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Jeremy Guillory's Counter-Complaint against Cruise Automation (drive.google.com)
334 points by finkin1 on April 15, 2016 | hide | past | favorite | 338 comments



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.


FYI for any readers, rayiner is an accomplished appellate lawyer.


Given that the company had been incorporated prior to the YC application, there are two possibilities: The original incorporation paperwork shows a 50:50 split or it contradicts the YC application. In the latter case, assuming that one party handled incorporation but made the other believe it said something different, wouldn't that constitute fraud?

Of course, it's also possible that they discussed resolving the equity when they split but never put it into writing...


In the countercomplaint, Jeremy says that he and Kyle first met in the beginning of October 2013.

Elsewhere in this thread, someone found that the company was incorporated in September 2013.

So a possible timeline is that Kyle creates the company with himself as the sole owner first, and goes looking for a technical partner. He finds Jeremy, they talk, they hit it off, and they decide to apply to YC together, and Kyle offers to split the existing company 50/50. But they don't put anything in writing, so on paper the company is still 100% owned by Kyle. Things go sour between them, and Jeremy leaves/is kicked out without the ownership of the company ever changing on paper. And then things move on, other people are brought into the company, shares and vesting schedules are formalized, and the whole thing is forgotten/buried. Until now.


> He finds Jeremy, they talk, they hit it off, and they decide to apply to YC together, and Kyle offers to split the existing company 50/50. But they don't put anything in writing...

One of the major questions is whether the YC application and any stated intent for a 50/50 split in it would be that writing.


Kyle fired(?) Jeremy after a month, was that a valid withdrawal of the verbal promise to give Jeremy 50% of the shares? Jeremy left, and did not in any way indicate that he still thought he had 50% of the company, is that an implicit acceptance of losing his promised shares?


That all sounds complicated and open to debate. Was Jeremy an employee? Did Kyle have any standing to fire him? What were the circumstances under which Jeremy left? Did Kyle use any primary IP contributions from Jeremy, like architectural designs?

Also, if there is sufficient evidence to declare that the 50/50 partnership existed, then Jeremy did not have to do anything to explicitly declare or let Kyle know that he (Jeremy) understood himself to still possess a 50% stake. There would be no such thing as an "implicit acceptance" of losing equity.

Basically the points you raise are not at all obviously addressable, and there are many ways they could play out that actually do support a significant award to Jeremy, regardless of whether that is a popular outcome.


The original paperwork might not have issued stock to anyone. It is quite common for people to organize a corporation while neglecting to issue any stock until a later date (often when an investor's lawyer first reviews the file). As you can see this creates a host of problems, which could be avoided if people would stop telling founders that the first thing to do is form a Delaware corporation.


With the final irony probably being that the acquiring company may lose its taste for the acquisition given the dispute, meaning they are just fighting over who gets half of the ashes of a bonfire of money.


I suspect large corporations are no strangers to these lawsuits and if they really wanted the IP, they wouldn't be scared off by debacle...although they would likely double down on any due diligence they planned.


This is not uncommon. The deal will have an escrow where money is held for a time period to protect against such claims.


Well, at the very least, moving forward if there is a mention of another founder on a YC application, that later leaves, I'm sure YC will probably suggest that the departure is formerly written/signed/witnessed to avoid this type of issue in the future.


Thanks for the summary - perhaps a slightly more philosophical Q: if applying to YC implied an intent to split the company 50:50, then would the notion YC usually asks a company to have a vesting schedule of that sort imply that it was intended?


The fact that it's a YC application as opposed to some other type of writing is mostly irrelevant.[1] What Guillory is relying on is the statements in the application:

> [The YC application] described repeatedly that Guillory was a founder of Cruise Automation and states unequivocally in response to a question asking “who are the shareholders and what percent does each own?” that “Cruise Automation is a Delaware C Corporation created in September 2013. 50/50 split between Kyle and Jeremy.”

