Cruise settles legal case involving cofounder

http://www.businessinsider.com/car-startup-cruise-settles-legal-case-involving-cofounder-2016-5?op=1

by taylorhou • 10 years ago

99 63 10 years ago

taylorhou2• 10 years ago

Surprised I found this on Techmeme and not here. No matter what the outcome actually became, this was a shtfest, rollercoaster, HBO drama, discussion, and learning experience all in one.

Cheers.

SuperKlaus• 10 years ago

Judging from the absence of a @sama blog post about the settlement it looks like things didn't work out too well for him and YC....

taylorhou2• 10 years ago

I almost feel like @sama's blog post helped Jeremy's case even before it became a case... at the very least, it raised suspicion and caused more conservative readers who don't take "things posted on the internet" at face value to at least think about the underlying reason/cause for his public post.

tommynicholas• 10 years ago

If you were to win a settlement and get what you wanted, would you immediately start running your mouth and riling up the other party? I don't think so. I'm sure this was fine for everyone.

aab0• 10 years ago

Anyone want to speculate about how much YC & Vogt just lost? They acknowledged him as cofounder based on a document in which he's listed as 50% owner; such a concession sounds like a complete victory for Guillory, implying he still owns 50% of the initial equity, and Cruise was bought for $1b. But presumably as cofounder he would have been diluted equally by the YC and any other subsequent investments. YC only takes 1.5%, IIRC, which is fairly negligible, but Cruise did 4 rounds according to https://www.crunchbase.com/organization/cruise#/entity . So how much of that $1b did Vogt wind up getting? And does it come out of Guillory's share entirely? (That wouldn't make sense, since Guillory might not even have 50% left.)

6stringmerc6• 10 years ago

Well, that private settlement certainly clears it up for them. As for the rest of us, who sat on the sidelines and watched the slap-fighting, it doesn't offer a whole lot. Here's the crux I guess of the article:

Cruise and its founder Kyle Vogt now acknowledge that Guillory was a cofounder of the company.

This is very much a sticking point that was extensively discussed in the prior hullabaloo regarding the YC-affiliated post on the matter. How this was agreed upon - the reasoning - being private isn't the most clarifying outcome for the public. I've no doubt this is on purpose for all the parties involved, and hope they are satisfied in private.

As a longtime observer of human behavior, my belief is this announcement will do nothing to quell outside speculation. If the parties involved don't want a bunch of randos-on-the-internet making up their own scenarios, there is an easy fix. Just share with the class what happened so we all may learn.

GavinMcG• 10 years ago

What is there to fix? They've settled it. Why should they care to satisfy your curiosity?

6stringmerc6• 10 years ago

To answer your questions in order:

1. Public perception of a contentious disagreement where both sides levied serious accusations and reputations may be relevant in future business dealings.

2. Because if they don't want people making up their own theories they'll at least say something in unison other than "we aren't saying anything" as it pertains to Answer #1.

I'm not saying they owe any explanation - I'm just saying if they don't give one then they don't have room to bemoan idle speculation.

pmorici• 10 years ago

There is almost certainly a clause in the settlement that limits what the parties can say about the terms and each other. ie: confidential terms, non-disparagement, and specific language that can be used in response to questions about the settlement. In this case it sounds like the things they have agreed to say are that Guillory was a co-founder and the settlement was mutually agreeable.

6stringmerc6• 10 years ago

Wouldn't doubt what you mention; I attempted to allude as to such. In legally precise language, yes I get the statement is the agreed upon statement. In general, casual observational language the agreed upon statement offers little in content.

will_brown2• 10 years ago

This is very much a sticking point that was extensively discussed in the prior hullabaloo regarding the YC-affiliated post on the matter.

For all intents and purposes consider YC/Cruise/Vogt all one party. So it shouldn't be surprising that any YC post took a legal position consistent with Cruise/Vogt that: Guillory was not a co-founder and had no claim to ownership of Cruise.

