Travis Kalanick, CEO of the global ridesharing service Uber. (Pic: File, AFP)
San Francisco - Uber co-founder
Travis Kalanick succeeded in forcing a court fight over board
appointments with venture capital firm Benchmark moved to private
arbitration in the company’s latest attempt to keep disputes out of
Delaware Chancery Judge
Sam Glasscock III on Wednesday granted Kalanick’s request while
rejecting his bid to have Benchmark’s lawsuit dismissed. Glasscock put
the suit on hold pending the outcome of the arbitration.
The decision means that a single arbitrator - not yet appointed -
will determine whether Kalanick remains on Uber’s board, and will do so
after reviewing evidence that investors are unlikely to hear unless the
case returns to court.
Benchmark took the unusual step earlier this month of waging a public
battle with the founder of a startup it invested in, accusing Kalanick
of duping the firm in order to gain control of three board seats.
Kalanick is fighting back with claims that Benchmark pressured and
threatened him into resigning as chief executive in June.
Forcing the suit into arbitration may also enable Kalanick to present
evidence that might otherwise be barred at a trial. The case is one of
several tests to force disputes involving Uber out of public courtrooms.
READ: Ex-Uber CEO says Benchmark suit should go to arbitration
Uber is also trying to move its fight with Waymo over trade
secrets for driverless cars into arbitration. It won a battle in
California last year when a federal appeals court ruled that most Uber
drivers can be forced to resolve their disputes with Uber through
Benchmark, which holds a 13% stake in Uber,
sued Kalanick August. 10, saying he misled the firm about his performance
as CEO and the reasons behind his request to expand the company’s board
from eight to 11 seats.
The firm claims Kalanick sought to pack the
board with allies willing to keep him as a director after he resigned.
Kalanick said the case should be governed by a mandatory arbitration
provision tucked into Uber’s voting agreement.
READ: Uber's Kalanick calls Benchmark lawsuit a 'fabrication'
Glasscock said he was concerned about how arbitration would affect
the rights of shareholders who aren’t involved. About 30% of
Uber’s shareholders aren’t represented on the board of directors and
weren’t bound by the voting-rights contract.
“I am not going to dismiss the matter,” Glasscock said. “I am going
to stay it and I will revisit the stay should a stockholder not
affiliated with the voting rights agreement come forward.”
Uber backer defends Kalanick against 'sanctimonious hypocrites'
A spokesperson for Kalanick said the former CEO expects to win in
arbitration and that Benchmark’s allegations have “unnecessarily harmed
Uber and its shareholders.”
Benchmark said it looks forward to presenting the facts as the case proceeds.
“This case is fundamentally a question of integrity and values and
the facts will fully support Benchmark’s position,” Reema Bahnasy, a
Benchmark spokesperson, said in an emailed statement.
Benchmark had blamed Kalanick for a slew of Uber scandals, including
his involvement in trade-secret theft claims tied to a lawsuit by
Alphabet’s self-driving car business and accusations of workplace
hostility to women. The company claimed Kalanick’s interference was
hampering a search for his successor.
Uber selected Expedia’s
Dara Khosrowshahi to succeed Kalanick and help put the scandals behind it.
READ: Its official! Uber hires Dara Khosrowshahi as chief
Kalanick and Khosrowshahi spoke to employees together at an all-hands
meeting Tuesday at the company’s San Francisco offices. Khosrowshahi
was complimentary of Kalanick’s time as CEO, according to two people who
listened to the meeting.
Khosrowshahi acknowledged the ongoing board
conflict and the need to recruit a chairman, one person said. At the end
of the meeting, the pair posed for a selfie taken by board member Ryan
Graves, with dozens of Uber employees filling the frame. The message was
In Delaware, Kalanick’s attorney Donald Wolfe argued that the board’s conflicts don’t justify keeping the case in court.
“I think what we have here is a political battle that belongs in the boardroom, not the courtroom,” he said.
Kalanick had dismissed Benchmark’s fraud claims as a “fabrication,”
arguing that the firm was aware of all the events on which it based its
Kalanick’s lawyers have also objected to Benchmark’s request for a
so-called “status quo” order that would temporarily bar the former CEO
from filling two open Uber board seats. Such a request is “drastic and
unwarranted,” the lawyer said.
Benchmark argued the opposite, telling Glasscock that allowing
Kalanick to fill the seats “and act as the decisive board vote would
seriously damage Uber and its stockholders.”
Investor Shervin Pishevar, a friend of Kalanick, supported the arbitration request.
“We continue to believe that Benchmark filed this public lawsuit to
vilify Travis Kalanick in the court of public opinion,” Shalanick said
in an emailed statement. “Now that the matter, has been ordered to
arbitration, and with the appointment of the CEO, we look forward to
this company achieving even greater success."
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