IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

BERWYN CAPITAL INVESTMENTS, : CIVIL ACTION

INC. :

 :

v. :

 :

SHORE VENTURE GROUP, LLC; :

REVERSEBID.COM, LLC; :

TERRENCE J. KEPNER; :

and MATTHEW J. DYE : 

 :

v. :

 :

AUTHENTIDATE HOLDING CORP. :

and AUTHENTIDATE, INC. : NO. 01-cv-00691-JF

ADJUDICATION

Fullam, Sr. J. February 14, 2006

This case was tried non-jury. The record has been

supplemented by a stipulation concerning post-trial events. 

After unduly protracted consideration, I have reached the factual

findings and legal conclusions which are set forth in this

adjudication.

I. THE PARTIES

All of the parties to this litigation were, at the

relevant times, involved in business activities related to the

internet – either conducting business at websites, promoting

software programs to be used on the websites of others, or

identifying sources of revenue-producing business for others.

Plaintiff Berwyn Capital Investments, Inc. was

established by a young lady named Catherine Cellucci, a recent

Case 2:01-cv-00691-JF Document 46 Filed 02/14/06 Page 1 of 13
2

law-school graduate, for the purpose of assisting start-up

companies to obtain financing, and, as related to this

litigation, to assist her clients in identifying possible sources

of business, and assisting in the establishment of ongoing

relationships.

Defendant and third-party plaintiff Shore Venture Group

LLC, a somewhat larger and more established firm, whose

principals were the individual defendants Terrence J. Kepner and

Matthew J. Dye, was also engaged in assisting other firms in

identifying and exploiting business opportunities on the

internet.

Third-party defendant Bitwise Designs, Inc. was the

owner of certain programs it had developed which were potentially

useful in conducting business on the internet, or in simply using

the internet. 

One of these programs is entitled “Authentidate.” It

makes possible the authentication and electronic storage of

important documents, and immediate verification of the

authenticity of e-mails, and proof of their receipt. Indeed,

Bitwise has now changed its name to Authentidate, Inc. The

third-party defendants are Authentidate, Inc. and its parent,

Authentidate Holding Corporation. 

Because all of the pertinent contracts were entered

into by Bitwise, the parties have, as a matter of convenience,

Case 2:01-cv-00691-JF Document 46 Filed 02/14/06 Page 2 of 13
3

continued to refer to the third-party defendant as Bitwise, and I

will do likewise. The Chief Executive Officer of Bitwise is a

gentleman named Botti, and its Chief Financial Officer is a

gentleman named Bunt. 

Another entity which, although not a party to this

litigation, was very much involved in the events giving rise to

the litigation is Crosswalk, Inc., a Virginia corporation

described in the testimony as the world’s largest Christian

website, with millions of members. It represented a potentially

lucrative source of business for Bitwise and similar firms.

II. BACKGROUND

Ms. Cellucci, the principal of Berwyn, was acquainted

with a gentleman named Scott Carroll, a former securities broker

who was employed by Crosswalk. She was also acquainted with the

principals of Shore Venture, Messrs. Kepner and Dye. In

September and October 1999, these three began discussing the 

idea of working together to enable Bitwise – a client of Shore

Venture – to establish its software programs on the Crosswalk

website.

Shore Venture entered into a “referral agreement” with

Bitwise, in which Shore Venture agreed to use its best efforts to

enable Bitwise to get established on the Crosswalk website, and

Bitwise agreed to compensate Shore Venture if and when certain

successes were achieved. Briefly, Bitwise was to pay Shore

Case 2:01-cv-00691-JF Document 46 Filed 02/14/06 Page 3 of 13
4

Venture $35,000 upon execution of a written contract with

Crosswalk, and thereafter was to issue warrants for the purchase

of Bitwise stock at $3.50 per share: warrants for 50,000 shares

of stock upon signing of the contract with Crosswalk, another

50,000 shares when the website was up and running; and a third

and fourth increments of 50,000 shares each, if specified levels

of activity were demonstrated. (Since it is agreed that the

third and fourth payments were not earned, we are concerned only

with the initial two tranches.)