Cruise and its founder Kyle Vogt now acknowledge that Guillory was a cofounder of the company.

This is simply part of the terms of the Settlement Agreement, they didn't necessarily have to include this, but as a former commercial litigator I will give you my two cents...

Guillory demanded that, because without that he purely seems interested in money and not the credit. In a way it is part reputation (important) part ego (not important).

Nevertheless, the big arbitrator here (behind closed doors) is GM, cruise investors and $1B. GM is weighting the idea of no publicity is bad publicity with the fact they just bought a start up for $1B that doesn't have its shit together. Investors just captured their unicorn, and now have pending litigation, putting that in jeopardy for how many years. So at a certain point both GM and investors are going to put a lot of pressure on Cruise to settle the lawsuit ASAP, whatever it take, including give him credit as co-founder publicly.

neurotech1• 10 years ago

Sam Altman posted on his views on his blog:

http://blog.samaltman.com/cruise

And the related HN comments:

https://news.ycombinator.com/item?id=11490188

SilasX4• 10 years ago

So, I have a stupid, flamebait question: What precisely is wrong with Jeremy Guillory's case? I read those links but I also read this related BI piece [1] and it looks like Guillory has a solid claim: there is a document of them representing the company as half belonging to him, and no one's presenting any later agreement that says when his half was bought out or invalidated.

All that Vogt is going on, it seems, is "but you were just congratulating us when we raised more money!". What does that matter?

Altman's response, in turn, is that Guillory isn't being cool about this and taking (what he deems) a reasonable offer from Vogt. Well, why would he? If he was led to believe early on that he had a full 50% stake, why is it some moral transgression not to accept less [2]?

If you don't want a now-silent partner keeping equity, then buy them out. Don't wait until the company is worth something and then try to retroactively void the equity because you don't feel like they're part of the gang anymore.

[1] http://www.businessinsider.com/cruise-cofounder-fires-back-2...

[2] than the corresponding amount modulo later dilution

jasonlaramburu• 10 years ago

It sounds like the primary evidence supporting Guillory's claim is what they wrote on one question in their YC application (50:50 equity split). I don't know if that would represent a legally-binding contract if the case had gone to court, since it doesn't reference any shares, corporate entity etc.

whamlastxmas4• 10 years ago

The issue is that his ownership only existed as a technicality and he only received a favorable outcome due to to the inflexible nature of the legal system. He was not a 50% owner or anything near that. However, due to a lack of evidence otherwise, he was able to convince the court he was.

vonklaus4• 10 years ago

I think Alman's emotional arguments were a bit misplaced and while I disagreed with, at the time, how they were made, he seems to be fairly correct. Here is my interpretation of why:

What precisely is wrong with Jeremy Guillory's case?

It isn't that there was anything wrong with it, but if you see Alman's post, they were in the preliminary stages of the company and I think jointly applied to YC. if IIRC they didn't even both do through YC together.

Let's say you and I talk about doing a lemonade stand. We apply to Techstars as Junicorn bespoke lemonade purveyors. Unfortunately, I want to use tensor flow & the latest stanford NLP techniques for our lemonade startup and build it on blockchain technology using go. You wanted to do some anachronistic throwback where the Lemonade POS system is built on nodeJS with gulp & browserfy having it be mobile-first, cloud based omnichannel.

So we have the break up.

Then I, and my new founders build an entire company based on Lemonade stands & blockchain technology. Going throug techstars with an entirely different group of people and taking the idea all the way from an idea into a product. Again for a timeline recap:

1. We both had the same idea independently.

2. Then we tried to combine our ideas.

3. Then we went our seperate ways to work on our own seperate implementation.

4. Then my team and I built Junicorn: Summer Lemonade and sold to MinuteMaid for our Concentration technology. (this is like thousands of steps you weren't part of)

5. Then you ask for some large number payoff because we both discussed starting a company but ultimately didn't.

However, depending on the legal structure and some of the other factors (e.g. massive leverage before a sale) he was probably able to make some money. He may have even contributed to the company in a way that entitled him to something. It was just pretty shitty to bring that up during a massive sale like this.

