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In Re Pine Street Associates, L.P v. Southridge Partners

April 25, 2013

IN RE PINE STREET ASSOCIATES, L.P., PETITIONER-APPELLANT,
v.
SOUTHRIDGE PARTNERS, L.P., ET AL., RESPONDENTS-RESPONDENTS.



Petitioner appeals from the orders of the Supreme Court, New York County (Bernard J. Fried, J.), entered October 6, 2011 and September 12, 2011, which, in this CPLR article 75 proceeding, directed them, in accordance with a prior order, to submit a satisfaction of judgment on notice.

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

Matter of Pine St. Assoc., L.P. v Southridge Partners, L.P.

Appellate Division, First Department

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on April 25, 2013

Peter Tom,J.P. Richard T. Andrias Rolando T. Acosta David B. Saxe Helen E. Freedman, JJ.

ACOSTA, J.

The primary issue in this case is whether the tender of securities to petitioner by respondent Southridge Partners L.P., an investment fund (the fund), satisfies respondent's obligation under an arbitral award to complete the redemption of petitioner's interest in the fund in cash or in kind. We hold that Southridge owes petitioner the same dollar amount regardless of whether it chooses to satisfy its obligation "in cash" or "in kind." We thus reverse Supreme Court's orders and remand for an evidentiary hearing to determine whether the obligation has been met.

In 2005, petitioner Pine Street Associates, L.P., invested approximately $8.3 million in the fund. In 2008, Pine Street requested a "full redemption" of its investment from Southridge, effective December 31, 2008. Under the terms of Southridge's Sixth Amended and Restated Limited Partnership Agreement (the agreement), withdrawal of a limited partner occurs upon the partner's request for redemption of all of its interest. Southridge acknowledged Pine Street's request and reported that the value of Pine Street's distributive class of interest at redemption was approximately $8,076,457.85. In March 2009, Southridge informed Pine Street of its decision to postpone redemption of Pine Street's class of interests pursuant to Section 7.2(f) of the Agreement.[*fn1]

In April 2009, Pine Street filed a demand for arbitration, alleging that Southridge engaged in bad faith in failing to honor its request to redeem. Following a two-day arbitration hearing, the arbitrator rendered an award, dated January 18, 2010, interpreting the Agreement as permitting Southridge to exercise its discretion as to when to redeem "only . . . under certain defined circumstances and [if] exercised reasonably in good faith." The arbitrator then found that "[Southridge] failed to establish a credible evidentiary basis for the existence of those defined circumstances, or the reasonableness of their exercising discretion, that delayed the redemption of [Pine Street's] interest then or now." On the basis of that finding, the arbitrator rendered the following award in favor of Pine Street: 1. Notwithstanding any other provision of the Agreement, (a) within thirty (30) days from the date of this Award, [Southridge] shall redeem no less than forty percent (40%) of the balance of [Pine Street's] interest in [the Fund] in cash; and (b) within ninety (90) days from the date of this Award, [Southridge] shall complete the redemption of [Pine Street's] interest in [the Fund] in cash or in kind, plus interest at the legal rate on said balance then remaining from October 1, 2009, until paid in full.2. Within forty five (45) days from the date of this Award, [Southridge] shall provide [Pine Street] with an accounting of [Pine Street's] interest and position in [the Fund] (represented to be $8,079,457.85 [sic] as of December 31, 2008) from January 1, 2008, to said date." On February 17, 2010, in compliance with paragraph 1 of the arbitration award, Southridge paid Pine Street $3,195,064 in cash, representing approximately 40% of the stated value of Pine Street's remaining interest in the fund ($7,987,660.19).

On April 20, 2010, Southridge also transferred a variety of stock certificates (whose value is disputed) to Pine Street. In a cover letter, Southridge informed Pine Street that it had delivered the stock certificates, "almost entirely" completing the redemption of Pine Street's interest in the fund in kind. The letter also stated that "[a]n additional certificate, representing only a single-digit percentage of the remaining redemption value [would be forwarded] shortly. Upon such delivery, the award will have been satisfied in full." On May 27, 2010, Southridge assigned to Pine Street a portion of its rights, in the amount of $151,258.80 plus interest, in a promissory note due December 31, 2009, and in two stock certificates, each for 500,000 shares in Akers Biosciences, Inc.

On or about November 24, 2010, approximately 10 months after the arbitrator issued the arbitration award, Pine Street filed a petition to confirm the award and for entry of judgment. In response, Southridge argued that the motion was belated, and that because it had satisfied the award some time before, confirmation was unnecessary. Pine Street did not dispute Southridge's representation that the award had been paid in full. Supreme Court granted the petition to confirm the award, and on May 12, 2011 entered judgment.

By order to show cause dated May 18, 2011, Southridge moved to enjoin and restrain Pine Street from seeking to enforce the judgment entered, "unless and until the Court determined that the judgment has not in fact been satisfied and has delineated the terms and conditions of any such enforcement." Southridge stated that it had just recently learned that Pine Street's position was that Southridge had not satisfied the award. In his affidavit in support of the motion, counsel stated that Pine Street had refused Southridge's proposal to litigate the issue of whether the award had been satisfied. In opposition, Pine Street argued that the in-kind portion paid in securities was worth far less than the $4.5 million (the remaining 60%) to which it was entitled under the award, ...


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