
Jeremy Guillory's Counter-Complaint against Cruise Automation - finkin1
https://drive.google.com/file/d/0B6iN8SvXQGKYblBna1MwRHBseFU/view
======
rayiner
The complaint has two major theories:

1) There was an actual agreement between Guillory and Vogt that they would be
a 50% owners. The YC application is a memorialization of the fact that this
agreement existed.

2) Even if there wasn't an actual agreement, Cruise is using IP that Guillory
developed.

The relevance of the YC application is this: Oral contracts are in general
perfectly valid, unless they apply to a specific situation that requires a
writing. A YC application listing the parties as 50-50 co-owners is at least
strong _evidence_ that an oral contract exists with those terms. It's
reasonable to infer that if people have a writing proposing to do X, then they
actually did X or have already agreed to do X.

While a vesting schedule might be typical, it's not going to be implied into
existence unless there is some evidence the parties intended for there to be a
vesting schedule. For similar reasons, questions of how much Guillory actually
contributed will be relevant to (2) but not (1). A 50-50 joint venture is like
marriage. Come the divorce, the assets will be split 50-50, even if one party
earned all the money. The law won't come in and try to value peoples'
contributions after the fact. That would be impractical. The law trusts that
people say what they mean and mean what they say.

This case will turn on whether Vogt has any evidence to counteract the
inference that may be made from the YC application. It will also turn on legal
issues such as whether a writing, not just an oral contract, is required for
the sort of arrangement Vogt and Guillory allegedly made, and if what's in the
YC application is a sufficient writing to meet that requirement. IIRC stock
issuance requires a signed writing in Delaware so that could be a stumbling
block depending on how the agreement is framed.

~~~
hoodoof
Apply HN: due diligence as a service

~~~
p4wnc6
I propose the name for 50% equity: DDaS Attack!

~~~
hoodoof
I hereby name you my co-founder. 50/50\. I shall now go find a buyer.

------
davemel37
Honestly, I think this whole story is a case of Kyle and Sama making a serious
misstep in how they treated a fellow human being. It's clear Jeremy was
involved and contributed in some capacity. If we ignored the legal for a
minute, he is arguably entitled to at least a discussion about the cap table
and some sort of payoff. However, Kyle telling him he gets nothing and than
offering him $100k of his own money is both very insulting and very telling.
It is a low ball offer starting a negotiation.

It all went downhill from there. It was no longer about money, now it became
about justice, and from a justice perspective Jeremy deserves some credit,
acknowledgment and respect for his contribution.

Just read Jeremy's complaint and you see he mentions the rewriting of history
and the lack of mention of him in the press coverage, etc...

Ronald Reagan had a plague on his desk that read, "Man can achieve anything so
long as he doesnt mind who takes the credit."

If Kyle would have shown some respect to Jeremy, this problem would have went
away for a couple million.

I don't blame sama, he started with a preconceived notion of charlatans coming
out of the woodwork and was also biased to one side. His anger is the most
telling sign of all. It is anger at not respecting Jeremy initially, leading
to digging a massive hole.

Walking away from this story, I want to side with Jeremy. If we lived in a
meritocracy, I am inclined to believe he is not really entitled to much more
than an honorable mention as the brains that started it all...but this was
mishandled in such a way that any judge would WANT TO SIDE WITH THE LITTLE
GUY, and the YC application and video is enough basis to let them find in
Jeremy's favor...even though we all know he doesn't deserve it all.

I think an apology, and public acknowledgement of Jeremy's contribution to the
direction and strategy would go a long way in settling this dispute...that and
a few million dollars.

~~~
argonaut
I'm sympathetic to Jeremy's case, which is actually _extremely common_ in
Silicon Valley (group of people get together informally to work on a startup,
nothing serious or 100% legally tied up, group of people break apart, idea
takes off, legal issues ensue).

But anyone taking either Sam _or_ Jeremy's word at face value has no idea what
they're talking about. You have no basis to trust Sam _or_ Jeremy in this
hundred-million-dollar matter. _Both_ sides have hundreds of millions of
reasons to exaggerate or distort their case.

~~~
davemel37
> Both sides have hundreds of millions of reasons to exaggerate or distort
> their case.

Fair enough. Its hard not to judge on what we think we know...but its clear
the bias on both sides means a court should figure this out.

------
beambot
> In early October 2013, Guillory met with 28-year-old Vogt, a self-proclaimed
> MIT drop-out who had spent a month to earn a degree in installing Microsoft
> Windows, and whose most impressive technical achievement by his own account
> was to build a device to crack certain kinds of high security safes. But
> Vogt had a shared interest in the emerging self-driving field from his days
> at MIT and its entry in the DARPA challenge. More importantly, Vogt had
> millions in capital from his successful sale of two previous start-ups in TV
> and video gaming, along with investor contacts.

Can someone shed light on this paragraph? Twitch sold for $1B, so it's
probably a bit disingenuous to take so many digs at Kyle's expertise &
accomplishments... If anything, Kyle's software expertise is just as (if not
more!) valuable than Jeremy's MechE skills for the early Cruise product.

EDIT: Also, I'm pretty sure Kyle worked on MIT's DARPA entry [1]. At the very
least, I know he was working with laser rangefinders -- I wrote an article
back in 2008 using photos of his SICK LRF teardown [2]. If anything, after
reading this "he stole my expertise/idea" claim, I'm more inclined to side w/
Kyle & sama.

[1]
[http://web.mit.edu/6.111/www/s2005/PROJECT/Groups/15/main.ht...](http://web.mit.edu/6.111/www/s2005/PROJECT/Groups/15/main.html)

[2] [http://www.hizook.com/blog/2008/12/15/sick-laser-
rangefinder...](http://www.hizook.com/blog/2008/12/15/sick-laser-rangefinder-
lidar-disassembled)

~~~
lazyant
To me that first sentence says more about the person writing it than the
person described.

~~~
joering2
Same here. What does "self proclaimed MIT dropout" means?

Is he trying to imply that Vogt never attended MIT and is making himself look
cool that he dropped out?

