463 F.Supp.3d 525 (E.D.Penn. 2020), C. A. 18-1973, CPR Management v. Devon Park Bioventures, L.P.

Docket NºCivil Action No. 18-1973.
Citation463 F.Supp.3d 525
Opinion JudgeRufe, J.
Party NameCPR MANAGEMENT, S.A., Petitioner, v. DEVON PARK BIOVENTURES, L.P. & Devon Park Associates, L.P., Respondents.
AttorneyAlbert J. Carroll, K. Tyler O'Connell, Morris James LLP, Wilmington, DE, Stephen G. Harvey, William A. Liess, Steve Harvey LLC, Philadelphia, PA, for Petitioner. Curtis J. Crowther, Young Conaway Stargatt & Taylor LLP, Wilmington, DE, Kevin C. Maclay, Sally J. Sullivan, Todd E. Phillips, Caplin &...
Case DateMay 29, 2020
CourtUnited States District Courts, 3th Circuit, United States District Courts. 3th Circuit. Western District of Pennsylvania

Page 525

463 F.Supp.3d 525 (E.D.Penn. 2020)

CPR MANAGEMENT, S.A., Petitioner,

v.

DEVON PARK BIOVENTURES, L.P. & Devon Park Associates, L.P., Respondents.

Civil Action No. 18-1973.

United States District Court, E.D. Pennsylvania.

May 29, 2020.

Page 526

[Copyrighted Material Omitted]

Page 527

[Copyrighted Material Omitted]

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Albert J. Carroll, K. Tyler O'Connell, Morris James LLP, Wilmington, DE, Stephen G. Harvey, William A. Liess, Steve Harvey LLC, Philadelphia, PA, for Petitioner.

Curtis J. Crowther, Young Conaway Stargatt & Taylor LLP, Wilmington, DE, Kevin C. Maclay, Sally J. Sullivan, Todd E. Phillips, Caplin & Drysdale, Chartered, Washington, DC, for Respondents.

MEMORANDUM OPINION

Rufe, J.

Petitioner CPR Management, S.A. filed a petition in the Court of Common Pleas of Philadelphia County seeking to confirm the award issued in an arbitration proceeding against Respondents Devon Park Bioventures, L.P. and Devon Park Associates, L.P. (collectively, "Devon Park"). Devon Park removed the action to this Court, and filed a cross-motion to vacate the award. For the reasons that follow, the arbitration award will be confirmed.

I. BACKGROUND

The background, although undisputed, is complex and involves financial deals and litigation in several countries. Devon Park Bioventures, L.P. is a venture capital fund formed as a Delaware limited partnership to invest in early-stage biotechnology companies. Devon Park Associates, L.P. is its general partner. In 2006, Sebastian Holdings, Inc. ("SHI"), which is controlled by Alexander Vik, became a limited partner by obtaining a 23% interest in Devon Park. Pursuant to Section 5 of the Limited Partnership Agreement ("LP Agreement"), limited partners are entitled to certain distributions.1 Section 13.8 of the LP Agreement provides for arbitration, administered by Judicial Arbitration and Mediation Services ("JAMS"), to resolve any disputes relating to the LP Agreement. Section 13.6 of the LP Agreement provides that Delaware law governs the Agreement. Section 11 of the LP Agreement allows a limited partner to assign its interest in the partnership with certain conditions, including general partner consent.

Beginning in 2008, SHI and Deutsche Bank became embroiled in litigation. In 2013, a court in the United Kingdom issued a judgment that SHI owed Deutsche Bank approximately $235 million. Since that judgment, Deutsche Bank has attempted to collect against SHI's assets all over the world.

In 2014, pursuant to an Assignment Agreement, and with Devon Park's consent, SHI assigned its interest in Devon Park to Universal Logistics Matters, S.A. ("ULM"). As part of the Assignment Agreement, SHI and ULM each made certain representations and warranties.2 During the arbitration proceedings, the parties stipulated that ULM is the same legal entity as Petitioner CPR.

After the assignment, Devon Park successfully wired a required distribution to ULM/CPR. However, a second distribution was rejected and flagged by the banks for regulatory concerns. At that point, Devon Park learned that Deutsche Bank was contending that SHI fraudulently transferred its interest in Devon Park to avoid the English court's judgment. Deutsche Bank alleges that in 2012, SHI purported to

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transfer its Devon Park interest to VBI Corporation, a Turks and Caicos Islands entity allegedly controlled by Vik, without Devon Park's knowledge or consent.[3] Therefore, Deutsche Bank asserts that SHI's subsequent assignment to ULM/CPR — which it alleges is also controlled by Vik— in 2014 is void because the representations and warranties in the Assignment Agreement were fraudulent. Accordingly, Deutsche Bank argues that the Devon Park interest should revert back to SHI, making it available to satisfy Deutsche Bank's judgment.

Not knowing how to disperse required distributions, Devon Park sought to intervene and interplead the partnership funds in a 2016 New York state court proceeding in which Deutsche Bank sued Vik and SHI seeking to set aside the transfer of the Devon Park interest to ULM/CPR.4 That suit was dismissed for lack of personal jurisdiction. Six months after Devon Park sought to intervene in the 2016 New York Action, in March 2017, CPR filed a Demand for Arbitration against Devon Park with JAMS in Philadelphia based on Devon Park's failure to make distributions required under the LP Agreement totaling close to $50 million ("Withheld Distributions"). Gregory P. Miller, Esquire was designated as arbitrator. In June 2017, Deutsche Bank submitted a letter to Miller requesting permission to participate in the arbitration as it maintained that it could provide context for determining whether CPR was entitled to the Withheld Distributions.5 Devon Park supported Deutsche Bank's request while CPR opposed it.6 Miller denied the request. Devon Park then answered the Demand, and, relevant to this proceeding, also asserted a counterclaim seeking a declaratory judgment on whether the assignment between SHI and ULM was valid. The parties engaged in discovery and, in late October 2017, a Final Hearing was set for February 2018.

