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Devon Park Bioventures, L.P v. Sebastian Holdings

February 10, 2012

DEVON PARK BIOVENTURES, L.P., MOVANT,
v.
SEBASTIAN HOLDINGS, INC., RESPONDENT.



The opinion of the court was delivered by: Diamond, J.

MEMORANDUM

Following an arbitration, the Honorable Jane Cutler Greenspan ordered Respondent Sebastian Holdings, Inc. to pay $2,712,500 to Movant Devon Park Bioventures, L.P., plus attorneys‟ fees and interest. The Arbitrator also ordered Sebastian to place $12,987,500 in escrow. Devon Park filed the instant Motion to Confirm Arbitration Award (Doc. No. 1), and Sebastian Holdings filed a Cross-Motion to Vacate Arbitration Awards. (Doc. No. 7.) For the reasons that follow, I will confirm the Award.

I.BACKGROUND

Devon Park is a Delaware limited partnership, created to invest in developing medical therapies. (Doc. No. 1.) General Partner Devon Park Associates, L.P. manages the Partnership and periodically calls for capital from the limited partners to fund investments. (Second Amended and Restated Partnership Agreement ¶ 3.2.) As described below, pursuant to contract, limited partners must provide capital to the General Partner as sought in each capital call. (Id.)

A "sophisticated investment firm," Sebastian Holdings is a foreign corporation formed under the laws of the Turks & Caicos Islands in the British West Indies. (Doc. No. 1-3 at 5.)

Sebastian‟s sole director and shareholder is Alexander Vik. (Doc. No. 11 at 6.) In 2005, Sebastian agreed to provide $25 million in investment funds to Devon Park over five years as required by the General Partner. (Id. at 5.) In February 2006, Sebastian also entered into an Amended and Restated Limited Agreement of Partnership with Devon Park, thus becoming a limited partner. The Parties entered into a Second Amended and Restated Limited Partnership Agreement ("Agreement") in December 2006. (Id.) In all iterations of the contract, Sebastian made the same $25 million-five year capital commitment. (Id.)

On September 16, 2008, the General Partner issued a capital call to invest in two companies. Under the Agreement, Sebastian was obliged to contribute $2,687,500 to Devon Park by October 1, 2008. When Sebastian failed to do so, Devon Park declared Sebastian to be in default and, pursuant to the Agreement, called for the arbitration of this dispute. (Doc. No. 11 at 6.)

On April 2, April 3, and May 5, 2009, the Parties presented evidence, testimony, and legal argument to the Arbitrator-former Chief Magistrate Judge James R. Melinson. On July 7, 2009, Judge Melinson concluded "that Sebastian was obligated to make [payment on] the capital call," and awarded Devon Park the $2,687,500 it had sought from Sebastian, plus attorneys‟ fees and interest (as provided for in the Agreement). Judge Melinson declined, however, to order Sebastian to place the balance of its $25 million investment commitment into an escrow account. (Doc No. 1-3 at 18.) He believed "that the parties can continue to meet their respective obligations honorably." (Id.)

Sebastian did not comply with Judge Melinson‟s Award, thus compelling Devon Park to seek relief in this Court. On September 8, 2009, Devon Park moved to confirm Judge Melinson‟s arbitration award, and I granted the Motion. Devon Park Bioventures, L.P. v. Sebastian Holdings Inc., No. 09-4085 (E.D. Pa. Dec. 3, 2009). Sebastian appealed, and on November 16, 2010, the Third Circuit affirmed. Devon Park Bioventures L.P. v. Sebastian Holdings, Inc., 401 F. App‟x 647, 648 (3d Cir. 2010).

Devon Park issued three subsequent capital calls: on April, 23, 2010 for $150,000; on May 19, 2010 for $1,750,000; and on January 3, 2011 for $812,500. (Doc No. 11 at 6.) Contrary to Judge Melinson‟s hope, however, Sebastian did not "continue to meet [its] obligations honorably," refusing all three calls. Devon Park declared Sebastian to be in default, and again went to arbitration. (Id.)

II.THE ARBITRATOR'S DECISION

The arbitration took place before Justice Greenspan on February 14, 2011. In addition to seeking payment for the missed capital calls, Devon Park asked the Arbitrator to place in escrow Sebastian‟s remaining investment obligation of $12,987,500. (Doc. No. 1-3 at 4.) The only evidence Sebastian presented was the testimony of Mr. Vik, who largely repeated the arguments Judge Melinson had rejected, and insisted that Sebastian was not obligated to honor the capital calls because Devon Park had breached the Agreement. Justice Greenspan was underwhelmed by Mr. Vik‟s testimony:

[W]hen specifically asked to state in what way Devon Park breached the Agreement, [Mr. Vik] responded that he delegated these responsibilities and was not involved enough to know and left it to others. (Doc. 1-3,at4.)

The Arbitrator thus found that Mr. Vik had failed to justify Sebastian‟s refusal to honor Devon Park‟s capital calls. (Id.) Significantly, Justice Greenspan also found that when asked whether Sebastian would honor its ...


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