~~~
danso
I think he's implying that Vogt took pride in not finishing his education,
which is an implication that Cruise would've never made it had Guillory not
agreed to collaborate with him.

------
jamiequint
As someone who has both started and worked very early at multiple startups,
it's so incredibly outlandish to hear someone claim that they brought in a
business plan and some ideas, and that ideas alone should represent an equal
percentage ownership to someone who actually worked on building a business for
multiple years. In startups no battle plan ever survives first contact with
the enemy. There is a reason why most successful companies release an initial
version of a product early, then adapt to market conditions rather than
sitting down, writing a long business plan, and executing it.

If Jeremy's MechE experience and background in self-driving cars was so
valuable how did Cruise manage to pivot from just offering an autonomous
driving add-on that only worked on the highway to building a fully-autonomous
city-based driving solution without him. How did they manage to raise millions
of dollars, write all the code, and build all the hardware without him. It
just doesn't add up.

~~~
foobarqux
Cruise hasn't (yet) built fully autonomous cars. Arguably even Google hasn't
done it yet.

~~~
toomuchtodo
Does Cruise Automation hold any autonomous vehicle patents? I could not find
any in Google Patents.

------
AndrewKemendo
The most interesting thing to me is that Cruise went through YC, several
funding rounds and most of a massive public acquisition - apparently before
anyone did enough due diligence to find out about this being _even a potential
problem_ (if the claimant has any grounds - which it seems there are at least
some amount) and heading it off at the pass.

That alone speaks volumes.

~~~
hendzen
Agreed, this is a massive fuck-up by everyone involved (Altman, Cruise Board
of Directors, Spark Capital, etc). Even if the claim has no merit it should
have been dealt with long ago, before the company got to this stage. Now all
the employees might get screwed as a result.

~~~
migep
I don't think it's fair to blame all of the investors. The later investors
were almost certainly misled, and not informed of this risk.

YC on the other hand was clearly informed that there was an individual who was
considered a founder at some point in time. Despite knowledge of this risk,
they invested and they facilitated follow-on financing. Now there's a big,
dumb, expensive problem. YC dropped the ball, big-time.

The fact that Sam Altman is turning this into a public spectacle is further
evidence that he knows YC fucked up badly, and probably doesn't have a legal
case. The only reason to write what he wrote is if you're out of actual ammo.

~~~
iiiggglll
> The fact that Sam Altman is turning this into a public spectacle is further
> evidence that he knows YC fucked up badly, and probably doesn't have a legal
> case. The only reason to write what he wrote is if you're out of actual
> ammo.

Between this incident and pg's "startups must be allowed to break the law
whenever they want or else civilization might collapse" essay a few months
ago, it's getting hard to take anything the higher-ups at YC say seriously.

~~~
fmstephe
link to essay? I can't pick it from that description.

~~~
chris11
[http://blog.samaltman.com/cruise](http://blog.samaltman.com/cruise)

------
1123581321
The facts seem to be more on Jeremy's side than Kyle's except that the
application video demonstrates that Jeremy believed Kyle also knew something
about robotics.

Regardless of the outcome of this incident, if you apply to Y Combinator with
someone who knows the YC partners better than you, and your cofounder decides
to push you out, your cofounder will be supported by YC against you. This is
now something that every team of founders will have to think harder about now.
It will harm founder cohesion which will reduce the success percentage in each
batch.

On the other hand, this is a positive signal to people who want to exploit a
cofounder to get past the YC application process and then push them out of the
company.

~~~
jamiequint
"If you apply to YC with someone who knows the YC partners better than you and
your co-founder decides to push you out, your co-founder will be supported by
YC against you"

What? One founder worked on the company for almost 3 years and the other party
in question worked on the company for one month, yet this is a huge YC
conspiracy? How do you get this crap out of the written complaints in any way?

~~~
snowwrestler
Would Cruise have been accepted to Ycombinator at all if it had just been Kyle
applying?

Put another way, if Jeremy didn't contribute anything, then why did Kyle start
working with him in the first place? Put him in the YC video? List a planned
50/50 equity split in the YC application?

These seem to be at least reasonable questions IMO.

All that said, I think the issue here is that Sam Altman personally invested
in Cruise, which creates a subtle conflict of interest. It's in Sam's best
interest as a Cruise director to crush Jeremy, but perhaps (as the parent
suggests) it would be in YC's best interest to just stay out of it (above the
fray).

~~~
jamiequint
> Would Cruise have been accepted to Y Combinator at all if it had just been
> Kyle applying?

Are you seriously asking if YC would have accepted the former co-founder of a
company that sold for over a billion dollars? Isn't the answer to that
question obvious?

~~~
snowwrestler
Well, answer the other questions then.

Granting 50% of equity is a _lot_ , and as an experienced entrepreneur, Kyle
would know that. But he wrote it down as the plan. Why?

These are the sorts of questions a court will be asked to ponder.

~~~
karamazov
The answer is, Kyle was entirely comfortable granting 50% equity because it
was subject to standard vesting, and everyone involved understood that Jeremy
would own no part of the company if he left in the first year.