That writing is evidence of the agreement. Commercial practice, like what YC usually requires in terms of vesting schedule, may also be evidence of the agreement, but obviously it's weaker evidence than the words on the page. And under certain circumstances,[2] it might not even be permissible to invoke external evidence such as commercial practice to add terms to a contract.

[1] It's relevant to the extent that a YC application is the sort of thing you'd expect to contain accurate and true statements written down with some care. Besides that, it's value is its contents, not any inferences that you may make from what you know about the YC process generally.

[2] Under the parole evidence rule, when a contract seems complete on its face, you can't invoke external evidence to add terms to the contract. Although it's hard to say that in this context you have a contract that's complete on its face.


Apply HN: due diligence as a service


When you raise a Series A or later funding there normally is an extensive amount of due diligence done before the deal is closed. Sometimes you pay for it, sometimes the VC pays for it, but it happens.

Before that point spending extensive time or money on due diligence is probably a waste. By all means keep accurate documentation of what is going on and follow best practices, but if there are a few minor issues it probably doesn't matter and will get cleaned up later if your business is doing well enough (note: this situation is obviously not a minor issue).


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


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


Isn't that a bit of an oxymoron? If you just trust some people you pay, how is that different from trusting the other people you pay?

'Due diligence' must be performed by the buyer, otherwise it is something else.


Interesting, so if the case hinges on the YC application as evidence of the equity split, then we also know that YC requires all founders to sign an employment agreement with their company and restricted stock purchase agreement, following a very standardized YC template, that would include a vesting schedule. Other requirements include an employee incentive pool and of course enough common shares for YC to purchase their portion.


I know that YC has a standard RSPA... but I'm also fairly certain that their template is not used universally by all YC companies (eg. Quora, who probably already had other RSPA docs [1]). Therefore, the standard YC RSPA cannot probably be deemed binding after the fact. (IANAL)

[1] http://techcrunch.com/2014/05/11/quora-y-combinator/


Could you comment on the cause of action that references the existence of joint venture? Being somewhat familiar with that area of law it seems like that's a great catch-all for any claims that Jeremy doesn't have any equity in the company specifically. That's an apparently somewhat sound doctrine that would imply that even if he has no shares in the company, there is a "joint venture" consisting of himself and that company which he still has a share of, and that said joint venture is subject to partnership law.

Am I reading that right?


So creating a partnership (a form of joint venture) is extremely easy: if you get together as co-owners and operate a business enterprise for profit a partnership arises, whether or not you intended to create a partnership.[1] So if Guillory and Vogt operated as co-owners of a for-profit business, there might be a partnership. The partnership probably wouldn't be around today. It probably would have been terminated when Vogt "fired" Guillory. But if Guillory was a partner, he was entitled to some distribution of the partnership assets that existed at the time.

Guillory's allegation here is basically that he never got that distribution, and Vogt took the IP that was among the partnership's assets to Cruise. The partnership claim isn't going to get him equity in Cruise. What it does get him will depend mostly on what IP he contributed and the harm to Guillory from Cruise not returning that IP.

[1] At least in California, which follows the Uniform Partnership Act.


I think the biggest thing everyone is glancing over is the wording of the app:

"If you have not formed the company yet, describe the planned equity ownership breakdown among the founders, employees and any other proposed stockholders."

Planned != official, no ? Couldn't cruise claim that the stock was never awarded


Surprisingly, CA statute of frauds does not seem to require a signed writing for this type of contract...


Quite a few states don't require a signed, written contract for agreements.


CA law does require that a sale of personal property for more than 5k be evidenced by some form of writing. However, does not have to be signed. Thus the key function of the ycombinator application form as evidence. This is practically a law school or bar exam question in the making!


So if the issue of stock wasn't in writing for a Delaware company, then his 50% claim is not valid as he was never issued stock? I'm sure #2 is a non issue for Cruise


Maybe. Guillory doesn't need to show he was issued shares to win. If Cruise promised him 50% equity, and didn't issue him any shares, that would be a breach of contract. Guillory would get damages not because he actually owned equity in Cruise, but to compensate him for the equity that was promised to him but never issued as shares. Contract damages put you in the place you would have been had the other side kept their promises.


