SUMMONS - Typepad · 2012. 1. 20. · SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK...

DON 412012006

SUPREME COURT OF THE STATE OF NEW YORK Index No. COUNTY OF NEW YORK

RICHARD N. FOSTER,

Plaintzfi

against

BRUCE KOVNER, ROBERT WILSON, CAXTON HEALTH HOLDINGS, LLC, and CAXTON ASSOCIATES, LLC,

Defendants.

Date purchased Plaintiff designates New York County place of trial.

The basis of the venue is residence of Defendants

SUMMONS

th

Plaintiff resides in New York County

To the above named Defendant(s)

YOU ARE HEREBY SUMMONED to answer the complaint in this action and to serve a copy of your answer, or, if the complaint is not served with this summons, to serve a notice of appearance, on the Plaintiffs Attorney(s) within 20 days after the service of this summons, exclusive of the day of service (or within 30 days after the service is complete if this summons is not personally delivered to you within the State of New York); and in case of your failure to appcar or answer, judgment will be taken against you by default for the relief demanded in the complaint.

Dated: April 19,2006

CRAVATH, SWAINE & MOORE LLP

u A member of the firm

Attorneys for Plaintiff Worldwide Plaza

825 Eighth Avenue New York, NY 100 19

(2 12) 474- 1000

Defendants’ address: 500 Park Avenue New York, NY 10022

Supreme Court Records OnLine Library - page 1 of 30

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK

RICHARD N. FOSTER,

Plaintiff,

V. 0 6 6 0 1 3 4 9 Index No.

BRUCE KOVNER, ROBERT WILSON, CAXTON HEALTH HOLDINGS, LLC, and $* COMPLAINT CAXTON ASSOCIATES, LLC, Y

L .

Plaintiff Richard N. Foster for his coGpGint herein alleges, on the basis of is

personal knowledge with respect to his own conduct and on &formation and belief as to

all other matters, as follows:

Nature of Action

1. This action seeks damages for breach of contract, unjust

enrichment, promissory estoppel, breach of fiduciary duty, aiding and abetting of breach

o f fiduciary duty, tortious interference with prospective business advantage and tortious

interference with contractual relations arising out of defendants' actions to deprive

Richard N. Foster of the economic benefits of his contributions and efforts in the creation

of Caxton Health Holdings, LLC ("CHH").

2. Mr. Foster is one of America's preeminent business consultants

and advisors, specializing in healthcare and private equity consulting. Prior to founding

CHH, Mi. Foster was a Senior Partner and Director at McJhsey, where he had worked

for over thirty years.


3. In 2003, Mr. Foster conceived of an investment structure to

capitalize on expanding healthcare opportunities. He shared his ideas with Bruce

Kovner, who later proposed that they jointly implement Mr. Foster's ideas. Mr. Foster

brought Robert Wilson into the planning and the three collaborated in the establishment

of CHH, a new group of funds to be an autonomous part of the Caxton family of funds.

Messrs. Foster, Wilson and Kovner, the latter acting on hs own 4.

personal behalf and on behalf of Caxton Associates, LLC, and/or certain of its affiliates,

agreed that Foster and Wilson would be co-equal in the new enterprise, sharing

responsibility for all major decisions at CHH. They also agreed that Foster and Wilson

would be compensated equally. Mr. Kovner made specific and repeated commitments to

Mr. Foster that he would receive payments of $1,000,000 per year and a 10% equity

interest in CHH.

5 . Pursuant to and in reliance on that partnership or joint venture

agreement, Mr. Foster left a lucrative position as Senior Partner and Director at

McKinsey & Company ("McKinsey") in order to apply his vision, experience, skills,

connections and efforts to the creation of the new enterprise. In addition to contributing

his strategic and business concepts and certain other significant intellectual capital to the

venture, Mr. Foster agreed to assume major responsibilities critical to the development

and eventual success of CHH, in addition to managing the day-to-day operations of CHH.

Over the next year, Mr. Foster established the CHH offices, developed the infrastructure

and facilities of CHH, recruited CHH's key employees and led the successful effort to

raise $1 billion in investment funds for the priority CHH hedge fund.

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6 . As Mr. Foster was performing his responsibilities and making

these contributions to CHH, Mr. Kovner continued to assure Mr. Foster that a formal

written document embodying the terms of his compensation would be forthcoming. That

written document never arrived. Instead, Mr. Kovner purported to terminate Mr. Foster's

employment as CEO of CHH on July 29,2005, after Mr. Kovner, Caxton, CHH and Mr.

