Alex Baykitch (Chairman)
Richard A. Eastman
Douglas K. Freeman
Hereinafter the "Tribunal"
The addresses of the arbitrators are as follows:
Holman Fenwick Willan
201 Elizabeth Street
Sydney NSW 2000
Ph:+61 2 9320 4605
Fax: +61 2 9320 4666
Richard A. Eastman
Kojimachi Heights Suite #206
6-4 Kojimachi, Chiyoda-ku
Ph: +81 3 3263 7930
Fax: +81 3 3263 7931
Douglas K. Freeman
The Law Offices of Douglas K. Freeman
TCCI Building, Suite 606
3-2-2 Marunouchi, Chiyoda-ku
Ph: +81 3 5208 5122
Fax: +81 3 5208 5124
"An award from the Arbitral Tribunal of USD4,500,000, plus interest at the default rates, costs and attorney fees according to proof.
Determination of the following issues raised by MediVas in the pending California litigation and disputed by Marubeni:
• MediVas's claims that Marubeni breached the implied covenant of good faith and fair dealing in the [Note Purchase] Agreement;
• MediVas's claims that it can avoid the [Note Purchase] Agreement and its accompanying Note because Marubeni was not qualified to do business in California;
• MediVas's claims that it transferred a security interest without equivalent value and that the transfer is therefore voidable; and
• MediVas's claims that Marubeni improperly and illegally interfered with MediVas's business relationships with Nastech and DSM
"The Tribunal may decide the issue of jurisdiction as its first order of business, based on the pleadings and correspondence accompanying this Stipulation as well as all correspondence and other documents previously supplied to the International Chamber of Commerce, the International Court of Arbitration, or the Tribunal.
MediVas's failure to sign the Tribunal's proposed Terms of Reference shall not preclude the Tribunal from deciding the issue of jurisdiction as its first order of business."
• claims in respect of the forbearance agreement set forth in the Points of Agreement dated 31 October 2008 (the "Points of Agreement"); and
• MediVas's claims that Marubeni breached its obligations under the Agency Agreement (as defined in the Terms of Reference) dated 13 April 2004.
(a) The Claimant's request to recover the balance of its loan to the Respondent in the amount of USD2,250,000;
(b) The Claimant's Request to recover the Forbearance Fee (as defined below) in the amount of USD500,000;
(c) The Claimant's request to recover interest on the loan principal;
(d) The Claimant's request to recover interest on the Forbearance Fee;
(e) The Claimant's request that the Tribunal rule on the merits of the following claims advanced by the Respondent in the complaint filed in the Superior Court of the State of California for the Country of San Diego on 28 April 2010:
(i) avoidance of Note Purchase Agreement and accompanying Note because Marubeni was not qualified to do business in California;
(ii) the Claimant's alleged breach of covenant of good faith and fair dealing;
(iii) the Claimant's alleged intentional interference with prospective economic advantage;
(iv) the Claimant's alleged breach of certain obligations under the Agency Agreement; and
(v) that MediVas transferred a security interest without equivalent value and that the transfer is therefore voidable..
