US judge rules against Paddy Cosgrave over investment fund dispute

Web Summit company directed to enter private arbitration to resolve row

Web Summit chief executive and co-founder Paddy Cosgrave. Photograph: EPA/ANTONIO COTRIM

Web Summit chief executive and co-founder Paddy Cosgrave. Photograph: EPA/ANTONIO COTRIM


A US judge has ruled against tech conference organiser Paddy Cosgrave, compelling him to enter private arbitration in a dispute with a former Web Summit partner and a fund manager.

California Superior Court Judge Ethan Schulman put a hold on Mr Cosgrave’s legal action taken against David Kelly, his former business partner and a Web Summit co-founder, and Patrick Murphy through Manders Terrace, the company behind the Web Summit tech conference.

In the legal action, Manders Terrace has accused Mr Kelly and Mr Murphy of “covertly” setting up an investment fund that it claimed benefited from its association with Web Summit, but from which the conference company and Mr Cosgrave were excluded.

The two men have denied the claims and described the case as “meritless.”

The parties are also involved in related legal actions before the Irish courts.

Lawyers for Mr Kelly and Mr Murphy argued before the California court that arbitration had been agreed between the parties as a dispute resolution mechanism when they created the investment fund at the centre of the legal action, the Amaranthine Fund.

‘Broad arbitration clauses’

This, they argued, prevented Mr Cosgrave from taking litigation. They claimed that two operating agreements behind the fund included “broad arbitration clauses” that required the independent arbitration of all of the claims taken by Manders Terrace in its legal action.

Lawyers for Mr Cosgrave said the company never agreed to go to arbitration in the case and that it was being “improperly” compelled to do so because there was no clause in a co-operation agreement between the parties compelling them to enter arbitration.

Judge Schulman found that Manders Terrace’s argument that the parties expressly intended not to arbitrate simply because they did not include an arbitration provision in one of the agreements between parties - the co-operation agreement - “lacks merit”.

The judge said that where several contracts are entered into between partners “as parts of substantially one transaction, they are taken together”.

He found that two agreements between the parties - “the management company operating agreement” and the “general partner operating agreement” - both contain arbitration provisions and that the co-operation agreement “incorporates by reference” the arbitration clause in the general partner operating agreement.

A spokeswoman for Web Summit and Mr Cosgrave said last night that the ruling was “immaterial and in no way relates to the facts of the case”.

She said that details of the claims against Mr Kelly and Mr Murphy “will still get a public airing” as the Irish cases against them have been entered into the Commercial Court in Dublin.

There was no comment from either Mr Kelly or Mr Murphy.