Wilson had utilized Mr. Foster's vision, skills, experience, connections and efforts to

create and launch CHH including the successful raising of $1 billion for the CHH funds.

Since that date, defendants have denied to Mr. Foster the promised equity interest and

have discontinued the annual payments.

7. This action seeks full and fair compensation for Mr. Foster for the

contribution of his intellectual capital and personal services, including the promised

$1,000,000 annual payments and the 10% equity interest in CHH for his contributions to

the creation of CHH.

The Parties

8. Plaintiff Richard N. Foster is a citizen of the United States residing

in New York, New York.

9. Defendant Bruce Kovner is a citizen of the United States residing

at 1009 Fifth Avenue, New York, New York. He is the Founder and Chairman of

Caxton. With a net worth of approximately $2.5 billion as of September 2005, he is 93rd

in the 2005 Forbes ranking of the highest net-worth Americans. In all of the events

described herein, Mr. Kovner made representations and acted on his own personal behalf

and on behalf of Caxton.


10. Defendant Robert Wilson is a citizen of the United States residing

in Hopewell, New Jersey. He is a former Vice-chairman of Johnson & Johnson and he is

currently the Chairman of CHH.

1 1. Defendant Caxton Health Holdings, LLC ("Caxton"), is a closely

held corporation organized and existing under the laws ofthe State of Delaware with its

principal place of business at 500 Park Avenue, New York, New York. CHH is in the

business of managing investment funds focused on the healthcare sector.

12. Defendant Caxton Associates, LLC, is a closely held corporation

organized and existing under the laws of State of Delaware with its principal place of

business at 500 Park Avenue, New York, New York. Caxton Associates, LLC, is in the

business of managing investment hedge funds.

Jurisdiction and Venue

13. Jurisdiction is proper subject to CPLR $5 301 and 302, because all

defendants transact business in the State of New York.

14. In addition, this action "arises out of ' and "relates to" the

agreement between Caxton and Messrs. Foster, Kovner and Wilson, which was made in

the State of New York.

15. Furthermore, this action "arises out of' and "relates to" Mr.

Foster's employment with CHH, which was in the State of New York.

16, Venue is proper subject to CPLR 6 503, since defendants CHH and

Caxton Associates, LLC, reside in New York County, New York.

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FACTS

Foster Conceived an Approach to Capitalize on Investment Opportunities in the Healthcare Sector

17. Mr. Foster is among America’s most prominent and successful

business consultants and advisors. For over thirty years, Mr. Foster was with McKmsey.

AS of April 2004, Mr. Foster was a Senior Partner and Director for McKinsey,

specializing in healthcare and private equity consulting. Mi. Foster was also the Co-

Head of McKinsey’s Global Private Equity practice, which he founded.

18. Over the past thirty years, Mr. Foster served as a consultant to the

boards of directors and senior management of more than fifty major companies, including

Johnson & Johnson; Xerox Corporation; Polaroid Holding Company; Celanese Holdings

LLC; Hoechst Aktiengesellschaft; Computer Associates International, Inc.; Electronic

Data Systems Corporation and E. I. du Pont de Nemours and Company. He has served

on the boards of directors of The Trust Company of the West, Memorial Sloan-Kettering

Cancer Center, the W. M. Keck Foundation, the Santa Fe Institute, the Council on

Foreign Relations and Synta Pharmaceuticals Corp (“Synta”). Mr. Foster authored the

best-selling Innovation: The Attacker’s Advantage, which laid the groundwork for the

economic analysis of technological competition in US industry, and co-authored Creative

Destruction, an influential study demonstrating how companies must maintain the pace

and scale of change of the “S&P 500’’ or they will eventually underperfom the market.

19. Through professional activities and affiliations, Mr. Foster came to

possess an extensive network of healthcare industry contacts and in-depth experience in

the healthcare industry. Mr. Foster was an early leader in McKinsey’s global healthcare

practice. He was also the Chairman of the Medical Research Committee of the

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W. M. Keck Foundation, a member of the board of the Louis V. Gerstner, Jr., School of

Biomedical Sciences; a member of the Executive Committee, Chairman of the

Organization and Policy Committee and a member of the Nominating and Compensation

committees of Memorial Sloan-Kettering Cancer Center and a founding investor in

Synta.

20. As co-founder of McKinsey's private equity consulting practice,

Mr. Foster also has strong practical experience with private equity businesses and the

workings of the capital markets.

