6 ms·

Cruise settles legal case involving cofounder

99 points by taylorhou 10y ago

taylorhou 10y ago
Surprised I found this on Techmeme and not here. No matter what the outcome actually became, this was a shtfest, rollercoaster, HBO drama, discussion, and learning experience all in one. Cheers.
- SuperKlaus 10y ago
  Judging from the absence of a @sama blog post about the settlement it looks like things didn't work out too well for him and YC....
  - taylorhou 10y ago
    I almost feel like @sama's blog post helped Jeremy's case even before it became a case... at the very least, it raised suspicion and caused more conservative readers who don't take "things posted on the internet" at face value to at least think about the underlying reason/cause for his public post.
    - imron 10y ago
      Agreed. Next time I guess he will probably check with lawyers rather than "saying something before the lawyers can stop me".
  - tommynicholas 10y ago
    If you were to win a settlement and get what you wanted, would you immediately start running your mouth and riling up the other party? I don't think so. I'm sure this was fine for everyone.
  - aab0 10y ago
    Anyone want to speculate about how much YC & Vogt just lost? They acknowledged him as cofounder based on a document in which he's listed as 50% owner; such a concession sounds like a complete victory for Guillory, implying he still owns 50% of the initial equity, and Cruise was bought for $1b. But presumably as cofounder he would have been diluted equally by the YC and any other subsequent investments. YC only takes 1.5%, IIRC, which is fairly negligible, but Cruise did 4 rounds according to https://www.crunchbase.com/organization/cruise#/entity https://www.crunchbase.com/organization/cruise#/entity . So how much of that $1b did Vogt wind up getting? And does it come out of Guillory's share entirely? (That wouldn't make sense, since Guillory might not even have 50% left.)
    - ncallaway 10y ago
      It's almost certain the settlement wasn't for the equity he would have been entitled based on the document that implies he had 50% equity at the time. That is the disaster, worst-possible outcome from a trial so there would be absolutely no reason to settle for that amount. If you're willing to accept that outcome you would be willing to go to trial and hope for the chance that you're willing to win. It would've been an amount that Guillory was happy to accept, and that Cruise was willing to part with in order to reduce the risk that the legal uncertainty would spoil their acquisition offer. I have no guess as to what this value was, other than to say it would need to be an amount far-below what you would get if you assumed Guillory received 50% equity. Additionally, Guillory probably traded some amount of financial compensation for the public admission that he was a co-founder.
      - dragonwriter 10y ago
        > That is the disaster, worst-possible outcome from a trial so there would be absolutely no reason to settle for that amount. Not entirely true: the disaster, worst-possible outcome from the trial is that plus an order to pay the other sides costs, plus having racked up a bunch of your own costs. Which is why one might, conceivably settle for that without the expense and delay of trial.
      - hueving 10y ago
        >If you're willing to accept that outcome you would be willing to go to trial and hope for the chance that you're willing to win. No, you're forgetting that a long legal battle could have ruined the deal completely. It's very feasible that they settle for the almost worst-outcome of the trial to avoid killing the very deal that made it worth so much.
deleted 10y ago
[deleted]
6stringmerc 10y ago
Well, that private settlement certainly clears it up for them. As for the rest of us, who sat on the sidelines and watched the slap-fighting, it doesn't offer a whole lot. Here's the crux I guess of the article: >Cruise and its founder Kyle Vogt now acknowledge that Guillory was a cofounder of the company. This is very much a sticking point that was extensively discussed in the prior hullabaloo regarding the YC-affiliated post on the matter. How this was agreed upon - the reasoning - being private isn't the most clarifying outcome for the public. I've no doubt this is on purpose for all the parties involved, and hope they are satisfied in private. As a longtime observer of human behavior, my belief is this announcement will do nothing to quell outside speculation. If the parties involved don't want a bunch of randos-on-the-internet making up their own scenarios, there is an easy fix. Just share with the class what happened so we all may learn.
- GavinMcG 10y ago
  What is there to fix? They've settled it. Why should they care to satisfy your curiosity?
  - 6stringmerc 10y ago
    To answer your questions in order: 1. Public perception of a contentious disagreement where both sides levied serious accusations and reputations may be relevant in future business dealings. 2. Because if they don't want people making up their own theories they'll at least say something in unison other than "we aren't saying anything" as it pertains to Answer #1. I'm not saying they owe any explanation - I'm just saying if they don't give one then they don't have room to bemoan idle speculation.
    - jrockway 10y ago
      > 1. Public perception of a contentious disagreement where both sides levied serious accusations and reputations may be relevant in future business dealings. That sounds exactly like why they said "we've reached a mutually-agreeable compromise." Now neither party will be negatively affected in future business dealings. > If they don't want people making up their own theories they'll at least say something Who cares? They have a billion dollars from General Motors. GM itself is a big enough company that opinions on HN don't matter and won't affect the sales of their final product. They defused a difficult set of complaints in a mutually-agreeable fashion without involving the courts. That's good business. As outsiders, we are not in any involved with them, and probably shouldn't spend any time caring, except to take away one lesson: talk your differences over and reach an amicable agreement. Don't invent drama when none is required!
