The co-founder of ride-sharing company Uber, Travis Kalanick, and the company’s directors on Monday won a dismissal of a lawsuit brought by major investors who sought to hold the company liable for a delay in the company’s push into autonomous vehicles caused by a fight over trade secrets.
The lawsuit, brought by investor Lenza McElrath, sought to obtain damages from Kalanick and directors for the costs associated with Uber’s high-profile battle with Google parent company Alphabet Inc, in which Alphabet accused Uber of stealing the company’s self-driving car technology.
Kalanick and the company’s directors are accused of breaching their fiduciary duties to investors by approving Uber’s $680 million acquisition of self-driving truck company Ottomotto LLC. Ottomotto was founded and staffed by former employees of Alphabet-owned Waymo. The deal with Uber was made shortly after Ottomotto founder Anthony Levandowski resigned from his position at Waymo.
Months after the deal closed, Waymo sued Uber over allegations that Levandowski had brought thousands of files containing trade secrets with him. The lawsuit resulted in Uber shuttering its autonomous trucking projects, and set back its larger efforts to introduce autonomous vehicles.
According to the lawsuit, the directors at Uber breached their duty to investors by failing to adequately consider intellectual property risks which might stem from the Ottomotto deal. In dismissing the suit, Delaware Vice Chancellor Sam Glasscock of the Court of Chancery said that there was no evidence of any actions by Kalanick or the directors which constituted a breach of fiduciary duty.
A due diligence report had been prepared in advance of the deal, but while there was some discussion of the legal risks of acquiring Otto, the board did not review the report in full before giving their approval to the deal. However, according to Glasscock “a failure to follow best practices is not necessarily a breach of fiduciary duty.”
The dismissal of the lawsuit closes a difficult chapter for Kalanick and Uber. Uber’s Initial Public Offering (IPO) is scheduled for this month, weeks after rival company Lyft’s strong opening on the stock market.