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Comment by theoracle101 | Hacker News Reader

So let me get this straight.

Jeremy was "waiting", while Cruise raised seed, Series A then B, and congratulated them assuming that he still had 50% and was happy to see his work grow?

He never thought to protest, or sign any documents at each round giving his consent. If this isn't extortion I don't know what is.

It will be pretty easy for Cruise to prove he wrote no code/prototyped nothing. All he has is association with Kyle and Cruise for 4 weeks before they parted ways.

Sad to think all the engineers at Cruise, working their ass off, getting fucked over by this guy. He'll probably end up with more than all of them.

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I agree in principle that Jeremy does not deserve any proceeds of the sale, because he did not contribute to any of the valuable IP that GM wants to acquire.

But there is one serious issue here I don't understand (devil's advocate mode) ....

If Kyle and Jeremy actually founded a Delaware C-corp in Sept 2013 (claim #11), then both their names would be on the officer's list. If that charter specifies a 50/50 split of corporate control, then legally Kyle has no ability to simply tell Jeremey that he's "fired" (claim #14). In fact, I don't think it's legal to fire a significant shareholder outright, unless you have an official company meeting and hold a vote. In this case, it's just 2 guys, so theoretically some impromptu meetup counts as a shareholder meeting. Also note here that the courts don't like having shareholder meetings without records, and in such cases leads the courts to treat such activities as non-corporate events (aka unofficial). In any case, it boils down to what ownership was declared when the C-corp was incorporated.

If someone controls the majority voting rights (or a collection of voters), then they can vote to remove someone from the shareholder's group. However, as far as I know you cannot simply seize ownership from the person you remove from the shareholder's group. The company must then be valued, and the person being ousted must be compensated for the value of his share. Furthermore, you can't simply revise arbitrarily future ownership. Jeremy's holdings would be appropriately diluted whenever fundraising events occur. Weirdly, Jeremy expected to receive his "50%", which as any person should know would have been diluted by investment rounds. Major investors are always involved during these events, and everyone knows exactly what they are getting. The fact that he thought at the end he would "get his 50%" leads me to believe he never cared about asserting ownership until the final big payday arrived.

I think Cruise as a company has a serious problem. If the documentation exists to prove this 50/50 ownership in Sept 2013, there is no way this lawsuit will be smooth sailing.

Exactly. If the 50/50 split is on paper, and signed by both parties, then Kyle is basically fucked. It literally doesn't matter of Jeremy "wrote any code" or whatever during his short time working with Kyle.

Since Kyle was the "sole director" does Jeremy's signature even need to be there?

Edit: tense

even if this were the case ( i'm sure it isn't) , there would be a vesting schedule which jeremy wouldn't have completed.

This was supposedly in place before the vesting schedule. Vesting is designed to limit, not give, shares to owners. So if he never signed anything and was part of the company when it formed and it was agreed that it was a 50/50 split I don't believe that vesting would matter for his position at all.

The engineers will not be screwed over. They get the same amount -- whether Jeremy wins or not. Jeremy is seeking half of whatever Kyle is slated to receive, i.e., his diluted pre-seed 50% stake.

Thats not how these things work. Scenarios:

1. Deal falls through (unlikely) 2a. Deal goes through, and engineers amount are held in a reserve fund for 18 months to 2 years until the lawsuit is settled or the after the above timeframe. This is standard in situations like this. 2b. GM may reneogotiate to have this come out pro rata. Also unlikely (this may be incorrect if dillution only impact Kyle. Jeremy does claim he wants 50% of the whole pie)

So in all scenarios, this does not bode well for them at all. Kyle must be furious, but for the engineers who had no part in this, who there is no question have both ownership and actually wrote code, I feel very sorry for.

The lawyers will make out better then them too :/

Of course, if the deal falls through they lose their payout. That's sad. We don't disagree there.

Please explain how GM would renegotiate their equity stakes pro rata? I've never come across this.

> So in all scenarios, this does not bode well for them at all. Kyle must be furious, but for the engineers who had no part in this, who there is no question have both ownership and actually wrote code, I feel very sorry for.

Never forget, your equity is a lottery ticket.

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