It was agreed between Berwyn and Shore venture that

whatever revenue Shore Venture might derive from the BitwiseCrosswalk connection would be shared equally between Shore

Venture and Berwyn. This agreement was confirmed in a letter

agreement dated December 9, 1999. In addition, there was a

separate agreement between Berwyn and Mr. Carroll (the Crosswalk

representative) that Berwyn would share 50/50 with Mr. Carroll

whatever revenues Berwyn received.

The joint efforts of Shore Venture and Berwyn were

largely successful. On or about December 29, 1999, the required

written agreement between Bitwise and Crosswalk was signed. 

Under the terms of the referral agreement, Bitwise was then

required to pay to Shore Venture $35,000, and to issue warrants

for the first 50,000 shares of Bitwise stock at $3.50 per share;

and Shore Venture became obligated to share those items with

Case 2:01-cv-00691-JF Document 46 Filed 02/14/06 Page 4 of 13
5

Berwyn. Bitwise paid the $35,000, and Shore Venture duly paid

Berwyn its $17,500 share. The difficulty arose with respect to

the warrants for the purchase of the first 50,000 shares of

Bitwise stock. The first problem was that the registration of

the stock was not yet completed, and it was understood by all

concerned that the warrants would not issue until the stock was

registered. Registration of the stock was completed in midFebruary 2000, and, on February 25, 2000, Bitwise issued the

warrants.

The warrants for all 50,000 of the shares were issued

in Shore Venture’s name, but, as between Shore Venture and

Berwyn, Berwyn was entitled to 25,000 of the warrants.

Shore Venture promptly exercised its warrants to

purchase 25,000 shares, purchasing them for $3.50 per share and

simultaneously selling the shares at the then market price

($15.44 per share).

Under the express written terms of the warrants, it was

provided that if the holder exercised the warrants as to only a

portion of the shares, Bitwise would retain and cancel the

original warrants, and would issue new warrants for the remaining

shares. Unfortunately, this did not occur; Bitwise retained the

warrant document.

Although Shore Venture was fully cognizant of its

obligation to share its compensation equally with Berwyn, – and,

Case 2:01-cv-00691-JF Document 46 Filed 02/14/06 Page 5 of 13
6

indeed, to see to it that whatever compensation was received from

Bitwise was made payable to Berwyn as well as Shore Venture –

this part of the Berwyn-Shore Venture agreement was not promptly

carried out. Bitwise took the position that, since it had no

agreement with Berwyn, its only obligation was to issue the

50,000 warrants to Shore Venture. And, although, as noted above,

the warrant documentation represented to Shore Venture that,

after Shore Venture exercised the first 25,000 warrants, Bitwise

would issue an amended document for the remaining 25,000 shares

(which, presumably, could somehow have been assigned to Berwyn),

the record makes clear that Bitwise was not particularly

interested in expediting the issuance and redemption of the

remaining 25,000 warrants. 

The record also demonstrates that Shore Venture was in

no hurry to get the matter resolved. At one point, Shore Venture

proposed to Berwyn that Berwyn put up the money for the 25,000

shares at $3.50, whereupon Shore Venture would obtain the shares,

sell them, and turn the proceeds over to Berwyn – but minus 40%

to cover taxes, and a 10% premium for the risk involved. In

short, under this proposal, Berwyn would have received only 50%

of the amount due.

Actually, Ms. Cellucci was in a position to carry out

the purchase and resale of the 25,000 shares without substantial

expense: she could readily have obtained a one- or two-day loan

Case 2:01-cv-00691-JF Document 46 Filed 02/14/06 Page 6 of 13
7

from her father and used the proceeds to purchase the shares, or

she could have handled the matter through a broker at very modest

expense.

At this point, a further complication developed: a

friend of Cellucci’s – an attorney who principally handled

criminal cases and had no real grasp of the issues involved,

filed suit on behalf of Berwyn in a federal district court in

Delaware, against Shore Venture and Bitwise, in May 2000,

asserting breaches of contract on the part of both defendants. 