"Section 10.14 Arbitration. All disputes and differences which may arise out of or in connection with this Agreement, or the breach thereof, will be settled amicably insofar as possible by means of negotiations among the responsible executive officers of the parties. All such disputes and differences which are not settled in this manner within thirty (30) days after the receipt by responsible executive officers of either party of written notification from the other party of the existence of a dispute, shall be submitted to arbitration under the commercial arbitration rules of the International Chamber of Commerce (the "ICC") for final and binding arbitration. The arbitration proceeding, including all hearings or meetings, shall be at a mutually convenient location in Tokyo, Japan. Each party to the arbitration shall select one arbitrator and those two arbitrators shall in turn select the third arbitrator; provided that, if the two arbitrators cannot agree on an additional arbitrator within sixty (60) days after notice of the dispute, or if either party fails to appoint its arbitrator within sixty (60) days after notice of the dispute, the ICC shall make such selection in accordance with its rules. The third arbitrator shall be the presiding arbitrator and shall be a national of a country other than the United States, Japan or any other country in which a party to this Agreement is incorporated, or in which a party's ultimate parent is incorporated or domiciled. The arbitration will be conducted in the English language; provided that any witness whose native language is not English may give testimony in his or her native language, with simultaneous translation into English (at the expense of the party presenting any such witness) and that either party may request simultaneous translation of the proceedings into Japanese (with the related expense to be borne equally by the parties). Each party to the arbitration shall bear its own costs, including attorneys' fees, as well as one-half of the cost of the arbitration panel, unless the arbitration panel determines that arbitration expenses, including attorneys' fees, shall be allocated on a different basis, according to the equities of the matter at issue. The remedies of the parties in the event of a breach of this Agreement shall not include any amount for lost profits or other consequential or indirect damages, nor for punitive or exemplary damages. All decisions rendered by a majority of the arbitration panel shall be final and binding among the parties, and shall include a statement of the reasons for the decision. Judgment upon the award rendered may be entered and shall be enforceable in any court of competent jurisdiction having jurisdiction over the parties. Either party to this Agreement may request any judicial or other authority to order any provisional or conservatory measure, prior to the institution of the arbitration proceeding, or during the proceeding, for the preservation of its rights and interests."
"9.2 Any controversy or dispute arising out of or in connection with this Agreement, its interpretation, performance, or termination, ("Dispute") that the parties are unable to resolve within thirty (30) days after written notice by one party to the other of the existence of such Dispute, shall be submitted to arbitration. The arbitration shall be conducted in Tokyo, Japan, except as may otherwise be agreed by the parties, in accordance with the Rules of Arbitration of the International Chamber of Commerce ("ICC") then in effect by three (3) arbitrators selected in accordance with said rules. The arbitration shall be held in English language. The award rendered therein shall be final and binding upon both parties."
(a) Forbearance Agreement (the "Forbearance Agreement") (Exhibit J);
(b) a Security Agreement (the "Security Agreement") (Exhibit K); and
(c) an Intellectual Property Security Agreement (the "IP Security Agreement") (Exhibit L).
The evidence indicates that these agreements were entered between Claimant and Respondent, each dated 10 October 2007 (31 May 2011 Davis Statement, Paragraph 7).
"Legal Effect. Except as amended by this Agreement, all of the terms of the Loan Documents [defined to mean the Note Purchase Agreement and the Note] remain in full force and effect...."
"6.14 Venue and Jurisdiction. Grantor [MediVas] and Lender [Marubeni] agree that the state and federal courts located in San Diego, California (the "San Diego Courts"), will have exclusive jurisdiction to hear and determine any dispute, claim or controversy between or among them concerning the interpretation or enforcement of this Agreement, or any other matter arising out of or relating to this Agreement. Each party to this Agreement specifically covenants and agrees that if it institutes litigation against any other party to this Agreement, it will file and maintain the action only in one of the San Diego Courts. Each party to this Agreement hereby unconditionally and irrevocably consents and submits to the exclusive jurisdiction of the San Diego Courts for this purpose only, and acknowledges and agrees that it has sufficient contacts within the State of California and the City and County of San Diego to warrant the imposition of jurisdiction over it for this purpose only."
Note Purchase Agreement
Section 10.13 Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of California.
9.1 This Agreement shall be construed and interpreted in accordance with and governed by the laws of the state of California, U.S.A. without regard to the conflict of laws provisions thereof.
11.h. Applicable Law. This Agreement shall be governed by the laws of the State of California without regard to principals concerning choice of the law.
6.13 Governing Law. Grantor and Lender agree that all disputes, claims and controversies between or among them concerning the interpretation or enforcement of this Agreement, or any other matter arising out of or relating to this Agreement, will be governed by, construed and enforced in accordance with the internal laws of the State of California, without regard to principles of conflicts of laws.
