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EFiled: Jul 30 2013 03:46PM EDT

Transaction ID 53349126
Case No. 8759IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
JACOB FRYDMAN,
Plaintiff,
v.
NASI SEED INVESTORS I, L.P., a Delaware
limited partnership, and RICHARD P.
KIPHART, as Representative of NASI SEED
INVESTORS I, L.P., and as Representative of
the limited partners,
Defendant.

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C.A. No.

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VERIFIED COMPLAINT
Jacob Frydman hereby alleges as follows:
NATURE OF THE ACTION
1.

Jacob Frydman and another individual executed a Guaranty (the Guaranty) in favor of NASI
Seed Investors I, L.P. (NASI) pursuant to which Mr. Frydman and the other individual
promised that, under certain circumstances carefully delineated in the Guaranty, they would
pay up to $2 million to NASI (for subsequent distribution to its limited partners) if another
limited partnership, North American Strategic Infrastructure Partners I, L.P. (the Fund), had
not raised at least $500 million on or before March 31, 2010. Mr. Frydman was required to
make such payments within 30 days after receipt of a Funding Notice as defined under
the Guaranty.

2.

The Fund did not raise at least $500 million on or before March 31, 2010, and accordingly, the
right of NASI to seek payment under the Guaranty accrued on March 31, 2010. The Guaranty
is governed in all respects by, and is to be construed in accordance with

the internal laws and judicial decisions (as opposed to conflict of law provisions) of Delaware,
including all matters of construction, validity and performance. Guaranty 7(g). Under
Delawares three-year statute of limitation (and the borrowing statute of any other forum having
such a borrowing statute), the time for NASI to assert a claim for breach of the Guaranty ran on
April 1, 2013.
3.

NASI did not assert any valid claim against Mr. Frydman prior to April 1, 2013. Richard Kiphart,
as representative of NASI Seed Investors I, L.P. is currently attempting to assert an arbitration
claim against Mr. Frydman against the Guaranty, but, as shown herein,
(i) Mr. Frydman is not a party to any arbitration agreement, so there is no valid arbitration
proceeding against him and (ii) in all events, no valid claim was asserted against Mr. Frydman
within the three-year statute of limitations. In this Action, Mr. Frydman seeks a declaration that
no valid claim or breach of the Guaranty was asserted against him within the three-year period
ended April 1, 2013, and that any such claims are now barred by the statute of limitations.
THE PARTIES

4.

Plaintiff Jacob Frydman is an individual residing in New York, New York. Mr. Frydman is a
signatory to the Guaranty. The Guaranty does not contain any arbitration agreement, and Mr.
Frydman is not a signatory to any agreement obligating him to arbitrate disputes with NASI
or Mr. Kiphart.

5.

NASI Seed Investors I, L.P. (previously defined as NASI) is a Delaware limited partnership.

6.

Richard P. Kiphart is an individual who, on information and belief, resides in the Chicago, Illinois,
metropolitan area. Mr. Kiphart has acted as the Representative of NASI and of the limited
partners.

FACTUAL BACKGROUND
I.
7.

THE GUARANTY

North American Strategic Infrastructure Partners I, L.P. (the Fund) was formed in 2008 to act
as an investment fund which would invest in infrastructure projects. NASI was formed to
contribute the seed money necessary to launch the Fund. It was contemplated that the General
Partner of the Fund, North American Strategic Infrastructure Partners GP I, L.P. (the GP),
would raise additional funding from public pension plans through the use of fund placement
agents.

8.

Mr. Frydman was one of the principals of the GP. Mr. Frydman entered into the Guaranty in 2008.
A true and correct copy of the Guaranty is attached hereto as Exhibit A.
9.

The Guaranty provides in relevant part as follows:

1. Guaranty Amount. In the event [GP] has not obtained


binding limited partner commitments to [the Fund] in an aggregate
amount of at least $500 million and no/100 dollars
($500,000,000.00) on or before March 31, 2010, the guarantors,
upon receipt of a Funding Notice (as defined in paragraph 3 below)
shall pay to [NASI], subject to the terms and conditions contained
in paragraphs 3 and 5, an aggregate amount equal to the lesser of
(i) one-third (1/3) of the aggregate amount of Capital Contributions
made to [NASI] by the limited partners as of March 31, 2010 and
(ii)
$2 million and no/100 dollars ($2 million) (such lesser
amounts, the Underlying Guaranty Amount).
Guaranty 1.
10.

Paragraph 3 of the Guaranty set forth the mechanics of payment of

Guaranty Amount, as follows:


3. Funding. In the event a Fund Closing (as defined in
paragraph 5 below) has not occurred on or before March 31, 2010,
[Kiphart], on behalf of [NASI], shall have the right at any time
thereafter to deliver to the Guarantors a written notice setting forth
the Guaranty Amount and the date and place of payment (the
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the

Funding Notice). The obligation of each Guarantor to fund the


Guaranty Amount shall be conditioned upon the receipt by such
Guarantor of the Funding Notice. The Guaranty Amount shall be
paid by the Guarantors within thirty (30) business days after
receipt of the Funding Notice by cashiers check or wire transfer of
immediately available funds to the address or account number (as
applicable) set forth in such Funding Notice.
Guaranty 3.
11.

