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A judge granted former Uber CEO Travis Kalanick a legal win on Wednesday by sending an explosive lawsuit brought by his investors to arbitration rather than ordering it to play out in his courtroom.
The decision is the latest dramatic turn in a rift between Kalanick and Benchmark Capital, once one of his closest allies, and moves the ugly fight between them out of the spotlight as Uber’s new CEO, Dara Khosrowshahi, tries to assert control.
“Mr. Kalanick is pleased that the court has ruled in his favor today and remains confident that he will prevail in the arbitration process,” a Kalanick spokesperson said. “Benchmark's false allegations are wholly without merit and have unnecessarily harmed Uber and its shareholders."
The arguments were made over the course of an hour in a courtroom in Georgetown, Del., before Judge Samuel Glasscock of Delaware’s Court of Chancery.
Benchmark sued Kalanick after ousting him as CEO of the world’s most valuable privately held company, claiming that he defrauded them. The firm asked the court to remove him from Uber’s board, among other actions. Kalanick, Uber’s founder, says he is the victim of a malicious slander brought by disgruntled investors.
Benchmark was seeking a status quo order that would effectively freeze Kalanick’s involvement in Uber’s business. Kalanick’s lawyers tried to move the case to arbitration, allowing him to avoid a possibly damaging deposition.
“We look forward to presenting the facts as the case proceeds,” a spokesperson for Benchmark said. “This case is fundamentally a question of integrity and values and the facts will fully support Benchmark’s position.”
The judge did not immediately rule on the status quo order — though an arbitrator could still grant one in the future. The case is expected to move quickly now that it has moved to arbitration.
Kalanick’s lawyers argued that the Voting Agreement at Uber indicated that controversies that do not revolve around intellectual property rights “shall be submitted to arbitration.” Benchmark believed that the dispute could not be resolved behind closed doors and would not be transparent.
It is still possible, Glasscock noted, that an investor who is not a party to the Voting Agreement could file a new lawsuit — one that wouldn’t automatically be subject to arbitration.
Arbitration still poses some risk. Arbitration rulings are typically binding, and if Kalanick loses, he won’t be able to appeal. Arbitration hearings also frequently allow hearsay evidence, unlike in courtroooms.
Shervin Pishevar, a close friend of Kalanick who was his most vocal defender in recent weeks, said he was glad the court recognized the board problems as a “bilateral dispute.”
“We continue to believe that Benchmark filed this public lawsuit to vilify Travis Kalanick in the court of public opinion,” Pishevar and his allied shareholders said in a statement. “Now that the matter has been ordered to arbitration, and with the appointment of the CEO, we look forward to this company achieving even greater success."
This article originally appeared on Recode.net.