------
minimaxir
> The promise was memorialized in the October 21, 2013 Y Combinator
> application, submitted by Vogt with the knowledge and approval of Guillory,
> that identifies Guillory and Vogt as the founders of Cruise and lists
> Guillory as a 50% shareholder of Cruise Automation

This is interesting, as the YC Application does require breakdown. ["If you
have not formed the company yet, describe the planned equity ownership
breakdown among the founders, employees and any other proposed stockholders.
(This question is as much for you as us.)"]

~~~
a_small_island
Well, according to Sam Altman:

"According to Kyle, Jeremy did not write any code or build any hardware during
this exploratory period. He did help find an office for the company. At the
point of Jeremy’s departure, neither he nor Kyle had signed employment
agreements, stock agreements, or any documents of any sort with the company.
Even if Jeremy had signed a stock agreement, he wouldn’t have reached the
standard 1-year cliff for founders to vest any equity."[1]

[1][http://blog.samaltman.com/cruise](http://blog.samaltman.com/cruise)

~~~
rtpg
Right, but even without contracts, if there's a document listing that the
planned ownership split is 50%, and that they're both listed as cofounders...

It sounds like there's documentation that this was the original agreed upon
split. If there's no documentation of some sort of "vesting" or "minimum
effort required", I don't see the legal argument for this person to not have
this split.

Contracts are documentation of agreements, but the agreements themselves are
what hold legal strength. The contracts just help when there's a dispute over
the facts.

~~~
foobarqux
To have a valid contract you need consideration: you can't get 50% for doing
nothing, you have to put up something in exchange (money, skill, resources,
etc).

edit: (I'm not saying anything as to whether Jeremy did so).

~~~
chris11
I don't think one month of work should be worth 50% of the company, but it
looks like he did actually do work. And he never got compensated for it.

~~~
timv
The issue is (assuming what Jeremy says is true) that he was forced out after
1 month with no say in the matter, no agreement & no buyout of stock.

So while 1 month probably _shouldn 't_ be worth 50% of the company, you also
can't just decide that you don't want your co-founder to have a stake in your
company any more, and push them out.

At the end of that 1 month, they had both done equal work (about a month's
worth) and had equal share (50% each). It sounds like (according to Jeremy's
story) he still owns that because no one agreed to a formal change in
ownership.

------
iandanforth
From the complaint:

"Vogt, as the sole Director of Cruise Automation, Inc., authorized the
issuance of 50% of the Company’s stock to Guillory;"

That seems like a very clear statement. It's either true, in which case
Guillory has a very strong case, or it's false and he doesn't.

~~~
kvogt
This is false.

~~~
iandanforth
Then the YC application quotes are inaccurate? Incomplete? Fabrications?

"Cruise Automation is a Delaware C Corporation created in September 2013.
50/50 split between Kyle and Jeremy."

Edit: Added quote.

~~~
Dwolb
It looks like you can search Delaware's database if anyone has a spare $20 to
pull information. [1]

[1]
[https://icis.corp.delaware.gov/Ecorp/EntitySearch/NameSearch...](https://icis.corp.delaware.gov/Ecorp/EntitySearch/NameSearch.aspx)

~~~
snowwrestler
Ok but one would think that some enterprising lawyer at GM or Ycombinator or
on retainer to Sam Altman, investor, would think to do this, right?

Without looking at the incorporation documents on file, I'm sure they don't
say that Jeremy gets 50% of the stock. If they did, there wouldn't be a
lawsuit. It would be cut and dry.

I think what Jeremy is arguing is that he and Kyle had an agreement in the
early days before paperwork, and that that agreement was not properly
documented when the paperwork was written up. This is an extremely difficult
thing to prove, and Kyle and his investors will no doubt lean heavily on the
actual paperwork to sway the court.

~~~
_sentient
This is wrong. Both the original suit and counter-complaint directly reference
the fact that Kyle founded the company before meeting/engaging with Jeremy.

~~~
snowwrestler
You're right about the date of incorporation, so my comments about "before
paperwork" were wrong.

Anyway, my main point above was that giving Delaware $20 to download the
incorporation documents is not likely to resolve the case. Thanks.

~~~
baseh
I dont think it has officers names on that $20 report.

>If you are requesting the $20 detailed information option, this application
will not return actual images of the documents on record. This application
will return a page listing the 5 most recent filings, franchise tax
assessment, total authorized shares if applicable and tax due. Officer and
Director names and addresses are maintained on the images of the annual
reports and are not available through this application. If you wish to order a
copy of an annual report please call 302-739-3073 for more information

------
alain94040
As a self-proclaimed expert on co-founder issues[0], I'm glad that we're
hearing both sides of the story. As expected, they don't match at all.
Hopefully, SamA will read both, try to find an honorable middle ground, and
write another blog post.

Basically, One mistake seems to have been made: writing on the YC application
that they are both founders, possibly stating a 50/50 split. That's one
mistakes, two years of hard work, and one billion dollars.

[0] As the author of the co-founder equity calculator, I still receive about
one email a week from founders asking for advice about co-founder issues.
After several years, I think I have seen about every possible problem with co-
founders.

~~~
llamataboot
According to Jeremy, he gave him. an exploding offer, tried to get him to fire
his counsel. Then he wrote a public blog post, upvoted here, and read by
pretty much anyone in Silicon Valley about how slimy and unreasonable this
Jeremy guy is (when he clearly has a vested interest in how this plays out).
Nope, I don't think we'll see a 'middle ground' anytime soon, Sam is clearly
playing on one team. That's fine. He picked his team. But I still think a
public blog was a wrong decision from all perspectives: legal, strategic, and
moral. And it will for sure be brought up in court as an underhanded tactic.

~~~
enraged_camel
Sam is obviously a very smart guy, but not a very wise one. He is, after all,
only 30 years old. He let his emotional side (anger, frustration) get the
better of him when he published that blog post. It's not how a competent
leader would have acted.

~~~
davemel37
I know I would, and I think most others would gladly give sama a pass if he
owned up to his bias and mistake and apologized to Jeremy publicly.

------
aresant
Sounds like they offered $4.5m ("triple the last offer" of $1.5m) to go away.

I assume the attorney would only make that statement if they had supportable
documentation.

Given that Guillory appears to be a "needs a paycheck" guy that's an awful lot
of money to walk away from without a damn good case.

