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Not long after Hyperloop One’s recently ousted co-founder and former CTO Brogan BamBrogan filed a lawsuit against the company alleging key executives were in breach of their fiduciary duty, Hyperloop One is firing back.
In a counterclaim filed today, Hyperloop One alleges BamBrogan and the three other cross-defendants were in breach of a number of agreements — including non-solicitation, non-compete, confidential information and proprietary information agreements — when they attempted to stage a coup and take over the company.
The company further alleges that after the coup failed, BamBrogan and — as the claim refers to them — the “gang” attempted to recruit employees to start a new company called Hyperloop Two or NewCo.
But BamBrogan’s and his fellow cross-defendant’s attorney, Justin Berger, says this is all false.
“Hyperloop One’s cross complaint goes beyond revisionist history--it's pure fiction, and that will be shown by the evidence,” Berger said in a statement. “Knowing their improper actions made them culpable, Defendants fabricated a story, put part of it out in a so-called statement and then expanded it in their court papers.”
In the claim, the company says BamBrogan went as far as purchasing a domain — hyperlooptoo.com — for the new company. Indeed, the domain was registered to a gunsbrogan@yahoo.com on May 25, 2016 — a few weeks before BamBrogan and his co-plaintiffs filed their first lawsuit against the company and its executives. (Berger said this was a joke and BamBrogan never intended to use it for business.)
According to the complaint:
While Hyperloop One’s talented and dedicated workforce was working hard to support the Company’s groundbreaking advances in Hyperloop technology, the Gang of Four was secretly plotting and fomenting a coup, aimed at destabilizing Hyperloop One’s leadership and gaining leverage. The coup came to a head in late-May 2016 when the Gang — led by the increasingly erratic BamBrogan — hand-picked seven of the Company’s key employees to join their scheme and most had less than a day or two to decide whether they were in or out. After trying unsuccessfully to solicit the Company’s CEO and head of HR to join them, the Gang then sent a threatening and inflammatory “demand” letter (the “Letter”) to some of the Company’s Board members under the guise of attempting to “reform” the Company.
The complaint charges that BamBrogan, former Assistant Legal Officer David Pendergast, former Vice President of Business Development Knut Sauer and former Vice President of Finance William Mulholland — all of whom have left the company or been fired — demanded in a letter that the company’s board of directors give them control of the company and grant them equity “equal to that of the company’s lead investors who had provided the initial financing to launch the venture.”
The company alleges that BamBrogan and the others gave the board 24 hours to answer, and when the board refused to give in to their demands, they attempted to recruit other employees from Hyperloop One to join Hyperloop Two.
Some of their demands, according to the claim, included:
• Shervin will step down as the Executive Chairman but will continue to support the company as a general Board Member.
• Brogan [BamBrogan] and Josh [Giegel] will be appointed to the Board of Directors. • An Executive Committee will be established on the Board, which will include BamBrogan, Josh Giegel, and the CEO.
• Shervin will have no day-to-day or operational role within the company and will not be authorized to act on its behalf in any way without Executive Committee approval. He will serve on no Board committees unless approved by the Executive Committee.
• The employees collectively will have voting control of the company via an exchange of their shares for a new Class C common stock which will have a sufficient number of votes per share to establish voting control. The option plan will be amended so that all existing and future employee options are exercisable for this super-voting Class C common stock.
• An additional 42 million shares of common stock will be placed into a new equity incentive pool for employees only. We think an elegant way to do this and avoid shareholder dilution would be for these 42 million shares to come as a gift out of the 50 million founder shares currently held by Shervin and [another primary investor].
“They attempted to lead a mutiny of key Company employees, destroy Hyperloop One’s relationships with its current and prospective investors, and launch a competing venture — ‘NewCo’ or ‘Hyperloop Two,’ as they called it,” the complaint reads.
But according to the complaint, the company did see merit in a few of the demands, including the request to recognize then Senior Vice President Josh Giegel as a co-founder and a member of the company’s board. Giegel is now listed as the company’s co-founder and president of engineering.
“In discussions, the Company quickly agreed to the reasonable demands and all seven of the other employees who joined the Letter have since returned to the Company,” the complaint read. “But other demands were not a sincere attempt to reform the Company or to negotiate better compensation; they were a ploy to antagonize the Board and lay the foundation for the Gang of Four either taking over or exiting the Company to start Hyperloop Two.”
Further, Hyperloop One claimed that the four employees who filed a suit underperformed and were constantly receiving negative evaluations. Berger disputed this.
“All of the employees were told their performance was stellar. None of the plaintiffs received negative evaluations from management,” Berger said in a statement. “In fact, several of them were awarded bonuses. Company communication will support this. By contrast, one of the plaintiffs was informed by the head of Human Resources that Afshin’s H.R. file was filled with complaints about his performance and conduct, including from the head of HR. But the chairman’s brother remained untouchable.”
The company is seeking more than $50 million in incidental damages and $200 million in punitive damages.
Hyperloop One is one of two companies attempting to pioneer a new transportation system that could change the way people travel longer distances. Essentially people would board a pod and be shot through tubes connecting cities.
It’s a complicated engineering task, the beginnings of which were laid out by Elon Musk.
While Hyperloop One claims it’s trudging along and progressing as planned — and that BamBrogan and his “gang” operated alone and pressured engineers into joining them — this series of shake-ups and BamBrogan’s lawsuit point to a different narrative: One where the company’s top engineers are at odds with those heading up the business.
Early this month, Recode first reported that BamBrogan along with two other employees — Afshin Pishevar and the company’s assistant counsel David Pendergast — were out at the company.
Shortly after, BamBrogan filed for a temporary restraining order against the company’s General Counsel Afshin Pishevar for placing a noose on his desk and then filed a suit against the company’s executives alleging they were in breach of their fiduciary duty and contract. Last week, a judge denied BamBrogan’s request for a restraining order.
According to the company, the rope Pishevar placed on BamBrogan’s desk was a lasso, not a noose. But because he did it after being angered by BamBrogan’s calls to investors informing them of the company’s internal issues, Hyperloop One’s CEO Rob Lloyd fired Pishevar.
The complaint alleges:
“While the Company did not perceive Afshin’s actions as a physical threat, it did find his behavior unacceptable: Given the ongoing dispute with the Gang of Four, it was not appropriate for Afshin to have undertaken such an act.”
This story is developing.
This article originally appeared on Recode.net.
