would subsequently sell that interest and declare an upstream dividend.35 Consistent with that expectation, in May 2007, fifteen months after the Acquisition, Indalex UK sold the minority interest for approximately $153 million.36

Upon receipt of the funds, Indalex Limited promptly transferred the entire amount to Indalex Inc., its "brother" entity.37 Indalex Inc. immediately directed a return wire of $31 million, leaving Indalex Inc. with approximately $122 million of additional capital from the sale, despite Indalex Inc. having had no prior interest in AAG.38 Indalex Inc. thereafter paid Sun Capital approximately $1.5 million in transaction fees and transferred approximately $75.5 million to the bond trustee for the 11.5% Notes due 2014 for an anticipated bond redemption offer.39

Around the time of the sale, Indalex Finance and Indalex Holding engaged FTI Capital Advisors, LLC ("FTI")—at the direction of Sun Capital—to analyze the solvency and financial condition of those entities immediately following a combined dividend and debt repayment (i.e., bond redemption) transaction.40 In particular, FTI was asked to perform an analysis and assume that Indalex UK would sell its 25% interest in AAG, and that Holdings and Finance would use the proceeds to offer to repurchase up to $75.5 million of the 11.5% Notes due 2014 and to make a stockholder distribution (i.e. dividend) of approximately $76.6 million.41 In the report, FTI was asked to address whether after that transaction: (i) the fair market value and the present saleable value of Holdings and Finance's assets would exceed their stated liabilities and contingent liabilities; (ii) Holdings and Finance would be able to pay their debts as they become due; and (iii) the capital remaining in Holdings and Finance would be unreasonably small for their business as it was then conducted.42

On June 1, 2007, after incorporating several modifications negotiated by Sun Capital and Kirkland, FTI issued its final report (the "FTI Report").43 The modifications requested by Kirkland included changes reflecting Kirkland's desire that the report mirror and cite to applicable Delaware General Corporation Law and/or Delaware's fraudulent conveyance statute.44 Some comments were accepted; others did not make their way into the FTI Report.45 Additionally, the day before FTI's report was due, Sun Capital specifically threatened to pull the work from FTI and give it to another firm if FTI could not make certain specified changes to its report.46 Kevin Schultz of FTI testified, in passing, to "harassment" related to getting the FTI Report out.47 But, Richard Braun of FTI testified that the requested changes did not affect the conclusions reached by FTI, and that FTI stands behind its work and the FTI Report.48 In any event, FTI issued its report.

As part of the process, the Debtors asked Kirkland whether Indalex UK also needed to receive the benefit of the FTI analysis.49 Kirkland advised the Debtors that there was no need for FTI to analyze the financial condition of that entity because interim financials already existed showing Indalex UK to have sufficient "distributable reserves" under UK law to complete the transaction.50 As part of that process, Kirkland also drafted and counseled Indalex on the corporate consents (the "Consents")51 needed to consummate the distribution of funds.

Also on June 1, 2007, Indalex issued an approximate $76.6 million dividend (the "Dividend") to its ultimate stockholders, the largest of which was Sun Capital.52 Numerous Kirkland partners also received a distribution through their indirect investments in Sun III and Sun IV.53 Later that month, as the second phase of the transaction, nearly $75.5 million previously transferred to the bond trustee was used to retire tendered bonds at a 5% premium.54

Shortly after the Dividend, Indalex filed its Form 10-Q with the United States Securities and Exchange Commission (the "SEC") for the quarter ended July 1, 2007 (the "July 10-Q").55 The consolidated balance sheet included shows Indalex Inc. having liabilities that exceeded its assets by more than $33.7 million.56 The same chart included in Form 10-Q for the quarter ended April 1, 2007 (the "April 10-Q"), indicates that the company's assets—prior to the Dividend—exceeded its liabilities by over $47.7 million.57

E. The Trustee Commences Litigation Against Sun Capital and Kirkland

On March 20, 2009, nearly two years after Indalex declared the Dividend, the instant bankruptcy cases were filed. Following conversion of the cases to chapter 7, the Trustee commenced an adversary proceeding against Sun Capital and others, including officers and directors of Indalex (the "Sun Adversary"),58 alleging, inter alia, that Sun Capital exercised its control of Indalex to improperly extract money from the company by way of the Dividend.59 The Trustee further alleges that the Dividend rendered Indalex insolvent, and therefore moved to recover against Sun Capital and the individual defendants for breaches of their fiduciary duties.60

Eight months after initiating the Sun Adversary, the Trustee asked Kirkland to enter into a tolling agreement (the "Tolling Agreement") with respect to any claims the Trustee may have against Kirkland arising out of Kirkland's representation of Indalex. Kirkland agreed and on March 14, 2011, the Tolling Agreement was executed.61 The Tolling Agreement specifically provided that any statute of limitations applicable to the Trustee's potential claims against Kirkland was "tolled from [March 14, 2011] through and including the earlier of (a) one year from [March 14, 2011] (subject to renewal as and when agreed by the parties) or (b) sixty (60) days following the termination of this Agreement in accordance with the provisions of paragraph 4 [of this Agreement]."62 Although the Trustee "disagrees" with Kirkland over the effect of the Tolling Agreement, he also does not contend that termination or renewal occurred as provided by the agreement.63 Accordingly, the Tolling Agreement expired on March 14, 2012.

The Trustee claims that he first learned of potential causes of action against Kirkland while taking discovery in the Sun Adversary. Specifically, the Trustee asserts that an April 17, 2012 deposition of Sun Capital co-founder Marc Leder revealed for the first time that Kirkland held disabling conflicts of interest by virtue of its partners' investments in the 2003 PEF and the 2005 PEF, which invested in Sun III and Sun IV. According to the Trustee, nothing prior to this revelation signaled any wrongdoing by Kirkland.

The Trustee thereafter initiated this adversary proceeding by filing the Complaint on May 14, 2012. The Complaint contains two separate counts: Aiding and Abetting Breach of Fiduciary Duty and Professional Negligence. In response, Kirkland moved to dismiss the Complaint on the basis that the Trustee's claims were time-barred by the relevant statutes of limitation. The Court denied that motion, finding, based solely on the allegations in the Complaint,64 that the statute of limitations was tolled because the Alleged Investment Conflict was not discovered until the Leder deposition.65 The Complaint, filed twenty-seven days later, was therefore timely, at least upon the limited review appropriate at the motion to dismiss stage.66 Put differently, a dispositive ruling was premature, assuming the Trustee only came to have notice—or could be deemed to have notice—of his claims less than a month before filing the Complaint.

Fact discovery in this matter concluded on October 13, 2014, and expert discovery closed on May 15, 2015.67 Per the Court's scheduling order, the Trustee was required to designate all of his experts and serve copies of their initial reports by November 13, 2014.68 To date, the Trustee has only designated an expert to address his legal malpractice claims. No expert has been put forth on the insolvency issue. Following discovery, Kirkland filed the Motion now under consideration.

The Parties' Positions

Kirkland supports its request for summary judgment with three principle arguments: (1) both of the Trustee's claims are time-barred in light of evidence not adduced at the motion to dismiss stage; (2) the Trustee cannot establish insolvency without an expert, nor can he prove that Kirkland knew Indalex fiduciaries would breach their duties by issuing the Dividend, and thus the aiding and abetting count cannot survive; and (3) the Trustee cannot establish legal malpractice without an expert on the appropriate standard of care.

In response, the Trustee argues that the Court already addressed the issue of timeliness. Specifically, the Trustee claims that the Court's prior ruling on the motion to dismiss is law of the case, and therefore the Court must reject the renewed limitations argument at this stage. Alternatively, the Trustee posits that the statutory periods never expired because they were tolled under the doctrines of fraudulent concealment and equitable tolling.

As to the aiding and abetting claim, the Trustee's position is that, by moving to stay this case pending a disposition in the Sun Adversary, Kirkland agreed to be bound by any ruling in that proceeding on the underlying fiduciary duty issues. Similarly, the Trustee insists that the law of the case principle dictates preclusion of summary judgment in Kirkland's favor, to the extent the Court determined summary judgment was inappropriate in the Sun Adversary. The Trustee further asserts that not all of the fiduciary duty claims in the Sun Adversary, and therefore not all of the aiding and abetting claims here, depend on solvency, despite the Complaint referencing insolvency as the only ground for the alleged fiduciary breaches. In any event, the Trustee believes that there is ample evidence—in this case—supporting the underlying breaches and Kirkland's knowing participation.

Lastly, with respect to the alleged malpractice, the Trustee contends that this is "the classic case of dueling experts" who disagree on whether Kirkland comported with the applicable standard of care, and thus summary judgment is inappropriate. However, rather than explain how the ethical rules and Kirkland's prior advice comprise the standard of care, the Trustee largely attacks the credibility of Kirkland's experts69 and alleges that certain corporate documents drafted by Kirkland contained false representations.

SUMMARY JUDGMENT STANDARD

The Court must grant a motion for summary judgment "if 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."70 "Although questions of negligence are usually reserved for the factfinder, summary judgment is proper where the facts are undisputed and only one conclusion may reasonably be drawn from them."71 Unlike the motion to dismiss stage, the Court is not limited to the complaint and documents referenced therein, but may appropriately consider the pleadings, admissible discovery, affidavits and disclosure materials on file.72 Importantly, when considering the facts before it, the Court must view the evidence in the light most favorable to the nonmoving party and must draw all reasonable inferences in favor thereof.73

Summary judgment will not be granted if the parties genuinely dispute an issue of material fact.74 A material fact is one which could alter the outcome of the case.75 A genuine dispute is "present when the evidence is such that a reasonable jury could return a verdict for the nonmoving party."76

If the moving party demonstrates an absence of evidence supporting the nonmoving party's case, "the burden of proof is switched to the non-movant who must present definite, competent evidence to rebut the motion."77 Put differently, "the non-moving party must adduce more than a mere scintilla of evidence in its favor" and "cannot simply reassert factually unsupported allegations contained in its pleadings."78 Similarly, where the nonmoving party completely fails to adduce evidence concerning an essential element of its case, summary judgment must be entered in favor of the moving party.79

ANALYSIS

I. The Law of the Case Doctrine Does Not Preclude Summary Judgment on Either Count

The law of the case doctrine states that a prior legal determination "should continue to govern the same issues in subsequent stages [of] the same case."80 When a successor judge inherits a matter, he should not "lightly overturn decisions of his predecessors"81 A court should only revisit matters decided earlier in a case if, for example, new evidence is available, supervening new law is handed down, or the previous decision is "erroneous and would create manifest injustice."82 But, the doctrine is not an absolute bar to rehearing a matter; rather, it "merely directs the court's discretion not to rehear matters ad nauseam."83 It should be evident that the doctrine only applies to issues that have been actually determined.84

Moreover, unlike decisions rendered after an opportunity for an evidentiary showing, the doctrine does not provide deference to rulings made on motions to dismiss.85 Specifically, the doctrine "does not preclude a grant of summary judgment in favor of a defendant whose motion to dismiss had been previously denied," as "the court must now take into consideration evidence that has been developed through discovery."86 Undeniably, when the procedural posture has shifted from the dismissal to the summary judgment stage, the Court is no longer required to accept all allegations in the complaint as true and must determine whether the plaintiff has established a prima facie case backed by evidence in the record.87

The Trustee's argument that the bar to joinder doctrine prevents the Court from considering Kirkland's statute of limitations argument is without merit. The Trustee contends that the Letter Ruling both included an "expansive discussion" of Laventhol, Krekstein, Horwath & Horwath v. Tuckman,88 and then held that "the statute of limitations was not available to K&E here" and that "experts who knowingly conspire with self-dealing fiduciaries are denied the protection of the statute of limitations."89 This is not an accurate characterization of the Letter Ruling or its holding. In the Letter Ruling, Judge Walsh90 compares this case to Laventhol by quoting at length from the Complaint and then at length from Laventhol. But, other than stating that this case "falls squarely within" Laventhol, there is no analysis.

