You are on page 1of 10

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS

COUNTY DEPARTMENT, LAW DIVISION


RICHARD P. KIPHART, as representative
of NASI Seed Investors I, L.P., a Delaware
limited partnership and its limited partners,
Plaintiff,
v.

JACOB FRYDMAN and LEONARD


SHAYKIN, Individuals,
Defendants.

)
)
)
)
)
)
)
)
)
)
)

VERIFIED COMPLAINT FOR BREACH OF GUARANTY


Richard P. Kiphart, on behalf of NASI Seed Investors I, L.P. ("NASI") and as
representative of the limited partners thereof, complains against defendants Jacob Frydman
("Frydman") and Leonard Shaykin ("Shaykin") (collectively "Guarantors") as follows:
INTRODUCTION
1.

This is an action to recover over $2,000,000 plus interests and costs owed on an

unconditional and irrevocable guaranty of payment ("Guaranty") issued by Guarantors in favor


of [NASI], for the benefit of the limited partners of [NASI] . . . ."(Guaranty at 1 (a true a nd
correct copy of the Guaranty is attached hereto as Exhibit A).) As of March 31, 2010,
Guarantors were obligated to pay NASI $2,000,000 for the exclusive benefit of NASI's 18
limited partners ("Limited Partners"). Plaintiff made demand on the Guarantors under the
Guaranty on July 25, 2012, but as of this filing the Guarantors have failed to honor their
obligations under the Guaranty and are in breach.
THE PARTIES
2.

Plaintiff Richard Kiphart is a Limited Partner in NASI. He is identified in the

NASI Amended and Restated Agreement of Limited Partnership ("Partnership Agreement") as


the "LP Representative." (Partnership Agreement at 6 (a true and correct copy of the Partnership

Agreement is attached hereto as Exhibit B).) Pursuant to the Partnership Agreement, "the LP
Representative shall have the right to cause [NASI] to make all decisions, elections, or
determinations that [NASI] is entitled to make under the Guaranty, including, without
limitation, causing the Partnership to exercise its right to require payment from the Principals
under the Guaranty." (Partnership Agreement at 12.) Pursuant to the Guaranty, "in an action to
enforce any of the obligations of a Guarantor under this Guaranty, the LP Representative, at its
election,
may proceed against any Guarantor . . . ." (Guaranty at 1.) Plaintiff is a Principal at William
Blair & Company, L.L.C., headquartered in Chicago ("Blair"). Plaintiff is a resident of Chicago,
Illinois. The other Limited Partners, like Plaintiff, were principals at Blair when the Guaranty
was provided and when the Partnership Agreement was entered into.
3.

Defendant Jacob Frydman is a partner in NASI GP 1, LLC ("NASIGP"), the general partner of
NASI. Frydman is a resident of New York state.

4.

Defendant Leonard Shaykin is the managing partner of NASIGP, the general partner of NASI.
Shaykin signed the Partnership Agreement as managing partner of NASIGP. Shaykin is a
resident of New York state.
JURISDICTION AND VENUE
5.

Regarding jurisdiction and venue, the Guaranty states as follows:


Each of the parties hereto submits to the jurisdiction of any U.S.
state or federal court sitting in Chicago, Illinois, in any action or
proceeding arising out of or relating to this Guaranty and agrees
that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each of the parties hereto
waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought . . . .

(Guaranty at 3.)
6.

While Guarantors have voluntarily submitted to the Court's jurisdiction, the Court also has personal
jurisdiction over the Guarantors because they sought out funding from the

-2-

Limited Partners, all of whom reside in Illinois and are principals at Blair, which is
headquartered in Chicago.
7.

Venue is proper in Cook County pursuant to 735 ILCS 5/2-101 both because negotiation
surrounding the Guaranty in part occurred in Cook County and because all defendants are
nonresidents of Illinois.
FACTUAL BACKGROUND
A. FORMATION AND PURPOSE OF NASI AND CREATION OF THE GUARANTY

8.