21. By 2003, Mr. Foster had concluded that healthcare, as a sector of

the economy, was likely to outperform the general public and private market sector, and

he identified unique features of the healthcare sector that would allow for more effective

risk management and superior returns on investments. Additionally, Mr. Foster

recognized how Wall Street's decreased coverage of emerging companies in this sector

would increase the value of proprietary healthcare research. These factors, and others,

led Mr. Foster to believe a healthcare investment fund would constitute an attractive

investment opportunity, if properly managed.

22. Drawing on his knowledge and background in healthcare and

financial markets, Mr. Foster conceived and articulated an investment structure to

capitalize on this opportunity.

23. Mr. Foster envisioned a collection of funds that would cover the

spectrum of healthcare investing opportunities in North America and Europe. These

funds would enjoy cost efficiencies by drawing on a common base of comprehensive

information and skill. At the same time, the combined funds would be less expensive,

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less risky, more economically efficient and more effective than the current stand-alone

funds.

24. After conceiving and developing the concept, Mr. Foster sought to

create a healthcare investment company that could implement this business strategy.

Throughout a lifetime of work, Mr. Foster had developed the 25.

necessary connections to staff both the senior and junior levels of the company he

planned to start.

CHH Was Constructed on Foster's Ideas

26. Mr. Foster was a founding investor of Synta, a corporation based

in Cambridge, Massachusetts. Mr. Foster's invested in Synta through the vehicle

Mountain Trail Investment Co., which he co-funded with Robert Day, the Chairman of

The Trust Company of the West and a friend of Mr. Foster.

27. Mr. Foster was an original member of the board of directors of

Synta. Because of McKinsey internal policies, Mr. Foster resigned as a board member of

Synta, although he remained an investor and continued to participate in board meetings.

After the second round of investments in Synta, Mi. Kovner and 28.

Caxton placed a substantial investment in Synta, thereby becoming the largest

shareholder. Mr. Kovner became a member of the board of directors of Synta. Mr.

Foster became acquainted with Mr. Kovner through their activities at Synta.

29. In December 2003, Mr. Foster invited Mr. Kovner to lunch in

New York City to review Mr. Foster's vision of a healthcare investing enterprise.

Mr. Foster sought Mr. Kovner's critique of his ideas, but he did not propose that

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Mr. Kovner join in the venture. Mr. Foster intended to approach other contacts, which he

believed would have an interest in providing cornastone investments in the funds.

30. In the first week of January 2004, Mr. Kovner invited Mr. Foster to

hs office, ostensibly to discuss an applicant Mr. Kovner was going to interview for a

healthcare analyst position at Caxton. When Mr. Foster visited Mr. Kovner's offce on

January 6,2004, M. Kovna told Mr. Foster that his company, Caxton, would be

interested in being involved in Mr. Foster's healthcare investment enterprise.

3 1. Later during that meeting, Mi. Foster and Mi. Kovner began to lay

out a structure for the venture based on Mr. Foster's ideas. The venture would manage an

initial four funds: a hedge fund, a long-only fund, a private equity fund and a venture

capital fund. They planned that a holding company, anchored by Caxton, would own at

least half of each fund, but the holding company would operate independently from

Caxton. The scope and potential for profit generation were perceived to be substantial.

32. Mr. Kovner and Mr. Foster concluded that it would be useful to

find a h r d person to help start up the venture. Mr. Foster suggested Robert Wilson, a

recently retired Vice Chairman of Johnson & Johnson and a long-time client of Mr.

Foster and whom Mr. Foster had already invited to sit on the board of Synta. Mr. Foster

contacted Mr. Wilson, who agreed to meet to discuss the possibility of his joining the

enterprise.

33. Messrs. Kovner, Foster and Wilson met later in January 2004.

Mr. Wilson was enthusiastic about the business opportunities being presented to him, and

all three men reached agreement that for the partnership or joint venture Caxton would

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provide the anchor funding and Mr. Wilson would help Mr. Foster implement the concept

that Mr. Foster had outlined to h4r. Kovner.

34. The venture was to be based upon Mr. Foster’s concepts and would

utilize intellectual property that he had already developed. Mr. Foster would also provide

personal services to the new venture.

35. Messrs. Foster, Kovner and Wilson expected that CHH would take

at least two to three years to get off the ground. During the first two years of this

formative stage, the enterprise would not be expected to show a profit. However, Messrs.

Foster, Kovner, Wilson and the Caxton staff estimated that the CHH funds, once

established, would return approximately 20% per year. That estimated performance was

conservative, being significantly lower than the long-term prior performance record of

Caxton funds averaging 30% per year.

36. Mi. Kovner would set general risk parameters to guide CHH

investment strategy, and Messrs. Foster and Wilson were to have discretion over daily

operations. It would be the responsibility and discretion of the portfolio manager and his

analysts to make the trading (buy and sell) decisions for the funds.