Paragraph 6 of the Guaranty specifies how notices under the Guaranty are

to be sent. It provides:
6. Notices. All notices required to be delivered to any party to
this Guaranty pursuant to this Guaranty shall be in writing and
delivered, couriered or mailed to such party at the address set forth
below such persons signature to this Guaranty or to such other
address as shall be designated by such party in a written notice to
the Partnership prior to the delivery of any notice hereunder. All
notices hereunder shall be effective when personally delivered, one
business day after deposit with an overnight courier service
(charges pre-paid) or, if mailed, upon the fifth business day after
the date deposited into the U.S. Mail (postage pre-paid and return
receipt requested).
Guaranty 6.
12.

The Guaranty listed Mr. Frydmans address, and hence the address to which notices to
him were required to be sent, as follows:
Jacob Frydman
th
885 Second Avenue, 34 Floor
New York, New York 10017

13.

In March 2013, Mr. Frydman designated a new address for notices under paragraph 6 of the
Guaranty.
II.

14.

THE PRESENT DISPUTE

No Fund Closing occurred on or before March 31, 2010, principally because the stock market
crash in September of 2008, and subsequent changes in the law, made any such funding
impossible.
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15.

Specifically, the parties contemplated that William Blair & Company, L.P. (William Blair), of
which Mr. Kiphart is a principal, would raise $500 million required for a Fund Closing by,
inter alia, acting as placement agent to secure investments from state and public pension
funds. William Blair was unable to do so, principally because the unexpected stock market
crash in September of 2008 made raising such funds impossible in the short term and by April
of 2009, the U.S. Securities and Exchange Commission, the Illinois General Assembly, the New
York State Attorney General and a multi-state task force of attorneys general, among others, had
passed legislation or undertaken investigations into and/or brought enforcement actions against
placement agents as a result of their activities relating to public pension funds. As a result,
it became impractical, and in some instances illegal, to raise funds from state and public
pension plans through the use of placement agents.

16.

As a result of these unforeseen market changes, no Fund Closing occurred by March 31, 2010.

17.

In 2012, Mr. Kiphart purported to send a Funding Notice to Mr. Frydman. However, the purported
Funding Notice was not sent in accordance with the Guaranty, as it did not contain either a
date for payment or a place for payment, it was not sent by a method proscribed under the
Guaranty, and it was not sent to the address required by Paragraph 6 of the Guaranty.

18.

At no time prior to April 1, 2013, did Mr. Frydman receive any Funding Notice at the address
set forth in the Guaranty.
19.

Accordingly, at no time prior to April 1, 2013, did Mr. Frydman have any obligation to
pay any amount under the Guaranty.

20.

In September of 2013, Mr. Kiphart, acting as representative of NASI, sued Mr.


Frydman and another individual asserting a violation of the Guaranty.

21.

Mr. Kiphart voluntarily dismissed his suit against Mr. Frydman without prejudice and on
January 18, 2013, filed a demand for arbitration against Mr. Frydman and another
individual, claiming that they had failed to perform alleged obligations under the Guaranty. At
the time the arbitration was commenced, however, no Funding Notice complying with the
requirements of the Guaranty had been sent to Mr. Frydman.
22.

Moreover, Mr. Frydman was never a party to any arbitration agreement. The only
relevant document signed by Mr. Frydman is the Guaranty, and it does not contain any
arbitration agreement.
23.

III.
24.

Accordingly, Mr. Frydman has withdrawn from the arbitration.

KIPHART BELATEDLY SENDS A FUNDING NOTICE


On April 30, 2013 more than three years after NASIs rights under the Guaranty
accrued Kiphart finally sent Mr. Frydman a Funding Notice in accordance with the
terms and conditions of the Guaranty at the address set forth in the Guaranty.

25.

However, this Funding Notice came too late as, on its face, it was sent more than
three years after NASIs right under the Guaranty accrued.

26.

Accordingly, Mr. Frydman has declined to make the payments demanded by the Funding Notice.
COUNT I
(Claim For Declaratory Relief)
27.

Frydman repeats and realleges the allegations of paragraphs 1 through 26

28.

NASIs rights under the Guaranty accrued on March 31, 2010.

hereof.

29.

Under Delawares applicable statute of limitations, NASI had until March 31, 2013, to
enforce its rights under the Guaranty.

30.

An express condition to NASIs enforcement of its rights under the Guaranty was
delivering a Funding Notice to Mr. Frydman in compliance with the terms and
conditions of the Guaranty.

31.

At no time on or prior to March 31, 2013, did NASI, or anyone acting on its behalf,
send a Funding Notice to Mr. Frydman in accordance with the terms and conditions of
the Guaranty.

32.

Accordingly, any claims against Mr. Frydman for failure to comply with the terms of
the Guaranty are now barred by Delawares three-year statute of limitation set forth in
10 Del. C. 8106.
WHEREFORE, plaintiff seeks:

A.

A declaration that any claim by NASI or anyone acting on its behalf against Mr. Frydman for
breach of the Guaranty is barred by Delawares three-year statute of limitations set forth in 10
Del. C. 8106; and
B.

Such other and further relief as is just and proper.


MORRIS, NICHOLS, ARSHT & TUN1NELL LLP
/s/ Kenneth J. Nachbar
Kenneth J. Nachbar (#2067)
Shannon E. German (#5172)
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
Attorneys for Plaintiff Jacob Frydman

July 30, 2013