NASI was originally formed on June 11, 2008. The Partnership Agreement was amended as of
October 3, 2008 to replace the original and sole limited partner of NASI (an entity known as
LambdaStar LS, LLC, which was owned and controlled by the Guarantors), with the Limited
Partners.

9.

The primary purpose of NASI was to provide seed capital to a second partnership, LambdaStar
Infrastructure Partners GP, LP (f/k/a North American Strategic Infrastructure Partners GP I,
1

L.P.) ("LambdaStar") who would use such seed capital to seek funding and investors for an
investment fund, LambdaStar Infrastructure Partners, L.P. (f/k/a North American
Strategic Infrastructure Partners I, L.P). ("Fund"). LambdaStar was owned and controlled by
Guantors and Guarantors are also the co-managing partners of the Fund.
10.

The purpose of the Fund was to make investments in infrastructure and related assets, primarily in
North America. In essence, NASI was providing money to LambdaStar to set up the business
operations of, and to operate, the Fund and to seek the necessary capital for the Fund.

North American Strategic Infrastructure Partners GP I, L.P., changed its name to LambdaStar
Infrastructure Partners GP, LP, on December 29, 2008.
-3-

1 1.

The Limited Partners were obligated to provide up to $6,000,000 in seed capital

to NASI, which would then be used by LambdaStar in establishing and seeking investors for the
Fund. LambdaStar was obligated to seek $500 million in limited partner commitments to
establish the Fund. Once established, NASI anticipated that the Limited Partners would receive
at least an 8% per annum return on their up to $6,000,000 investment of seed capital in NASI.
12.

Guarantors did not themselves provide any seed capital to NASI. Rather than provide their own
seed capital to NASI, Guarantors agreed, in the form of the Guaranty, to
refund up to $2,000,000 of the Limited Partners seed capital if Guarantors and LambdaStar failed
to secure at least $500,000,000 of funding commitments for the Fund. The Guaranty was
requested by the Limited Partners, and agreed to by the Guarantors, to ensure that Guarantors
had "skin in the game" and were thus incentivized (as LambdaStar) to perform their obligations.

13.

Guarantors executed the Guaranty. The Guaranty is dated "as of the date" of the Partnership
Agreement (October 3, 2008) and was signed and witnessed by both the Guarantors on or about
that date. The Guaranty provides that if LambdaStar has not obtained at least $500 million in
"binding limited partner commitments to [the Fund]" "on or before March 31 , 201 O," then the
LP Representative (Plaintiff here) may issue a "Funding Notice" and seek payment from the
Guarantors to the Limited Partners under the Guaranty.

14.

Under the Guaranty, if LambdaStar failed to timely secure the required funding, the Guarantors
would be obligated to pay up to $2,000,000 to the Limited Partners, depending on the total amount
of seed capital contributed by the Limited Partners.

15.

The Guaranty obligates the Guarantors, jointly and severally, to make full and prompt payment
under the Guaranty when a Funding Notice has been issued:
Each Guarantor hereby absolutely, unconditionally and irrevocably
guarantees the full and prompt payment when due and at all times
thereafter of the Guaranty Amount at the times and on the terms
and conditions contained herein. This Guaranty is an absolute,
-4 -

irrevocable, present and continuing guaranty of payment and not


merely a guaranty of collection.
(Guaranty at 1.)

B.

The Limited Partners Performance And Guarantors Breach Of The Guaranty


16.

Upon the execution of the Partnership Agreement, the Limited Partners made a

$2,000,000 initial capital contribution. Thereafter, the NASIGP was entitled to make capital calls
on the Limited Partners, pursuant to the terms and conditions of the Partnership
17.

Agreement.

NASIGP made two capital calls, for a total of $4,000,000. On February 25, 2009, NASIGP made a
capital call for $3,000,000, due to be paid by March 11, 2009. On November 3, 2009, NASIGP
made a second capital call for $1,000,000, due to be paid on November 17, 2009. The Limited
Partners timely paid both of these capital calls such that, by December 2009, the Limited Partners
had committed $6,000,000 of seed capital to NASI.

