Espiritu Santo Holdings, LP v. L1bero Partners, LP

Background

Espiritu Santo Holdings, LP (ESH) and L1bero Partners, LP entered into a Partners Agreement under which each had equal investment and equal control of Espiritu Santo Technologies, LLC. The agreement required disputes to be arbitrated before the International Court of Arbitration at the International Chamber of Commerce and was governed by Delaware law.

After the relationship deteriorated, ESH requested arbitration and sought an injunction from this court. On May 16, 2019, the court entered a preliminary injunction that, among other things, prohibited L1bero from making business decisions for companies covered by the Partners Agreement in violation of that agreement or without ESH and its appointed directors.

ESH later sought contempt proceedings, alleging that L1bero continued to deny ESH access to business, financial, and accounting information and obstructed ESH’s participation in the joint venture. On August 13, 2019, the parties entered into a stipulated order requiring L1bero to take reasonable steps to seek a 45-day stay of certain civil and criminal proceedings in Mexican courts and prohibiting further proceedings related to those matters during the specified period.

Current Motion

ESH asked the court to hold L1bero in civil contempt of both the preliminary injunction and the August 13 stipulated order. ESH alleged that L1bero failed to request a stay of the Mexican criminal action by August 23, 2019, encouraged the Mexican court to impose interim measures against Eduardo Zayas, made business decisions without ESH’s consent, reduced ESH’s ownership and management participation, and prevented ESH-appointed directors from accessing financial records.

ESH also served notice terminating the Partners Agreement and canceling L1bero’s shares in Espiritu Santo Technologies, LLC under provisions of the agreement. The court treated the parties’ relationship as having changed substantially because ESH had taken steps to dissolve the partnership.

Court’s Analysis

The court denied contempt based on the allegedly late request to stay the Mexican criminal action. Although L1bero filed a writ to stay the action after the August 23 deadline, the court noted that L1bero had complied with the underlying requirement by filing the writ. The court also stated that the Mexican proceeding was a matter for the Mexican courts and was not the preliminary injunction that this court had entered.

Regarding the allegations that L1bero diminished ESH’s ownership and management rights, the court said it could not hold L1bero in contempt without an extensive hearing, evidence, witnesses, and exhibits. The court had been prepared to hold such a hearing earlier, but the parties had avoided it by entering the August stipulated order. The court further explained that civil contempt is meant to compel compliance with a court order, not punish past violations.

The court concluded that the parties’ dissolution of the partnership placed the dispute in a different posture and affected the continuing viability of the injunction, which had assumed an ongoing partnership. It stated that its authority was limited to issuing an injunction in aid of arbitration and that it lacked power to resolve matters concerning the affairs of the former partners or the dissolution of a Delaware partnership between Mexican nationals.

For the same reason, the court declined to hold L1bero in contempt for allegedly blocking access to corporate books and records. It stated that access could be addressed through a wind-up proceeding in an appropriate court, not through this court’s contempt power.

Disposition

The court denied ESH’s motion to hold L1bero Partners, LP in civil contempt and directed the Clerk of Court to close Docket No. 62.