(CN) – A venture capital firm and one of the earliest investors in Uber sued the ride-hail’s former CEO in Delaware Chancery Court on Thursday, saying he resorted to fraud to keep himself and allies installed on the company’s board.
Benchmark Capital Partners VII, an early-stage funder of numerous Silicon Valley startups, sued Uber’s former CEO Travis Kalanick claiming he fraudulently concealed his own mismanagement of the company when he obtained control of three board seats in June 2016.
“Unknown to Benchmark at the time, in obtaining control over the three new board seats for his personal benefit, Kalanick intentionally concealed and failed to disclose his gross mismanagement and other misconduct at Uber,” Benchmark says in the complaint. “Kalanick knew Benchmark never would have approved the amended certificate of incorporation or the voting agreement as to the three new board seats if Benchmark had known the truth about Kalanick’s prior conduct.”
Kalanick stepped aside from his role at Uber in June, after coming under increasing pressure from several board members and investors including Benchmark. Kalanick presided over a series of scandals at the ride-hail technology company, including allegations 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 a Uber driver in India, and a workplace culture of widespread misogyny and sexual harassment.
However, Kalanick retained his position on the board.
Benchmark’s latest move, which is being dubbed as highly unusual by business analysts, seeks to have him removed from the company altogether.
“Kalanick’s overarching objective is to pack Uber’s board with loyal allies in an effort to insulate his prior conduct from scrutiny and clear the path for his eventual return as CEO – all to the detriment of Uber’s stockholders, employees, driver-partners, and customers,” Benchmark says.
If successful, the suit will not only prevent Kalanick from serving on the board of the company he joined in 2009 and helped build into one of the largest technology companies in the world, but ensure he will not return as CEO.
The particulars of the complaint detail how Uber expanded the board from 8 people to 11 in June 2016, and allowed Kalanick to choose those three seats. Benchmark, still a major investor in the company, signed off on the agreement but says now it only did so because Kalanick kept the extent of his mismanagement a secret.
“Kalanick fraudulently obtained control of three newly created seats on Uber’s board by his material misstatements and fraudulent concealment from Benchmark of material information that would have led Benchmark to reject the creation of the seats,” Benchmark says.
The remaining board seats have yet to be filled.
The complaint also details the ongoing dispute between Waymo and Uber over trade secrets relating to self-driving technology.
“The Waymo lawsuit presents significant legal, financial and reputational risks to Uber,” Benchmark says in the complaint.
Benchmark says it holds about 13 percent of Uber’s stock, including 20 percent of Uber’s voting power, 36 percent of the preferred-stock voting power and 0.5 percent of Uber’s Class B common stock.
Uber is named as a nominal defendant in the lawsuit.
Benchmark seeks to invalidate the board vote to add more board members and to remove Kalanick from the board. In the alternative, the investor wants the court to force Kalanick to abide by his agreement to appoint two board members who are “independent, experienced, unbiased and diverse” and who are approved by all of Uber’s directors.
Through a spokesman, Kalanick called the lawsuit without merit.
“The lawsuit is completely without merit and riddled with lies and false allegations,” he said.
Benchmark is represented by Daniel Mason, of Paul, Weiss, Rifkind, Wharton & Garrison LLP in New York.
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