In Laventhol, the Delaware Supreme Court held that "the principles of law governing the statute of limitations" should apply equally to certified public accountants who were alleged to have conspired with a corporation to defraud shareholders and the corporate directors with whom they conspired.91 Thus, the statute of limitations can be tolled in cases asserting wrongful self-dealing against professionals advising corporations. But, Laventhol does not stand for the proposition that a defendant is forever denied the benefit of the statute of limitations. Rather, even in instances of alleged self-dealing, the statute is tolled only until the plaintiff knew or had reason to know of the facts alleged to give rise to the wrong.92

In finding that this case falls squarely within Laventhol, Judge Walsh recognized the allegations of self-dealing in the Complaint and acknowledged that the self-dealing fiduciary tolling principle can be applied to Kirkland here. Crediting the allegations in the Complaint, as required on a motion to dismiss, Judge Walsh denied the motion because the Complaint was filed 27 days after the Trustee was on notice of allegations he alleged were material to his claims. Far from holding that Kirkland could never be entitled to the benefit of the statute of limitations, the very language of the holding sounds in inquiry notice, which reads, in its entirety:

If the Trustee's interpretation of the holding were correct and Kirkland was altogether denied the benefit of the statute of limitations, there would have been no need to detail when the Trustee learned of the Alleged Investment Conflict and when he filed the Complaint.

As the Court's prior ruling did not hold that Kirkland could never be entitled to the benefit of the statute of limitations, the bar to joinder doctrine does not foreclose a review of the record on a motion for summary judgment to determine whether there is evidence establishing that the statute of limitations should indeed be tolled and/or that Indalex was on inquiry notice of the claims asserted in the Complaint.94

Likewise, the Court is not persuaded that summary judgment is precluded here simply because issues of material fact were found to exist in the Sun Adversary on the underlying breach of fiduciary duty claim. While there is some disagreement in the case law regarding whether the law of the case doctrine applies between adversary proceedings involving different litigants,95 the Court need not decide that issue. First, one of the fact issues raised on summary judgment in this case—whether Kirkland knowingly assisted Indalex in breaching its fiduciary duty by declaring an unlawful dividend—is not an issue in the Sun Adversary. Second, even as to the underlying breach, the decision in the Sun Adversary was made on the record in that case, not the record here. Therefore, no deference will be accorded to the Sun Adversary ruling for purposes of deciding Kirkland's Motion.

II. The Trustee's Claims Are Barred by the Statute of Limitations

Given the conclusion reached in the first part of this analysis, the Court may, and should, revaluate Kirkland's renewed statute of limitations argument at this stage. For purposes of summary disposition, Kirkland accepts application of Delaware's three-year statute of limitations to both counts.96 Because ordinary operation of the statute and Bankruptcy Code would render the Complaint untimely, the Trustee argues that certain tolling principles apply to keep his case afloat. For reasons the Court will explain, the Trustee's argument fails and the Complaint, as a consequence, is barred by the statute of limitations.

For statute of limitations purposes, it is well-settled that a cause of action accrues, and the clock generally starts ticking to file a complaint, "at the time of the wrongful act, even if the plaintiff is ignorant of the cause of action."97 Here, the Trustee's claims accrued—at the latest—on June 1, 2007, the date the Dividend was issued.98 Accordingly, under ordinary circumstances, the statutory period would have run on June 1, 2010, and the Trustee's Complaint, filed on May 14, 2012, would have been dismissed because the limitations period expired.99

Two additional factors, however, come into play under the facts and circumstances of this case. First, due to Indalex's bankruptcy filing, section 108(a) of the Bankruptcy Code extended the initial June 1 deadline an additional two years from the Petition Date to March 20, 2011.100 Second, six days before the new "108(a) deadline," the Trustee and Kirkland entered into the Tolling Agreement, which afforded the Trustee another year (plus the six days remaining on the 108(a) clock).101 Therefore, barring other grounds for further continuation, the clock stopped on March 20, 2012, approximately two months before the Complaint was filed.

Keenly aware of the timing hurdle, the Trustee argues that the statutory periods never expired because they were further tolled to the time of the Leder deposition— regardless of the 108(a) extension and subsequent Tolling Agreement—under the doctrines of fraudulent concealment and equitable tolling. Ultimately, the burden is on the plaintiff to demonstrate that tolling is warranted.102 For purposes of this decision only, however, the Court will credit the Trustee's argument that Kirkland hid the existence of the Alleged Investment Conflict from Indalex, and that, therefore, Indalex and/or the Trustee may take advantage of one of these two tolling theories.

But while Delaware recognizes both of these tolling mechanisms,103 "any possible tolling exception to the strict application of the statute of limitations tolls the statute `only until the plaintiff discovers (or by exercising reasonable diligence should have discovered) his injury.'"104 Thus, regardless of the theory, the clock begins to run once the plaintiff is on "inquiry notice" of a possible injury.105 Such notice "does not require full knowledge of the material facts; rather, plaintiffs are on inquiry notice when they have sufficient knowledge to raise their suspicions to the point where persons of ordinary intelligence and prudence would commence an investigation that, if pursued[,] would lead to the discovery of the injury."106

Whose knowledge matters for purposes of the statute of limitations?

Presumably driven by the decision on the Motion to Dismiss, the parties' briefs largely focus on whether the Offering Memorandum sufficiently disclosed the Alleged Investment Conflict. According to the Trustee, the disclosure of the Alleged Investment Conflict, buried deep within the Offering Memorandum, is equivocal and under no circumstances can be viewed as alerting the Trustee to Kirkland's future malfeasance. Rather, revelation of the Alleged Investment Conflict at Mr. Leder's deposition triggered the investigation into Kirkland and was the first time the Trustee was on notice of the present claims. Kirkland responds by arguing that Indalex, not the Trustee, is the relevant actor for notice purposes and that it certainly knew (or should have known) of any claims it could assert against Kirkland (as its outside counsel working on the transaction documents), especially considering Indalex issued the Offering Memorandum. Alternatively, Kirkland asserts that even if Indalex is not the appropriate party for inquiry notice purposes, all bondholders and seventeen stockholders107 received the Offering Memorandum—which did provide sufficient information on the Alleged Investment Conflict—and had authority to bring the instant causes of action.

As an initial matter, the question of whose knowledge is relevant for purposes of the statute of limitations—the Trustee's or Indalex's—must be determined.108 Actions that may be pursued by bankruptcy trustees generally fall into two categories: "(1) those brought by the trustee as successor to the debtor's interest included in the estate under Section 541, and (2) those brought under one or more of the trustee's avoiding powers"109 Under section 541 of the Bankruptcy Code, the bankruptcy estate is comprised of "all legal or equitable interests of the debtor in property as of the commencement of the case,"110 including "whatever causes of action the debtor may have possessed prior to the petition date."111 Any action included in the estate under section 541 that is later pursued by a bankruptcy trustee is brought by the trustee as successor to the debtor's interest in that claim. As such, a section 541 claim is a debtor cause of action. Because the trustee stands in the shoes of the debtor when bringing these claims, the trustee is "subject to the same defenses as could have been asserted by the defendant had the action been instituted by the debtor."112 Unmistakably then, if the debtor is barred from bringing the section 541 claims by the relevant statute of limitations, so too is the chapter 7 trustee.113 This is true despite the trustee's innocence in connection with the alleged transgressions.114

As opposed to a debtor cause of action which comes into the estate under section 541 of the Bankruptcy Code, claims that the Bankruptcy Code authorizes the trustee to assert on behalf of creditors are largely avoidance actions brought pursuant to section 544, 547 and 548 of the Bankruptcy Code.115 These powers, exercised by an estate representative, "relate to the trustee's power to resist pre-bankruptcy transfers of property."116 Avoidance actions are not owned by the debtor prepetition, but are within "the unique purview of the trustee."117 As such, a trustee bringing an avoidance action does not stand in the shoes of the debtor, and thus defenses which may be successful against the prepetition debtor, may not preclude an avoidance action.118

It is clear that the claims the Trustee is asserting—professional negligence and aiding and abetting a breach of fiduciary duty—are section 541 claims that Indalex had prepetition against its attorneys. They are not avoidance actions under the Bankruptcy Code. As such, the Trustee is subject to the same defenses that could have been raised against Indalex, had Indalex brought the action itself. In the context of the statute of limitations, therefore, the Court must look to Indalex's knowledge, or what it should have known, in connection with the claims the Trustee is asserting.119

Application of the Third Circuit's three-part test for inquiry notice

The Third Circuit has stated that proper resolution of the inquiry notice issue requires careful analysis of (1) the precise nature of the claims asserted by the Trustee, (2) whether and when an objectively reasonable person would have realized the need to investigate the dividend transaction further, and (3) what information that investigation would have disclosed.120

The precise nature of the claims asserted by the Trustee, as detailed in the Complaint, are as follows:

While the Trustee ascribes motivations to Kirkland for their actions, the salient allegations are that Kirkland, in numerous, various and different ways: failed to provide proper legal advice with respect to the Dividend, drafted resolutions and other documents that they knew or should have known were patently false with respect to the Dividend, and had a major role in obtaining and/or negotiating the FTI Report to bless the Dividend. The Trustee alleges that the Dividend was made while Indalex was insolvent and/or made Indalex insolvent, and that Kirkland's advice both aided and abetted Sun Capital and Indalex's board of directors in breaching their fiduciary duties, and constituted legal malpractice. The Trustee's claims therefore hinge on the solvency/insolvency of Indalex either before the issuing of the Dividend, or shortly thereafter.

Having identified the nature of the claims asserted by the Trustee, the Court next determines whether and when Indalex had sufficient knowledge to raise its suspicions (i.e., was objectively aware of facts giving rise to the alleged wrong) or, in other words, when an objectively reasonable person should have realized the need to investigate the dividend transaction further. Unfortunately, in their briefing, Kirkland and the Trustee focus on the Alleged Investment Conflict. But that has little, if any, bearing on whether Indalex can be charged with inquiry notice of the claims asserted by the Trustee as identified above.

Knowledge of the defendant's motivation to inflict the injury or the defendant's concealment of his motivation to inflict the injury, is not relevant to a notice inquiry analysis. "Inquiry notice does not require actual discovery of the reason for the injury. Nor does it require plaintiffs' awareness of all of the aspects of the alleged wrongful conduct."122 So, while knowledge of the Alleged Investment Conflict may have prompted Indalex to include Kirkland in its investigation of Indalex's injuries stemming from the Dividend, the inverse is not true. Lack of knowledge of the Alleged Investment Conflict—in and of itself—cannot suffice to defeat a statute of limitations defense where Indalex had knowledge of its injuries arising from the Dividend. Because the undisputed facts demonstrate that Indalex possessed sufficient information shortly after the time of the Dividend, which, if pursued, would have led it to discover the alleged injury—that the Dividend was made while Indalex was insolvent, or rendered it insolvent—the Trustee cannot seek refuge under his tolling theories.

As Kirkland notes, in passing,123 and as supported by the undisputed facts in the record, Indalex knew that: Kirkland represented both Sun and Indalex,124 Kirkland provided legal advice with respect to the Dividend,125 Kirkland prepared the Consents126 and Indalex paid the Dividend to its shareholders.127 The Trustee also asserts that Kirkland (and, thus Debtors) knew that Indalex Inc. was balance sheet insolvent when the Dividend was issued.128

Moreover, shortly before the Dividend was issued, Indalex disclosed in its April 10-Q that Indalex Inc. held assets worth approximately $47.7 million more than its total liabilities. According to the Trustee's Complaint, the Dividend caused all of the Indalex entities, including "Indalex Inc. to be insolvent, insufficiently capitalized and/or unable to meet [its] debts when due."129 Seemingly fitting this theory, Indalex revealed in its July 10-Q—for the period ending July 1, 2007 (one month after the Dividend)—that Indalex Inc. was now balance sheet insolvent by more than $33.7 million. The July 10-Q also disclosed the fact that the $76.6 million dividend was issued on June 1, 2007—which was in the period between the two quarterly reports.130 The harm or injury on which the Trustee predicates his claims was therefore known to Indalex, at the latest, by August 10, 2007, the date that the July 10-Q was filed with the SEC131. Assuming the Dividend actually rendered all of the Indalex entities insolvent, as alleged in the Complaint, the company at a minimum should have recognized the need to investigate the Dividend given the close temporal proximity between the distribution and the company's own declaration that Indalex Inc. was balance sheet insolvent.132 Any such investigation would have quickly led the company to the Dividend as a possible cause of its injury and even to the realization that Kirkland— as the lawyers handling the transaction for both Indalex and Sun—may have contributed to that injury.133

Ordinary operation of the three-year statute, therefore, would require the claims in the Complaint to have been brought, at the latest, by August 10, 2010—three years after the July 10-Q was filed. However, due to the 108(a) extension and Tolling Agreement, that deadline was extended to March 20, 2012. The Complaint, filed on May 14, 2012, was therefore barred by the statute of limitations.