~~~
iandanforth
The complaint suggests that he was asked to make up his mind _really_ quickly
without extended discussion with a lawyer.

"Altman, also said he was authorized to negotiate on Cruise’s behalf and
offered Guillory triple the amount of Vogt’s previous offer, but only if
Guillory would agree to sign a formal settlement agreement that same day.
Cruise’s attorneys then sent Guillory a lengthy settlement demand and Altman
told him he could have only two hours to propose any changes. When Guillory
told Altman he would not be able to meet that deadline because he needed to
review the proposed terms of the agreement with legal counsel, Altman told
Guillory he should fire his lawyer if he had already retained one, and offered
to send him a list of lawyers to consult. Guillory could not comply with
Cruise’s unreasonable deadline, and as a result, it passed on Friday, April 8,
2016."

~~~
imron
If this is true (and given the obvious biases being displayed by both sides,
I'm not sure it is), but if it is, it would really lower my opinion of Sam
Altman.

He knows exploding offers suck[0] and he knows they are used to exert time
pressure on people rather than letting them make informed decisions.

I know he said in his Cruise post they had no choice because they were under
time pressure themselves from the merger, but to not give him sufficient time
to consult his own lawyer and to suggest instead to choose one from a list he
provided, doesn't really seem like someone acting in good faith.

Whatever time pressure they are under due to the merger is only going to be
intensified due to this matter and I can't help but wonder if it's made things
worse.

[0][https://blog.ycombinator.com/exploding-offers-
suck](https://blog.ycombinator.com/exploding-offers-suck)

~~~
cookiecaper
Exploding offers suck _for whom_? That's what's missing from that post. They
suck _for the disadvantaged party_. They're used because they're beneficial to
the advantaged party. That blog post is propaganda for YC; it says "Hey, look,
the other VCs are gonna try to be mean to you, but we're gonna be REEEEAL nice
;)". They just picked something that they knew was a pet peeve for founders
and that they knew wouldn't really cost them substantially to exclude from
their courting strategies (as YC already has the best reputation in the
business, they don't need exploding offers to get founders to sign up with
them). There was probably a list of 5 "X sucks" articles that could've been
written and sama just picked the one he felt he could work with best that day.
Such pieces should be recognized as the intentionally-placed PR pieces they
are, instead of pretending like it's just a random, unvetted musing from the
YC president.

sama really wants this deal to go through and he is pulling out all the stops
to try to make it happen, including pressuring Jeremy in a way that he's
already stated is unfair (though it's unclear how sincerely-held this belief
is and how much is just an attempt to court more founders; sama's employment
of this technique seems to imply he doesn't really think it's that bad) and
then publicly shaming Jeremy to try to get control of the story's narrative
and make it "lazy nerd tries to defraud noble investors who push the
boundaries of tech" instead of "mega-rich investors won't let a founder get
his share of a massive buyout".

Every action is a tradeoff. If I'm being honest, I would probably do a similar
thing if I were in sama's shoes, and do everything I could to spin the
situation in my favor, since I had already convinced myself that my position
was fundamentally correct and that this guy really _was_ trying to rip
everyone off. I think most of us would, even if we're not willing to admit it
on HN.

~~~
imron
I don't disagree with anything you said.

I still hold however that if true it would lower my opinion of sama - not
because he used an exploding offer, but because it would mean he set a bar he
is only willing to meet when there's no disadvantage to him (everyone wants to
apply to y-combinator) rather than because the bar is a worthwhile thing to
aim for.

P.R. or not, he's on record as saying these types of offers are a poor way of
treating people, ergo, if he used one, then by his own definition he is
engaging in 'terrible behaviour'.

$4.5 million seems to me to be a _very_ generous offer based on actual work
performed, but I don't know how many people would consider 2 hours (as alleged
in the complaint) to be sufficient time to assess an offer worth $4.5 million
(and potentially much more).

------
Bahamut
After reading the various viewpoints posted, here are my thoughts.

Jeremy sounds a bit greedy, and probably won't get 50% compensation, but
probably will get a significant amount since it sounds like he wasn't dealt
with fairly through the whole process if his claims hold up.

However, based on Sam Altman's actions as depicted, this makes me not to ever
want to work for a YC company, and I've been approached by plenty at various
stages (early to late). With an investor that wants to resolve things in bad
faith, I cannot trust that I wouldn't ever potentially get screwed the same
way, all because an investor believes "That person does not deserve
compensation, so we'll operate shadily to make it end that way."

It makes all the talk about nice people and such from YC leaders sound as fake
as the reputation of many tech industry people in the Bay Area is touted to
be.

------
refurb
"After Guillory engaged counsel, cross-defendants then precipitously filed and
made public their lawsuit, _accompanied by a public blog post by Cruise
investor and Director Sam Altman that wrongly accuses Guillory of extortion
and an attempt to disrupt General Motors (“GM) acquisition of Cruise_."

This is why you don't speak publicly about a court case you're involved with.
Now every single word Sam wrote will be put under the microscope and whether
or not he "meant" something won't matter. All that will matter is what the
jury _believes_ he meant by it.

~~~
bradleyjg
That's the downside. It's certainly a real one and exactly why a lawyer would
have advised him not to say anything. But there were also upsides, or at least
potential upsides. Both in this specific case and influencing those involved
current and future yc companies.

The reason general counsels make much less than CEOs is that it's a heck of a
lot easier to always point out the risks than to weigh them against the
rewards.

~~~
snowwrestler
It's one thing to hear your lawyer's counsel and then decide to do it anyway,
because the potential reward is worth the risk.

It's another thing to rush something through before your lawyer has a chance
to provide counsel--which is essentially what Sam Altman claims he did, in his
post.

CEOs make more than GCs, but they employ GCs for a reason.

------
theoracle101
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.

