SAN DIEGO (CN) – Fact-checking website Snopes won the first round Tuesday in an ownership spat with its web hosting provider when a state court judge declined to remove Snopes’ director from his leadership position at the website.
Snopes co-founder and CEO David Mikkelson and the website’s parent company Bardav were sued in San Diego Superior Court in May by its former web hosting and advertising services provider, Proper Media, over claims Mikkelson conspired to gain majority control of the company.
Mikkelson terminated Snopes’ contract with Proper Media earlier this year to seek an alternative contractor with a more competitive price. But the fact-checking website wasn’t able to make a clean break from Proper Media because Mikkelson’s ex-wife sold her 50 percent stake in the company to Proper Media’s co-founders Christopher Richmond and Drew Schoentrup. The pair claims they are majority shareholders and should have a board vote to make decisions on how Snopes is run.
Proper Media had asked for an injunction to oust Mikkelson as director of Snopes.
But San Diego County Superior Court Judge Judith Hayes found in a 5-page order that Proper Media did not provide “sufficient evidence to prove fraudulent acts” by Mikkelson, whom Richmond and Schoentrup claim is paid too high a salary – as is Mikkelson’s current wife, Snopes employee Elyssa Young. They also claim Mikkelson and Young were wrongfully reimbursed company expenses to cover the cost of their honeymoon last year.
“Schoentrup signed off on the compensation agreement under which Mikkelson was paid and only raised an issue with it once the [general services agreement] was terminated by Bardav. Similarly, plaintiffs have not identified any particular financial transaction conducted by Mikkelson that would constitute waste or abuse of control,” Hayes wrote.
The judge found Mikkelson properly followed the terms of the contract when he terminated Proper Media’s service agreement with Snopes. She also found Proper Media failed to provide evidence that Schoentrup or “anyone else besides Mikkelson was a board member.”
Hayes also found Proper Media must release advertising revenue generated by the Snopes website it had been holding back from the company.
Snopes went public with its struggle to pay employees and continue running the website in late July, when it launched a GoFundMe campaign to solicit donations from supporters. Proper Media had not paid Snopes advertising revenue generated by the website since the legal dispute transpired and was owed hundreds of thousands, Proper Media’s attorney Karl Kronenberger revealed at a court hearing earlier this month.
Running Snopes costs about $165,000 a month, according to Bardav.
The judge also ordered Proper Media to release “functional” themes, templates and content used for the Snopes website. But she found a source code called “Proper Press,” which Proper Media developed and is used on other websites, should not be released to Snopes.
Hayes found Proper Media must continue providing web hosting services to Snopes.com for 60 days to facilitate the transfer of hosting activities without a disruption in service.
Bardav and Mikkelson are represented by Paul Tyrell with Procopio Cory Hargreaves & Savitch, while Proper Media and its co-founders are represented by Karl Kronenberger. Neither attorney returned email requests for comment.