On top of what @theoracle110 said, would other contracts in previous investment rounds (in which Jeremy did not speak up) have any power/relevance?


Isn't there a statue of limitations for this? It's been over 2 years and he never lodged a complaint


This is trivial, but my favorite part of your post is the use of "a writing" as an expression.


It's a term of art.


Ha! "Term of art" is another good one.


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.


>offering him $100k

you're kidding? i mean it can't be real. It is like an insult on top of the original insult. When i first read sama's post mentioning the offer without the actual number, i was making bets with myself whether they offered $10M, and was guessing whether the guy was right walking away from money like this. $100k never even crossed my mind :) That is the kind of greed that really kills luck (and getting $1B or just $990M for the Cruise is a Vegas scale luck)

Edit: read in the other comments that from original $100k the offer has now reached $4.5M. That is one "hockey stick"! Giving such low insulting start, my bet would be that instead of $10M - originally reasonable offer - the thing, with all the court filings, lawyers and emotions, will reach closure close to $100M, definitely crossing the $50M. Btw, where is my popcorn, this Cruise story is basically episode 0 of the season 3 of "SV" :)


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.


> 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.


This. Looks like a classical story of ideas guy using an engineer with relevant education and a decade of experience, then kicking him out. Looks very unjust to me, esp. considering there is big SV establishment (YC) on the other side.


> 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...

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


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


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?


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.


I would imagine that this is supposed to help support their argument for conversion, that Kyle was inclined to use Jeremy's IP contributions in part because Kyle was otherwise incapable of practically accomplishing the company's goals.

It does seem harshly written, but the same could be said of the complaint and sama's post.


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.


> 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

This is a filter bubble that startup founders need to snap out of...in the real world, two people can agree to anything, and general startup best practices dont dictate or say anything about the past, they can just guide you in the future.

That startup advice about how to split equity is sound advice and it is arguably outlandish to not follow it...but that in no way shape or form makes it the reality of what actually happened. People agree to all sorts of things all the time.


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


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


> 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.

I really don't understand your view here. If the value of the business plan didn't merit equal percentage, that should've been made clear at the onset. At the time, according to Jeremy's complaint it was valued at 50% of the company:

    ... Vogt agreed that Guillory should be a co-founder and 50% equity owner of Cruise.
If the business plan and some ideas didn't merit 50% ownership, Vogt shouldn't have agreed that Guillery should be a 50% equity owner of Cruise. Simple as that.


Ownership as stated in a Y Combinator application 100% of the time implies there is also a vesting agreement.

I've filled out my own (successful) YC application which stated that I owned 50% of my company. My own equity was still subject to a vesting agreement requiring that I continue to be employed at the company.

A proposed (or even stated) equity split doesn't grant outright ownership. It would be impossible to raise investment from any professional Series A/B investor (anything involving a priced round) without founder and employee vesting, typically on a 4 year vesting schedule with a 1 year cliff at the very least.


> Ownership as stated in a Y Combinator application 100% of the time implies there is also a vesting agreement.

An ownership agreement doesn't require vesting, unless one was agreed to. An implication is worthless.

> A proposed (or even stated) equity split doesn't grant outright ownership.

In a YC boilerplate stock vesting agreement, perhaps. Doesn't apply to contract law as a whole.

EDIT:

> It would be impossible to raise investment from any professional Series A/B investor (anything involving a priced round) without founder and employee vesting, typically on a 4 year vesting schedule with a 1 year cliff at the very least.

You can raise investment from someone if they never know of an outstanding ownership claim until an event occurs.


I'm just wondering what startup you're a founder of that didn't have founder vesting?


Facebook didn't have founder vesting. Which is why Saverin has billions of dollars despite not really doing anything.