~~~
silverpikezero
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.

~~~
enraged_camel
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.

~~~
mkoble11
even if this were the case ( i'm sure it isn't) , there would be a vesting
schedule which jeremy wouldn't have completed.

~~~
BinaryIdiot
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.

------
akg_67
The media coverage of this dispute, Sam Altman blog post, details of claims
and counterclaims are doing nothing more than tarnishing YC brand. YC need to
settle this dispute as quickly as possible.

Protecting YC reputation as the ones in founders corner in the world of
"Angels are demons and VCs are vultures" is more important. The salacious
details of strong-arming, fire your lawyer hire mine, and exploding offers are
doing nothing more than giving appearance of YC that it is not much different
from the people they were trying to help founders deal with.

------
a_small_island
Here is the YC application video from the counter complaint
[https://www.youtube.com/watch?v=_P6oXe1YI90](https://www.youtube.com/watch?v=_P6oXe1YI90)

~~~
p4wnc6
What is interesting to me is that the video offers some hints that _both_
parties are being uncharitable in their description of the other party.

Jeremy acknowledges previous robotics and technical competency of Kyle, and
Kyle describes both of them having a fairly developed plan involving commodity
components, a plan to bring to market quickly, and "constraining the problem".

Nothing in the video is a silver bullet, and I have no idea what the final
legal implications are. But it seems complicated. It certainly doesn't sound
like you can write off the short 1-month period in which Guillory worked on
it, and it suggests he may have contributed to patentable items or significant
architectural designs, which if then used to carry out Cruise's products,
would really raise questions if Guillory's degree of ownership (yes, 1-month
of architectural designs really are that big of a deal).

But it also absolutely does not seem like Kyle is so devoid of technical
expertise that he couldn't have advanced the company without critical work
from Jeremy.

Whatever the outcome, I think it will be contentious and drawn out.

------
enraged_camel
It looks like this whole case rests on whether Jeremy can actually produce any
document that shows a 50/50 split. This can be the corporate charter, or it
can be some sort of paper with both their signatures. IANAL, but even the YC
application alone may be sufficient if it indeed does say they're joint
owners.

As a side note, Sam Altman's recent blog post [1] vilifying Jeremy really
rubbed me the wrong way. Sam is hardly a neutral player in this, and his post
really felt like an attempt to ruin Jeremy's reputation in Silicon Valley. Sam
really should have kept his mouth shut here, because depending on how this
case plays out, it may be his own reputation that may be endangered.

[1][http://blog.samaltman.com/cruise](http://blog.samaltman.com/cruise)

------
Dwolb
For what it's worth, the YC app video mentioned in the complaint here:
[https://m.youtube.com/watch?v=_P6oXe1YI90](https://m.youtube.com/watch?v=_P6oXe1YI90)

~~~
rpgmaker
Thanks.

------
the_zodiac
Sam, you messed up here. Your post just ended up giving more leverage to
Jeremy.

There is a reason you should listen to lawyers and not just write something
'before the lawyers get to you'.

------
sergers
after reading this, YC and Sam altman might be the dagger to kill the
acquisition by GM...

if true of course... but cant deny that he was a founder and has somewhat of a
claim. do i think he deserves 50% in any possible scenario? no... but he was
being strong-armed into taking the deal (which is just business as usual).

if this goes to Jury trial he has a case for more than the measly 4.5million

edit: "deserves" was a bad choice of words, i meant entitled.

~~~
thehivemind123
That is probably more than an engineer with a typical 100 basis points would
get. You think he deserves more than someone who ACTUALLY built something at
the company.

~~~
jkestner
"Deserves"? I'm sure the engineers here want to be recognized purely on their
effort, but that's not how it works.

------
steven2012
This is why sama should have stfu and not said anything. There are two sides
to every story and the argument presented is compelling, so it's up to a judge
and/or jury to sort this out. Of course sama has a dog in this race, which
makes it even dumber that he commented at all. I hope he learns from this.

------
burger_moon
It still isn't clear to me how Vogt cut Guillory from the company. How that is
even possible when they had already established the company at a 50/50 split?

This also sounds like he was around for a lot longer than Sam implied in his
blog.

I have a lot of mixed feelings about this whole thing; parties on both sides
have been rolling around in mud it seems.

~~~
theoracle101
It was likely not even incorporated, they hadn't done nearly enough work for
either to care. Also seems like Jeremy needed a job anyway and bounced.

Of course hindsight is 20/20, hence this whole ordeal.

~~~
iandanforth
From the YC application via the counter complaint

"“Cruise Automation is a Delaware C Corporation created in September

2013\. 50/50 split between Kyle and Jeremy.”"

~~~
mkoble11
that's what it says in the complaint...but does it _actually_ say this in the
YC application?

~~~
BinaryIdiot
I would say most likely. No doubt would it be requested during trial and they
would both know what's on it so saying something untrue about it would be
profoundly stupid. In my opinion anyway.

------
pbreit
This thread seems to be falling faster than it's numbers would suggest. There
are currently at least 3 older articles with fewer votes above it.

------
tlogan
It seems like KEKER & VAN NEST LLP is Jeremy's law firm. They represented
Google in copyright infringement vs Oracle. Do I read this correctly?

~~~
snowwrestler
If they took this on contingency, that's an interesting social signal.

~~~
trhway
>If they took this on contingency

can you imagine otherwise, i.e the size of their retainer and rates :)

------
danielpal
I just read both complains. This one is frankly ridiculous. The fact is that
Kyle incorporated the company before he met Jeremy. And from Jeremy's
complain, he is trying to build the case by saying he was more competent than
Kyle. Yet why didn't he continue with the idea by himself if he was so
competent?

The only proof he is using to say he was a co-founder is a YC application.
This is I hope a non-binding document. I hope judge agrees that the only way
to get equity in a company is if its granted in the form of shares. Jeremy was
never granted any shares so he own's 0 shares.

He also acknowledges he did no provide any IP to the company. So if he didn't
provide any IP and didn't receive any shares he should be entitled to 0.

I really hope Kyle wins and Jeremy is found guilty of tortorous interference
and is obligated to pay for Kyle legal fees.

