United States District Court, D. Minnesota
Pine River Performance L.P., Pine River Holdings L.P., and PRCM Receivables L.P., Plaintiffs,
Steven Kuhn, Defendant and Counterclaim-Plaintiff,
Pine River Performance L.P., Pine River Holdings L.P., and PRCM Receivables L.P., Counterclaim-Defendants, and Steven Kuhn, Third-Party Plaintiff,
Pine River Capital Management, LLC, and Brian Taylor, Third-Party Defendants.
Conlin, Esq., and Barry M. Landy, Esq., Ciresi Conlin LLP,
Minneapolis, MN, on behalf of Plaintiffs and
Counterclaim-Defendants Pine River Performance L.P., Pine
River Holdings L.P., and PRCM Receivables L.P., and
Third-Party Defendant Pine River Capital Management LLC.
Benjamin B. Plaut, Esq., Law Offices of Benjamin Plaut,
Manhattan Beach, CA; Andrew M. Edison, Esq., Edison McDowell
& Hetherington LLP, Houston, TX; Karl L. Cambronne, Esq.,
and Christopher P. Renz, Esq., Chestnut Cambronne, PA,
Minneapolis, MN, on behalf of Defendant,
Counterclaim-Plaintiff, and Third-Party Plaintiff Steven
H. Jenkins, Esq., Lisa B. Ellingson, Esq., and Robert R.
Weinstine, Esq., Winthrop & Weinstine, PA, Minneapolis,
MN, on behalf of Third-Party Defendant Brian Taylor.
MEMORANDUM OPINION AND ORDER
MONTGOMERY U.S. DISTRICT JUDGE
April 19, 2017, the undersigned United States District Judge
heard oral argument on Plaintiffs and Counterclaim-Defendants
Pine River Performance L.P., Pine River Holdings L.P., and
PRCM Receivables L.P. (collectively, “Pine River”
or the “Partnership”), and Third Party-Defendant
Pine River Capital Management LLC's Partial Motion to
Dismiss [Docket No. 49]. The Court also heard oral argument
on Third-Party Defendant Brian Taylor's Motion to Dismiss
[Docket No. 56]. For the reasons set forth below, the Motions
are granted in part and denied in part.
2002, Brian Taylor (“Taylor”) founded Pine River,
a hedge fund partnership organized under Delaware law and
headquartered in Minnetonka, Minnesota. Am. Countercl.
Third-Party Compl. [Docket No. 43] ¶¶ 3, 10. Taylor
is Pine River's CEO, managing member and 98% owner of
Pine River Capital Management LLC (the “General
Partner”), and a Limited Partner of Pine River with the
largest Partnership Interest. Id. ¶¶ 3, 4.
Steven Kuhn (“Kuhn”) joined Pine River as an
employee in 2008, and was admitted into the Partnership on
January 1, 2009 with a 5% Partnership Interest. Id.
¶¶ 12, 13. Upon joining the Partnership, Kuhn
signed the operative limited partnership agreement
(“LPA”) in effect at that time, as well as every
other LPA presented during his time as a Limited Partner.
Id. ¶ 14.
The Alleged “Partnership Percentage Increase
result of his positive performance, Kuhn's Partnership
Interest grew to 17.5% by 2013. Id. ¶ 27. On
February 24, 2014, Kuhn requested to meet with Taylor.
Id. ¶ 29. The purpose of the meeting was to
discuss a plan and a path for Kuhn to obtain a 25% equity
stake in Pine River. Id.
sent Taylor an email the following day memorializing the
details of their meeting. Id. The email reads, in
And I thank you for agreeing to the framework below, and for
having the trust in me to give me this path to 25% ownership,
which has been a long time goal of mine. It means a great
deal to me.
Given that I will now be buying 0.75% equity this year at a
rate of ___ /1%, I will be starting this coming year at
18.25%. At a rate of __ per 1%, we would need to generate __
of profitability for me to get to 2%--subject to max 2%
growth per year with carry forwards. I will exclude sources
of revenue that are new and which I had very little impact in
creating - and I ask that you trust that I will be fair in
Id. at Ex. A. Taylor responded in an email nine days
later, stating “Yes, this sounds good to me.”
Id. Sometime thereafter, Kuhn forfeited a sizeable
bonus and his Partnership Interest was increased by 0.75%.
Id. ¶ 34. Under the LPA, Taylor, as a Limited
Partner and as the General Partner, had the ability to
effectuate the Partnership Interest increases contemplated in
Kuhn's February 25, 2014 email. Id. ¶¶
36, 38. Kuhn refers to this agreement as the
“Partnership Percentage Increase Agreement”
New LPA is Signed
December 2014, Kuhn was presented with a new LPA that was
substantially similar to the prior year's LPA.
Id. ¶ 43. Kuhn asked Pine River General Counsel
Tim O'Brien (“O'Brien”), who also had
ownership interests in Pine River and in the General Partner,
if there was anything in the LPA that was disadvantageous to
Kuhn. Id. ¶ 43. O'Brien, who was aware of
the PPIA, said there was not. Id. Kuhn asked the
same question to Pine River's Deputy General Counsel, who
gave the same response. Id. ¶ 45.
LPA, however, includes the following integration clause:
This Agreement (including any exhibits or attachments to the
Agreement referenced herein) constitutes the entire
understanding and agreement among the Partners with respect
to the subject matter hereof, and supersedes all other prior
agreements and understandings among the Partners or between
any of them with respect to such subject matter. In the event
of any conflict or inconsistency between this Agreement and
any other agreement by or among the Partners and/or the
Partnership, the terms of this Agreement shall prevail.
Landy Decl. [Docket No. 52] Ex. 1 (“LPA”) §
10.10. Kuhn signed the new LPA.
Events in 2015 and Beyond
alleges that although Taylor initially complied with the
terms set forth in the PPIA, in 2015 Taylor began deviating
from both the PPIA and the LPA. Id. ¶ 47.
Relevant to the current Motions is Kuhn's allegation that
Taylor, as General Partner, allocated bonus payments to
negate the value of the Partnership Interest Kuhn had
purchased pursuant to the PPIA. Id. ¶ 58. Kuhn
additionally alleges that in 2016, Kuhn's Partnership
Interest was decreased to 17.04%, where it was prior to 2014,
despite Kuhn's positive performance in 2015. Id.
¶¶ 61-63. Finally, Taylor, again acting as General
Partner, unilaterally reduced Kuhn's draw by 85% for