37. A number of meetings occurred between the middle of January

2004 and March 2004 among Messrs. Kovner, Foster and Wilson to work out the details

of the venture. Over the course of these meetings, a detailed description of the joint

venture, named Caxton Health Holdings (CHH), was drawn up by Caxton staff, led by

Peter D’Angelo, Caxton’s President, and the basic principles of CHH were agreed upon

by Messrs. Kovner, Foster and Wilson.

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Foster Received and Relied Upon Express Commitments of Compensation

38. Messrs. Kovner, Foster and Wilson met on March 11,2004, to

discuss compensation. During this meeting, Messrs, Kovner, Foster and Wilson agreed

that to reflect the partnership and equal relationship of Messrs. Foster and Wilson, each

would hold the same 10% equity interest in CHH and receive the same annual

compensation of $1,000,000. Caxton would anchor the CHH funds and receive an 80%

equity interest in CHH. Any principal added later would be compensated by a modest

salary and a share in the fund profits.

39. Mr. Kovner promised he would write a letter describing the

compensation terms for Messrs. Wilson and Foster and send the CHH organization

papers shortly thereafter. Mr. Foster asked Mr. Kovner if he could rely on that promise,

and Mr. Kovner said he could.

40. During that meeting, Mr. Kovner asked Mr. Foster to start working

on CHH immediately. Mr. Foster explained that he had told McKinsey that he was going

to stay through the end of the year. Mr. Kovner requested that Mr. Foster leave

McKinsey earlier.

41. In reliance on Mr. Kovner's promises and representations, Mr.

Foster arranged to leave McKinsey nine months early, thereby forgoing a substantial

salary and share of McKinsey profits that he was guaranteed until the end of 2004.


Foster did not pursue further potential alternative financial partners to provide

cornerstone funding for his venture.


Foster also forewent other attractive employment opportunities with established

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companies for positions that would have been available in 2005 after Mr. Foster's

departure from McKinsey.

Foster Successhllv Accomplished His Responsibilities

44. Immediately after leaving McKinsey, Mr. Foster commenced work

as CEO of CHH. Mr. Wilson became Chairman of CHH.

45. Mr. Foster's accomplishments as CEO were essential to the

development of CHH fiom a vision into a full-fledged enterprise poised to achieve

profitability in the near future.

46. In addition to his strategic insight and entrepreneurial drive,

Mr. Foster also took on most of the day-to-day work of recruitment, organization and

management, marketing to investors and other key CHH activities as well as working

closely with all Caxton staff.

47. Mr. Foster was primarily responsible for the recruitment of a

world-class management team to run CHH. Mr. Foster tapped his reputation and

extensive connections to bring in elite talent, hiring a team that reached a peak of 28

people. Mr, Foster's recruits included Eli Combs (MBA, Masters in Finance) from

Goldman Sachs & Co., Dr. Ari Baggren from Kynikos Associates, Dr. Michael Batten

(MD, PhD) fiom Pfizer, Inc.; Dr. Vijay Shankaran (MD, MBA) from MedImmune, Inc.;

and Bruce Booth (PhD), Jay Rao (MD, JD) and Rich Christie (MD, PhD, MBA) fiom

McKinsey.

48. Mr. Foster drove CHH's fundraising efforts and was the main

reason for the success of those efforts. One of the top priorities for the development of

CHH was the raising of $1 billion for the hedge fund. Caxton set the goal of raising the

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full $1 billion by December 3 1,2004, Under the pressure of the tight timeline insisted

upon by Caxton, Mr. Foster developed marketing plans and assumed an aggressive

schedule to meet with prospective investors in the United States and Europe. Mr. Foster

also established business relationships with key supporters, including several of the most

influential and powerful individuals and investors in the financial industry.

49. Mr. Foster personally brought in excess of $350,000,000 fiom

various investors including The Blackstone Group L.P., Societe Generale and

Papamarkou Asset Management, the U.S. arm of a group of wealthy European investors.

50. Mr. Foster raised an additional $450,000,000 fiom existing Caxton

clients and Caxton provided $200,000,000 it had committed to in the original agreement.

5 1. Due to Mr. Foster's efforts, CHH achieved the company target of

raising $1,000,000,000 by December 3 1,2004. Those funds generated in excess of

$15 million of fees for CHH during calendar year 2005.

52. Mr. Foster was responsible for the setting up of the firm's

infrastructure and facilities, including the information technology systems, databases and

analytical tools that CHH would need to get the funds up and running. Mr. Foster was

also responsible for hiring the administrative and support staff.

