Fasten your seatbelts, Uber watchers. The company's ride is about to get a good bit rougher.
Benchmark Capital, an early investor in Uber which maintains a seat on Uber's board of directors, is suing Travis Kalanick in an apparent bid to thwart his efforts to return to his role as CEO. Talk we heard earlier this week about Kalanick potentially angling for a shareholder battle to vote himself back into power may have been all too real, and as Axios is reporting, Benchmark filed suit today in the Delaware Court of Chancery a court specializing in business law that often helps resolve internal disputes in companies accusing Kalanick of fraud, breach of contract, and breach of fiduciary duty.
The lawsuit appears to be a direct effort to kick Kalanick off the board of Uber and negate a change made a year ago that increased the size of the board from eight to 11 seats, and thereby prevent him from potentially regaining the CEO role at the company.
Benchmark is said to have been instrumental in pushing for Kalanick's June resignation, and as Axios explains, they may not have realized that Kalanick had a Plan B involving these extra seats on the board. According to a change voted on by shareholders in June 2016, the three extra board seats were to be appointed by Kalanick alone, and when he resigned as CEO, losing the CEO's designated seat on the board, he simply appointed himself to one of the three open seats, and the other two remain unfilled. Benchmark now apparently sees that Kalanick could have a path back into power at the company using those two vacant seats he must have three other guaranteed votes on the existing board so Benchmarks wants the court to invalidate the vote to add those seats altogether.
Per the complaint, "Plaintiff Benchmark brings this action to redress the fraud... perpetrated by Kalanick, the former CEO of Uber, to entrench himself on Uber's Board of Directors and increase his power over Uber for his own selfish ends. 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 further says that in moving to add the three board seats last year, Kalanick "intentionally concealed and failed to disclose his gross mismanagement and other misconduct at Uber" which they say included "pervasive gender discrimination and sexual harassment."
At the time of Kalanick's resignation, it was reported that Benchmark, along with other key investors Lowercase, First Round, and Menlo Ventures, all stood to lose billions of dollars if Uber were to decline in valuation.
Stay tuned as this heats up.
Previously: Travis Kalanick May Be Angling For A Shareholder Battle To Return As Uber CEO