18.

While the Limited Partners had satisfied the terms of the Partnership Agreement, LambdaStar was
not able to secure the required $500 million of limited partner commitments by the Guaranty's
March 31, 2010 deadline. On January 12, 2011, the LP Representative sent a letter to
Guarantors acknowledging that the LP Representative had the right to issue a Funding Notice
under the Guaranty, but electing not to do so. (January 12, 2011 Letter, a true and correct copy of
which is attached hereto as Exhibit C.) The January 12, 2011 Letter expressly stated that the LP
Representative was not waiving the right to issue a Funding Notice "at any time in the future."
(Id.)

19.

On July 25, 2012, the LP Representative issued a Funding Notice under the Guaranty and sought
payment under the Guaranty. Because the Limited Partners had contributed the maximum seed
funding under the Partnership Agreement ($6,000,000), the Guarantors were obligated to pay
$2,000,000 under the Guaranty. (July 25, 2012 Funding Notice, a true and
correct copy of which is attached hereto as Exhibit D.)

-5-

20.

While the Limited Partners have performed under the Partnership Agreement and have issued the
required Funding Notice under the Guaranty, the Guarantors have not made the required
$2,000,000 payment under the "unconditional[] and irrevocabl[e]" Guaranty.

COUNT I - BREACH OF
GUARANTY
21.

Plaintiff repeats and realleges as it set forth herein the allegations set forth in Paragraphs 1
through 19.

22.

The Guaranty is a valid and enforceable contract. The Limited Partners have performed their
obligations under the Guaranty and the Guarantors have executed the Guaranty.

23.

Under the Guaranty, with the Limited Partners having provided $6,000,000 of seed capital to
NASI, the Guarantors are obligated to pay $2,000,000 to NASI for the benefit of the Limited
Partners if the Fund GP has not secured $500 million of limited partner commitments for the
Fund on or before March 31, 20 I 0.

24.

The Fund GP did not secure the necessary funding for the Fund by March 31, 2010. Plaintiff has
issued a Funding Notice under the Guaranty that the Guarantors have refused to pay. As such,
the Guarantors are in breach of the Guaranty.
WHEREFORE, Plaintiff prays that the Court enter judgment in its favor and against
Defendants:
a.

for the principal amount of $2,000,000;

b.

for such pre-judgment interest as permissible under the law;

c.

for all attorneys' fees, expenses and costs incurred in enforcing the

d.

for any other or different relief as the Court may deem appropriate.

Guaranty; and

-6-

Dated: September 24, 2012

An Attorney for Plaintiff Richard P. Kiphart

Jim Klenk
James.Klenk@snrdenton.com Steve
Merouse
Steven.Merouse@snrdenton.com
SNR DENTON US LLP
Firm ID 47568
233 South Wacker Drive Suite
7800
Chicago, Illinois 60606
312.876.8000
Telefax 312.876.7934

-7-

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS


COUNTY DEPARTMENT, LAW DIVISION
RICHARD P.KIPHART, as representative
of NASI Seed Investors I, L.P., a Delaware
limited partnership and its limited partners,
Plaintiff,

v.
JACOB FRYDMAN and LEONARD
SHAYKIN, Individuals,
Defendants.

)
)
)
)
)
)
)
)
)
)
)

Case No.

DECLARATION IN SUPPORT OF VERIFIED COMPLAINT


Under penalties as provided by law pursuant to Section 1-109 of the Code of Civil
Procedure, the undersigned certifies that the statements set forth in the accompanying Verified
Complaint for Breach of Guaranty are true and correct, except as to matters therein stated to be
on information and belief and as to such matters the undersigned certifies as aforesaid that
verily believes the same to be
true.
Richard P. Kiphart

Dated: September 24, 2012

he