He actually has billions of dollars because he was the first investor in the company, he invested $18k in Facebook in 2004.


No, most of his stake is almost certainly from shares given to him as a founder. Mark Zuckerberg publicly admitted at Startup School that it was a billion dollar mistake not to have founder vesting (because he didn't know anything about startups at the time), and claims that Eduardo "just bounced."

Anyways, this is irrelevant because the fact is Facebook initially did not have founder vesting.


I'd imagine most of them start that way. Most startups go without a formal partnership agreement or incorporation until they need it (like being funded). Look at the winklevosses and facebook


I'm sorry, but you're flat out wrong.

There has to be a definitive and clearly stated offer to do something in exchange for valuable consideration to make a valid contract. A document that simply says what the proposed ownership is doesn't make said ownership legally valid.


OK firstly, consideration doesn't have to be "valuable". It has to have _nonzero_ value, but that value can famously be as trivial as "a mere peppercorn" [0]. Furthermore: "a peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn".

[0] https://en.wikipedia.org/wiki/Peppercorn_(legal)

The point is that the law doesn't attempt to make everyone "be nice", nor does it protect you from making a bad business decision. It's really just ensuring that there was _some_ business (ie, some exchange of nonzero value) occurring at all.

Secondly, it's important to note that a written contract is not absolutely needed to enact shared ownership; a written contract (or a deed, or a shareholder's agreement) is just to formalize the agreement in writing to avoid disagreement later.

If you start working together, shared ownership is the _default_ in the absence of any mode-changing agreements. Were they working together? A recorded video, in which they take turns looking into the camera and effectively saying "We are working together" [1] is a pretty strong evidence that, at one point, they were working together.

[1] https://m.youtube.com/watch?v=_P6oXe1YI90

Thirdly, in the absence of formal documents saying "We are officially working together" or "We are officially not working together", the court has to fall back on attempting to determine the intention. It will have to fall back on looking for any evidence (like that video) that suggests they were in agreement about working together at some point.


If I were on the jury, that video would definitely make me accept Jeremy's claims.


The complaint says that Jeremy brought to the initial relationship his previous work on self-driving car technology, for which he received 50% equity. Kyle brought his capital, experience, and VC contacts, for which he received his 50% equity.

Now, maybe that's a lie, but taken on face value, it reads to me like there was exchange of value between the company and each founder.


Consideration takes many forms. Just because a small, niche population like HN thinks something isn't consideration, doesn't mean a jury of 12 is going to see it the same way.


Vesting is absolutely not implied, expected, or required by the law. Regardless of common practice in YC companies or YC applications, vesting is not the automatic default mode in corporation law or contract law.

If there is evidence of an agreement (whether written or oral) between the parties to apply a vesting schedule, then that will override the default mode; otherwise the default mode (no vesting) prevails.


Just because your ownership agreement stipulates a vesting schedule doesn't mean all companies are organized that way. In fact, I believe the default is to have no vesting, which is why we have vesting agreements in the first place!

I'm not arguing that having immediate vesting is a smart way to organize a company. But, to claim that a YC application 100% of the time implies anything is a stretch.


Presumably because equity is also for the work done?


Assumptions aren't contract law. If someone says you own 50% of the company with them, even if you do nothing, you own 50%.


It's super rare that founder shares don't vest. YC would have advised it.


What happens to ownership interests/claims that YC isn't aware of?


What if they stop working with you and buy out your worthless stake?


Presumably the money raising came from Vogt. And there are other engineers at Cruise capable of assisting with the rest?


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.


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.


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.


> The only reason to write what he wrote is if you're out of actual ammo.

This is really astute. In my experience, more often than not, when someone becomes angry at someone else, deep down they are really angry at themselves for letting something happen.


> 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.


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



Which PG essay is this?


VC firms are sophisticated investors and are supposed to conduct due diligence on behalf of their L.P's. Part of what the big management fees they charge are supposed to go to is ensuring that each investment is legally sound - i.e. having their people verify the incorporation documents, cap table, etc.