deleted 10y ago
[deleted]
neurotech1 10y ago
Sam Altman posted on his views on his blog: http://blog.samaltman.com/cruise http://blog.samaltman.com/cruise And the related HN comments: https://news.ycombinator.com/item?id=11490188 https://news.ycombinator.com/item?id=11490188
- SilasX 10y ago
  So, I have a stupid, flamebait question: What precisely is wrong with Jeremy Guillory's case? I read those links but I also read this related BI piece [1] and it looks like Guillory has a solid claim: there is a document of them representing the company as half belonging to him, and no one's presenting any later agreement that says when his half was bought out or invalidated. All that Vogt is going on, it seems, is "but you were just congratulating us when we raised more money!". What does that matter? Altman's response, in turn, is that Guillory isn't being cool about this and taking (what he deems) a reasonable offer from Vogt. Well, why would he? If he was led to believe early on that he had a full 50% stake, why is it some moral transgression not to accept less [2]? If you don't want a now-silent partner keeping equity, then buy them out. Don't wait until the company is worth something and then try to retroactively void the equity because you don't feel like they're part of the gang anymore. [1] http://www.businessinsider.com/cruise-cofounder-fires-back-2016-4 http://www.businessinsider.com/cruise-cofounder-fires-back-2... [2] than the corresponding amount modulo later dilution
  - jasonlaramburu 10y ago
    It sounds like the primary evidence supporting Guillory's claim is what they wrote on one question in their YC application (50:50 equity split). I don't know if that would represent a legally-binding contract if the case had gone to court, since it doesn't reference any shares, corporate entity etc.
    - BinaryIdiot 10y ago
      The YC application isn't and doesn't need to be a contract. It was just another piece of evidence demonstrating the division of the company at the beginning. They also registered in Delaware as 50 / 50 split if I recall correctly and Guillory never signed any of the paperwork regarding limiting their shares.
fraserharris 10y ago
To all new founders, get a legal agreement in place from day 1 with your collaborators. Here are some amazing free resources (vetted for Canada, a million times better than nothing in the US, pass it by a lawyer if you have the money): http://wiki.velocity.uwaterloo.ca/Legal http://wiki.velocity.uwaterloo.ca/Legal @sama - could YC spearhead creating US versions of the founder IP agreements?
- brudgers 10y ago
  It's worth noting that Vogt is not a new founder. He was a cofounder of JustinTV, SocialCam, and Twitch before Cruise. It might have been an error due to lack of relevant experience, but the previously problematic situation isn't attributable to a rookie mistake. Though I am not a lawyer, my understanding is that the claims and counter claims did not really revolve around IP. Take it out of the equation and the documents [as described on the internet] might still form the basis of a claim.
  - Dobbs 10y ago
    Those there companies are all the same company. Also while Kyle was a cofounder of Justin.tv he wasn't actually part of it until a little bit in when they needed someone to figure out the camera.
    - brudgers 10y ago
      My intuition from a distance is a two dollar dollop of conceptual imprecision regarding meaty persons versus fictitious persons lies closer -- not further -- from the center of the recently settled issue. Autodesk and Amazon did not buy the same company.
      - arcticfox 10y ago
        "two dollar dollop of conceptual imprecision regarding meaty persons versus fictitious persons" ... what? Maybe I'm just slow today, but even as a native English speaker I cannot understand that sentence.
seibelj 10y ago
So all of that drama, name calling, sam altman posts, etc. ended with them agreeing that he was indeed a co-founder? Honestly the only people who really know what happens between two people, are those two people.
- jamiequint 10y ago
  Settling != agreeing the other party was right. Lots of times it makes financial sense to settle even if the other person was completely wrong. e.g. When you have a legal issue holding up the close of your $1bn deal and you have to choose between paying up so you can get your deal closed, or dragging it out over 1-3 years in a protracted legal battle that risks never getting the deal done.
  - 6stringmerc 10y ago
    And sometimes Stettling == agreeing the other party was right. In the recent GoldiBlox suing the Beastie Boys which resulted in a swift counter-suit, the settlement to drop the lawsuits included a public statement by GoldiBlox. That statement accounted to an admission of guilt and explained that GoldiBlox was in the wrong. Sometimes financial sense can be dictated by legal standing as well.
  - seibelj 10y ago
    So you are saying, without in-depth knowledge about the situation, that even though they settled and publicly agreed that he was indeed a cofounder, that he is lying and Cruise is wrong? I choose to believe the court record.
    - deleted 10y ago
      [deleted]
  - deleted 10y ago
    [deleted]
- phonon 10y ago
  "co-founder" =/= "50% co-founder"
throwaway6497 10y ago
If Guillory has undiluted 50% ownership of Cruise - he surely must have made a bank. Anywhere from tens of millions to hundreds of millions.

