Investor Ordered to Arbitrate Claims Against Ex-Uber CEO

WILMINGTON, Del. (CN) – A Delaware judge ruled from the bench Wednesday that a major Uber investor must arbitrate its explosive claims against the ride-share's former CEO Travis Kalanick.

It was a first round victory for Kalanick, who has had to publicly defend himself against allegations of mismanagement and fraud by Benchmark Capital Partners VII. The fight between the Uber insiders will now be behind closed doors and off the record.

Delaware Chancery Court Judge Samuel Glasscock III decided to stay the proceedings instead of granting a motion to dismiss. This will allow the arbitrator to decide what claims can be arbitrated and what, if any, claims must decided by the court at a later date.

Glasscock also wanted to keep the door open for other Uber investors who were not parties to the voting agreement that granted Kalanick three board member picks – a key point of contention in Benchmark’s case against Kalanick.

"I will revisit the stay should a stockholder not affiliated with the voting-rights agreement come forward," Glasscock said at the hearing. Approximately 30 percent of Uber shareholders are not board-represented.

The 2016 voting agreement between major Uber investors and Kalanick is the heart of the dispute. Benchmark said in court Wednesday and in its Aug. 10 complaint that Kalanick induced it to sign the agreement by hiding his mismanagement of Uber.

Counsel for the venture capitalist also said Kalanick knew he might be removed as CEO once the mismanagement was revealed, because he appointed himself to one of the vacant board positions. The other two positions granted to Kalanick remain unfilled.

Benchmark blames Kalanick for a series of scandals at the ride-hail company that surfaced during the past year and culminated in the CEO's June resignation.

The scandals include accusations of trade-secrets theft of self-driving technology from Google spin-off Waymo, an Uber executive’s theft of the medical records of a victim who was raped by an Uber driver in India, and a widespread culture of misogyny and sexual harassment at Uber headquarters.

During Wednesday’s arguments, Benchmark’s lawyer Daniel Mason described the dispute as "fundamentally about a question of integrity and values."

But Kalanick’s attorney Donald Wolfe Jr. said Benchmark's lawyers are using "diabolical ingenuity to paint this as a corporate emergency."

Judge Glasscock picked up the colorful language and asked for a response from Mason: "Diabolical or otherwise?"

Mason replied in a more straightforward style, saying there is “no dispute about Kalanick's fraud about failing to disclose. Those facts are unchallenged."

Wolfe is with Potter Anderson in Wilmington, Delaware. Mason is with the firm Paul, Weiss, Rifkind, Wharton & Garrison New York.

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