fraserharris• 10 years ago

To all new founders, get a legal agreement in place from day 1 with your collaborators. Here are some amazing free resources (vetted for Canada, a million times better than nothing in the US, pass it by a lawyer if you have the money):

http://wiki.velocity.uwaterloo.ca/Legal

@sama - could YC spearhead creating US versions of the founder IP agreements?

brudgers2• 10 years ago

It's worth noting that Vogt is not a new founder. He was a cofounder of JustinTV, SocialCam, and Twitch before Cruise. It might have been an error due to lack of relevant experience, but the previously problematic situation isn't attributable to a rookie mistake.

Though I am not a lawyer, my understanding is that the claims and counter claims did not really revolve around IP. Take it out of the equation and the documents [as described on the internet] might still form the basis of a claim.

Dobbs2• 10 years ago

Those there companies are all the same company. Also while Kyle was a cofounder of Justin.tv he wasn't actually part of it until a little bit in when they needed someone to figure out the camera.

whamlastxmas4• 10 years ago

I wish a good, solid, but flexible founder agreement template existed. I have not found any that wasn't overly opinionated.

edit: in light of the Cruise fiasco, the agreement should probably contain language saying the organization is being formed without any ownership interest outside of the people listed.

will_brown2• 10 years ago

As a lawyer I have to acknowledge legal agreements are important; however, they are not determinative. Cruise was acquired by GM for $1B, so it goes without saying they had their t's crossed and i's dotted...again it is not necessarily enough.

Besides written contacts (express), there are agreements created by the actions of the parties (implied).

I don't have the facts beyond the article, but at the point an application is submitted to YC naming someone a co-founder, its going to be difficult to argue there isn't an implied contract in place for anything the company (or even proposed company) does moving forward. Yes legally a company that doesn't even exist can be bound by the representations of its agents.

I wouldn't be to surprised to learn Cruise had a very strong case, which might have even included written resignations, stock transfers/assignments, etc... Again I don't know; nevertheless, one could see certainly see the practicality of just paying someone to go away even with a weak case so long as there is a modicum of truth to having started the company. There is nothing worse than a client who litigates out of principle instead of with their wallet.

I having been discussing contracts a lot on HN as of late especially in regards to what people dub smart contracts and I can't stress it enough, breach of contract cases usually never end at summary judgment and can usually always go to trial because whether or not there was a breach is a question of fact reserved for judge or jury at trial.

seibelj2• 10 years ago

So all of that drama, name calling, sam altman posts, etc. ended with them agreeing that he was indeed a co-founder? Honestly the only people who really know what happens between two people, are those two people.

jamiequint• 10 years ago

Settling != agreeing the other party was right. Lots of times it makes financial sense to settle even if the other person was completely wrong.

e.g. When you have a legal issue holding up the close of your $1bn deal and you have to choose between paying up so you can get your deal closed, or dragging it out over 1-3 years in a protracted legal battle that risks never getting the deal done.

6stringmerc6• 10 years ago

And sometimes Stettling == agreeing the other party was right. In the recent GoldiBlox suing the Beastie Boys which resulted in a swift counter-suit, the settlement to drop the lawsuits included a public statement by GoldiBlox. That statement accounted to an admission of guilt and explained that GoldiBlox was in the wrong. Sometimes financial sense can be dictated by legal standing as well.

seibelj2• 10 years ago

So you are saying, without in-depth knowledge about the situation, that even though they settled and publicly agreed that he was indeed a cofounder, that he is lying and Cruise is wrong? I choose to believe the court record.

phonon• 10 years ago

"co-founder" =/= "50% co-founder"

throwaway6497• 10 years ago

If Guillory has undiluted 50% ownership of Cruise - he surely must have made a bank. Anywhere from tens of millions to hundreds of millions.

Cruise settles legal case involving cofounder

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