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According to a federal district court in California, speculation that discretionary discovery is inadequate does not defeat a motion to compel arbitration, and individual non-signatory defendants can demand arbitration of related claims that arise out of their agency relationship with a signatory corporation.
In Amisil Holdings Ltd. v. Clarium Capital Management, No. C06-05255 MJJ, 2007 WL 2768995 (N.D. Cal. Sept. 20, 2007), Amisil entered into an agreement with Clarium as an investor in a hedge fund. After repeated attempts by Clarium and its manager Thiel to buy out Amisil, and repeated attempts by Amisil to gain access to Clarium records, Amisil filed a complaint against Clarium and many of its managers individually.
Clarium and the individual defendants sought to compel arbitration of the claims pursuant to an arbitration clause within the agreement with Amisil. Amisil opposed arbitration, claiming that arbitration would provide inadequate discovery under its controlling rules, and that the individual defendants as non-signatories to the agreement had no standing to demand arbitration of the claims against them.
First, according to the Court, it was “entirely speculative to assume” that discovery would be inadequate merely because it was discretionary. While the discovery was to proceed at the discretion of the arbitrator, the Court found such discretion “did not mean that Amisil will necessarily be denied the ability to obtain relevant books and records” during discovery.
Second, the Court held that the individual defendants could compel Amisil to arbitration as long as the alleged wrongful acts of the individuals related to their behavior as agents of Clarium, and that the claims against the individuals arose out of or were related to the agreement containing the arbitration clause. Here, this standard was satisfied, and the Court compelled arbitration.
The Court observed that the individual defendants would have been entitled to arbitration on an estoppel theory as well. Because Amisil would have to rely on the terms of the agreement containing the arbitration clause to assert its claims against the individuals, the Court found it would be inefficient and inequitable to deny arbitration to the individuals under those circumstances, especially while allowing arbitration of the substantially similar Clarium claims.
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