~~~
refurb
_The only proof he is using to say he was a co-founder is a YC application.
This is I hope a non-binding document. I hope judge agrees that the only way
to get equity in a company is if its granted in the form of shares. Jeremy was
never granted any shares so he own 's 0 shares._

That's not how it works. If you and I decide to start a company and you give
me a verbal agreement that it's a 50/50 split, then it's pretty strong
evidence of the ownership of the company _unless some other document
supersedes it_.

From what I can tell so, no such document exists.

~~~
bpicolo
What about the incorporation docs? :)

------
onebot
Unbelievable. An experienced & successful entrepreneur would take on an
unknown cofounder without any kind of vesting schedule + cliff. Doesn't make
any sense to me. I am not buying Jeremy's side at all.

~~~
chris11
Yeah, but if that is true the agreement should be in writing. So I think Kyle
should be able to easily prove Jeremy wrong if they did have a vesting
schedule. Edit: according to Sam Altman's blog post they never got around to
signing employment agreements.

------
tlrobinson
Well, I have a feeling we'll be seeing a change to the wording of the equity
split question on the YC application...

~~~
typpo
Agreed. Anyone who's filled out a YC app answers the equity split question as
though it's post-vesting.

No one answers the question like, "Our equity split is 0%, 0%. After a 1 year
cliff we begin vesting 50% each over 3 years" because that's pedantic and
you're supposed to keep the app simple. People just write "50/50". Almost
every YC app has this problem.

------
samfisher83
Can Sama get sued for Libel? I think writing that post was not a good idea.
This Jeremy dude seemed like he had spent some years working on this.

------
bing_dai
To any entrepreneur who reads this thread and suddenly develops the cold
sweat-inducing thought that "Oh No...I do not have proper paper work with that
departed ex-cofounder/ex-employee either!", please build the courage to talk
to that person and have proper written agreement in place. Consult a lawyer if
necessary (IANAL). That way, you would not be in the same situation as Cruise
and Guillory.

I worked at a VC firm for about 3 years. By far the most difficult situation
to mediate was co-founder disputes.

------
coldcode
Given that joining YC is supposed to make building a startup easier they
cleared screwed up this time in not requiring clear contracts with everything
specified. There is no place for oral contracts or quasi legal agreement given
that the potential payoffs are so huge.

------
boto3
This is gold:

In early October 2013, Guillory met with 28-year-old Vogt, a self-proclaimed
MIT drop- out who had spent a month to earn a degree in installing Microsoft
Windows.

------
rdl
Is there a standard restricted stock repurchase agreement/ founder vesting
here? If so, was it exercised?

I now have a new fear which trumps "failure to file 83b in time". I am so
incredibly paranoid about doing 83b, already.

------
mooreds
And this is why founder vesting is so important. Ideas and knowledge are
great, but execution is what really matters. If they'd had a cliff (3 mos, 6
mos, a year, etc) and a written agreement, none of this would be happening.

I went through this with co-founders recently. It was unpleasant and
expensive, but at least everyone knows where we stand w/r/t leaving, vesting,
etc.

This excerpt from Do More Faster is worth reading:

"A common reason for startup fatalities, particularly in the early days, is
some sort of conflict between co-founders. One of the main reasons for co-
founder conflict is that many aspects of the relationships were either ill-
defined or misunderstood. To minimize the chance of this, it’s critical that
you and your co-founders come to agreement on some key issues. I’ve framed the
most important of these as a set of questions that the co-founders should be
asking each other as they enter into the business relationship.

Many of these questions are hard but they get only harder with time. The
sooner you address them, the better off your startup will be."

[http://readwrite.com/2010/10/28/excerpt-from-do-more-
faster-...](http://readwrite.com/2010/10/28/excerpt-from-do-more-faster-avoid-
co-founder-conflict-by-dharmesh-shah/)

~~~
TaylorGood
Learned the hard way myself in pre-launch. Also, watched a friends company
with $4m ARR close shop as a result of not having a vesting schedule and legal
fees trying to gain back a deadbeat co-founder's equity.

Not easy to bring up in the honeymoon phase of an idea that yes, we need a
vesting schedule. My experience is most of the time (CPG startups in so. Cal)
my co-founders don't even know what one is. There was resistance to the
education process and agreement to terms but worth it.

------
jontas
A lot of people are criticizing Guillory for waiting until the deal was
announced to come forward. Whether or not this is true (it is disputed in the
two opposing briefs), one can hardly fault him for not wanting to spend time,
money, and effort litigating for half of a company that may or may not be
worthless. I would wait for some evidence of success/value before deciding to
invest my time/money into claiming my half of the pie.

------
danbmil99
Not precisely equivalent, but I was involved in a startup where 3 of us split
the shares _without_ any vesting agreement in the paperwork.

Fast forward 18 months, one of my co-founders was fed up and decided to quit.
He claimed (correctly) he was entitled to his 33.3% regardless of future work
or any other factors. Of course he would be diluted if there were investments
or option grants, but his position was the split represented the full value of
our contributions at the start date. After all, he argued, we were paying
ourselves salaries for the work we did, so that was our compensation -- the
equity was simply an investment that may or may not pay off some day.

In the end, we paid him a lot of hard-earned cash to buy back most of his
stock over a period of years -- enough for him to live very comfortably
without working, while we sweated our asses off to make something of the
venture. Probably stupid of us, even though in the end the company went public
and the stock was quite valuable for a while.