The same holds true even if, under Delaware law, the Court should analyze inquiry notice from the perspective of Indalex's creditors and stockholders.134 For instance, the Delaware Court of Chancery has typically looked to stockholders' constructive knowledge in the context of derivative actions where tolling is likewise asserted.135 Those cases, however, appear to focus on stockholders because they are the plaintiffs in the applicable actions.136

Here, any non-insider stockholders—and, as importantly, bondholders holding in excess of $190 million in 11.5% Notes due 2014137—were on inquiry notice of the claims the Trustee is asserting for at least one of the same reasons as Indalex. Both the balance sheet insolvency and Dividend were disclosed in one document: the July 10-Q. Thus, assuming the accuracy of the Trustee's Complaint, Indalex stakeholders were on notice of the injury and should have looked into whether a dividend of the size issued could have rendered the company insolvent,138 especially considering the fact that Indalex Inc. was balance sheet solvent as of December 31, 2006 (as disclosed in the July 10-Q) and as of April 1, 2007 (as disclosed in the April 10-Q). Therefore, even if this was a derivative action brought by stockholders or creditors of an allegedly insolvent Indalex, the Complaint would similarly be barred by the statute of limitations.

Does the statute of limitations analysis change because Sun Capital controlled Indalex's board of directors?

During oral argument on the Motion, the Trustee's counsel appeared to invoke the doctrine of adverse domination.139 This doctrine tolls the statute of limitations on a corporation's claims against its officers and/or directors while the corporation's board is controlled by blameworthy directors.140 "The premise underlying the adverse domination doctrine is that a corporation acts through its board of directors, and when that board of directors is controlled by culpable directors it will not cause the corporation to bring a lawsuit against themselves."141 As Judge McKelvie explained in Marvel, sister states that recognize the doctrine adopt variations on the theme, but Delaware has not recognized this doctrine at all.142 In the fourteen years since that decision, this still holds true.143

What is more, Judge McKelvie ruled that the concern addressed by the adverse domination doctrine is not implicated in instances, such as Marvel, where the director defendants dominated the board, but the alleged harmful act was disclosed in public documents to shareholders. Specifically, Judge McKelvie held that in such situations, "the corporate entity is no longer without redress against those who control it because the shareholders have both the knowledge and authority to protect the corporation's rights, and therefore, there is no reason to toll the statute of limitations."144 He finds this position supported by the genesis of derivative actions, which "enable shareholders to sue in the corporation's name where those in control of the company refused to assert a claim belonging to it"145 as well as Delaware's recognition of the tolling doctrine discussed supra. Citing, among other cases, Dean Witter and United States Cellular, he noted that Delaware courts have "consistently rejected" equitable tolling when the facts underlying the claim were disclosed in publically filed documents.146 While these cases do not address the adverse domination doctrine, they address the underlying assumption of that doctrine: "with control comes non-disclosure and without knowledge of directors' wrongful activities plaintiffs have no meaningful opportunity to bring suit."147

The corporate relationships in Marvel are similar to those in the matter sub judice. Simplified as pertinent to this discussion, in Marvel, the debtor (Marvel Entertainment Group, Inc.) sued Mafco Holdings, Inc, which formerly held, directly or indirectly, 80% of the debtor's equity and had the ability to elect all of the members of the debtor's board. In turn, defendant Ronald O. Perelman was a former member of the board, and held 100% of Mafco's outstanding stock; he, therefore, ultimately elected the debtor's board members. Marvel Entertainment alleged that while it was part of Mafco's consolidated tax filing group, Mafco used the debtor's net operating losses for the benefit of Mafco and without compensation under a certain tax sharing agreement. The complaint sounded in three counts all related to the net operating losses: (i) breach of fiduciary duty; (ii) breach of the tax sharing agreement and (iii) an avoidance action. The tax sharing agreement was disclosed in Marvel Entertainment's 1993 Form 10-K, the year the contract was formed. The complaint was filed more than five years later. Based on his analysis and the public disclosure of the tax sharing agreement, Judge McKelvie held that Marvel Entertainment's claim for breach of fiduciary duty against Perelman was barred by the statute of limitations. Specifically, he held:

The holding of and reasoning in Marvel are compelling regarding the adverse domination doctrine, and are also illuminating on tolling, in general. As applied to the matter sub judice, the same result is attained: the Trustee's claims are barred by the statute of limitations. The Court is persuaded that Delaware has not adopted the adverse domination doctrine and so rejects that argument to the extent it was suggested by the Trustee. But, to the extent that the Court were to accept the doctrine, it would not toll the statute of limitations until the domineering directors were no longer on the board; rather, the statute would be tolled only until public disclosure of the acts underlying the Trustee's claims. As in Marvel, the public disclosure of the acts underlying the adverse domination doctrine eliminates concerns here. To paraphrase: as of August 10, 2007, Indalex was "no longer without redress against those who control it" because the bondholders had "both the knowledge and authority to protect the corporation's rights, and therefore, there is no reason to toll the statute of limitations."149

Does equity compel a different result?

Finally, the Court cannot help but note that the tolling doctrines are equitable in nature, and the equities do not favor the Trustee here. The Trustee was appointed on October 30, 2009. He had almost two and one-half years before the March 12, 2012 deadline to investigate and file suit against Kirkland, if appropriate. The extended deadline was also nineteen months after he filed the Sun Adversary. By that point, at the latest, the Trustee clearly was aware of Kirkland's involvement in the transaction. Nonetheless, despite the additional time granted under the Bankruptcy Code and by Kirkland, voluntarily, through the Tolling Agreement, the Trustee still failed to bring his claims on time. As far as the Court can tell, no investigation into Kirkland's role in the Dividend transaction was performed during the entirety of that period. The only explanation provided was that the Trustee relied on Mr. Gessner's declaration (made on December 8, 2010), which the Trustee contends characterizes Kirkland as a mere scrivener in connection with the Dividend transaction and does not disclose the Alleged Investment Conflict.150 And, the Trustee requested documents from Kirkland, but was rebuffed.

As to the Gessner Declaration, it reflects that the Trustee reviewed, in detail, the time records submitted by Kirkland to Indalex, including entries reflecting work on the Dividend, the April 2007 10-Q, the FTI Report and the Consents. While it is true that Mr. Gessner attempts to minimize the work performed by Kirkland for Indalex, he specifically identifies work which forms the basis of the Complaint.

For example, Mr. Gessner states:

Rather than supporting the Trustee's position, at the very least, the Gessner Declaration suggests a deposition of Mr. Gessner was appropriate to confirm—if not test— his testimony.152

As for the documents that were not forthcoming, the Trustee did not seek the Court's assistance by way of Rule 2004 examination or otherwise. Under these circumstances, equity does not demand a different result.

III. The Professional Negligence Claim: Alternatively, Summary Judgment is Appropriate on Count II of the Complaint Because the Trustee has Failed to Submit Appropriate Expert Testimony on Delaware's Standard of Care

In Count II of the Complaint, the Trustee alleges that Kirkland was negligent with respect to the advice it provided to Indalex regarding the Dividend.153 Specifically, the Trustee alleges that "[i]n performing legal services for Indalex, [Kirkland] performed their services negligently and below the standard of reasonable care, skill and diligence expected of lawyers advising Delaware corporations on their obligations under applicable law including, but not limited to, Delaware law."154

Under Delaware law,155 in order to recover for legal malpractice, the plaintiff must prove the employment of the defendant as its attorney, the attorney's neglect of a reasonable duty, and that such negligence caused the plaintiff to incur damages.156 Ordinarily, expert testimony is necessary to substantiate such a claim.157 Specifically, an expert must testify as to the standard of care governing the lawyer's allegedly negligent conduct.158 An exception exists "when the professional's mistake is so apparent that a layman, exercising his common sense, is perfectly competent to determine whether there was negligence."159 In other words, the conduct, or lack thereof, is so obvious that expert testimony is not required to assist the factfinder.160

Neither party contends that the matters involved are so simple, or the lack of skill and diligence so obvious, as to be within the range of the ordinary experience of laymen, thus excusing the requirement of expert testimony. The Court agrees with that assessment. Whether Kirkland was negligent in its representation of Indalex is a question that cannot be answered by the knowledge and experience of the average person. Accordingly, the Court finds that expert testimony is required in this case to establish the applicable standard of care and any deviation therefrom.

The Trustee's theory of malpractice is based upon a complex web of professional conflicts—among various other violations of the ethical rules—that purportedly motivated Kirkland to give self-interested legal advice to Indalex for the benefit of Sun Capital and certain Kirkland attorneys. The Trustee relies upon the opinion of his proffered expert, Lawrence J. Fox, to establish professional negligence. As evidenced by the curriculum vitae attached to his initial report,161 Mr. Fox is a highly qualified expert in the area of legal ethics who is well-versed in the field of professional responsibility.162 Mr. Fox opines that Kirkland attorneys representing Indalex violated myriad rules of professional responsibility including, among other, Rules 1.7 and 1.8 of The Delaware Lawyers' Rules of Professional Conduct (the "Rules"), and thus committed professional negligence. He also faults Kirkland for not following its prior advice or practice regarding a previous dividend declared by Indalex.163 As for Kirkland's experts, the Trustee argues that the credibility and persuasiveness of Kirkland's experts will be an issue as none of them has been qualified to testify on the standard of care for a lawyer in a malpractice action. Thus, the Trustee characterizes this matter as "present[ing] the classic case of dueling experts who disagree on whether [Kirkland's] behavior towards Indalex comported with the applicable standards of care."164

Kirkland's position on Count II is straightforward. Kirkland contends that, while not required on a motion for summary judgment, they provided expert testimony on the appropriate standard of care through the expert reports of Richard M. Leisner, William H. Coquillette and Jonathan Macey.165 Kirkland further contends that the Trustee's expert, Mr. Fox, has not opined as to the appropriate standard because neither a breach of the rules governing professional conduct nor an alleged failure to adhere to a firm's own prior advice establishes a suitable metric for evaluating professional negligence. Kirkland concludes that because the Trustee has not countered their expert testimony with evidence on the standard of care, the Trustee has failed to raise a disputed issue of material fact with respect to the standard, thus summary judgment must be granted in its favor.

Having already determined that expert testimony is necessary for the Trustee to prove his claim of professional negligence, the Trustee must show that his expert has opined as to the relevant standard of care.166 In a legal malpractice action, the standard of care is "the skill and knowledge ordinarily possessed by attorneys under similar circumstances."167 In his briefing, it is unclear whether the Trustee contends that the Rules establish an independent cause of action, establish the standard of care applicable under the circumstances, or both. Given this ambiguity, the Court will address each theory in turn.