This attorney apparently adhered to a strict policy of refusing

to negotiate once litigation was started. At any rate, when, in

June 2000, Bitwise and Shore Venture had resolved the impasse,

and had sent to Berwyn’s attorney the necessary paperwork for the

assignment of the warrants to Berwyn, the attorney took no

action, and simply retained the assignment documentation – either

because he wished to pursue the lawsuit, or because he simply did

not understand the situation. The Delaware lawsuit was

eventually dismissed for lack of personal jurisdiction over

either defendant.

Throughout the trial of this case, that stalemate

continued. After the trial concluded, Berwyn eventually received

the 25,000 warrants which it could exercise, and, on October 20,

2003, Berwyn exercised the 25,000 warrants at $3.50 per share,

Case 2:01-cv-00691-JF Document 46 Filed 02/14/06 Page 7 of 13
8

and re-sold the stock at the then-going price of $10.31 per

share, realizing net proceeds totaling $170,250.

The events thus far described relate only to the first

tranche of 50,000 warrants which Bitwise was obligated to issue. 

The second 50,000 warrants were due to be issued when the

Crosswalk website was “implemented” – i.e., when the website was

up and running, and open for business. The evidence makes clear

that this triggering event was completed by June 29, 2000, at the

very latest. On that date, Crosswalk issued a press release,

approved by Bitwise, announcing the fact. But Bitwise/

Authentidate has not yet issued the warrants for the second

tranche of 50,000 shares.

III. CONCLUSIONS AS TO LIABILITY

I have concluded that, as between plaintiff Berwyn and

the defendant Shore Venture, the latter breached its contract by

failing to make sure that the compensation received from Bitwise

would be payable equally to plaintiff and Shore Venture; and,

when this did not occur, by failing to expedite reasonable

measures to cure the breach – i.e., by promptly arranging for the

assignment of the 25,000 warrants to Berwyn.

I conclude, further, that Bitwise breached the terms of

the warrants it issued to Shore Venture, by failing to issue

amended documentation for the unexercised 25,000 warrants. I

conclude that this breach by Bitwise was a substantial factor in

Case 2:01-cv-00691-JF Document 46 Filed 02/14/06 Page 8 of 13
9

causing Shore Venture’s liability to Berwyn to increase. Thus,

in my view, Shore Venture is liable to Berwyn, but Bitwise is

liable to Shore Venture for damages sustained by Berwyn in

connection with the first 25,000 warrants.

Finally, I conclude that Bitwise/Authentidate is liable

to both Shore Venture and Berwyn for failure to issue the second

tranche of 50,000 shares. Berwyn is also, apparently, liable to

share with Mr. Carroll whatever recovery is obtained in

satisfaction of that liability.

IV. DAMAGES

The evidence makes clear that all parties contemplated

that, when the warrants were issued by Bitwise, they would

promptly be exercised and the resulting shares simultaneously

sold. Hence, the damages in each instance are measured by the

difference between the $3.50 strike price, and the market value

of the shares on or about the date when the warrants should have

been made available. Shore Venture received the 50,000 warrants,

and exercised them as to its 25,000 shares, on March 8, 2000. On

that date, the market price was $15.44 per share, and Shore

Venture realized $298,500. Absent the breaches found above,

Berwyn would have likewise received a profit of $298,500.

The defendant is chargeable with having delayed the

payout until mid-June 2000 (when the necessary documentation was

furnished to plaintiff’s then-counsel). At that time, the stock

Case 2:01-cv-00691-JF Document 46 Filed 02/14/06 Page 9 of 13
10

was selling for about $7.00 per share (or less). But to hold

Shore Venture liable for the entire difference between the March

2000 and June 2000 prices would be inequitable, since Berwyn did

eventually receive its stock and exercised the 25,000 warrants

and received net proceeds totaling $170,250. It seems to me that

the most equitable disposition of the damages issue is to hold

Shore Venture liable for the difference in price between March

2000 and October 2003, plus interest on the difference. As I

calculate it, plaintiff was damaged in the amount of $128,250,

plus interest in the sum of $25,393.50, for a total of

$154.643.50. That is the amount which Shore Venture owes to

plaintiff, and, in turn, which Bitwise owes to Shore Venture, in

connection with the first tranche. 

