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Uber's Kalanick, directors win dismissal of investor lawsuit

Stock MarketsApr 01, 2019 10:12PM ET
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© Reuters. FILE PHOTO: Former Uber Chief Executive Officer Travis Kalanick leaves a federal court in San Francisco

By Tom Hals

WILMINGTON, Del. (Reuters) - Travis Kalanick, the co-founder of ride-hailing company Uber, and the company's directors won the dismissal of an investor lawsuit that sought to hold them liable for a fight over trade secrets that slowed Uber's push into autonomous vehicles.

The lawsuit by California investor Lenza McElrath sought to pin damages on Kalanick and board members for the cost of its high-profile battle with Google's parent company Alphabet (NASDAQ:GOOGL) Inc, which accused Uber of stealing self-driving technology.

The ruling on Monday by Delaware Vice Chancellor Sam Glasscock dismissing the lawsuit closes a difficult chapter for Uber, which paid $245 million to Alphabet in February 2018 to settle their trade secrets fight.

Uber is scheduled for an IPO this month. Its rival Lyft Inc (NASDAQ:LYFT) made a soaring stock market debut last week, opening with a share price of $87.24 but it was down 10 percent on Monday.

Michael Barry, a lawyer with Grant & Eisenhofer in Wilmington who represented McElrath, declined to comment.

An Uber spokesman said the company was "pleased with the court’s decision to dismiss this meritless complaint."

The decision can be appealed to the Delaware Supreme Court.

The dismissed lawsuit accused Kalanick and Uber's directors of breaching their fiduciary duties to investors by approving Uber's $680 million deal in 2016 for Ottomotto LLC. The self-driving trucking company was founded and staffed by former employees of Waymo, which is owned by Alphabet.

Uber struck the deal shortly after Otto founder Anthony Levandowski resigned from Waymo.

Just months after the deal closed, Waymo sued Uber in federal court over allegations that Levandowski brought with him thousands of secret files.

The Waymo fight set back Uber's self-driving development and led to the shuttering of its autonomous trucking efforts.

The lawsuit said the Uber board ignored intellectual property risks from the Otto deal and should have been more skeptical of Kalanick's judgment.

The Court of Chancery judge, however, said there was no evidence that the board simply rubberstamped a deal.

A due diligence report on the deal had been prepared but directors did not review it in full before the board gave its initial approval, and the board had some discussion of potential legal liability from acquiring Otto.

"Their decision ultimately damaged Uber," wrote Glasscock. "Nonetheless, a failure to follow best practices is not necessarily a breach of fiduciary duty."

Uber's Kalanick, directors win dismissal of investor lawsuit

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