99 points by taylorhou 10y ago

Surprised I found this on Techmeme and not here. No matter what the outcome actually became, this was a shtfest, rollercoaster, HBO drama, discussion, and learning experience all in one. Cheers.

SuperKlaus 10y ago
Judging from the absence of a @sama blog post about the settlement it looks like things didn't work out too well for him and YC....
- taylorhou 10y ago
  I almost feel like @sama's blog post helped Jeremy's case even before it became a case... at the very least, it raised suspicion and caused more conservative readers who don't take "things posted on the internet" at face value to at least think about the underlying reason/cause for his public post.
  - imron 10y ago
    Agreed. Next time I guess he will probably check with lawyers rather than "saying something before the lawyers can stop me".
- tommynicholas 10y ago
  If you were to win a settlement and get what you wanted, would you immediately start running your mouth and riling up the other party? I don't think so. I'm sure this was fine for everyone.
- aab0 10y ago
  Anyone want to speculate about how much YC & Vogt just lost? They acknowledged him as cofounder based on a document in which he's listed as 50% owner; such a concession sounds like a complete victory for Guillory, implying he still owns 50% of the initial equity, and Cruise was bought for $1b. But presumably as cofounder he would have been diluted equally by the YC and any other subsequent investments. YC only takes 1.5%, IIRC, which is fairly negligible, but Cruise did 4 rounds according to https://www.crunchbase.com/organization/cruise#/entity https://www.crunchbase.com/organization/cruise#/entity . So how much of that $1b did Vogt wind up getting? And does it come out of Guillory's share entirely? (That wouldn't make sense, since Guillory might not even have 50% left.)
  - ncallaway 10y ago
    It's almost certain the settlement wasn't for the equity he would have been entitled based on the document that implies he had 50% equity at the time. That is the disaster, worst-possible outcome from a trial so there would be absolutely no reason to settle for that amount. If you're willing to accept that outcome you would be willing to go to trial and hope for the chance that you're willing to win. It would've been an amount that Guillory was happy to accept, and that Cruise was willing to part with in order to reduce the risk that the legal uncertainty would spoil their acquisition offer. I have no guess as to what this value was, other than to say it would need to be an amount far-below what you would get if you assumed Guillory received 50% equity. Additionally, Guillory probably traded some amount of financial compensation for the public admission that he was a co-founder.
    - dragonwriter 10y ago
      > That is the disaster, worst-possible outcome from a trial so there would be absolutely no reason to settle for that amount. Not entirely true: the disaster, worst-possible outcome from the trial is that plus an order to pay the other sides costs, plus having racked up a bunch of your own costs. Which is why one might, conceivably settle for that without the expense and delay of trial.
    - hueving 10y ago
      >If you're willing to accept that outcome you would be willing to go to trial and hope for the chance that you're willing to win. No, you're forgetting that a long legal battle could have ruined the deal completely. It's very feasible that they settle for the almost worst-outcome of the trial to avoid killing the very deal that made it worth so much.

