Uber CEO Claims Venture Capital Lawsuit Against Him Should Go to Arbitration

By , and | August 17, 2017

Ex-Uber Technologies Inc. Chief Executive Officer Travis Kalanick said the lawsuit brought by venture-capital firm Benchmark seeking his ouster from the company’s board should be heard in private arbitration.

In a letter Monday to a Delaware judge, an attorney for Kalanick said Benchmark’s claims are subject to a mandatory arbitration provision contained in the voting agreement that is the focus of the suit. Forcing the suit into arbitration would likely keep details of the claims out of the public spotlight and may also enable Kalanick to present evidence that might otherwise be barred at a trial.

Benchmark last week sued the ride-hailing company’s co-founder in state court in Delaware, saying he duped the firm into allowing him to fill three board seats. The suit escalated a simmering feud between Kalanick and Benchmark, one of Uber’s early investors which holds a 13 percent stake. Benchmark Partner Bill Gurley led an effort to oust Kalanick as CEO in June.

Kalanick’s lawyer said in the letter that he plans to file documents opposing Benchmark’s request to expedite its lawsuit and will also submit a request to dismiss the case or stay it in favor of arbitration.

‘Hostile Actions’

Kalanick criticized Benchmark in an emailed statement on Monday, saying he was “disappointed and baffled by Benchmark’s hostile actions, which clearly are not in the best interests of Uber and its employees on whose behalf they claim to be acting.” He vowed to continue to work “tirelessly” with the company’s board to identify and hire the next CEO.

Reema Bahnasy, a spokeswoman for Benchmark with the Hatch Agency, didn’t immediately return a call Monday about the arbitration request. Matt Kallman, an Uber spokesman, didn’t immediately return an email seeking comment.

Benchmark wrote a letter addressed to Uber’s employees on Monday, explaining the venture capital firm’s decision to sue Kalanick. In the letter, Benchmark said that Kalanick had failed to honor his agreement to modify the company’s voting agreement giving the board more control over the addition of new directors.

Kalanick resigned in June after a series of controversies, including allegations of sexual harassment by his employees and the use of software designed to bypass regulators.

Private Report

Benchmark told employees that a private report prepared by former U.S. Attorney General Eric Holder for the company’s board of directors was damning, writing that “hard-hitting would be an understatement.” The venture capital firm also criticized Kalanick’s failure to appoint a chief financial officer.

“Uber has operated without one for over two years now,” the firm wrote. “This cannot be justified, given the scale and complexity of the business, and is symptomatic of the broader problems with past management practices.”

Benchmark has had to strike a tricky balance between putting pressure on Kalanick, who has significant voting power at Uber, and maintaining the firm’s reputation with startup founders with whom the firm might one day want to invest.

Kalanick’s lawyers also object 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, saying it was “drastic and unwarranted.”

Benchmark contends that allowing Kalanick “to fill the two seats and act as the decisive board vote would seriously damage Uber and its stockholders,” according to court filings

The case is Benchmark Capital Partners VII LP v. Travis Kalanick, CA 2017-0575, Delaware Chancery Court (Wilmington).

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