The first theory is easily dismissed. Under Delaware law, there is no private right of action solely for a violation of the Rules.168 Delaware courts are clear that the Rules, by themselves, do not comprise a basis for civil liability.169 For instance, in the recent case of Dickerson v. Murray,170 the plaintiff brought suit against her former attorney alleging negligent provision of legal services due, in part, to a purported conflict of interest.171 Addressing that claim, the Superior Court held that "violations of [the Rules], standing alone, are not actionable because the Rules themselves were not intended to be independent causes of action."172 To hold otherwise would be contrary to the Rules' stated purpose.173

The second theory must also be dismissed as the Rules do not provide the applicable standard of care. In Flaig v. Ferrara,174 the Delaware Superior Court specifically rejected application of the Rules as the standard of care in legal malpractice cases.175 Similar to the Trustee's contentions here, the plaintiff in Flaig argued that the attorney/defendant had an undisclosed conflict of interest that tainted his representation of her. She further argued that Rule 1.7 established a standard for assessing her prior attorney's alleged negligence.176 In granting partial summary judgment in favor of the attorney/defendant, the Superior Court emphasized that the Scope section of the Preamble "makes clear that the Rules are not to form a basis for civil liability."177

In Flaig, Judge Quillen relied on the clear directive of the Delaware Supreme Court in In re Appeal of Infotechnology, which stated that, while "lawyers have substantive legal duties, which may be congruent with the requirements and objectives of the Rules, the latter provide no additional bases for the enforcement of such duties outside of the framework of disciplinary proceedings."178 Applying the Delaware Supreme Court's mandate, Judge Quillen held that the Rules may not comprise the standard of care against which a lawyer's actions will be judged in a legal malpractice suit.179 Specifically, he held that "the use of the Rules as a legal standard to show an independent breach of a duty would be directly contrary to Delaware Supreme Court precedent and the Scope of the Rules."180

Finding Flaig persuasive, this Court holds that the Rules cannot be used to establish the standard of care applicable to the Trustee's professional negligence claim. Any other determination would be logically inconsistent with Delaware's prohibition on using the Rules to bring independent causes of action.181

That being said, it is true that under Delaware law the breach of an ethical rule, if relevant, may be considered evidence of professional negligence in certain circumstances.182 Evidence, however, is distinct from the standard of care, which must exist independently of the Rules.183 Thus, an expert may refer to the Rules to support a claim of negligence, but only to the extent the Rules are "expressive of the common law duty otherwise owed" to the client.184 Put differently, the Rules may bolster, but do not establish, a breach of the standard of care.

Here, the Trustee bases his claim on professional negligence, i.e. that Kirkland's services were "below the standard of reasonable care, skill and diligence expected of lawyers advising Delaware corporations on their obligations under applicable law."185 The Trustee also contends that in its representation of Indalex, Kirkland "failed to satisfy its duty to act in the highest degree of fidelity, loyalty and good faith towards Indalex" and failed to explain the existence of a conflict between [Kirkland], Indalex and Sun so as to permit Indalex to make an informed decision regarding the representation"186 The Trustee, therefore, can use violations of the Rules as evidence to support his claim of negligence assuming he otherwise establishes the requisite standard of care.187

The question is: in the Fox Report, does Mr. Fox establish the standard of care for negligence apart from the Rules? This determination is not easy because Mr. Fox's report is a narrative making identification of his exact opinion(s) a challenge. Further, he appears to give opinions, or at least make statements, on matters other than professional negligence.188

The Court has attempted to glean whether there is a basis for Mr. Fox's opinion(s) other than the Rules. Some of his opinions, such as the obligation "to report up the ladder," the prohibition against doing business with a client, and impermissibly aiding and abetting a fraud are clearly supported by citation to the Rules and non-Delaware case law, which in certain instances cite to professional rules as guidance.189 With one exception discussed below, the only portion of the Fox Report that may arguably rely on a common law duty (as well as the Rules) is titled "Representing Parents and Subsidiaries Concurrently Raises Serious Conflicts of Interests." In this section, Mr. Fox uses the words "breach of loyalty" and "duty of loyalty." But even in this section, he does not cite to Delaware (or even Illinois) law to identify a common law duty, nor does he explicitly testify to a standard of care apart from the Rules.

Ultimately, the Court relies on Mr. Fox's own words in determining that the Fox Report equates the standard of care with a violation of the Rules. Mr. Fox states:

There is only one way to read this paragraph: in his reports, Mr. Fox uses the Rules to establish the standard of care. This is not permitted under Delaware law.

The only non-ethics based opinion in the Fox Report—that Kirkland's prior advice regarding dividends established the standard of care governing Kirkland's representation with respect to the Dividend—is equally unavailing.191 Delaware law establishes that the standard of care for a legal malpractice case is the level of skill and diligence ordinarily exercised by attorneys in the relevant community under similar circumstances.192 Without evidence of a recognized, standard practice, how a particular attorney, or subset of attorneys, have acted is irrelevant.

This principle is amply demonstrated by the Delaware District Court's decision in Beneville v. Pileggi.193 In this legal malpractice action, the court ruled after a three-day bench trial in which both the plaintiff/client and the defendant/law firm each put on the testimony of their respective expert witness regarding the alleged malpractice. Plaintiff's expert, a local Delaware attorney, testified as to his own practice when engaged in a similar transaction as well as to what a lawyer might negotiate with a client regarding the lawyer's responsibilities in such a transaction. But, he did not testify as to a recognized standard practice for commercial transactional lawyers in Delaware.194 Defendant's expert, another Delaware lawyer, testified as to the standard commercial practice in Delaware with respect to commercial transactions of the type at issue. The District Court found the law firm's expert more persuasive, and in doing so, noted that the standard for a claim of legal malpractice is not a personal standard, but a recognized, standard practice for Delaware attorneys regarding the conduct at issue.195

As applied here, the Trustee's theory has two fatal flaws. First, assuming that Kirkland's earlier advice perfectly emulated the correct standard of care, Mr. Fox did not provide expert testimony to that effect. Second, even if Mr. Fox's report could be considered expert testimony on a standard of care based on this theory, it establishes only what Kirkland's personal standard was on one occasion. It does not establish the standard practice of a Delaware attorney, or an attorney admitted in any state, regarding advice on special dividends or how to advise portfolio companies. In short, and without more, Kirkland's prior advice cannot comprise the standard of care.

Had the Trustee provided an expert on the standard of care, Mr. Fox's expert opinion(s) that Kirkland breached the Rules could be introduced to bolster the Trustee's claims. But, having failed to do so, Mr. Fox's reports do not save the Trustee from the entry of summary judgment against him. Because the Trustee has failed to produce an expert on the pertinent standard of care, he has not presented a prima facie case for legal malpractice under Delaware law nor created an issue of material fact preventing summary judgment.196 Accordingly, summary judgment must be granted in favor of Kirkland on Count II.197

IV. The Aiding and Abetting Claim: Alternatively, Summary Judgment Is Not Granted on Count III of the Complaint for Failure to Proffer a Solvency Expert and Because There are Material Facts Exist as to Kirkland's Knowledge of any Breach of Fiduciary Duty

Under Delaware law, an aiding and abetting claim consists of four elements: (1) a fiduciary relationship; (2) a breach of fiduciary duty; (3) defendants' knowing participation in that breach; and (4) damages proximately caused by the breach.198 Kirkland argues that summary disposition is warranted because the Trustee cannot establish the second and third elements. As to the second element, Kirkland claims that only a solvency expert can substantiate the underlying breaches alleged by the Trustee; therefore, the Trustee's failure to proffer an expert in this proceeding mandates judgment in Kirkland's favor. Further, notwithstanding its emphasis on expert testimony, Kirkland avers that additional "undisputed evidence,"199 including market valuations and reports, confirms that Indalex was solvent in June 2007 and, as a result, it is clear that the Trustee cannot establish the necessary underlying breaches.

As to the third element, Kirkland similarly contends that the Trustee has zero evidence that it knowingly assisted Indalex in declaring an unlawful dividend. Rather, what evidence there is indisputably "shows that Kirkland had no knowledge, and no reason to believe, that the [Dividend] would render Indalex insolvent."200 Accordingly, because the Trustee cannot prove the second and/or third elements, the aiding and abetting claim must fail.

Significantly, the Trustee does not respond by arguing that expert testimony is unnecessary with respect to insolvency. Instead, the Trustee attempts to argue that not all of his claims depend on insolvency and separately that Kirkland agreed, by virtue of its earlier motion to stay, for the solvency issue to be conclusively decided in the Sun Adversary.201 In addition, he claims that there is "ample" evidence of Kirkland's knowing participation, including a Form 10-K drafted in part by Kirkland and filed in April 2007 for the year ending December 31, 2006, that indicated Indalex may not be able to service its debt obligations, and certain language included the FTI Report that Kirkland insisted upon. The Court will proceed by addressing the Trustee's arguments in the order presented.

The Court will not consider claims not pled in the Complaint

As noted above, the Complaint depends on Indalex's insolvency for the aiding and abetting count. Put differently, the only breach of fiduciary duty alleged in the Complaint relates to the issuance of an unlawful dividend. Seemingly ignoring this self-imposed limitation, the Trustee now—for the first time—alleges that various transactions202 attacked in the Sun Adversary form additional underlying breaches that support his aiding and abetting claim here. However, it is beyond peradventure that a plaintiff cannot expand or amend his complaint by a responsive pleading.203 Because these allegations are beyond the scope of the Complaint, the Court cannot and will not consider them for any purpose.

The Court will not grant summary judgment as a discovery sanction

The Trustee similarly strains to argue that Kirkland's previous motion to stay should somehow be construed as an agreement to be bound by the district court's decision on Indalex's questioned solvency. This argument is rejected out of hand. Nowhere in the motion to stay does Kirkland agree to that. Rather, Kirkland merely requested (as indicated by the title of its pleading) a stay, or pause, in these proceedings in order for the Sun Adversary to play out. Moreover, the Trustee conveniently ignores the fact that he opposed the Kirkland motion to stay and prevailed. The Trustee thereafter did not attempt to withdraw the reference and consolidate the two cases, and, as such, they proceeded on their own separate tracks. Accordingly, the Trustee was obligated to establish insolvency in this case and should have timely designated an expert in accordance with the approved scheduling order. Either the Trustee mistakenly missed the deadlines or strategically opted not to engage in the process. Either way, the Court soundly rejects the motion to stay argument.

Nonetheless, by virtue of the Trustee's motion to stay argument, he recognizes the significance of having a solvency expert testify on an issue that goes to the core of his aiding and abetting count. As Kirkland states, "[w]ithout a solvency expert, plaintiff cannot prove that the Indalex directors breached a fiduciary duty when they approved the dividend and therefore he also cannot prove that Kirkland aided and abetted the supposed breach."204 Again, the Trustee does not debate that proposition. Although Kirkland has not cited any Delaware law requiring an expert, it takes very little to realize the eventual outcome if the Trustee cannot combat Kirkland's solvency expert with one of his own. Kirkland agrees and specifically addressed the Trustee's inevitable evidentiary problems, asserting that the lack of a qualified expert would preclude the Trustee from "rebut[ting] the testimony of Kirkland's expert[,] who concluded that Indalex was solvent."205 Thus, if this Court refused to allow the Trustee to use or designate an expert it would essentially be granting summary judgment on the aiding and abetting count through a discovery sanction.

Whether to impose a discovery sanction tantamount to dismissal of the case is a question governed by the six-factor analysis set forth by the Third Circuit in Poulis v. State Farm Fire & Casualty Co.206 This Court has the discretion to grant dismissal when a party has failed to comply with its scheduling orders.207 Nonetheless, the Third Circuit has made clear that dismissal is a "drastic" sanction only appropriate in "extreme" circumstances.208 To help guide courts' discretion, the Poulis court enumerated the following factors:

As applied here, there is no suggestion or evidence by either party that the failure to designate an expert by the applicable deadline was attributable directly to the Trustee rather than his attorneys. Considering the motion to stay motion theory, it is far more likely that counsel was the source of this mishap or strategy. Additionally, the question was not whether to hire a solvency expert, as one was already retained for the Sun Adversary, but instead the procedure for ensuring that that expert could testify in this case. Under those circumstances, proper compliance with civil procedure and prior scheduling orders clearly was counsels' responsibility.

Turning to the second factor, it is clear that Kirkland suffered some prejudice as a result of the discovery transgressions. In particular, Kirkland's expert was forced to develop his report without the opportunity to review an opposing report specifically submitted for this case, as this Court's scheduling order provided for. Any expert designated now would still need to be deposed, his report assessed, and his opinions fully responded to. As such, Kirkland's expert likely would have no choice but to supplement and/or amend his prior report. This equates to added time and expense for Kirkland. The court can lessen that prejudice, however, by permitting the Trustee to designate only one specific expert—the expert designated in the Sun Adversary, an expert with which Kirkland is familiar by virtue of its role as counsel for Sun Capital in that case. Although that does not alleviate the Trustee's burden of having to prove insolvency in this case, Kirkland cannot reasonably argue that it would be blindsided by the Trustee using the same expert, given the nature of the claims in this case. To be clear, the Court is not suggesting that Kirkland should have responded to the Sun Adversary expert; nor is the Court implying that Kirkland should have acted to protect its own interests in the Sun Adversary. Rather, Kirkland's involvement in the Sun Adversary is simply a mitigating factor under the prejudice analysis.