53. Mr. Foster also established offices for the intended LBO fund

(Caxton Health Acquisition Partners) and the Venture Capital fund (Caxton Health

Ventures Management) on Montgomery Street in San Francisco.

Defendants Delayed Completion of the Formal Documents

54. On several occasions between June 2004 and May 2005,

Mr. Foster raised with Mr. D'Angelo, Mr. Kovna and Scott Bernstein, General Counsel

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of Caxton, the fact that he had not received the documentation of the partnership

agreement as promised. Mr. Bemstein responded that Mr. D'Angelo was not yet ready to

complete the documentation.

55. None of Messrs. Kovner, D'Angelo or Bernstein ever indicated to

Mr. Foster that the delays in preparing the documentation were in any way due to

outstanding or unresolved issues with respect to the terms of the agreement.

56. Messrs. Kovner and D'Angelo repeatedly assured Mr. Foster that

he would be provided with a written agreement setting forth the terms of his

compensation. Mr. Foster relied on their assurances by continuing to perform as CEO,

partner and joint venturer of CHH.

57. Contrary to the representations of Messrs. Kovner, D'Angelo and

Bernstein, Mr. D'Angelo did not complete the documentation of the partnership

agreement.

After Utilizing Foster's Skills and Efforts, Defendants Sought to Deny Him His Interest in the Partnership

58. Mr. Wilson on May 13,2005, told Mr. Foster that Mr. Foster

should resign as CEO by the end of July 2005. Mi. Foster declined to agree to leave the

CEO position voluntarily.

59. Mr. Foster's employment as CEO of CHH was terminated without

cause by defendants on July 29,2005.

60. h4r. Foster's telephone line and e-mail account were disconnected

immediately, CHH refused to forward messages to Mr. Foster or to inform people who

tried to contact him his forwarding telephone number or e-mail address. Persons

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attempting to reach Mr. Foster were told that he was no longer at CHH and that he had

left no contact information.

61. The promised payments to Mr. Foster of $1,000,000 per year

ended on July 29,2005.

62. Mi. Foster has requested his 10% equity interest in CHH, but

defendants have consistently stated that he will not receive that interest.

63. h4r. Foster was purportedly terminated as CEO of CHH only after

he had accomplished all of the goals set in the initial meetings with Messrs, Kovner and

Wilson, but before the promised written agreement on compensation was delivered and

signed.

Defendants Have Denied Foster the Full and Fair Compensation for His Contributions to CHH

64. By contributing his original entrepreneurial vision, intellectual

capital, strategic leadership, professional connections and personal efforts to CHH, Mr.

Foster performed fully his part of the agreement.

Defendants Interfered With Foster’s Relationships at Svnta to Coerce His Acquiescence to the Denial of Fair Compensation

65. In mid-2004, while Mr. Foster had recently begun his duties as

CEO of CHH, discussions commenced as to who would serve on the Board of Directors

of the Synta, which was anticipating a public offering in the near future. Initially, it was

determined that the Board would consist of Messrs. Foster, Kovner and Wilson, and

Keith Gollust, the founder and Chairman of Synta. Mr. Gollust also owns ajoint venture

with Caxton Associates called Caxton Gollust.

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66. Although Mr. Gollust had proposed that Mr. Foster be on the

Board, as he was no longer employed by McKinsey, Mr. Foster declined. Mr. Foster’s

concern was that because Messrs. Kovner, Wilson, Gollust and Foster were all business

partners associated with Caxton, Mr. Foster’s inclusion on the Board would convey the

impression that Synta was a subsidiary of Caxton.

67. Although Mr. Foster would not serve as a Board member, he and

Mr. Gollust agreed that Mountain Trail Investment Co., the vehicle through which Mr.

Foster and Mr. Day invested in Synta, should be represented on the Board in some

capacity. Mr. Gollust suggested that Mr. Foster be appointed as an advisor to the Board,

representing Mountain Trail Investment Co. and paid at the normal director salary of

$40,000 per year.

68. Counsel for Synta drafted an agreement providing for Mr. Foster’s

appointment as an advisor representing Mountain Trail Investment Co. The draft

agreement was sent to Caxton for approval. Caxton held the agreement and refused to

consent to Mr. Foster’s appointment as an advisor. Caxton stated that Mr. Foster did not

have sufficient time to serve as both an advisor at Synta and the CEO of CHH,

notwithstanding Mr. Wilson’s similar dual responsibilities aa a member of the board of

Synta and Chairman of CHH.