IP Security Agreement
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute the same instrument. This Agreement shall be governed by the laws of the State of California.
(i) avoidance of illegal contracts, specifically the Note Purchase Agreement, the Agency Agreement, the Forbearance Agreement, the Security Agreement and the Intellectual Property Agreement, premised on the allegations that Marubeni was doing business in California without properly qualifying to do business in the state;
(ii) breach of a covenant of good faith and fair dealing implied in the Note Purchase Agreement;
(iii) breach of certain obligations under the Agency Agreement, including failure to adequately explore the Japanese market on behalf of MediVas;
(iv) fraudulent conveyance and avoidable transfer, concerning the conveyance of security interests by MediVas to Marubeni in October 2007;
(v) intentional interference with prospective economic advantage in connection with an alleged prospective merger with Nastech;
(vi) intentional interference with prospective economic advantage in connection with an alleged prospective acquisition of MediVas by DSM;
(vii) a request for declaratory relief relating to primarily the allegations under the first 6 causes of action; and
(viii) a request for declaratory relief concerning a series of promissory notes, called the "Incentive Notes" which had been executed by the 9 individual plaintiffs in favor of MediVas and which Marubeni allegedly sought wrongly to treat as Collateral under the Security Agreement.
[apart from the amendment to paragraph 8.1(d) of the Note Purchase Agreement] [t]here are no other provisions in the Forbearance Agreement, the Security Agreement or the IP Security Agreement that amend or supersede the Note Purchase Agreement or the arbitration clause. Because MediVas concedes that all of its claims are related to the 2004 Note Purchase Agreement, MediVas must arbitrate its claims.27
(a) Avoidance of illegal contract with respect to the Forbearance Agreement, IP Security Agreement and Security Agreement;
(b) Declaratory Relief (7th cause of action) with respect to the Forbearance Agreement, IP Security Agreement and Security Agreement;
(c) Declaratory Relief - incentive notes (8th cause of action).
(a) the Claimant by 15 September 2007, USD500,000 principal plus accrued and unpaid interest of USD142,215.0.
(b) successive quarterly principal payments of USD1,000,000 to be made on 1 December 2007,1 March 2008,1 June 2008, 1 September 2008 and a final payment on 1 December 2008 of USD500,000.
(a) the Forbearance Agreement;
(b) the Security Agreement; and
(c) the IP Security Agreement.
• 14 September 2007 - USD500,000 (29 July 2011 Supplemental Statement Paragraph 2);
• 15 February 2009 - USD2,250,000 (29 July 2011 Supplemental Statement Paragraph 4).
1. MediVas shall pay to Marubeni all amounts, including interest, due under the Loan Documents by not later than December 31, 2008;
2. Marubeni agrees to forbear from exercising its rights under the Loan Documents or the original Forbearance Agreement through December 31, 2008;
3. MediVas agrees to pay to Marubeni a forbearance fee of USD500,000 in value agreed to by the parties for the period through December 31, 2008, payable on or before December 31, 2009; and
4. The parties agree to discuss alternatives to a cash payment of the forbearance fee including possible equitable rights in MediVas or an affiliated entity.
On USD4,500,000 at 15% per annum 14 September 2007 -15 February 2009:
On USD2,250,000 at 15% per annum 16 February 2009 - 25 November 2011: USD932,979.
• Marubeni, a Japanese company, was doing business in the State of California (Complaint, Paragraph 80, on "information and belief");
• Marubeni failed to qualify to do business in California or name an agent for the service of process in the state (Complaint, Paragraph 83);
• pursuant to R&TC § 23304.1 contracts made by a foreign corporation in the state while not qualified to do business and not having a corporate account number with the California Franchise Tax Board and which has failed to file a tax return are voidable at the instance of any party to such contract (Complaint, Paragraph 85); and
• Marubeni had failed to obtain a corporate account number from the Franchise Tax Board, failed to file franchise tax returns and had failed to pay franchise tax (Complaint, Paragraph 87).