With respect to the third and fourth factors, nothing in the record is sufficient to support a definitive finding that the Trustee's counsel has a history of dilatoriness in this adversary proceeding or acted wilfully or in bad faith.

With respect to the fifth factor, the Court finds that sanctions other than dismissal are appropriate and will effectively incentivize counsel to comply with future deadlines. In the event this decision is overturned and it becomes necessary to designate an expert in this case, the Court can assess costs, including attorneys' fees, attributable to the "lack of a solvency expert" portion of the briefing in support of the Motion.210 And, the Court can require the Trustee or counsel, as appropriate, to bear the reasonable costs associated with Kirkland's expert having to amend his prior report in order to respond to the Trustee's designated expert. Lastly, Kirkland can be granted the opportunity to file a renewed motion for summary judgment after expert discovery solely on the issue of Indalex's solvency.

The final factor, meritoriousness, also weighs against dismissing the case. "In considering whether a claim . . . appears to be meritorious for this inquiry," the Court does not apply summary judgment standards.211 Rather, a claim is meritorious if the "allegations of the pleadings, if established at trial, would support recovery by plaintiff or would constitute a complete defense."212 Utilizing that standard, the Court finds that the aiding and abetting claim is meritorious.

As the Poulis court explained, "[d]ismissal must be a sanction of last, not first, resort."213 and "[a]lternatives are particularly appropriate when the plaintiff has not personally contributed to the delinquency."214 After weighing the above considerations, and taking into account the Third Circuit's express admonition that "dismissal with prejudice is only appropriate in limited circumstances and doubts should be resolved in favor of reaching a decision on the merits,"215 the Court concludes that granting Kirkland summary judgment based on the Trustee's lack of a solvency expert would be inappropriate at this time.

Material facts exist as to Kirkland's knowledge of any breach of fiduciary duty

Finally, turning back to the third element of an aiding and abetting claim (defendants' knowing participation in the underlying breach of fiduciary duty), the Trustee has established a reasonable inference that Kirkland knowingly participated in the breach, assuming the Dividend actually rendered Indalex insolvent. Knowing participation "requires that the third party act with the knowledge that the conduct advocated or assisted constitutes . . . a breach."216 The Court may infer such knowledge where the alleged aider and abetter gained an advantage from the board's breach of its duties.217 An inference is therefore appropriate here, where Kirkland's legal advice facilitated payment of a substantial dividend, part of which Kirkland partners ultimately received. Accordingly, summary judgment is denied on this basis.

CONCLUSION

For the foregoing reasons, the Court recommends that the district court enter summary judgment in favor of Kirkland and against the Trustee on both counts of the Complaint.

UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

I hereby certify that all designated items are available electronically through CM/ECF.

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

KIRKLAND & ELLIS LLP'S MOTION FOR SUMMARY JUDGMENT

Defendant Kirkland & Ellis LLP ("Kirkland"), by and through its undersigned counsel, brings this Motion for Summary Judgment pursuant to Fed.R.Bankr.P. 7056 and Fed.R.Civ.P. 56 on Counts I and II of the Complaint filed by plaintiff George L. Miller, the Chapter 7 Trustee of IH 1, Inc., IH 2, Inc., IH 3, Inc., IH 4, Inc., and IH 5, Inc. ("Plaintiff").

Pursuant to Local Rule 7007-1(a), Kirkland has filed contemporaneously herewith a memorandum of law and exhibits, upon which it relies to support this motion. Kirkland respectfully requests that the Court enter the proposed form of Order granting summary judgment in its favor and against Plaintiff.

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

ORDER

AND NOW, this _________ day of ___________________, 2015, upon consideration of defendant Kirkland & Ellis LLP's motion for summary judgment, and any response in opposition, it is ORDERED that:

1. The motion is GRANTED; and further

2. Judgment will be entered in favor of Kirkland & Ellis LLP and against plaintiff, George L. Miller, the Chapter 7 Trustee of IH 1, Inc., IH 2, Inc., IH 3, Inc., IH 4, Inc., and IH 5, Inc. as to Counts I and II of the Complaint.

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

MEMORANDUM OF LAW IN SUPPORT OF KIRKLAND & ELLIS LLP's MOTION FOR SUMMARY JUDGMENT

TABLE OF CONTENTS

TABLE OF AUTHORITIES

I. NATURE AND STAGE OF PROCEEDINGS

On March 20, 2009, in the midst of the Great Recession, Indalex, a US-based aluminum extrusion company heavily dependent upon the housing and credit markets, filed for bankruptcy protection before this Court. This adversary proceeding is the latter of two separate and independent lawsuits that the Chapter 7 trustee of Indalex filed years apart, both of which ignore the recent financial crisis and blame others for Indalex's demise. The trustee filed the first action against the private investment firm, Sun Capital Partners, Inc. and various affiliated entities and individuals on July 30, 2010. The trustee withdrew that case to the district court where it awaits pre-trial motion practice before Judge Andrews (No. 13-01996). Almost two years after he filed that lawsuit, on May 14, 2012, the trustee filed this adversary proceeding against Kirkland & Ellis LLP ("Kirkland"), claiming that Kirkland committed malpractice and knowingly assisted Indalex's directors in plundering the company, principally through their decision to declare a $76 million, publicly-disclosed, pro rata dividend, which Indalex paid to its shareholders on June 1, 2007.

II. SUMMARY OF ARGUMENT

1. This action is time-barred.

Plaintiff's case is untimely and inexcusably so. Indeed, it is undisputed that plaintiff waited to file this suit until May 12, 2012, fifty-five days after the statute of limitations—which had been tolled by agreement— expired. To justify his delay and defeat Kirkland's motion to dismiss, plaintiff argued that Kirkland concealed certain of its partners' indirect investments in Indalex, which he argued created a conflict of interest that he could not have discovered until April 2012. But the undisputed facts disprove plaintiff's story. In reality, Indalex's bond offering memorandum published in January 2006 makes clear that Indalex itself knew and disclosed that certain Kirkland partners indirectly invested in Indalex. That document, which Indalex shared with prospective public bondholders, their counsel, and Indalex's management, clearly stated: "[s]ome of the partners of Kirkland & Ellis LLP are partners in a partnership that is an investor in one or more of the investment funds affiliated with Sun Capital Partners that may purchase common stock of Indalex parent in connection with the Acquisition." Thus, Indalex and plaintiff, who stand in Indalex's shoes, knew in 2006 about the alleged conflict that plaintiff proffers to excuse his tardy filing of this lawsuit. Plaintiff's claims are thus time-barred and the Court should enter judgment for Kirkland on this basis.

Moreover, the alleged "conflict" underlying both of plaintiff's causes of action is no conflict at all. Kirkland partners did not invest in Indalex. Instead, much like a mutual fund, certain Kirkland partners made passive investments into a fund that invested in a fund, which, in turn, invested in Indalex. As a matter of law, these investments are too attenuated to create a conflict of interest and plaintiff has no authority to the contrary.

2. No evidence of aiding and abetting a fiduciary breach.

Of equal importance, plaintiff seeks to hold Kirkland liable for the June 1, 2007 dividend, claiming that its payment rendered the company insolvent. Yet, plaintiff has no evidence that Indalex was actually insolvent when that transaction took place and, in fact, ignores overwhelming contemporaneous market and other evidence to the contrary. That Indalex was going to pay the June 1, 2007 dividend was widely known. Indeed, the formula for it was negotiated and then publicly disclosed in the bond indenture used to finance Sun Capital's February 2006 purchase of the company. Following the dividend, Indalex's bonds continued to trade above par and Indalex's stakeholders and professionals (bondholders, secured lenders, analysts, ratings agencies, trade creditors, and auditors) believed the company to be solvent at the time. Indeed, Indalex continued to operate after the dividend was paid for a full 22 months, in an acutely distressed economy. In the face of this undisputed factual record, plaintiff asks the Court to accept his "say so" that Indalex was insolvent as of June 1, 2007. The law, however, does not allow plaintiff to prove insolvency simply by an ipse dixit. And a party seeking to prove insolvency cannot ignore what the market was saying about the company at the time. Plaintiff has proffered no expert opinion about Indalex's insolvency and willfully ignores what virtually everyone else was saying about Indalex at the time. Nor can plaintiff establish that Kirkland acted with knowledge to cause Indalex harm, since the factual record indicates that Kirkland, like nearly everyone at the time, reasonably believed, based on the input that Indalex's management and outside financial advisors provided, that the company was solvent when it paid the dividend. As a result of a complete lack of any evidence of insolvency, plaintiff's aiding and abetting claim fails.

3. No evidence of negligence.

With the benefit of hindsight, plaintiff criticizes Kirkland's work for Indalex, yet plaintiff did not retain a corporate attorney with the necessary experience to opine on Kirkland's work for the company. Instead, plaintiff offers only the testimony of an ethicist, who admits he has never advised a board of directors about the payment of a dividend (much less one of the complexity and public nature in this case) and acknowledges that he is not qualified to opine on the corporate transactions at issue here. Because expert testimony is necessary to establish the standard against which plaintiff seeks to judge Kirkland's work and plaintiff lacks such proof, he cannot prove his negligence case and the Court should enter judgment for Kirkland.

III. STATEMENT OF UNDISPUTED FACTS

A. Some Kirkland Partners Passively Invest In Client-Operated Funds.

Beginning in the 1980's, a group of Kirkland partners formed investment funds to make personal investments alongside their private equity clients ("PE clients").1 Since then, these investment vehicles have been funded solely with personal capital contributions from individual Kirkland partners.2 The Firm itself has never invested in the funds, known as "PEFs," short for "Private Equity Funds," and each partner individually decides whether (and how much) to invest.3 There is no requirement or expectation that a partner invest in the investment funds4 and the PEFs only invest after a PE client invites them to do so.5

The PEFs are passive investments that a committee of Kirkland partners manages.6 This committee has sole discretion to decide whether the PEFs will invest in a specific fund.7 As such, when Kirkland partners commit capital to a PEF, they do not know how the management committee will invest the PEF's committed capital.8 Likewise, when the management committee decides that a PEF will invest in a PE client's fund, it does not know how the PE fund will invest the PEF's money or what portfolio companies the PE fund will acquire.9 In fact, after the initial investment, the management committee does not consult with the PE funds in any way.10

In 2004, long before the Indalex bankruptcy and this litigation, the management committee circulated a memorandum explaining the need to obtain client consent before a PEF invested in a private equity fund formed by a firm client.11 The memorandum provided examples of appropriate "Rule 1.8 investment letter[s]" and explained that the "PEFs will not disburse funds for a new investment" without first memorializing the client's consent to the investment.12

This case involves two PEFs in which Kirkland partners invested: (i) K&E Investment Partners, LLC — 2003 PEF (the "2003 PEF"), and (ii) K&E Investment Partners, LLC — 2005 PEF (the "2005 PEF" and collectively with the 2003 PEF, the "PEFs"). [REDACTED\]13,14,15,16 [REDACTED\]

B. 2003-2005: The PEFs Invest In Sun Capital Funds.

Kirkland started representing Sun Capital in 2000.17 [REDACTED\]18,19

In June 2004, Kirkland partner Doug Gessner sent a letter to Sun Capital's General Counsel to confirm that Sun Capital consented to the PEFs' investments in Sun Capital-sponsored funds and to Kirkland's continued representation of Sun Capital and its affiliates.20 The letter attached the relevant excerpts from Rule 1.7 and Rule 1.8 of the Rules of Professional Conduct and explained that:

Sun Capital signed and returned the letter, acknowledging Sun's consent to the PEFs' investments in Sun Capital funds.22,23,24,25,26

[REDACTED\]

