Benchmark-Kalanick Uber board suit sent to arbitration

Today, a Delaware court ruled in the favor of former Uber CEO Travis Kalanick, who asked that a case brought against him by early Uber investor Benchmark be moved to arbitration, allowing him to avoid a nasty public battle with one of the company’s earliest supporters.

Kalanick quickly sent out a statement to reporters, saying that he is “pleased that the court has ruled in his favor today and remains confident that he will prevail in the arbitration process. Benchmark’s false allegations are wholly without merit and have unnecessarily harmed Uber and its shareholders.”

A Benchmark spokesperson subsequently sent a separate statement, reading, “We look forward to presenting the facts as the case proceeds. This case is fundamentally a question of integrity and values and the facts will fully support Benchmark’s position.”

Earlier this month, Benchmark sued Kalanick after pressuring him to resign from Uber in late June. In a filing that surprised many industry watchers, Benchmark further said it wants to remove Kalanick from Uber’s board, while eliminating three additional board positions that it says Kalanick sought — and won approval for — last year.

Benchmark claims the board approved these board seats without seeing crucial information about some of the company’s internal failings that should have been provided to it by Kalanick and the company. Furthermore, Benchmark states that Kalanick, who also resigned from his board seat when he resigned from his CEO position, quickly re-appointed himself to one of those outstanding and “fraudulently procured” seats. It alleges that Kalanick ultimately hopes to “pack the board to facilitate his desired re-appointment as Uber’s CEO.”

Today, at an all-hands meeting welcoming Uber’s new CEO, Dara Khosrowshahi, Kalanick sounded both excited to welcome Khosrowshahi, who he characterized as “an inspiring leader,” as well as highly emotional. (Yahoo, which obtained a leaked recording of the meeting, notes that Kalanick appeared to be crying as he spoke.)

If Benchmark is able to prune back Kalanick’s involvement with the company, the public won’t learn about it until after a judgment is made. Arbitrations are private, alternative dispute resolutions that are heard by an impartial arbitrator who reviews the evidence in the case and imposes a decision that is legally binding on both sides and enforceable in the courts.

Put another way, if Kalanick loses to Benchmark, he’ll have no recourse. Obviously, the same is true for Benchmark if Kalanick prevails.

While employment attorneys often try steering clients away from arbitrators, given that they tend to favor businesses, both Kalanick and Benchmark are major and longstanding stakeholders in Uber, meaning it isn’t clear which way an arbitrator might rule.