deleted 10y ago

[deleted]

6stringmerc 10y ago

Well, that private settlement certainly clears it up for them. As for the rest of us, who sat on the sidelines and watched the slap-fighting, it doesn't offer a whole lot. Here's the crux I guess of the article: >Cruise and its founder Kyle Vogt now acknowledge that Guillory was a cofounder of the company. This is very much a sticking point that was extensively discussed in the prior hullabaloo regarding the YC-affiliated post on the matter. How this was agreed upon - the reasoning - being private isn't the most clarifying outcome for the public. I've no doubt this is on purpose for all the parties involved, and hope they are satisfied in private. As a longtime observer of human behavior, my belief is this announcement will do nothing to quell outside speculation. If the parties involved don't want a bunch of randos-on-the-internet making up their own scenarios, there is an easy fix. Just share with the class what happened so we all may learn.

GavinMcG 10y ago
What is there to fix? They've settled it. Why should they care to satisfy your curiosity?
- 6stringmerc 10y ago
  To answer your questions in order: 1. Public perception of a contentious disagreement where both sides levied serious accusations and reputations may be relevant in future business dealings. 2. Because if they don't want people making up their own theories they'll at least say something in unison other than "we aren't saying anything" as it pertains to Answer #1. I'm not saying they owe any explanation - I'm just saying if they don't give one then they don't have room to bemoan idle speculation.
  - jrockway 10y ago
    > 1. Public perception of a contentious disagreement where both sides levied serious accusations and reputations may be relevant in future business dealings. That sounds exactly like why they said "we've reached a mutually-agreeable compromise." Now neither party will be negatively affected in future business dealings. > If they don't want people making up their own theories they'll at least say something Who cares? They have a billion dollars from General Motors. GM itself is a big enough company that opinions on HN don't matter and won't affect the sales of their final product. They defused a difficult set of complaints in a mutually-agreeable fashion without involving the courts. That's good business. As outsiders, we are not in any involved with them, and probably shouldn't spend any time caring, except to take away one lesson: talk your differences over and reach an amicable agreement. Don't invent drama when none is required!

deleted 10y ago

[deleted]

neurotech1 10y ago

Sam Altman posted on his views on his blog: http://blog.samaltman.com/cruise http://blog.samaltman.com/cruise And the related HN comments: https://news.ycombinator.com/item?id=11490188 https://news.ycombinator.com/item?id=11490188