So yes, the fact that this situation has become known at this terribly late stage reflects badly on all the investors in previous rounds.


I'm familiar with due diligence processes. They're why I believe the later stage VCs are likely the victims of fraud on the part of Cruise's D&Os. All of those investors would've demanded a clean separation agreement if they had any information regarding the co-founder.


> 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.

This. That post was a huge red flag and after reading the claim it's very clear why he posted it.


I think this really hits the nail on the head. "The later investors" here really include everyone except for YC, insofar as investors have heretofor been able to take the YC stamp on a company as certification that these sort of issues have been worked out. I think the end result of this is that you'll see a market correction against YC companies as VC's find they have to put in extra due diligence they didn't have to before. Altman raising attention to this issue may act as a catalyst.


They did fail to identify the problem ....

But if there's any anger from screwed employees, it should be directed at the criminals who did the bullshit crime instead of the detectives who failed to identify the crime sooner, no?


In this case there is a fiduciary duty from the investors (detectives in your metaphor) to make sure that the company is free from these kinds of things. So while they aren't to blame - they aren't really off the hook either - it's more of a sin of omission.

And yes, in many cases when detectives or investigators in law enforcement are lazy with their work and miss something obvious, they often pay for it with their jobs.


Investors do not have a fiduciary duty to the employees. Members of the board of directors (which all investors presumably are not) have a fiduciary duty to the stockholders (which many employees presumably are not).


VCs have a fiduciary duty to _their_ investors.


Do they? Serious question. I mean, I assume someone involved in the VC firm has a fiduciary duty to its investors, but it's not like an employee typically has a fiduciary duty to his firm's investors.


I guess I don't see how this was so obvious.


There will be enough anger for everyone.


That's pretty crazy to me.


> That alone speaks volumes.

Move fast, break things.

I bet this is one thing that will be fixed for all future applications.


>That alone speaks volumes.

It's also pretty scary that YC are willing to railroad a co-founder in favour of a SV insider.


If you had a partner who left after a month - then do a financing right thereafter with vesting schedules and the like it's easy to assume that those same schedules apply to everyone. If it were to be caught- it would have been at the Series A but it sounds like so much time passed and his involvement was so short people just forgot about the guy.

If Jeremy never said a word about it since it would never come up. If I owned 50% of a company and it did a financing- I'd certainly inquire about my shares. Sounds like he never even did that.

Kyle probably feels like shit I am sure- it's a sickening case to read but to be honest I could see it going down exactly like that.


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.


"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?


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).


> 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?


Not without begging the question. Because we could rephrase your sentiment as, "Are you seriously asking whether a co-founder of a billion dollar company should list some unknown engineer as his 50/50 co-founder on a YC application?" Most people would say, "Of course not", and yet it is currently undisputed that Guillory's name is listed as such.

And so no, the answer is not obvious.


> we could rephrase your sentiment as, "Are you seriously asking whether a co-founder of a billion dollar company should list some unknown engineer as his 50/50 co-founder on a YC application?"

Please don't, that is a completely different question. I'm honestly not sure how you managed to conflate the two.


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.


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.


They did get accepted into YC without Jeremy (who had already parted by the time the interview was done). Perhaps your question should have been "would they have been shortlisted".

Given Kyle's background... The answer is yes.


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

Yes, without a doubt. He's previously YC by way of Justin.tv / Socialcam / Twitch. If you're good enough to go through YC once and have a track record of success you're a shoe-in for your next venture.

Realistically Kyle would have been accepted to YC without any idea and he would have been wildly successful with Cruise even without YC.


So then why include Jeremy and state his 50% ownership?


Uh, how do you not get that from Guillory's counter-complaint, unless you believe that Guillory is lying? He claims to have been forced out. The YC app has him listed as a 50% co-founder. Altman's blog post and the complaint against Guillory don't dispute that fact.