Finally, I conclude that the second tranche of 50,000

warrants should have been issued on or about June 29, 2000, when

the market price was $5.97 per share. By that time, all parties

were aware that half of the warrants were for the benefit of

Berwyn. But for Bitwise’s breach, plaintiff and Shore Venture

would each have realized $61,750 on or about that date, and the

judgments in favor of each of them should include interest from

and after that date.

V. THE INDIVIDUAL DEFENDANTS

Although various individuals are named as defendants or

third-party plaintiffs, the evidence provides no adequate basis

Case 2:01-cv-00691-JF Document 46 Filed 02/14/06 Page 10 of 13
11

for imposing liability against any of these individuals, or in

their favor.

VI. JUDGMENT

For the reasons discussed above, judgment will be

entered in favor of the plaintiff Berwyn Capital Investments,

Inc. and against Shore Venture Group, LLC in the amount of

$154,643.50, plus interest at 6% from and after October 20, 2003.

Judgment will be entered in favor of third-party

plaintiff Shore Venture Group, LLC and against the third-party

defendants, Authentidate Holding Corp. and Authentidate, Inc., in

the sum of $154,643.50, plus interest. Authentidate may satisfy

this judgment by payment directly to plaintiff Berwyn Capital

Investments, Inc.

Finally, judgment will be entered in favor of Berwyn

Capital Investments, Inc. and against the defendants Authentidate

Holding Corp. and Authentidate, Inc. in the sum of $61,750, plus

interest thereon from and after June 29, 2000. Judgment will

also be entered in favor of the defendant Shore Venture Group,

LLC and against third-party defendants Authentidate Holding Corp.

and Authentidate, Inc., in the sum of $61,750, together with

interest from and after June 29, 2000.

An Order follows.

Case 2:01-cv-00691-JF Document 46 Filed 02/14/06 Page 11 of 13
12

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

BERWYN CAPITAL INVESTMENTS, : CIVIL ACTION

INC. :

 :

v. :

 :

SHORE VENTURE GROUP, LLC; :

REVERSEBID.COM, LLC; :

TERRENCE J. KEPNER; :

and MATTHEW J. DYE : 

 :

v. :

 :

AUTHENTIDATE HOLDING CORP. :

and AUTHENTIDATE, INC. : NO. 01-cv-00691-JF

ORDER

AND NOW, this 14th day of February 2006, for the

reasons set forth in the foregoing Adjudication, IT IS ORDERED:

1. JUDGMENT is entered in favor of plaintiff, Berwyn

Capital Investments, Inc., and against the defendant Shore

Venture Group, LLC in the sum of $177,019.30. 

2. JUDGMENT is entered in favor of defendant/third-party

plaintiff Shore Venture Group, LLC and against third-party

defendants, Authentidate Holding Corp. and Authentidate, Inc., in

the sum of $177,019.30. 

3. JUDGMENT is entered in favor of plaintiff, Berwyn

Capital Investments, Inc., and against the defendants

Authentidate Holding Corp. and Authentidate, Inc. in the sum of

$65,733.10. 

Case 2:01-cv-00691-JF Document 46 Filed 02/14/06 Page 12 of 13
13

4. JUDGMENT is entered in favor of the defendant/thirdparty plaintiff Shore Venture Group, LLC and against third-party

defendants Authentidate Holding Corp. and Authentidate, Inc., in

the sum of $65,733.10.

BY THE COURT:

/s/ John P. Fullam 

John P. Fullam, Sr. J.

Case 2:01-cv-00691-JF Document 46 Filed 02/14/06 Page 13 of 13