(b) If a foreign taxpayer that neither is qualified to do business nor has a corporate account number from the Franchise Tax Board, fails to file a tax return required under this part, any contract made in this state by that taxpayer during the applicable period specified in subdivision (c) shall, subject to Section 23304.5, be voidable at the instance of any party to the contract other than the taxpayer.
(c) For purposes of subdivision (b), the applicable period shall be the period beginning on January 1, 1991, or the first day of the taxable year for which the taxpayer has failed to file a return, whichever is later, and ending on the earlier of the date the taxpayer qualified to do business in this state or the date the taxpayer obtained a corporate account number from the Franchise Tax Board.
23304.5. A party that has the right to declare a contract to be voidable pursuant to Section 23304.1 may exercise that right only in a lawsuit brought by either party with respect to the contract in a court of competent jurisdiction and the rights of the parties to the contract shall not be affected by Section 23304.1 except to the extent expressly provided by a final judgment of the court, which judgment shall not be issued unless the taxpayer is allowed a reasonable opportunity to cure the voidability under Section 23305.1. If the court finds that the contract is voidable under Section 23304.1, the court shall order the contract to be rescinded. However, in no event shall the court order rescission of a taxpayer's contract unless the taxpayer receives full restitution of the benefits provided by the taxpayer under the contract.
• "Marubeni, as opposed to Marubeni America Corporation, does not transact intrastate business in California...."
• "The transaction which resulted in execution of the Convertible Note Purchase Agreement was a singular transaction. I am informed and believe that Marubeni does not regularly engage in such transactions, nor does it regularly do business in California. The transaction with MediVas was the "one off" transaction which has not been repeated to my knowledge."
It seems to be rather well established by most of the authorities that "doing business" in order to incur tax liability under the statutes imposing taxes on persons "doing business" in the state means that a foreign corporation must transact some substantial part of its ordinary business in the state and that it must be continuous in character as distinguished from a mere casual or occasional transaction.50
(1) The acquisition by purchase, by contract to purchase, by making of advance commitments to purchase or by assignment of loans, secured or unsecured, or any interest therein, if those activities are carried on from outside this state by the lending institution.
(2) The making by an officer or employee of physical inspections and appraisals of real or personal property securing or proposed to secure any loan, if the officer or employee making any physical inspection or appraisal is not a resident of and does not maintain a place of business for that purpose in this state.
(4) The modification, renewal, extension, transfer or sale of loans or the acceptance of additional or substitute security therefore or the full or partial release of the security therefore or the acceptance of substitute or additional obligors thereon, if the activities are carried on from outside this state by the lending institution.
No foreign lending institution solely by reason of engaging in any one or more of the activities set forth in subdivision (d) of Section 191 shall be required to qualify to do business in this state nor be subject to (a) any of the provisions of the Bank and Corporation Tax Law (commencing with Section 23001)52 of the Revenue and Taxation Code....
(a) unreasonably withholding its consent to the Nastech Merger Agreement in an effort to extract legal concessions, priorities, powers and benefits to which it was otherwise not entitled;
(b) using the threat of legal enforcement of the Note Purchase Agreement to force MediVas to enter the illegal, voidable and oppressive Forbearance Agreement and related agreements;
(c) interfering with and ultimately causing the collapse of MediVas's pending merger with Nastech; and
(d) interfering with MediVas's proposed sale to DSM (Complaint, Paragraph 94).