I don't know, because I'm not delusional maybe?

Even if he was forced out how does this involve YC in any way. Everything in both timelines With regard to Jeremy and Kyle ceasing to work together happened prior to YC even agreeing to invest in the company.


Because YC accepted the application with the names of both founders and a 50/50 split. Vogt has not produced documentation that, at the time that YC accepted Cruise or shortly afterwards, that they formalized the fact that Vogt was sole founder.

A couple of years later, just as it is on the verge of sharing in a big payday, only now does YC take an interest in saying that Guillory is an extortionist who shouldn't get a co-founder's due. If you're someone who believes Guillory's side of the story -- that he was forced out -- then yes, you might see YC and Vogt conspiring against Guillory.


Even if he were forced out, do you honestly believe that someone who was fired after 1 month at a company is entitled to full 50% ownership in that company? Can you honestly not see how that claim, given its timing, is being construed as extortion?


Come on, stick to the actual claims, don't make up strawmen scenarios.

Jeremy isn't claiming 50% of the company, he is claiming 50% of Kyle's share, minus whatever Kyle would be given in exchange for the $100k he put in.

Noone is saying that Jeremy is entitled to that share because of a month of work. Jeremy is claiming that Kyle promised him a 50/50 split, and that their YC application video is a writing of this promise. And if that's the case, then the magnitude of Jeremy's effort doesn't matter legally.


I didn't say that I believe that Vogt and YC claim of extortion is false. You asked, "How do you get this crap out of the written complaints in any way?", because you seem surprised why any reasonable person could consider Guillory's side, given the facts stated in the complaint and counter-complaint.

Well, his counter-complaint claims that he was integral to the development of the company. To back that claim, he has actual paperwork, the existence of which has not been disputed by Vogt. Of course, there's plenty of time for Vogt to produce documentation showing that Guillory's stake was rescinded, but we haven't seen it yet, not even in Altman's principled "screw the lawyers" blog post yesterday.


As someone who has worked in early stage startups for 9 years now, I'd be hard pressed to believe that anyone who worked at a company for one month at its beginning was 'integral to the development of the company'. That's just not how startups work. The value isn't in the initial idea, or the detailed initial plan. It's in the hard work, the long nights writing code, the prototyping and testing, and prototyping and testing again, the recruiting, the sales, the fundraising, the deal-making. So no, I don't believe that anyone who has worked for 1 month at any company at any stage deserves 50% of that company. That is fundamentally unfair.


Fundamentally unfair happens all the time, especially when the law is at play. But unfair doesn't mean immoral, illegal, or even "mean".

Further I would dispute the notion that the value is in the hard work, long nights, etc. Value definitely does lie there and that's definitely measurable. But there's TONS of value in outlining the correct approach, dividing the problem correctly, etc. That's called architecture and I've worked on projects with none of it and it's a disaster.

For the starkest example of how this plays out, I would invite you to watch the NOVA special "The Great Robot Race" which outlines how all the competitors worked on getting "the best X hardware" where X was the piece that they thought was the most crucial to success including now giants like CMU. In the end it was folks from Stanford who recognized that the exact car, exact LIDAR, etc weren't the crucial missing link, but rather that the software was the problem. And they won based primarily on that insight and then successfully executing.


I have a counter-example. I worked at a small SaaS company where I built the foundation web service and performed query optimization that took from them a highly-inadequate non-scalable product to something that handled scale gracefully. A substantial amount of this work was done in my first month there - in my opinion, my domain knowledge ensured that what I did for them in this month would have taken them a lot more hardware and many months to even get close.

You seem to be very dismissive of turning-point ideas and crucial features that make or break companies. Archimedes' principle, the foundation of modern naval history, was a Eureka moment thought up in a bathtub. Should we ignore this contribution because it took moments to come upon this insight?

I am not taking sides here and wish to let the courts work through this complaint without casting aspersions on either side.


How do you justify use of the term "fired"?