Moral of the story: get the paperwork right or pay the consequences.

BTW, quitting co-founder wrote up the founding documents...

------
6stringmerc
The one thing this dispute and drama makes me wonder is if GeoHot might have a
competitive advantage for a limited window. Time will tell.

------
karmacondon
YC includes a vesting clause as a standard part of their incorporation
documents, in part for just this situation.

I've heard that a corporation was formed BEFORE the YC application. If shares
were issued in that corporation without a vesting clause, then that's that.

If shares were not issued and the YC application is the only evidence of a
50/50 split, then why wouldn't one assume that vesting was part of that
agreement? The question on the application was "describe the _planned_ equity
ownership breakdown...". Someone could reasonably argue that they agreed to a
50/50 split given the assumption of a vesting schedule, and would not have
agreed to it otherwise. Which is to say, if the YC application is the proof of
ownership, then how can you ignore everything that is also implicit in that
application?

------
masterponomo
I doubt this is what PG had in mind when he brought Sam on board. Just a
prediction, we will soon be wishing Sam well in his future non-YC endeavors.
He's perfectly justified in strongly protecting his own investment, but using
HN to vilify the opposition--not cool.

------
prawn
I imagine that things that seemed insignificant in the HN application may
prove now to be quite problematic. I'd guess that founders might feel inclined
to nominate a 50/50 split, assuming that anything else could be a red flag for
YC's judgement?

------
hoodoof
It seems that the people who now own the company acknowledge that he was the
cofounder but feel that "well he didn't do much, so he doesn't deserve his
full shares".

The law doesn't work like that.

It's exceedingly strange to have had the initial cofounder depart and nothing
was done to formalise the terms of that separation.

Also Sam seems really annoyed that this ghost-co-founder has turned up with
this claim at the most inopportune time, and suggests that this is bad
behaviour. I don't think so, it's the right way to play it. Wait until you
have maximium leverage and then play your legal cards. The missing cofounder
would have been a fool to play it any other way, thereby losing his leverage.
The evidence that he has played it right is that so many people are running in
circles desperate to resolve it - he has them against a barrel.

It appears the due diligence was pretty loose. Heads will roll.....

~~~
Animats
_" It seems that the people who now own the company acknowledge that he was
the cofounder but feel that "well he didn't do much, so he doesn't deserve his
full shares. The law doesn't work like that."_

Exactly. The founding documents are controlling, unless later modified by a
contract signed by the parties.

~~~
_sentient
The founding documents explicitly list Kyle as the sole founder and
shareholder of Cruise. If what you state is true then Jeremy's claim is
entirely baseless.

This counter-complaint conveniently breezes past that fact, and moves directly
on to allusions of a verbal contract, as memorialized in the YC app.

~~~
enraged_camel
Founding documents aren't the only document through which someone can be given
50% shares. If you found a company on your own, and then give me 50%, and it
is on paper with your signature and mine, I now own 50%.

~~~
bhouston
It is more complex than than, someone may create multiple conflicting
documents and the you need to resolve them by going to court to figure out how
to resolve the conflicts.

~~~
jhall1468
Well, then the individual in question is liable for fraud, but that probably
isn't the case here anyway.

------
axg
IANAL, but wouldn't Jeremy's 50% be relative to the time he left the company?
No reasonable person would assume a co-founder leaving a startup would retain
50% equity.

------
nykho
In the cruise Cross complaint it says that they entered together to Cruise as
a joint venture. In this joint venture they put code, algorithms, etc. Is it
posible to say that newer algorithm, code, etc or even other responsibilities
not mentioned from Vogt, are not part of the joint venture?. The idea of this
it would be to contain the % of ownership of the joint venture. Or is this
their plan all along?

------
a13n
It's pretty common SV knowledge that ideas are a dime a dozen and team &
execution are what really matters. However, this doesn't necessarily hold up
in court. It'll be very interesting to see how this plays out. Especially
considering sama's involvement.

Any idea when we'll get an update?

------
parray
Knowing Jeremy, this doesn't surprise me whatsoever. Greedy and good at
selling his side of the story. One of the most selfish human beings I know.
Kyle, I'm rooting for you to win this case here. You deserve it for the hard
work you put in.

------
jboydyhacker
A couple reactions after reading the cross complaint:

First. In a game of legal posturing sometimes a good writer can make a great
deal of difference. Jermey’s lawyers are fairly good writes and they weave
quite a huge story. I think as I said in original comments there is almost no
way this case gets dismissed on summary judgement. That’s unfortunate because
it means no easy way out.

Second. Man Jeremy is pretty dismissive of Kyle’s background and it’s
downright nasty. “two successful startups” and not related to autos. Well,
does Jermey have any successful startups at all? It’s not a small thing and
someone unpleasant to read if you are in the startup world or have spent much
time actually trying to build a business to see lawyers talking smack about a
guy whose done pretty well.

Lastly, it’s a fine piece of writing but I still go back to what the hell did
Jermey do for one month that would entitle him to anything. I think you have
to go back to what is the convention in the industry which is a typical
vesting schedule applies and that’s a risky in any startup.

I also have to say poor Kyle must feel terrible. I’m honestly kinda sick to my
stomach reading the complaints. Startups are tough thing and 2.5 years vs 1
month in a big difference in blood sweat and tears no matter how much Jermey
put in. It strains any reasonable amount of credulity that if Jeremy felt this
way – he’d never mention it until now. I believe under the law that does
weaken his case quite a bit. I forget the legal concept but in some cases when
you don't speak up- it minimizes your right to speak up later.

It's deceptive to not speak up and let someone else continue building
something under the mistaken belief they owned it- when you beleived you owned
half. I think that's the part that has a lot of people taking Kyle's side-
imagine if you built something for 2.5 years and you thought you owned all of
it- and someone else believed the whole time they owned half?

There is an inherent unfairness to that and the law does recognize that.

My best advice for Kyle would be figure out a way to close the GM deal without
settling as these guys are in for a fight. Get everyone else paid, close the
deal and let the lawyers handle it as even reading their very well written
prose- I don’t think there is a case here for Jeremy and given all the drama
in the nice prose I think their lawyers know that too and it’s just a well
worded shakedown.

But yeah- really a sickening read. A lot of my opinion is based on the
assumption Jeremey never said a thing about this until after the huge sale. If
that's the case, quote sun tzu all ya want but it's still slimey and I think
against some basic precepts of US corporate law.