C. January-March 2006: The PEFs' Passive Investments In The Sun Funds Is Disclosed.

In July 2005 (after the PEFs had already committed to Sun III and Sun IV), Sun Capital started to analyze whether to acquire Indalex, an aluminum extrusion company.27 Kirkland provided a variety of legal services to Sun Capital in connection with the Indalex acquisition, including assistance with drafting a Bond Offering Memorandum that would eventually be issued to raise debt financing for the acquisition.28 On January 11, 2006, as Kirkland worked to finalize the Bond Offering Memorandum, Kirkland partner Carol Anne Huff—who was an investor in the PEFs—added language to the "Legal Matters" section of the Bond Offering Memorandum that specifically identified the PEFs' investments in funds affiliated with Sun Capital.29 The "Legal Matters" section is typically used to describe relationships with advisors; in this case, it specifically identified the investments that plaintiff claims Kirkland "deliberately concealed" from Indalex and its debtholders:

Thereafter, all versions—including the final January 30, 2006 version—of the Bond Offering Memorandum included the Legal Matters Disclosure.31 The document was provided to prospective bondholders and their attorneys at Cravath, Swaine & Moore LLP ("Cravath"), who were charged with protecting the bondholders' interests in the transaction.32 In January 2006, prospective bondholders and/or their counsel, Cravath, received at least seven drafts containing the Legal Matters Disclosure.33 Some or all of those distributions were sent to J.P. Morgan and Harris Nesbitt (co-lead managers of the bond offering),34 Morgan Joseph, Credit Suisse First Boston, and Piper Jaffray (additional co-managers of the bond offering), and Crowe Chizek and Deloitte (Indalex's accountants).35 On January 30, 2006, prospective bondholders (many of whom later became actual bondholders) received the final Bond Offering Memorandum, which, like the earlier drafts, included the disclosure about the PEFs' investments in funds affiliated with Sun Capital.36 No creditor, debtor, or investor in Indalex ever raised any concerns about the alleged "investment conflict" upon which plaintiff's case is built.

After the final Bond Offering Memorandum was circulated to prospective investors, a Sun affiliate acquired Indalex on February 2, 2006 for $425 million (plus fees and expenses).37 Sun Capital financed the purchase through a $111.3 million equity contribution (from Sun III, Sun IV and co-investors), $69.8 million in borrowings on a revolving bank loan, and $270 million in senior subordinated notes (i.e., the bonds that Indalex issued pursuant to the Bond Offering Memorandum).38

[REDACTED\]39,40,41,42,43,44

A short time after the acquisition, Indalex provided its management-level employees with an opportunity to purchase equity in the company (the "Management Equity Offering"). On March 7, 2006, Kirkland attorney Ted Frankel sent two e-mails to Indalex's Chief Compliance Officer Bill Corley attaching a number of relevant documents, including the Bond Offering Memorandum, asking Mr. Corley to "distribute these documents to each [U.S./Canadian] resident who has indicated an interest in participating in the [Management Equity Offering]."45 Mr. Frankel copied Indalex CEO Tim Stubbs and CFO Mike Alger on both e-mails.46 That same day, Mr. Corley forwarded the information—including the Bond Offering Memorandum with the Legal Matters Disclosure—to 23 Indalex managers; the distribution included two senior vice presidents, numerous vice presidents, and the director of investor relations, among other high level managers at Indalex.47 Although a number of Indalex managers participated in the Management Equity Offering, no Indalex employee ever raised any concerns about the PEFs' investments.

D. February 2006: Indalex Retains Kirkland And Executes A Conflict Waiver.

When a Sun Capital affiliate acquired Indalex in February 2006, Indalex retained Kirkland to render legal services, as is customary in the industry.48 Indalex signed a written engagement letter with Kirkland, which outlined the relationship between Kirkland, Indalex, and Sun Capital (the "Engagement Letter").49 The Engagement Letter specifically advised Indalex that Kirkland had represented Sun Capital "on a variety of matters, including Sun's investment in [Indalex]" and anticipated that the Firm would continue to represent Sun Capital in the future:

The Engagement Letter also included an explicit waiver provision that encompassed past, present, and future conflicts arising from Kirkland's representation of Sun Capital:

Mike Alger, Indalex's Chief Financial Officer at the time, read the Engagement Letter and understood its contents—including that Kirkland could continue to represent Sun Capital in the event of a conflict with Indalex—before he signed it.52

E. May-June 2007: Indalex Sells Its Interest In AAG, Repays Debt, And Pays A Dividend.

As part of the acquisition, Sun Capital disclosed in February 2006 to Indalex's creditors and bondholders that Indalex might sell its interest in Asia Aluminum Group ("AAG"), a Chinese aluminum extruder, and declare a dividend in the future.53 Indeed, both the credit agreement, which provided the terms for the revolving bank loan used to finance the acquisition, and the bond indenture, which set forth the terms under which Indalex sold the bonds, included a detailed formula that governed the precise amount of the AAG sale proceeds Indalex could use to declare a dividend.54

In May 2007, Indalex UK, a non-operating subsidiary of Indalex Limited, sold its sole asset—the 25.1% interest in AAG—for approximately $152.2 million.55 Afterwards, Goldman Sachs Credit Research issued an "outperform" rating for the Indalex bonds, recommending that investors invest in the Indalex bonds even though the bonds were trading above par (i.e., were relatively more expensive than when they were issued) despite also noting that it expected that Indalex would soon issue a dividend along the lines permitted by the formula in the bond indenture.56 Subsequently, Indalex UK declared an intracompany dividend (the "UK Intracompany Dividend") to upstream the proceeds of the AAG sale to its parent company for use in the long-anticipated dividend.57 Kirkland drafted the Indalex UK board meeting minutes approving the UK Intracompany Dividend.58

After it sold its interest in AAG but before it declared a dividend, Indalex retained FTI Capital Advisors, LLC ("FTI"), a subsidiary of global advisory firm FTI Consulting, Inc.,59 to review Indalex's financials and confirm that Indalex had sufficient resources to declare the dividend (i.e., that declaring a dividend would not render Indalex insolvent).60 FTI met with management to discuss the company's financial condition and reviewed Indalex's projections.61 After FTI completed its work, it determined that, in its professional opinion, Indalex would pass the three relevant solvency tests under Delaware law if it paid a $114.4 million dividend from the proceeds of the AAG sale.62 After FTI circulated a draft of its report, attorneys from Kirkland reviewed the language of the report and suggested revisions to track the language of the relevant Delaware statutes.63 Under oath, the leader of FTI's engagement team described Kirkland's changes as legal "wordsmithing," and confirmed that the revisions had no effect on FTI's fundamental conclusion that Indalex would remain solvent after it paid the dividend.64 Thereafter, on June 1, 2007, in accordance with the formula set forth in the bond indenture and the revolving credit agreement, Indalex paid a $76 million pro rata dividend to its shareholders.65 Kirkland drafted the unanimous consents that Indalex's board of directors used to declare the June 2007 Dividend.66

In June 2007, the PEFs held very small interests in the Sun Capital funds and an even more modest investment in Indalex. [REDACTED\] [REDACTED\]67

Later that month, as part of the June 1, 2007 dividend transaction, Kirkland assisted Indalex with a tender offer that resulted in the retirement of $71.9 million of bonds at 105% of principal—a significant de-levering event that resulted in $8.3 million in annual interest savings for Indalex.68 The second priority Indalex bonds continued to trade above par after the June 1, 2007 dividend and near par well into 2008.69 Indalex received clean audit opinions from its auditors both before (April 2007) and after (March 2008) the June 2007 Dividend.70 Additionally, at the time of the dividend, independent analysts noted that Indalex seemed primed for solid performance over the coming years.71

F. As The U.S. Economy Weakens, Indalex Faces Liquidity Challenges.

In 2008, as a result of the weakening U.S. economy and tightening credit markets, the aluminum extrusion market saw demand decline and volatile prices.72 This volatility had a negative effect on Indalex's liquidity.73 As a result, availability under its revolver tightened more than expected.74 To combat these challenges, Indalex sought to inject additional cash into the business.75 In May 2008, almost a year after Indalex declared the June 1, 2007, Indalex received a $15 million term loan from Sun Capital.76 As 2008 progressed, demand for extruded aluminum products continued to fall rapidly.77 In the fall of 2008, massive losses spread throughout the financial system that impacted all aspects of the U.S. economy, including the aluminum extrusion market.78 Accordingly, on the heels of the Lehman Brothers bankruptcy, Indalex required additional financing and Sun Capital agreed to make an additional loan of $15 million, which was funded in late November 2008.79

On March 20, 2009, nearly two years after Indalex declared the June 1, 2007 dividend and, in the worst economic crisis since the Great Depression, Indalex filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code.80 On October 15, 2009, the Indalex bankruptcy was converted to a Chapter 7 case and George L. Miller was appointed trustee.81

G. After An Extensive Investigation, Plaintiff Sues Sun Capital And Certain Former Indalex Officers And Directors.

Nine months after his appointment, plaintiff filed the Sun Adversary on July 30, 2010.82 There, plaintiff alleged that the June 1, 2007 dividend rendered Indalex insolvent and that the Indalex directors breached their duties in approving it.83 Despite knowing that Kirkland provided legal advice to the Indalex board, plaintiff did not name Kirkland as a defendant in that case and never sought to depose any Kirkland attorneys during discovery. The Sun Adversary is pending in the District Court where the District Court has taken defendants' motion to exclude plaintiff's sole expert under advisement.84

H. March 14, 2011: Plaintiff And Kirkland Enter Into A One-Year Tolling Agreement.

Eight months after initiating the Sun Adversary, plaintiff asked Kirkland to enter into a Tolling and Standstill Agreement (the "Tolling Agreement").85 In that agreement, plaintiff acknowledged that "the statute of limitations with respect to one or more of Plaintiff's claims against Kirkland may expire on March 20, 2011."86 On March 14, 2011, six days before the statute of limitations expired, Kirkland agreed to toll all statutes of limitations from March 14, 2011 "through and including the earlier of (a) one year from [March 14, 2011] (subject to renewal as and when agreed by the parties) or (b) sixty (60) days following the termination of [the Tolling] Agreement in accordance with the provisions of paragraph 4 below."87 Neither plaintiff nor Kirkland terminated the Tolling Agreement pursuant to paragraph 4 and, thus, it expired on March 14, 2012. Thereafter, the six days remaining on the statute of limitations began to run again. Plaintiff did not sue Kirkland during the six days after the Tolling Agreement expired.

I. May 14, 2012: Plaintiff Files His Untimely Claims Against Kirkland.

On May 14, 2012, nearly five years after Indalex declared the June 1, 2007 dividend, more than three years after Indalex filed bankruptcy, and 55 days after the statute of limitations expired, plaintiff filed this two-count complaint against Kirkland. Recognizing that his suit required a tolling theory to survive, plaintiff alleged that Kirkland had "deliberately concealed from Indalex" the fact that certain Kirkland partners had an indirect financial interest in Indalex through the PEFs.88 Plaintiff asserted, moreover, that the PEFs' investments were "revealed, for the first time" during the April 17, 2012 deposition of Sun Capital co-founder Marc Leder in the Sun Adversary.89 Accordingly, plaintiff claimed that Kirkland's alleged "conflict of interest was not discovered and could not be discovered by Indalex until after Plaintiff's appointment."90

In Count I, plaintiff claims that Kirkland "knowingly assisted [various Indalex] fiduciaries in violating their duties to Indalex" by "declaring a dividend which benefited them and rendered Indalex insolvent and/or was made at a time Indalex was already insolvent".91 In search of a tolling theory, plaintiff alleges that "K&E's partners also received dividend proceeds as a result of K&E's complicity with Indalex's fiduciaries . . . The interest of these K&E partners was not discovered and could not be discovered by Indalex until after discovery commenced in [the Sun Adversary.]"92

In Count II, plaintiff claims that Kirkland committed professional negligence. More specifically:

Kirkland moved to dismiss plaintiff's untimely complaint arguing that the Sun-affiliated members of the Indalex board knew about the PEFs' investments from the outset and, therefore, plaintiff's claims, both of which are premised on an alleged "investment conflict," were time-barred.94 In response, plaintiff sought protection under the "self-dealing fiduciary exception," which tolls the statute of limitations when the only parties with knowledge of the key facts are self-dealing fiduciaries and their conspirators. Deferring to the allegations in plaintiff's complaint, Judge Peter J. Walsh denied Kirkland's motion and allowed the case to proceed to discovery.95

Discovery has revealed that Indalex itself knew about the investments because it disclosed them in the Bond Offering Memorandum and that the Bond Offering Memorandum was widely circulated to Indalex's creditors and senior managers in 2006. For that reason, Kirkland renews its statute of limitations defense and, in addition, seeks summary judgment on the additional grounds set forth below.