If you have 50% of equity, therefor 50% of the vote in corporate decisions, how can the decision be made to "fire" you without your active consent?

"Fire" seems to apply to someone compensated under the normal "right to work" ("right to fire") legal framework in the US, not a founder. So the terminology seems very odd to me.

(Maybe this just reflects my lack of understanding of business law?)


It has the appearance of involving YC because the president of YC posted an aggressive blog post about it.


>I don't know, because I'm not delusional maybe?

The fact that you find it unfathomable that maybe, possibly, some rich SV-types could be the bad guys here is delusional.


Or it means you should always get everything in writing no matter what side you're on. A simple statement regarding how the shares vest would have prevented this.


It sounds like Jeremy wasn't at the company long enough to get that sorted out. I am curious why he left so soon though.


The complaint says he was ousted by Vogt unilaterally.


True, I'm wondering what Vogt's response would be. I'm also curious why Kyle would want Jeremy gone after a month.


> 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.)"]


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


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.


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).


IANAL but it seems plausible they could argue that the 50% was for the original concept and all the work he had done on it up to that point. Or are they really arguing that they threw all that away and started with nothing after he left? I agree with those saying that ideas don't make a company, but startup companies don't suddenly become worth a billion real dollars to GM without ideas. If what GM is buying is largely IP, and that IP is largely based on the departed co-founder's ideas, then his claims seem reasonable to me.

Edit: reading further I guess they are arguing that none of his IP is in what GM is buying. So I guess that will be the real point of contention.


My point was merely that a contract isn't valid without consideration, which may exist in this case.

In any event, breach of contract isn't the only claim being made.


I don't think this is true. Unless said contract specifically says that your 50% of the share is contingent upon a list of explicitly spelled out contributions, you would actually be entitled to the 50% even if you did nothing.


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.


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.


Yes, but what if, for example, the work that he had done prior to beginning that one month's involvement in Cruise was the majority of the IP that GM wants to buy? Would you still interpret it the same way? I have no idea whose IP is in there, at all. Just pointing out that simply stating he did "a month's work" could be quite disingenuous.


Claim 27 of this response enumerates the (claimed) consideration.


Yes, I know. I was only pointing out that the issue is more complicated than having an agreement that lays out a 50/50 split.


Conspicuously absent from this paragraph (and Sam's post) is any mention of the technology that Jeremy claims to have brought to the initial partnership from his previous work.

From this paragraph, it sounds like Jeremy could have been any dork off the street who can find some office space. The question then is why Kyle worked with Jeremy at all, and in particular, why he proposed to Ycombinator to found a self-driving car company with Jeremy as an equal partner.


The statement is suspiciously precise. It says that he didn't build hardware, write code or file any patents. But that's obviously not the stuff to be doing at that stage of the company. It would make sense that he's doing research and planning out what the build steps might look like. And Sam's post conveniently omits any reference to this kind of work.


..ir indeed do other invention work and introduce IP to the company from his years of prior engineering and design work. And no time to patent it before he got thrown out.


From the YC application video alone, there seems to be a major point of contention about what Jeremy actually contributed. In the video they are talking about specific plans involving commodity hardware, that they devised a way to constrain the engineering problem to make it feasible, and that they had co-developed a business plan to get it to market quickly.

That's all just plainly in the YC application video.

That doesn't seem compatible with what Sam Altman says, so either the video does not depict Jeremy's contributions up to that point in time, or else Sam is incorrect and has omitted many contributions from Jeremy. Those contributions may or may not justify Jeremy's claim, but they certainly complicate the issue and present a very legitimate position for Jeremy to at least make the claim.

Jeremy's claim may ultimately not be considered or may not be upheld, but either way the degree to which Altman seems to think it should be categorically ignored does not seem to match the facts regarding the initial formation of Cruise at all.


When I re-read this carefully, I get the feeling an analogy might work:

"You see, your honor, I meant to pay my bill at the restaurant, but they threw me out on the sidewalk before I had a chance to pay it."