~~~
threesixandnine
This "speak up" argument you use can go both ways? Why didn't Kyle "speak up"
and connect with Jeremy to sort this out. I am sure he didn't forget about his
YC application where he wrote 50/50\. No, he instead buried his head and hoped
it will just go away. It's deceptive.

------
nxzero
Very possible this has been covered, but how would a startup execute proactive
due diligence to counter such claims from go to exit?

~~~
fudged71
Proactive due diligence on the side of the company?

Leading up to investment rounds it is common to create a "Data Room" with all
of your corporate documents. This is shared with the investors. If you spend a
lot of internal effort to keep this Data Room complete and accurate, then you
might find things that have been missed.

But to be truly proactive is to get proper legal advice at every stage of your
company so that these issues never happen in the first place. (Thinking of
firing a cofounder? Talk to you lawyer, understand the process, follow it by
the book).

------
rdl
Has anyone pulled the $20 worth of filings from Delaware on file number
5403771? Seems stupid for everyone to do it.

------
rajacombinator
This whole incident really lowers my opinion of YC.

------
possibility
> After hearing the announcement, Guillory contacted Vogt to inquire about his
> share of the proceeds from the sale of Cruise to GM. Vogt responded that he
> was due nothing, but first offered $100,000, then $1 million, and then $1.5
> million and acknowledgment that Guillory was a co-founder — but only if
> Guillory would immediately surrender his ownership rights.

> The second Director to contact Guillory, Altman, also said he was authorized
> to negotiate on Cruise’s behalf and offered Guillory triple the amount of
> Vogt’s previous offer, but only if Guillory would agree to sign a formal
> settlement agreement that same day.

3 x $1.5 million = $4.5 million. Personally, I would have taken the money, but
I think it must be incredibly hard to make such a decision under time pressure
and without counsel. Still, you can retire on that money and basically be
happy, and I would have chosen that over this shitstorm if I'd had the
presence of mind.

~~~
threesixandnine
Why?

It's pretty obvious to me that they pushed him. First he was pushed out from
the company and then they tried to push him out of the bigger deal with
$100,000.

All Internet outcry in the last few days about this is also pretty indicative.
They used their influence to portray Guillory as a bad character all in "we
are angels" and he's a freeloader way. Which of course considering Guillory
previous work in the field is suspicious. He certainly contributed at the
beginning and probably that contribution was very, very important for the
company. Otherwise they wouldn't go all the way to $4.5 million.

The interesting point you make about "presence of mind". Exactly. No one in
this case has the presence of mind. It reeks of anger and revenge. I feel the
same way so I am rooting for the small guy here.

~~~
possibility
Why would I take the money? Because I've seen someone sue and win a lawsuit
and I just wouldn't want to go through the stress of it. Even if I thought I
was right and could win. Everyone has their price, maybe Jeremy would have
settled for $20M.

------
mkoble11
haha, this seems like total bullshit.

there's no WAY an experienced founder like kyle would have given 50% of the
company away, _especially_ without a vesting schedule.

~~~
sergers
the facts show there is no vesting schedule, i haven't seen anything that
contradicts this yet.

Sam alludes to it in his blogpost...

~~~
mkoble11
a vesting schedule is standard and _would not_ have been overlooked by someone
who founded 2 companies w/ successful exits.

here's a direct quote from sam's post
([http://blog.samaltman.com/cruise](http://blog.samaltman.com/cruise)) : _"
Even if Jeremy had signed a stock agreement, he wouldn’t have reached the
standard 1-year cliff for founders to vest any equity."_

~~~
sergers
you are making assumptions (while are all are here too)... clearly something
was overlooked to be in situation now.

but as he alludes to no agreement exists, there is no "standard" in contract
terms to rely on.

~~~
mkoble11
i'm just reading the case as i see it. there might be more or less to this -
but there were multiple opportunities for the guy to come forward especially
after previous rounds.

~~~
sergers
no doubt Jeremy is opportunistic, but that doesnt really affect his claims
legally if he was in fact identified as a cofounder when there is no contract
in place to say otherwise.

------
alexcaps
This makes me sick. Jeremy makes me sick. Despicable.

~~~
jamiequint
100% agree, he's a scumbag.

------
Jeong19
This thread is full of nasty comments about sama and his blog post.

To those of you attacking him, remember that you're talking about a man who
has already proven himself to be one of the most disruptive entrepreneurs SV
has ever seen, despite still being relatively young. When Sam was a fresh
Stanford dropout, he built Loopt, the very first location aware app, which
spawned dozens of imitators, including Foursquare and Gowalla. It also doubled
as a dating app popular amongst gay men and easily beat Grindr to market by a
decade.

If sama says Jeremy's claim is baseless, then I'm inclined to believe him, on
the strength of his reputation and accomplishments alone.

Edit: Could the downvoters at least explain themselves? Is defending YC or
sama enough to deserve downvotes now?

~~~
joslin01
You're getting down-voted because your argument boils down to Sam is a smart
guy, trust him. Engineers like to think for themselves and play detective.

For consolation, I had the same reaction especially when I first read the
blog-post. Having read through this entire counter-complaint and the comments
here, I'm not so sure anymore.