III. ARGUMENT

Plaintiff's claims that Kirkland aided and abetted Indalex's board of directors to breach their fiduciary duties and committed professional negligence must fail for two reasons. First, without justification, plaintiff did not file this lawsuit within the applicable limitations periods. Second, there is no genuine issue of material fact that would allow plaintiff to proceed past summary judgment.

A. Plaintiff's Claims Are Time-Barred.

Although the parties agree that Delaware's three-year statute of limitations applies to plaintiff's aiding and abetting claim, they disagree as to whether Delaware's (three years) or Illinois' statute (two years) applies to his professional negligence claims.96 Because his claims are time-barred under either statute, for purposes of this motion only, defendant assumes that Delaware's three-year statute applies to both claims.

1. Plaintiff Missed The Deadline For Bringing This Lawsuit.

Plaintiff's claims accrued on June 1, 2007 when Indalex paid the dividend. In Delaware, "the statute of limitations begins to run, i.e., the cause of action accrues, at the time of the alleged wrongful act, even if the plaintiff is ignorant of the cause of action." In re Dean Witter P'ship Litig., C.A. No. 14816, 1998 WL 442456, at *4 (Del. Ch. July 17, 1998) aff'd, 725 A.2d 441 (Del. 1999) (holding plaintiffs' breach of fiduciary duty claims accrued when they purchased certain partnership interests causing injury); HealthTrio, Inc. v. Margules, C.A. No. 06C-04-196, 2007 WL 544156, at *7 (Del. Super. Ct. Jan. 16, 2007) (holding statute of limitations accrued on date attorney provided legal advice).

Here, plaintiff's entire aiding and abetting claim derives from his belief that Kirkland knowingly assisted Indalex's directors to breach their fiduciary duties when they declared the dividend on June 1, 2007.97 Similarly, plaintiff's professional negligence claim derives from the legal services Kirkland performed "relating to the dividend."98 Because plaintiff's claims center on advice Kirkland provided "relating to the dividend," which Indalex declared on June 1, 2007, plaintiff's claims accrued—and the statute of limitations began to run—on June 1, 2007.

Although the statute of limitations would have expired three years later, on June 1, 2010, Section 108 of the Bankruptcy Code afforded plaintiff an additional two years from the date of the bankruptcy to file his claims against Kirkland. See 11 U.S.C. § 108(a) (2012). Indalex filed for bankruptcy on March 20, 2009; accordingly, Section 108 extended the time for plaintiff to file this lawsuit until March 20, 2011.

Instead of filing his complaint by that date, however, plaintiff asked Kirkland to agree to the Tolling Agreement, which "stopped the clock" for one year beginning on March 14, 2011.99 But as March 14, 2012 approached, plaintiff did nothing. As a result, the Tolling Agreement terminated and the "clock" resumed on March 14, 2012. From that point, plaintiff had six days (the time remaining before the Section 108 extension expired)—or until March 20, 2012—to file his complaint. Yet still he did nothing and instead, plaintiff waited until May 14, 2012—55 days after the statute of limitations expired—to file this lawsuit.100 The following timeline is illustrative:

2. The Discovery Rule Cannot Save Plaintiff's Claims.

Aware that he inexcusably missed his deadline, plaintiff claims that Indalex could not have discovered that it had potential claims against Kirkland until April 2012 when plaintiff allegedly first learned about the PEFs' investments or until he became Indalex's trustee.101 Plaintiff is wrong on the law and the facts.

a. Plaintiff Stands In Indalex's Shoes.

At the threshold, plaintiff incorrectly claims that he should be exempt from the statute of limitations because he was not appointed until October 30, 2009 and therefore could not have discovered the facts that give rise to his claims until then.102 In other words, plaintiff argues that his knowledge—as opposed to Indalex's—is determinative. He is wrong. Although the trustee, as successor to the debtor's interest, has standing to assert claims belonging to the debtor, he is "subject to the same defenses as could have been asserted by the defendant had the action been instituted by the debtor." Official Comm. of Unsecured Creditors v. R.F. Lafferty & Co., 267 F.3d 340, 356 (3d Cir. 2001) (quoting Hays & Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1149, 1154 (3d Cir. 1989)). In other words, the "trustee stands in the shoes of the debtor." Id.

Thus, as Indalex's trustee, plaintiff stands in the shoes of the company and Indalex's knowledge—including the fact that it knew, in 2006, about the investments and, in 2007, that Kirkland provided legal services to Indalex in connection with the dividend—is imputed to plaintiff. See id. at 356 (quoting Senate Report to the Bankruptcy Reform Act of 1978: "[I]f the debtor has a claim that is barred at the time of the commencement of the case by the statute of limitations, then the trustee would not be able to pursue that claim, because he too would be barred. He could take no greater rights than the debtor himself had.").

b. Indalex Knew About The PEFs' Investments And The Alleged Injury In June 2007.

Moreover, to the extent plaintiff claims that the statute of limitations should be tolled because Indalex was allegedly unaware of the facts underlying plaintiff's claims until April 2012, plaintiff is wrong.

"[A]ny possible tolling exception to the strict application of the statute of limitations [including the discovery rule] tolls the statute `only until the plaintiff discovers (or [by] exercising reasonable diligence should have discovered) his injury.'" Pomeranz v. Museum Partners, L.P., C.A. No. 20211, 2005 WL 217039, at *3 (Del. Ch. Jan. 24, 2005) (citing Dean Witter, 1998 WL 442456 at *6) (emphasis in original). To toll the limitations period, "there must have been no observable or objective factors to put a party on notice of an injury, and plaintiffs must show that they were blamelessly ignorant of the act or omission and the injury." Dean Witter, 1998 WL 442456 at *5. "Once a plaintiff is on notice of facts that ought to make her suspect wrongdoing, she is obliged to diligently investigate and to file within the limitations period as measured from that time." Pomeranz, 2005 WL 217039 at *13. "Inquiry notice does not require actual discovery of the reason for the injury. Nor does it require plaintiffs' awareness of all of the aspects of the alleged wrongful conduct." Dean Witter, 1998 WL 442456 at *7.

Pomeranz is instructive. In that case, certain partners in an investment vehicle sued other partners claiming that they aided and abetted a breach of fiduciary duty when they withdrew from the partnership. See Pomeranz, 2005 WL 217039 at *8. Plaintiffs argued that the discovery rule tolled the statute of limitations because they were not aware of their injury until they received the terms of the withdrawal agreement. Id. at *10. The court disagreed and held that the clock started as soon as they received financial schedules that "should have raised their eyebrows regarding what was happening to the financial strength of the partnership" because a "rational investor should have been suspicious that the reported withdrawal of 66% of the Partnership's capital in mid-February 2000—or over $12 million had injured the Partnership." Id. at *10, *13. The court dismissed plaintiffs' claims as untimely noting that plaintiffs' ignorance of the "full economic impact of the wrong" and the precise cause of the wrong was irrelevant and the discovery rule only tolled the statute of limitations until plaintiffs were on notice of the general financial impact of defendants' actions. Id. at *12.

Here, as in Pomeranz, Indalex was not blamelessly ignorant that its payment of the dividend allegedly injured the company. Indeed, plaintiff himself claims "Indalex knew or should have known that the payment of [the] dividend did or would render Indalex insolvent."103 Even absent this "admission," the undisputed facts show that, as of June 1, 2007, Indalex knew:

Because, Indalex knew or should have known that the payment of the dividend would (according to plaintiff) harm Indalex, and Indalex knew that Kirkland provided advice to Indalex regarding the dividend, at a minimum, Indalex was on inquiry notice of its claims.

Nevertheless, throughout his complaint, plaintiff repeatedly claims that the statute of limitations should be tolled because Indalex was unaware of the alleged "investment conflict" Kirkland "deliberately concealed."105 But this allegation also cannot save plaintiff's claims because the undisputed facts show that Indalex knew about the PEFs' investments in early 2006—well before the June 2007 Dividend.106 Indalex's own Bond Offering Memorandum expressly disclosed the Kirkland partners' investments.107 Indalex shared the document with its creditors and also sent the Bond Offering Memorandum to 23 of its senior executives in early 2006.108 Plaintiff has nothing to refute this evidence.

Furthermore, now that plaintiff must support his allegations with evidence, he cannot argue, as he did in opposition to Kirkland's motion to dismiss, that the only people at Indalex who knew that certain Kirkland partners invested in funds that invested in funds that invested in Indalex were allegedly self-dealing fiduciaries on Indalex's board of directors.109 See Bovay v. H.H. Byllesby & Co., 38 A.2d 808 (Del. 1944) (applying self-dealing fiduciary exception to toll statute of limitation). The undisputed facts confirm that the PEFs' investments were known to non-insider employees and executives of Indalex long before Indalex declared the dividend. No one—not a bondholder, not Cravath (counsel for the bondholders), and not a single Indalex employee—ever complained about the PEFs' investments. Indalex knew of the facts comprising all of his claims against Kirkland immediately after the dividend. Therefore, plaintiff cannot rely on tolling principles to save his untimely claims and the Court should enter judgment for Kirkland because plaintiff failed to timely file this action.

B. Plaintiff Cannot Establish Essential Elements Of Either Of His Claims.

1. Kirkland Did Not Have An Undisclosed Conflict Of Interest.

The gravamen of plaintiff's entire case is his claim that Kirkland had an undisclosed conflict of interest because some Kirkland lawyers invested in funds that invested in funds that invested in Indalex. But the undisputed evidence confirms that Kirkland disclosed the investments to Indalex and its creditors and that the de minimis, passive investments did not create a conflict in any event. Because there was no conflict, the Court should enter summary judgment on all claims for Kirkland.

First, as discussed in detail above, the PEFs' investments were disclosed to Indalex and its creditors at the time of the Indalex acquisition.

Second, plaintiff's conflict argument is contrary to established authority. When evaluating whether a lawyer's personal interest could give rise to a conflict, "[t]he circumstances of each potential conflict must be analyzed, taking into account such factors as the extent and value of the lawyer's ownership interest relative to [his or] her overall income and assets and the client's capitalization, the type of legal service being provided, and the possible effect of the lawyer's ownership stake upon the lawyer's actions and recommendations." Lawyer's Interests Adverse to Client, ABA/BNA LAWYERS' MANUAL ON PROFESSIONAL CONDUCT 51:407 (2012); see also Acquiring Ownership in a Client in Connection with Performing Legal Services, ABA COMM. ON ETHICS AND PROF 1 RESPONSIBILITY, Formal Op. 00-418 at 7 (July 7, 2000) ("ABA Comm., Formal Op. 00-418") ("A lawyer's representation of a corporation in which she owns stock creates no inherent conflict of interest. . . .").

A conflict of interest exists under Rule 1.7 only if there is a "significant risk" that a lawyer's "personal interest[s]" will "materially limit[]" the representation of one or more clients.110 Numerous commentators have confirmed that small ownership interests in clients do not give rise to a conflict and need not be disclosed. See Lawyer's Interests Adverse to Client, ABA/BNA LAWYERS' MANUAL ON PROFESSIONAL CONDUCT 51:407 (2012); see also id. at 51:405 ("Slight interests that would be unlikely to have much if any impact on a representation do not even need to be disclosed to the client."); MALLEN & SMITH, LEGAL MALPRACTICE § 16.8 (2014 ed.) (recognizing that conflicts may be avoided by limiting ownership in a client to a nonmaterial sum, such as less than 5%). This issue often arises in the analogous context where a lawyer invests in a mutual fund which invests in the lawyer's client or adversary.111 In such instances, the lawyer is not conflicted when either representing, or adverse to, one of the mutual fund's portfolio investments. See ABA COMM., Formal Op. 00-418 at 2, n.7 (citing authorities that permit lawyers to acquire client stock in an open market).