SilasX 10y ago
So, I have a stupid, flamebait question: What precisely is wrong with Jeremy Guillory's case? I read those links but I also read this related BI piece [1] and it looks like Guillory has a solid claim: there is a document of them representing the company as half belonging to him, and no one's presenting any later agreement that says when his half was bought out or invalidated. All that Vogt is going on, it seems, is "but you were just congratulating us when we raised more money!". What does that matter? Altman's response, in turn, is that Guillory isn't being cool about this and taking (what he deems) a reasonable offer from Vogt. Well, why would he? If he was led to believe early on that he had a full 50% stake, why is it some moral transgression not to accept less [2]? If you don't want a now-silent partner keeping equity, then buy them out. Don't wait until the company is worth something and then try to retroactively void the equity because you don't feel like they're part of the gang anymore. [1] http://www.businessinsider.com/cruise-cofounder-fires-back-2016-4 http://www.businessinsider.com/cruise-cofounder-fires-back-2... [2] than the corresponding amount modulo later dilution
- jasonlaramburu 10y ago
  It sounds like the primary evidence supporting Guillory's claim is what they wrote on one question in their YC application (50:50 equity split). I don't know if that would represent a legally-binding contract if the case had gone to court, since it doesn't reference any shares, corporate entity etc.
  - BinaryIdiot 10y ago
    The YC application isn't and doesn't need to be a contract. It was just another piece of evidence demonstrating the division of the company at the beginning. They also registered in Delaware as 50 / 50 split if I recall correctly and Guillory never signed any of the paperwork regarding limiting their shares.

fraserharris 10y ago

To all new founders, get a legal agreement in place from day 1 with your collaborators. Here are some amazing free resources (vetted for Canada, a million times better than nothing in the US, pass it by a lawyer if you have the money): http://wiki.velocity.uwaterloo.ca/Legal http://wiki.velocity.uwaterloo.ca/Legal @sama - could YC spearhead creating US versions of the founder IP agreements?

brudgers 10y ago
It's worth noting that Vogt is not a new founder. He was a cofounder of JustinTV, SocialCam, and Twitch before Cruise. It might have been an error due to lack of relevant experience, but the previously problematic situation isn't attributable to a rookie mistake. Though I am not a lawyer, my understanding is that the claims and counter claims did not really revolve around IP. Take it out of the equation and the documents [as described on the internet] might still form the basis of a claim.
- Dobbs 10y ago
  Those there companies are all the same company. Also while Kyle was a cofounder of Justin.tv he wasn't actually part of it until a little bit in when they needed someone to figure out the camera.
  - brudgers 10y ago
    My intuition from a distance is a two dollar dollop of conceptual imprecision regarding meaty persons versus fictitious persons lies closer -- not further -- from the center of the recently settled issue. Autodesk and Amazon did not buy the same company.
    - arcticfox 10y ago
      "two dollar dollop of conceptual imprecision regarding meaty persons versus fictitious persons" ... what? Maybe I'm just slow today, but even as a native English speaker I cannot understand that sentence.

seibelj 10y ago

So all of that drama, name calling, sam altman posts, etc. ended with them agreeing that he was indeed a co-founder? Honestly the only people who really know what happens between two people, are those two people.

jamiequint 10y ago
Settling != agreeing the other party was right. Lots of times it makes financial sense to settle even if the other person was completely wrong. e.g. When you have a legal issue holding up the close of your $1bn deal and you have to choose between paying up so you can get your deal closed, or dragging it out over 1-3 years in a protracted legal battle that risks never getting the deal done.
- 6stringmerc 10y ago
  And sometimes Stettling == agreeing the other party was right. In the recent GoldiBlox suing the Beastie Boys which resulted in a swift counter-suit, the settlement to drop the lawsuits included a public statement by GoldiBlox. That statement accounted to an admission of guilt and explained that GoldiBlox was in the wrong. Sometimes financial sense can be dictated by legal standing as well.
- seibelj 10y ago
  So you are saying, without in-depth knowledge about the situation, that even though they settled and publicly agreed that he was indeed a cofounder, that he is lying and Cruise is wrong? I choose to believe the court record.
  - deleted 10y ago
    [deleted]
- deleted 10y ago
  [deleted]
phonon 10y ago
"co-founder" =/= "50% co-founder"

throwaway6497 10y ago

If Guillory has undiluted 50% ownership of Cruise - he surely must have made a bank. Anywhere from tens of millions to hundreds of millions.