LENZA H. MCELRATH, III, derivatively on behalf of UBER TECHNOLOGIES, INC., Plaintiff Below, Appellant,
TRAVIS KALANICK, GARRETT CAMP, RYAN GRAVES, ARIANNA HUFFINGTON, YASIR AL-RUMAYYAN, WILLIAM GURLEY, DAVID BONDERMAN, Defendants Below, Appellees. and UBER TECHNOLOGIES, INC., Nominal Defendant Below, Appellee.
October 30, 2019.
Closed January 28, 2020.
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
Below: Court of Chancery. C.A. No. 2017-0888.
Michael J. Barry, Esq. (argued), John C. Kairis, Esq.,
Kimberly A. Evans, Esq., GRANT & EISENHOFER P.A., Wilmington,
Delaware; Jeffrey Reeves, Esq., Atlanta, Georgia; Attorneys
for Plaintiff-Appellant Lenza H. McElrath, III, derivatively
on behalf of Uber Technologies, Inc.
Judson Scaggs, Jr., Esq., Susan W. Waesco, Esq., Sabrina M.
Hendershot, Esq., MORRIS, NICHOLS, ARSHT & TUNNELL LLP,
Wilmington, Delaware; Susan S. Muck, Esq., Kevin P. Muck,
Esq., Marie C. Bafus, Esq., FENWICK & WEST LLP, San
Francisco, California; Attorneys for Defendants-Appellees
Garrett Camp, Ryan Graves, Arianna Huffington, Yasir
Al-Rumayyan, William Gurley and David Bonderman.
J. Wolfe, Jr., Esq., T. Brad Davey, Esq., J. Matthew Belger,
Esq., Jacob R. Kirkham, Esq., POTTER ANDERSON & CORROON LLP,
Wilmington, Delaware; Joseph G. Petrosinelli, Esq., Kenneth
J. Brown, Esq., WILLIAMS & CONNOLLY LLP, Washington, D.C.;
Attorneys for Defendant-Appellee Travis Kalanick.
Thompson Bayliss, Esq., Michael A. Barlow, Esq., ABRAMS &
BAYLISS LLP, Wilmington, Delaware; Mark Gimbel, Esq.
(argued), C. William Phillips, Esq., COVINGTON & BURLING,
LLP, New York, New York; Bryant Pulsipher, Esq., COVINGTON &
BURLING, LLP, San Francisco, California; Attorneys for
Nominal Defendant-Appellee Uber Technologies, Inc.
SEITZ, Chief Justice; VALIHURA, and TRAYNOR, Justices.
2016, Uber Technologies, Inc. acquired Ottomotto LLC to gain
more traction in the autonomous vehicle space. The
acquisition was high risk from the start. Although Uber
ostensibly bought a company, and paid only $100,000 up front,
it hired key employees from Google's more mature
autonomous vehicle program. Uber took some steps to ensure
the former Google employees did not misuse Google's
confidential information, but the transaction ended in
embarrassment. Uber fired its key hire from Google after it
came to light Google's proprietary information had been
misused. It also ended up settling Google's
misappropriation claims by issuing additional Uber stock to
Google valued at $245 million.
plaintiff, an Uber stockholder and former Uber employee,
filed suit in the Court of Chancery against the directors who
approved the Otto acquisition. The plaintiff claimed that the
directors ignored the alleged theft of Google's
intellectual property and failed to investigate pre-closing
diligence that would have revealed problems with the
transaction. According to the plaintiff, the board should not
have relied on the CEO's representations that the
transaction had the necessary protections because he and Uber
had a history of misusing the intellectual property of
defendants responded by moving to dismiss the complaint under
Court of Chancery Rule 23.1. As they asserted, the
plaintiff first had to make a demand on the board of
directors before pursuing litigation on the corporation's
behalf. The Court
of Chancery found that a majority of the Uber board of
directors could have fairly considered the demand, and
dismissed the complaint. The plaintiff has appealed the Court
of Chancery's decision.
reasonable measure, the Uber board of directors approved a
flawed transaction. But we, like the Court of Chancery, do
not decide the merits of the claims at this stage of the
proceedings. Instead, we consider the gating issue of the
demand requirement in a derivative action. Under Delaware
law, the board of directors manage the business and affairs
of the corporation. That responsibility normally includes
deciding whether to bring litigation on the corporation's
behalf. When the board is disabled from making the decision,