In November 2017, Deutsche Bank filed two more lawsuits. The first lawsuit was filed in Delaware Chancery Court against Devon Park, SHI, and ULM seeking to enforce its judgment against SHI and require Devon Park to pay it the Withheld Distributions.7 Devon Park filed an interpleader in the Delaware Action requesting that the court direct payment of the proceeds. The second lawsuit was filed in New York state court against ULM asserting that the transfer of the Devon Park partnership interest from SHI to ULM was fraudulent.8

Devon Park then sought to stay the arbitration, explaining that because Arbitrator Miller had denied Deutsche Bank's request to participate in the arbitration, not all of the parties claiming the Withheld Distributions were participating, and therefore a final resolution could not be

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reached.9 In essence, Devon Park argued that if Arbitrator Miller ruled in CPR's favor but one of the courts eventually ruled in Deutsche Bank's favor, then it would be subject to inconsistent rulings. Thus, Devon Park requested that the arbitration be stayed so that a court with all of the relevant parties before it could make a final decision as to who was entitled to the Withheld Distributions. CPR responded that the arbitration was brought to enforce CPR's present rights to the Withheld Distributions and CPR's rights were not conditioned upon the outcome of litigation with Deutsche Bank.

In late December 2017, Devon Park's Motion to Stay was denied during a telephonic status conference. Shortly thereafter, Arbitrator Miller issued a Case Management Order that granted CPR's request to dismiss Devon Park's counterclaim but allowed discovery relating to the LP Agreement, Assignment Agreement, and related documents so that Devon Park could obtain evidence relating to its defense that the assignment was fraudulent and present this defense at the Final Hearing.10 Devon Park responded by letter on January 9, 2018, refusing to participate in the arbitration because it would serve "no valid purpose" without Deutsche Bank because "it cannot achieve a full and final resolution as to who is ultimately entitled to partnership distributions."11

On January 17, 2018, Deutsche Bank filed a motion for expedited proceedings and a motion for a temporary restraining order in the 2017 Delaware Action seeking an order preventing Devon Park from paying CPR the Withheld Distributions. Devon Park did not oppose the motion. The Delaware Court of Chancery denied the motion for expedited proceedings, but granted Deutsche Bank's request for a temporary restraining order and held that Devon Park was prohibited from distributing the Withheld Distributions. The court did not, however, restrain the arbitration proceedings from continuing.

The arbitration Final Hearing was held in February 2018, without the participation of Devon Park. Two weeks later, Arbitrator Miller issued an Arbitration Award in CPR's favor. Miller explained that Devon Park consented to the assignment of SHI's interest to ULM/CPR, and that no provision in the LP Agreement permitted Devon Park to withhold distributions because another party claimed to have a right to that distribution. Therefore, Arbitrator Miller held that CPR "is entitled to payment of the Withheld Distributions along with pre-judgment interest from January 1, 2016, compounded quarterly from and calculated at 5% above the Federal Reserve Discount Rate in accordance with 6 Del. C. § 2301(a)."12 However, Arbitrator Miller suspended Devon Park's obligations (including the accrual of post-judgment interest) while the TRO in the 2017 Delaware Action prevented Devon Park from paying the Withheld Distributions to CPR.13

On April 30, 2018, CPR filed a petition in Pennsylvania state court to confirm the award. Devon Park timely removed the petition to this Court14 and filed an answer

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and a cross-motion to vacate or modify the Arbitration Award.15 Devon Park also sought to interplead Deutsche Bank into this proceeding as a third-party defendant under Federal Rule of Civil Procedure 22. After conducting a telephone conference with counsel for the interested parties, including Deutsche Bank, the Court issued an order permitting CPR to file a motion to strike the interpleader claims before continuing with the confirmation proceedings.[16] After all parties briefed the interpleader issue, the Court granted CPR's Motion to Strike Devon Park's Interpleader Claims as to Deutsche Bank, and terminated all third-party claims and parties.17 The Court now decides CPR's petition to confirm the award and Devon Park's cross-motion to vacate the...

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1 practice notes
  • CPR Mgmt. v. Devon Park Bioventures, L.P., 112221 FED3, 20-2343
    • United States
    • United States Court of Appeals (3rd Circuit)
    • 22 Noviembre 2021
    ...concerning the counterclaim; and (3) award prejudgment interest, compounded quarterly. CPR Mgmt., S.A. v. Devon Park Bioventures, L.P., 463 F.Supp.3d 525, 532-39 (E.D. Pa. Devon Park and Deutsche Bank appeal. II A3 We have jurisdiction over Devon Park's appeal of the interpleader and confir......
1 cases
  • CPR Mgmt. v. Devon Park Bioventures, L.P., 112221 FED3, 20-2343
    • United States
    • United States Court of Appeals (3rd Circuit)
    • 22 Noviembre 2021
    ...concerning the counterclaim; and (3) award prejudgment interest, compounded quarterly. CPR Mgmt., S.A. v. Devon Park Bioventures, L.P., 463 F.Supp.3d 525, 532-39 (E.D. Pa. Devon Park and Deutsche Bank appeal. II A3 We have jurisdiction over Devon Park's appeal of the interpleader and confir......

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