69. Mr. Foster requested a revised contract from Synta defining the

limited nature of his duties as an advisor. Mr. Foster submitted the revised contract to

Caxton, but received no response.

70, After defendants’ purported termination of Mr. Foster as CEO of

CHH on July 29,2005, Mr. Foster attempted to exercise the contractual right of

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Mountain Trail Investment Co. to nominate a director of Synta. Mr. Foster nominated

himself on behalf of Mountain Trail Investment Co.

7 1. Thereafter, Mr. Gollust informed Mr. Foster that his nomination

would not be honored as long as Mr. Foster was “causing trouble” and “being hard to get

along with” at Caxton. Mr. Foster responded that Caxton had nothing to do with his

activities at Synta.

72. Mr. Gollust stated that he would accept the nomination of someone

other than Mr. Foster as an advisor on behalf of Mountain Trail Investment Co.

73. Finally, Mountain Trails Investment Co. nominated Kasheif Sheik

to the Synta Board of Directors. Mi. She& is an employee of Mr. Day’s family

investment ofice and has no experience in the health field. Mr. Sheik has been invited to

observe Board meetings, but his nomination has not been put to a vote.

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CLAIMS FOR RELIEF

FIRST CLAIM FOR RELIEF

BREACH BY MR. KOVNER, CHH, AND CAXTON OF THE COMPENSATION AGREEMENT

74. Paragraphs 1-73 are incorporated by reference as if fully set forth

herein.

75. CHH is controlled and managed by Caxton, which is controlled by

Mr. Kovner.

76. Mr. Kovner, CHH, Caxton and Mr. Foster are parties to the

compensation agreement entered into on March 1 1,2004, Under that agreement, Mr.

Kovner promised Mr. Foster compensation amounting to $1,000,000 per year plus a 10%

equity interest in CHH in consideration for his work as CEO of CHH.

77.

78.

The compensation agreement is a valid and binding contract.

Mr. Foster has fully performed all of his obligations unda that

contract.

79. Mr. Kovner, CHH and Caxton materially breached the express

terms of the contract and its implied obligation of good faith and fair dealing by refusing

Mr. Foster his promised equity interest in CHH and ceasing payment of the $1,000,000

per year that was promised.

80. As a result of this breach by Mr. Kovner, CHH and Caxton, Mr.

Foster has suffered and continues to suffer damages reflecting the value of his 10% share

in the Caxton Health Trading Hedge Fund, an amount with a present value to be

determined at trial but estimated to be in excess of $40,000,000, and his $1,000,000

annual payment.

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SECOND CLAIM FOR RELIEF

BREACH BY MR. KOVNER, MR. WILSON AND CAXTON OF THE JOINT VENTURE OR PARTNERSHIP AGREEMENT

8 1. Paragraphs 1-73 are incorporated by reference as if fully set forth

herein.

82. Caxton, Mr. Kovner, Mr. Wilson and Mr. Foster are parties to a

joint venture or partnership agreement entered into on March 1 1,2004.

83.

84.

This joint venture agreement is a valid and binding agreement.

Caxton, Mi. Kovner, Mr. Wilson and Mr. Foster agreed to be

associated in a joint venture or partnership to found CHH. The parties' subsequent

actions in planning the venture and running it together show their continued intent to act

as joint venturers.

85, The parties all contributed material resources to the joint venture or

partnership. Mr. Kovner and Caxton contributed capital to anchor the funds; Mr. Wilson

contributed his labor and skill and Mr. Foster contributed his original business idea,

labor, skill and access to his network of contacts.

86. The parties exercised joint proprietorship and control over the

company. Mr. Kovner and Caxton set risk parameters for CHH investments and Messrs.

Foster and Wilson managed the investments and day-to-day operations jointly.

87. The agreement provided that profits and losses of CHH would be

shared among the parties. Caxton was to receive 80% of the equity interest. Mr. Foster

and Mr. Wilson would each receive a 10% equity interest.

88. Mr. Foster performed all of his duties under the agreement.

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89. Caxton, Mr. Kovner and Mr. Wilson materially breached the

express terms of this contract and its implied obligation of good faith and fair dealing by

refusing Mx. Foster his equity interest in the joint venture and ceasing payment of the

promised $1,000,000 per year.

90. As a result of Caxton, Mi. Kovner and Mr. Wilson's breach of the

joint venture agreement, Mr. Foster has suffered and continues to suffer damages

reflecting the value of his 10% share in the Caxton Health Trading Hedge Fund, an

amount with a present value to be determined at trial but estimated to be in excess of

$40,000,000, and his $1,000,000 annual payment.

