Breaking up is Uber hard to do

Patrick Berry, The Levison Group

Breaking up is hard to do. Divorces, separations, dissolutions, splits, “amicable un-couplings.” No matter the type of break up or what you call it, they’re inevitably challenging, and frequently contentious. Often, the more public the break up, the more painful the process becomes, and the more likely it is that lawyers will get involved.

Break ups take many different forms. The American public is currently captivated by one particular type of separation: the divorces happening within the Trump administration.  Upper echelon executive branch officials have been dropping like lemmings off a cliff. The first, Michael Flynn, was ostensibly forced out because he lied to the vice president. He subsequently retained a high-powered team of Washington lawyers to aid in defending his pre-departure activities. To date, his fancy legal team has advised him to beg for immunity and plead the Fifth Amendment.

The list goes on: Sean Spicer, who, by the end, had lost significant credibility with the press and public due to his frequent gaffes and inaccurate statements, was unceremoniously forced to resign. He has since hired famous television lawyer Bob Barnett to help him secure a TV gig, so I don’t think we’ve seen the last of Spicey (to the delight of “Saturday Night Live” and Melissa McCarthy, I’m sure). Reince Priebus, the constantly embattled chief of staff who never seemed to fit with the president’s style, was killed off by his rival, Anthony “the Mooch” Scaramucci shortly after his arrival. Then the Mooch himself was shown the door after his profanity-laden interview with the “New Yorker.” Stephen Bannon is the most recent casualty, and he seems intent on making this as difficult and public of a separation as possible. Interviewed immediately after the firing, Bannon reportedly said: “If there’s any confusion out there, let me clear it up: I’m leaving the White House and going to war.” I’m sure Bannon’s rivals in the White House spent their weekend interviewing lawyers experienced in defamation and libel law.

Many Americans, and a certain segment of the legal community, also love a good celebrity divorce. Wildly popular tabloids, online websites and magazines such as “Us Weekly,” TMZ, and the “National Enquirer” all rush to be the first to break news of a celebrity split. Details of Angelina Jolie’s separation from Brad Pitt and the unfortunate associated custody battle have graced the covers of grocery store check-out line tabloid magazines for months. Before that, it was Johnny Depp’s nasty divorce from Amber Heard in the midst of domestic abuse allegations. Depp’s legal team argued Heard was falsely making the accusations for financial gain, and Heard responded by withdrawing her request for spousal support and donating the proceeds of the settlement to charity. Touché. Famous celebrity divorce lawyers like Laura Wasser (who has represented Johnny Depp, Angelina Jolie, and Britney Spears, among others) and Neal Hersh (Brad Pitt, Halle Berry, Kim Basinger) rush to set up meetings with these kind of prospective high profile clients.

But as a corporate attorney, I encounter a different kind of dissolution: the corporate divorce. These break ups can get just as contentious and personal as the types discussed above. Consider the fight taking place at the most valuable startup in the U.S., Uber. It is about as contentious and captivating as it gets.

On June 20, after months of internal turmoil stemming from legal and ethical troubles — including allegations of sexual harassment within the company and a nasty lawsuit by Waymo, Google’s self-driving car offshoot — one of Uber’s biggest shareholders, the venture capital firm Benchmark, confronted Uber’s CEO, Travis Kalanick. Following hours of contentious negotiations and discussions, Kalanick agreed to step down from his position as CEO. It was a dramatic move by Benchmark, particularly because Silicon Valley V.C. firms go out of their way to appear “founder friendly,” which doesn’t typically include forcing the founder out of his company, particularly one he built into a $70 billion behemoth (and that has made Benchmark and its owners a ton of money along the way).

The drama didn’t end with the forced resignation. In an even more unprecedented move by Benchmark, the prestigious V.C. firm proceeded to sue Kalanick for fraud, breach of contract and breach of fiduciary duty stemming from Kalanick’s pre-resignation activities. Apparently, last summer, Kalanick convinced the board of directors (including Benchmark) to expand the number of voting directors from 8 to 11, with Kalanick able to designate those three extra seats. Following the firing, Kalanick had been using the board seats to hold on to power and, according to some, sabotage the search for a replacement CEO and clear the path for his eventual return. In light of the recent turmoil at Uber, Benchmark’s attorneys claim that Kalanick had withheld material information — including information about Uber’s internal sexual harassment issues — in seeking its consent to expand the board. Benchmark now wants the board expansion vote invalidated. It’s clear that Kalanick is not willing to go quietly into the night from the company he co-founded. His lawyers are currently fighting to move the case out of public view (Delaware state court) and into private, confidential arbitration.

Breaking up is never easy, but sometimes proves unavoidable. You can choose to leave with your head held high and your pride intact (ala Amanda Heard), or you can go out in a blaze of glory, bad-mouthing your critics and vowing revenge (in the vein of Stephen Bannon or the Mooch). Whatever your style, there is one important thing to keep in mind: When the negotiations have finally concluded, the documents have been signed, and you’ve made your parting remarks, it’s probably a good idea to make sure you have enough cell phone juice to call an Uber so you don’t have to ask for a ride home from your ex-husband or former business partner.


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