Suit by PayPal Founder and Macro Hedge Fund Manager Against Minority Investor in his Hedge Fund for Extortion Stayed Pending Arbitration of Related Fraud Suit Against the Hedge Fund

On November 12, 2008, a lawsuit filed by macro hedge fund management company Clarium Capital Management LLC, and its principle shareholder, PayPal founder Peter A. Thiel, in California state court against the agent of Amisil Holdings, Ltd., Amit Choudhury, was removed to the United States District Court for the Northern District of California.  In the state and now federal action, Clarium and Thiel complained that Choudhury committed acts of defamation, tortious interference with business advantage, fraud and negligent misrepresentation, and that he violated the California Business and Professions Code.  Choudhury moved for a Stay Action Pending Arbitration, because his firm, Amisil, had submitted to arbitration an outstanding and closely related lawsuit against Clarium and Thiel involving the same or similar claims.  The District Court agreed with Choudhury and imposed the stay.  Our discussion of the facts and legal analysis in the opinion shows, among other things, how courts may construe mandatory arbitration provisions in the operating agreements of hedge fund management companies.

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