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THIRD CLAIM FOR RELIEF

UNJUST ENRICHMENT AGAINST CHH, CAXTON AND MR. KOVNER IN QUANTUM MERUIT


herein.

92. Alternatively, Mr. Foster is entitled to restitution for the unjust

enrichment of CHH, Caxton and Mr. Kovner in quantum meruit.

93. Within the last two years, from March 2004 through July 2005,

Mr. Foster rendered his original business idea, work, labor, services and personal

business contacts to defendants CHH, Caxton and Mr. Kovner.

94. Mr. Foster rendered these services at the special request of

defendants CHH, Caxton and Mr. Kovner.

95. Mr. Foster left his job as a partner at McKinsey early and devoted

his career and contacts to building up CHH in reasonable reliance on this agreement.

96. It is against equity and good conscience to permit CHH, Caxton

and Mr. Kovner to retain that portion of monies they owe to Mr. Foster in exchange for

his original business idea, work, labor, services and personal business contacts.

97. At all times herein mentioned, the above services were and are of

the reasonable value of $1,000,000 per year and a 10% equity interest in CHH, an amount

with a present value to be determined at trial but estimated to be in excess of

$40,000,000.

98. Alternatively, Mr. Foster should be entitled to compensation for

his role in raising the $1,000,000,000, which would be between $10,000,000 and

$20,000,000 under prevailing industry standards (1 %-2% of the funds raised), plus a

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trailer of twenty-five "basis points" on the value of the invested funds thereafter, likely to

exceed $2,500,000 per year.

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FOURTH CLAIM FOR RELIEF

PROMISSORY ESTOPPEL AGAINST CAXTON AND MR. KOVNER


herein.

100. On March 1 1,2004, Mr. Kovner made clear and unambipous

promises that Mr. Foster would receive a 10% equity interest in CHH and annual

payments of $1,000,000.

101. Mr. Kovner also promised that a written document memorializing

the terms of this agreement would be drawn up and sent to Mr. Foster shortly thereafter.

102. Mr. Kovner and Caxton expected and intended that Mr. Foster rely

on his representations, desiring that upon hearing his promises of compensation and a

written agreement memorializing the orally agreed upon terms of compensation, Mr.

Foster would leave McKinsey early and devote his time, energy and skills to CHH.

103. Mr. Foster forewent nine months of his salary and share of

McKinsey's profits as a Director and Senior Partner when he left McKinsey nine months

early in reliance on the promises of Mr. Kovner and Caxton.

104. Mr. Foster devoted a year and half of his labor and skills and his

vast network in the healthcare industry to CHH in reliance on the promises of Mr. Kovner

and Caxton.

105. Mr. Foster also forewent other attractive employment opportunities

to build up CHH in reliance on the promises of Mr. Kovner and Caxton.

106. Mr. Foster acted reasonably in relying on the promises of

Mr. Kovner and Caxton.

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107. By refusing Mr. Foster his 10% equity interest in CHH and ceasing

the payments of $1,000,000 per year, Caxton and Mr. Kovner are breaching the promise

to Mr. Foster's detriment.

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FIFTH CLAIM FOR RELIEF

BREACH OF FIDUCIARY DUTY AGAINST MR. KOVNER, MR. WILSON AND CAXTON AS PARTNERS OR JOINT VENTURERS


herein.

109. By virtue of their status as partners or joint venturers, Mr. Wilson,

Mr. Kovner and Caxton are in a fiduciary relationship with Mi . Foster, pursuant to which

they owe Mr. Foster the duty to act in good faith and with the utmost loyalty, candor and

integrity.

1 10. In breach of their fiduciary duty to Mr, Foster as partners or joint

venturers, Caxton, Mr. Wilson and Mr. Kovner knowingly induced Mr. Foster to

contribute his vision, experience, skills, connections and efforts in the creation and

development of that partnership by making repeated promises of compensation which

they never intended to keep.

1 1 1. In breach of their fiduciary duty to Mr. Foster as partners or joint

venturers, Caxton, Mr. Wilson and Mr. Kovner are now refusing to compensate Mr.

Foster for his contributions to CHH despite having benefited from such contributions.

As a result of the breach of their fiduciary duty to Mr, Foster by 1 12.

Caxton, Mr. Wilson and Mr. Kovner, Mr. Foster has suffered and continues to suffer

damages reflecting the value of his 10% share in the Caxton Health Trading Hedge Fund,

an amount with a present value to be determined at trial but estimated to be in excess of

$40,000,000, and the payment of $1,000,000 per year.

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1 . : .

