Uber investor takes legal action to force former CEO Kalanick off board

The Delaware Chancery Court filing alleges Kalanick committed breach of contract, breach of fiduciary duty, and fraud.

Benchmark Capital now owns a 13 per cent stake in Uber which equates to about $9.1 billion.

A spokesperson for Kalanick said Benchmark's accusations were "completely without merit and riddled with lies and false accusations". The lawsuit was filed in an effort to kick Kalanick off the board and get rid of a few empty board seats that were added a year ago, with Benchmark arguing that it never would have approved the addition of those seats had they been aware of Kalanick's "gross mismanagement" of the company.

The letter was first reported by the news site Axios.

"In doing so, Kalanick acquired a disproportionate level of influence over the Board, ensuring that he would continue to have an outsized role in Uber's strategic direction even if forced to resign as CEO".

The shareholder group is asking Benchmark - which led the effort for Kalanick's ouster - to divest itself of enough shares to surrender board appointment rights. Benchmark, still a major investor in the company, signed off on the agreement but says now it only did so because Kalanick kept the extent of his mismanagement a secret. The lawsuit alleges that Kalanick gained several board seats through "material misstatements and fraudulent concealment".

Venture capital firm Benchmark Capital has begun the action against Kalanick, who it accuses of concealing malpractice from the board and attempting to assert control despite his resignation earlier this year.

Benchmark is one of Silicon Valley's top venture firms, whose team includes noted investor Bill Gurley.

"But to make those accusations against the founder of a company whose blood and sweat turned Uber into what it is today, yes, that is a bit peculiar", said Dan Handman, an attorney with Hirschfeld Kramer.

Members of Uber's board, not including Kalanick or Benchmark's Matt Cohler, said they were "disappointed that a disagreement between shareholders has resulted in litigation", according to an emailed statement. Under the terms of Uber's corporate charter, Mr. Kalanick has the power to name two more board members - a power that Benchmark is suing to nullify while also trying to remove Mr. Kalanick from the board entirely.

The particulars of the complaint detail how Uber expanded the board from 8 people to 11 in June 2016, and allowed Kalanick to choose those three seats. Investors and PR pros should watch for how that move affects Uber's chief-executive search-as it might further dissuade otherwise ideal candidates.

Vanessa Coleman

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