Here, the PEFs' investments, individually and collectively, represented a de minimis indirect interest in Indalex. Moreover, similar to a mutual fund, the Kirkland lawyers did not have any control over the management committee's decision to invest in the Sun Capital funds.112 Likewise, when the management committee committed to the Sun Capital funds, it relinquished all control over how the Sun Capital funds invested the PEFs' capital.113 In short, the Kirkland lawyers' held de minimis indirect interests in Indalex and had no control over those indirect interests. As such, the indirect investments did not present a conflict under Rule 1.7.

Nor did the indirect investments violate Rule 1.8. Rule 1.8(a) prohibits lawyers from entering into business transactions or knowingly acquiring an interest adverse to a client. See id. However, "Rule 1.8(a) does not . . . apply when the lawyer acquires stock in an open market purchase or in other circumstances not involving direct intervention by the client." ABA COMM., Formal Op. 00-418 at n.7 (unlike where a lawyer accepts an interest in a client in connection with a fee for legal services). As plaintiff's own expert admits the "[Kirkland's partners] were not entering into a business transaction [with Indalex].114 Nor did the Kirkland partners acquire an interest adverse to the client. As investors, their interest was to see the Sun Capital funds, and their portfolio companies, like Indalex, succeed.

Because Kirkland disclosed the PEFs' investments and they do not create a conflict of interest in any event, plaintiff cannot present any evidence to support the underlying predicate for all of his claims.

2. Plaintiff Cannot Establish Essential Elements of His Aiding And Abetting Claim.

Even assuming this case was timely (it is not), plaintiff's aiding and abetting claim also fails because plaintiff cannot establish that Indalex's directors breached their fiduciary duties or that Kirkland knowingly helped them to do so. See Houseman v. Sagerman, C.A. No. 8897-VCG, 2014 WL 1600724, at *9 (Del. Ch. Apr. 16, 2014) ("[K]nowing participation in a board's fiduciary breach requires that the third party act with the knowledge that the conduct advocated or assisted constitutes such a breach." (quoting Malpiede v. Townson, 780 A.2d 1075, 1097 (Del. 2001)).

a. Plaintiff Cannot Establish An Underlying Breach.

Plaintiff claims that Kirkland aided and abetted Indalex's directors in breaching their fiduciary duties when they declared the June 1, 2007 dividend that allegedly rendered Indalex insolvent."115 But plaintiff has no evidence that the June 1, 2007 dividend actually rendered Indalex insolvent, and, therefore, cannot demonstrate a breach, causation, or damages.116 To prove insolvency, a trustee "must establish a reasonable estimate of cash conversion based upon balance sheets, financial statements, appraisals, expert testimony and other affirmative evidence." In re Thomas Farm Sys., Inc., 18 B.R. 541, 543 (Bankr. E.D. Pa. 1982) (finding statement of the debtor's president not sufficient to satisfy the balance-sheet test and establish insolvency) (citing Constructora Maza Inc. v. Banco de Ponce, 616 F.2d 573 (1st Cir. 1980); In re Fulghum Construction Co., 7 B.R. 629 (Bankr. M.D. Tenn. 1980)). Courts typically rely on expert testimony in determining whether a company is insolvent. See e.g., Brandt v. Samuel, Son & Co., Ltd. (In re Longview Aluminum, L.L.C.), C.A. No. 03 B 12184, 2005 Bankr. LEXIS 1312, at *17 (Bankr. N.D. Ill. July 14, 2005) ("It is generally accepted that whenever possible, a determination of insolvency should be based on seasonable appraisals or expert testimony.") (emphasis added); Miller & Rhoads, Inc. Secured Creditors' Trust v. Robert Abbey, Inc. (In re Miller & Rhoads, Inc.), 146 B.R. 950, 956 (Bankr. E.D. Va. 1992) ("Numerous cases have held that the schedules are not dispositive or controlling and that courts should rely upon more accurate evidence, such as current appraisals, opinion testimony or actual sales of the assets in determining insolvency.") (citation omitted); see also In re Am. Classic Voyages Co., 367 B.R. 500, 508 (Bankr. D. Del. 2007), aff'd sub nom., 384 B.R. 62 (D. Del. 2008) (considering expert testimony in determining insolvency).

Here, plaintiff did not identify a solvency expert and his only expert, Lawrence Fox, admits that he is not qualified to opine on issues of solvency."117 Mr. Fox's, opinion was limited to the alleged conflicts of interest and he specifically disavowed any opinion on solvency as irrelevant to his analysis.118 Without a qualified expert,119 plaintiff cannot rebut the testimony of Kirkland's expert who concluded that Indalex was solvent.120

In fact, the overwhelming undisputed evidence in this case confirms that the June 1, 2007 dividend did not render Indalex insolvent. First, Kirkland's expert John Finnerty reviewed Indalex's records and determined that the payment of the June 1, 2007 dividend would not render the company insolvent. Second, Indalex's bonds continued to trade above par well after the Indalex paid the June 1, 2007 dividend and Indalex's first lien creditors under the company's revolver permitted the dividend to be paid.121 See VFB LLC v. Campbell Soup Co., 482 F.3d 624, 623-33 (3d Cir. 2007) (reviewing contemporaneous market valuations, including price of bonds, as "strong evidence that VFI was solvent at the time of" transfer); In re Old CarCo LLC, 435 B.R. 169, 193 (Bankr. S.D.N.Y. 2010). Third, Indalex's auditors' determined that Indalex had "sufficient availability of borrowings and sufficient ability to generate cash flow and will be able to continue as a going concern through 2008."122 See In re AbitibiBowater Inc., C. A. No. 09-11296, 2010 WL 4823839, at *6 (Bankr. D. Del. Nov. 22, 2010) ("The Debtors' public filings substantiate that Bowater was solvent at the time. For example, in rendering its opinion on Bowater's Form 10-K for 2007, the Company's outside auditors, Pricewaterhouse Coopers, did not express any going concern qualification.").

Fourth, independent market analysts, including Standard & Poor's, Moody's, and Goldman Sachs, affirmed this view.123 These contemporaneous opinions of independent analysts, free of litigation bias, are compelling evidence of Indalex's solvency, which plaintiff cannot rebut. See VFB LLC v. Campbell Soup Co., C.A. No. 02-137, 2005 WL 2234606, at *13 (D. Del. Sept. 13, 2005) (noting that assessments of value by investment analysts and other "contemporaneous evidence of fair market value has the advantage of being untainted by hindsight or post-hoc litigation interests"); In re Iridium Operating LLC, 373 B.R. 283, 349 (Bankr. S.D.N.Y. 2007).

Fifth, Indalex continued to operate for more than 22 months after it paid the June 1, 2007 dividend, failing only after aluminum demand dropped to its lowest levels in 20 years.124 It strains credibility to think that Indalex's stakeholders sat on their hands for almost two years if Indalex was insolvent in June of 2007. See In re Prime Realty, Inc., 380 B.R. 529, 537 (8th Cir. 2007) (finding fact that debtor "continued to operate as a going concern for almost a year after it remitted the Transfers" supported conclusion that debtor was solvent at time of transfer); In re Iridium, 373 B.R. at 348 (contemporaneous actions of stakeholders are powerful evidence of solvency).

Sixth, Indalex management concluded that Indalex would remain solvent following the payment of a much larger dividend.125 And Indalex hired FTI to evaluate Indalex's solvency.126 After a thorough analysis, FTI determined that Indalex's assets (debt free) would exceed its liabilities by over $60 million, even if Indalex paid a $114 million—rather than $76 million—dividend.127 During his deposition, Rick Braun of FTI testified that the solvency opinion was conservative.128

Because the undisputed evidence confirms that Indalex was solvent in June 2007, plaintiff cannot establish that the Indalex directors breached their fiduciary duties to Indalex and therefore his aiding and abetting claim against Kirkland fails.

b. Plaintiff Cannot Demonstrate That Kirkland Knowingly Assisted The Directors To Breach Their Fiduciary Duties.

Even if plaintiff could prove that the directors breached their fiduciary duties (and he cannot), he cannot demonstrate that Kirkland "acted with knowledge" that the June 1, 2007 dividend violated Delaware law. "[K]nowing participation in a board's fiduciary breach requires that the third party act with the knowledge that the conduct advocated or assisted constitutes such a breach." Houseman, 2014 WL 1600724 at *9. (quoting Malpiede v. Townson, 780 A.2d 1075, 1097 (Del. 2001)). A third party knowingly participates in a breach of the duty of care if it "knows that the board is breaching its duty of care and participates in the breach by misleading the board or creating the informational vacuum," or otherwise "purposely induce[s] the breach of the duty of care." Id. (quoting In re Rural Metro Corp. S'holders Litig., 88 A.3d 54 (Del. Ch. Mar. 7, 2014)).

Here, the undisputed evidence shows that Kirkland had no knowledge, and no reason to believe, that the payment of the June 1, 2007 dividend would render Indalex insolvent. Kirkland appropriately and reasonably relied on the business judgment of Indalex management, FTI, and external factors in the marketplace,129 all of which indicated that Indalex could pay the June 1, 2007 dividend.130 The possible payment of the June 1, 2007 dividend was anticipated at the time of the acquisition and calculated in accordance with the formula set forth in the bond indenture and credit agreement.131 Indalex retained FTI to prepare a solvency report to confirm that it could lawfully proceed. After weeks of inquiry and analysis, FTI confirmed Indalex was solvent.132 Both management's and FTI's conclusions were supported by information in the marketplace and audit reports.133 Plaintiff has no evidence that Kirkland knowingly assisted Indalex in declaring an unlawful dividend and, as a result, plaintiff cannot prove that Kirkland aided and abetted the Indalex directors' alleged breach of fiduciary duty.

3. Plaintiff Cannot Establish Essential Elements Of His Professional Negligence Claim.

Similarly, plaintiff's professional negligence claim fails because he cannot establish that Kirkland's advice with respect to the June 1, 2007 dividend fell below the standard of care. It is well settled that expert testimony is required to establish the standard of care.134 See Pinckney v. Tigani, C.A. No. 02C-08-129, 2004 WL 2827896, at *3 (Del. Super. Nov. 30, 2004) ("It is well settled under Delaware law that claims of legal malpractice must be supported by expert testimony.") (citation omitted).

Plaintiff's expert, Mr. Fox, is an ethicist and litigator not a transactional lawyer.135 His experience is in the field of ethics and professional responsibility, and not in the payment of publicly disclosed dividends.136 And he admits that he is not qualified to opine on corporate transactions, private equity transactions, valuations, or solvency issues.137 Without this expertise, Mr. Fox cannot establish the standard of care that a "reasonably prudent" attorney should have exercised "under the circumstances."138 See Waldorf v. Shuta, 142 F.3d 601, 625 (3d Cir. 1998) (holding expert witness must have specialized knowledge regarding the area of testimony based on practical experience, academic training, and/or credentials).

In contrast, the admissible evidence confirms that Kirkland met the appropriate standard of care with respect to the work it performed on behalf of Indalex. Kirkland's three experts have testified that Kirkland's professional services in connection with the preparation of the written consents approving the June 1, 2007 dividend satisfied the applicable standards of skill, care and diligence for competent counsel in similar circumstances,139 Kirkland acted consistent with customary practice in private equity transactions when it undertook to represent Indalex, and when it negotiated the wording of the solvency opinion with FTI,140 and Indalex's Board of Directors was well-informed, thoughtful, and acted in accordance with good corporate governance practices when it declared the June 1, 2007 dividend.141 Because plaintiff has nothing other than his own bald assertion that Kirkland violated the standard of care and the undisputed evidence demonstrates otherwise, plaintiff's professional negligence claim fails.

IV. CONCLUSION

For the reasons set forth above, the Court should enter summary judgment for Kirkland on plaintiff's untimely claims.