Appellants... argue that Wells Fargo breached the implied covenant by taking a "hard line" in repayment negotiations.... The necessary implication of appellants' argument is that the bank owed them a duty of reasonable forbearance in enforcing its creditor's remedies. They do not, however, cite any authority supporting this proposition, and we are aware of none. Contracts are enforceable at law according to their terms. The covenant of good faith and fair dealing... does not impose any affirmative duty of moderation in the enforcement of legal rights (emphasis supplied).64
113. MediVas is informed and believes and thereon alleges that Marubeni and its agents improperly attempted to, and did, disrupt and interfere with MediVas' above-described business relationship with Nastech through the acts and omissions alleged herein.
125. Medivas is informed and believes and thereon alleges that Marubeni and its agents improperly attempted to, and did, disrupt and interfere with MediVas' above-described business relationship with DSM through the acts and omissions alleged herein including in particular its false assertion of its unlawful "first priority" secured position to all of MediVas' assets.
a plaintiff seeking to recover for an alleged interference with prospective contractual or economic relations must plead and prove as part of its case-in-chief that the defendant not only knowingly interfered with the plaintiff's expectancy, but engaged in conduct that was wrongful by some legal measure other than the fact of interference itself.75
after Delia Penna the elements of the tort of interference with prospective economic advantage remain the same,77 except that the third element also requires a plaintiff to plead intentional wrongful acts on the part of the defendant designed to disrupt the relationship.78
1. The plaintiff and a third-party were in an economic relationship that probably would have resulted in an economic benefit to the plaintiff;
2. The defendant knew of the relationship;
3. The defendant intended to disrupt the relationship;
4. The defendant engaged in wrongful conduct (identifying independent, wrongful conduct e.g., misrepresentation, fraud, violation of statute);
5. The relationship was disrupted;
6. The plaintiff was harmed; and
7. The defendant's wrongful conduct was a substantial factor in causing the plaintiff's harm.79
• By 2007, it was evident that Marubeni was doing nothing as MediVas' exclusive agent in Japan to fulfill Marubeni's duties under the Agency Agreement (Complaint, Paragraph 46).
• Marubeni has breached the Agency Agreement by acts and omissions including, but not limited to:
(a) Failing to adequately explore the Japanese market with respect to licensing MediVas' intellectual property and selling MediVas' products;
(b) Failing to assist MediVas in negotiation of specific agreements to license MediVas' intellectual property and sell MediVas' products in Japan;
(c) Failing to use commercially reasonable efforts to license MediVas' intellectual property and sell MediVas' products in Japan; and
(d) Omitting to provide MediVas with quarterly written reports summarizing the plans, status, contacts, and results of Marubeni's efforts to license MediVas' intellectual property and sell MediVas' products in Japan throughout the entire period of the Agency Agreement (Complaint, Paragraph 101).
• As a direct and proximate result of Marubeni's above-described breaches of the Agency Agreement, MediVas has suffered damages in an amount to be proven at trial (Complaint, Paragraph 102).
(a) Explore the market with respect to licensing potential for the TECHNOLOGIES and sales potential for the PRODUCTS in the TERRITORY;
(b) Assist MediVas in negotiation of specific agreements relating to the license of TECHNOLOGIES for the sales of the PRODUCTS in the TERRITORY;
(c) Use commercially reasonable and diligent efforts to perform the responsibilities specified above; and
(d) Give to MediVas quarterly written reports which summarize the activities, plans, status, contacts and results with respect to performing the responsibilities specified above.
• Terumo-Appointment for meeting and preparation of presentation by Marubeni (e-mail from Omura to Carpenter dated 9 June 2004; Exhibit V, Page 005);
• Nitto Denko-lntroduction of MediVas polymer product, and communication of technical queries by Marubeni to MediVas (e-mail from Omura to Carpenter dated 17 August 2004; Exhibit V, Page 023);
• Dainippon Pharmaceutical-Company visit by Marubeni and communication of indication of interest in MediVas Nanoparticle to MediVas (e-mail from Omura to Carpenter dated 3 September 2004; Exhibit V, Page 025);
• Osteogenesis-Contact with company and request for required specifications by Marubeni (e-mail from Omura to Carpenter dated 9 September 2004, Exhibit V, Page 030);
• Medgel-Communication with company and exchange of draft MTA by Marubeni (e-mail from Omura to Carpenter dated 14 November 2004; Exhibit V, Page 035);
• Kyowa Hakko-lntroduction of MediVas polymer to company by Marubeni (e-mail from Omura to Carpenter dated 12 November 2004; Exhibit V, Page 036);
• J-TEC-lntroduction of MediVas polymer to company and communication of technical queries by Marubeni (e-mail from Omura to Carpenter dated 28 November 2004; Exhibit V, Page 037);
• Takeda-Communication of expected meeting with company and indication of interest by Marubeni (e-mail from Omura to Carpenter dated 29 March 2005; Exhibit V, Page 053);
• Mitsubishi Chemical-expected meeting with company and preparation of introductory material by Marubeni (e-mail from Omura to Carpenter dated 2 May 2005; Exhibit V, Page 068);
• Kureha-Provision of signed MTA from company by Marubeni (e-mail from Omura to Carpenter dated 11 October 2005; Exhibit V, Page 083);
• Aqumen Biopharmaceuticals-Exchange of draft NDA and MTA by Marubeni (e-mail from Omura to Carpenter dated 17 August 2005; Exhibit V, Page 076).
"It is important to note that our polymers are highly specialized to be biocompatible, biodegradable medical grade polymers, which makes them far more expensive than most commercial polymers. This probably means they would never be practical for large-scale commercial activities that are not related to medical applications. Certain cosmetic applications, especially for highend cosmetics, might be appropriate for our technology."
"We are currently involved in a negotiation which may have an impact on our ability to partner in this area so we will get back to you later this month on this matter.... Please allow us a few weeks to finalize our current negotiations and then we will be in touch with you." (emphasis supplied)
The first time that MediVas raised a complaint about Marubeni's performance under the Agency Agreement was on 1 May 2008 when Joe Dowling, Marubeni's [sic]["MediVas'" clearly intended] COO, asked to meet with me. Mr. Dowling requested that Marubeni consent to sharing its security interest with Mr. Satomi. It was obvious to me that Mr. Dowling found the financial situation at MediVas quite desperate. When I declined, on Marubeni's behalf, to share Marubeni's security interest with Mr. Satomi, Mr. Dowling countered with the statement that MediVas' grant of a security interest to Marubeni was a "fraudulent transfer."... Growing frustrated, Mr. Dowling lashed out suggesting that Marubeni had failed to live up to its obligations under the Agency Agreement. Mr. Dowling did not elaborate" (emphasis supplied).83
(a) Monetary Relief: The Respondent is ordered to pay the Claimant the following sums:
(i) USD2,250,000 in respect of outstanding principal on the loan made by Claimant to Respondent;
(ii) USD500,000 on account of the Forbearance Fee; and
(iii) Accrued interest to date of award on the above sums totaling USD1,989,142.
(b) in relation to the Claimant's request that the Tribunal rule on the merits of the following claims advanced by the Respondent in the Complaint:
(i) Respondent's allegations of avoidance of allegedly illegal contracts predicated on California Revenue and Taxation Code23304 fail;
(ii) MediVas's allegations of breach by Marubeni of covenant of good faith and fair dealing fail;
(iii) MediVas's allegations of intentional interference by Marubeni with prospective economic advantage fail;
(iv) the Tribunal has jurisdiction to decide MediVas's allegations of breach of the Agency Agreement;
(v) MediVas's allegations of breach of the Agency Agreement by Marubeni fail;
(vi) The Tribunal has no jurisdiction to decide the Voidable Security Claim; and
(c) The Tribunal defers any decision on the Claimant's request for an award of costs, including attorneys' fees, to a subsequent phase of the proceedings.
(d) Further, the Tribunal defers the question of award of post-award interest to a subsequent phase of the proceedings.
Place of Arbitration: Tokyo (Japan)