SIXTH CLAIM FOR RELIEF

TORTIOUS INTERFERENCE WITH PROSPECTWE BUSINESS ADVANTAGE AGAINST CAXTON AND MR. KOVNER

Paragraphs 1-73 are incorporated by reference as if fully set forth 1 13.

herein.

1 14. Mr. Foster had a business relationshp with Synta as a major

investor. Synta is an entity independent of defendants Caxton, CHH and Mr. Wilson.

1 15. Mr. Foster had a reasonable expectancy of economic gain resulting

from the relationship based on Mr. Gollust’s offer of an advisory position on the Synta

Board, which would have paid Mr. Foster $40,000 per year.

116. Defendants Caxton and Mr. Kovner caused Mr. Gollust to refuse to

consent to Mr. Foster’s appointment as an advisor, an adverse effect on Mr. Foster’s

relationship with Synta.

1 17. Defendants Caxton and Mr. Kovner intended to cause the

destruction of or harm to Mr. Foster’s relationship with Synta, for the improper purpose

of coercing Mr. Foster to relinquish rights in connection with CHH.

1 18. The conduct of defendants Caxton and Mr. Kovner was the

proximate cause of the destruction of or harm to Mr. Foster’s relationship with Synta.

1 19. As a result of defendants’ intentional interference with Mr.

Foster’s relationship with Synta, Mr. Foster has suffered the loss of $40,000 annual

compensation and influence on the affairs of Synta.

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SEVENTH CLAIM FOR RELIEF

TORTIOUS INTERFERENCE WITH CONTRACTUAL RELATIONS AGAINST CAXTON, MR. KOVNER AND MR. WILSON


herein.

121. Mr. Foster is a partner, with Mr. Day, in the investment vehicle

Mountain Trail Investment Co. Mountain Trail Investment Co., as the owner of

substantial shares in Synta, had a contractual right to nominate a director on Synta's

board and to have that nomination given serious consideration.

122. As a member of the Synta Board of Directors, Mr. Kovner knew of

this contractual right. His knowledge may be imputed to CHH, which he controlled, and

to Caxton, of which he wm an agent. Mr. Wilson WFIS also a member of the Synta Board

of Directors and was aware of the contractual right.

123. On information and belief, in an effort to gain leverage over Mr.

Foster in any dispute resulting from his purported termination, Mr. Kovner, Caxton, CHH

and Mr. Wilson, intentionally, improperly and without justification caused Mr. Gollust, a

joint venturer with Caxton in the organization Caxton Gollust, to deny Mountain Trail

Investment Co. and, thus, Mr. Foster the contractual right to nominate a director.

As a direct result of defendants' tortious interference with 124,

Mr. Foster's contractual relations with Synta, Mr. Foster has suffered and continues to

suffer damages. He was unable to serve as a director or advisor to the Synta Board, was

denied the proposed $40,000 annual compensation and was unable to exercise all of the

rights attendant on his investment in Synta.

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' .

PRAYER FOR RELIEF

125. WHEREFORE, Mr. Foster respectfully requests the following

relief

(a)

(b)

(c)

(d)

A declaration that CHH has breached the agreements.

A declaration that Caxton has breached the agreements.

A declaration that Mr. Kovner has breached the agreements.

An award to plaintiff of compensatory damages for defendants' breaches

of contract in an amount to be determined at trial, but estimated to be in excess of

$40,000,000.

(e) Altmatively, if the contract is not strictly enforced, an award to plaintiff

of restitution in quantum meruit for the unjust enrichment of the defendants, in an amount

to be determined at trial, but no less than $25,000,000.

(f) A declaration that Mr. Wilson, Mr. Kovner and Caxton have breached

their fiduciary duties to Mr. Foster as partners or joint venturers.

(g) An award to plaintiff of compensatory damages for defendants' breaches

of fiduciary duty in an amount in excess of $40 million.

(h) An award of punitive damages to plaintiff for the breaches of fiduciary

duty through acts of Mr. Wilson, Mr. Kovner and Caxton in an amount of $25,000,000.

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* . , I ; .

(i) An award of attorneys fees and expenses such other and additional relief

as appears just and appropriate.

Dated: April 19,2006 CRAVATH, SWAINE & MOORE LLP,

by h John E. Beerbower L / A member of the Firm

Attorneys for Plaintiff Worldwide Plaza 825 Eighth Avenue New York, NY 10019 (2 12) 474- 1000

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SUMMONS - Typepad · 2012. 1. 20. · SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK...

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Transcript of SUMMONS - Typepad · 2012. 1. 20. · SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK...