Free Response - District Court of Connecticut - Connecticut

Case 3:03-cv-00651-MRK

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Filed 10/29/2004

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UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

WILLIAM E. McCARTY PLAINTIFF V. DERIVIUM CAPITAL, LLC, et al. DEFENDANT

: : : : : : : : :

CIVIL ACTION NO. 3:03cv651 (MRK)

OCTOBER 29, 2004

DEFENDANT DERIVIUM CAPITAL, LLC'S RESPONSE TO AMENDED ORDER TO SHOW CAUSE

Defendant, Derivium Capital, LLC ("Derivium") hereby responds to the Court's September 28, 2004 Amended Order to Show Cause, and respectfully submits that a default should not be entered against it, for the following reasons: 1. As set forth in the attached Affidavit of Charles Cathcart, Derivium's founder

and managing member, and in the Motion to Dismiss filed simultaneously herewith ("Affidavit"), Derivium was never properly served with a summons in the case, and has never consent to waiver of such service. 2. Based on the foregoing, Derivium has filed herewith a Motion to Dismiss,

pursuant to Fed. R. Civ. P., Rule 4(m) and Rule 12(b)(5). 3. The dispute at issue arises from two written agreements between Derivium and

Plaintiff, attached as Exhibits A and B to the Affidavit, that require the submission of such disputes to arbitration before the American Arbitration Association, to be conducted in Charleston, South Carolina. See Affidavit, ¶ 5 and Exs. A and B. 4. As further set forth in the Affidavit, Plaintiff previously commenced an arbitration

proceeding concerning the same dispute before the American Arbitration Association, a co904908

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defendant herein. However, that arbitration was brought in New York, contrary to the requirement of the arbitration clause that such arbitration must be brought in Charleston, South Carolina, and was, accordingly, dismissed. 5. Based on the foregoing, Derivium has filed herewith a Motion to Stay in Favor

of Arbitration and respectfully submits that the merits of this dispute should be arbitrated in Charleston, South Carolina. 6. Derivium has meritorious defenses to the claims raised by Plaintiff. In 1998, in

conjunction with the original Master Agreement to Provide Financing and Custodial Services, see Affidavit, Ex. A, Plaintiff received substantial loan proceeds based on shares of stock utilized as collateral for the loan. Thereafter, in September 2001, Plaintiff entered into a second agreement, pursuant to which he was able to postpone his obligation to repay the loan. See Affidavit, Ex. B. 7. While expressly reserving the procedural claims set forth in the Motion to

Dismiss and in the Motion to Stay in Favor of Arbitration, Derivium has also filed a Request for Settlement Conference, based upon the recent conflicting requests of Plaintiff with respect to the outstanding loan and disposition thereof, as set forth in the September 14, 2004 and October 12, 2004 written requests attached as Exs. 1 & 2 to the Request for Settlement Conference. Based on the foregoing, it is respectfully submitted that a default should not enter against Derivium, and that the Court should rule on the merits of the procedural motions now

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filed by Derivium, or, in the alternative, hold said motions in abeyance pending the scheduling and completion of a settlement conference.

DEFENDANT DERIVIUM CAPITAL, LLC

By:__s/Kenneth Rosenthal__________ Kenneth Rosenthal (ct05944) BRENNER, SALTZMAN & WALLMAN LLP Its Attorneys 271 Whitney Avenue New Haven, CT 06507-1746 Juris No. 06063 Tel. (203) 772-2600 Fax (203) 772-4008

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CERTIFICATE OF SERVICE This is to certify that a copy of the foregoing was served by U.S. Mail this 29th day of October, 2004 upon:

William E. McCarty 113 Grove Place West Haven, CT 06516 ____s/Kenneth Rosenthal______ Kenneth Rosenthal (ct 05944)

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