As in, one of the two parties might have been genuinely interested in signing such documents, and one of the two parties might have had reasons to want to avoid letting the other one sign those documents.


So is "planned equity" "equity"?


This is exactly the right question. It's clear that Jeremy is not and has never been a formal shareholder in Cruise.

The question is whether having explored (and subsequently abandoned) a potential co-founder relationship constitutes sufficient basis for an equity claim.


I think the majority of this (counter)claim is that Jeremy provided critical IP to the company as consideration for (promised) equity. That makes the issue more complicated, unless Cruise can prove that they threw out 100% of the intellectual property he brought in during his short tenure.


Or would Jeremy need to prove he provided the IP?


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.


This is false.


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.


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...


You can search basic information without paying.

Just searching for Cruise Automation reveals Incorporation date as 24/09/2013


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.


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


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.


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


The YC application isn't a legal document and Kyle (having gone through YC) knows this. Legally he'd have full ownership and in the application specify 50/50 meaning if/when they formalize the relationship that is what the equity split will be. YC doesn't really care what the actual current/legal split is at the time you write the application. What they care about is what the split will be by the time you start YC because that is what is relevant to them.

And (my guess) is that the real reason they care about the split is that they're looking for red flags. i.e. is the cap table already messy with lots of people on it? Is the split NOT 50/50 signalling the founders don't consider each other equals which is a bad sign, etc.


> The YC application isn't a legal document

Of course it is. All documents are legal documents.


Email isn't a legal document, either, but putting things in writing, or even saying them, can change the shape of a legal negotiation.


Kyle Vogt said: "This is false."

Talk to your lawyer before posting on social media.


You should probably not comment.


Not sure if we can actually prove in court that the man behind the nick is vogt himself.


Well, I mean, presumably a lawyer associated with the case who was interested in proving it could depose Mr. Vogt and ask him under oath if he posted that comment.


https://news.ycombinator.com/item?id=8994651

Also interesting because it makes reference to the earliest prototype.


Surely your lawyers advised you to keep silent?


That would seem to be the case. If Jeremy's claims were true there wouldn't be any lawsuit, as Jeremy would already have what he is currently suing for.

It amazes me from the other HN replies comments how much debate and confusion there is, about something so obvious.


I support your version of events. Hang in there!


This whole case is really surprising. I would expect intellectual property assignment agreements and a vesting cliff, particularly after cofounding Twitch.

On the other hand, I know how normal it can feel to trust each other, procrastinate on docs, and just get all over the tech.


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.


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.


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.


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.


Write a book? I'd preorder.


Seconded! In the meanwhile, Founder's Dilemmas is a great read (http://www.amazon.com/The-Founders-Dilemmas-Anticipating-Ent...)


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.


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."


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


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.


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).


The thing is that most of us would do as sama did and the same as Jeremy as well. I know I would. I don't claim to be an angel though....


That's damning if true, and paints YC and sama in a very poor light.


I find this hard to believe considering how strongly sama has come out against exploding offers:

http://blog.ycombinator.com/exploding-offers-suck

Even characterizing them as "terrible behavior"


Right, but he also said:

> Given the time pressure because of the pending merger, we had to set a Friday at 5 pm deadline for Kyle’s offer, which Jeremy let expire.


Investor exploding offer:

"Given the time pressure because of other deals we're looking at"

Employer exploding offer:

"Given the time pressure because of other candidates"

Everybody has a way of dressing up an exploding offer. And FTR, I still don't believe that this is exactly what happen.


From the complaint:

the application that Vogt himself submitted to Y Combinator described repeatedly that Guillory was a founder of Cruise Automation and states unequivocally in response to a question asking “who are the shareholders and what percent does each own?” that “Cruise Automation is a Delaware C Corporation created in September 2013. 50/50 split between Kyle and Jeremy."

If true, that could be worth hundreds of millions, which is an even larger amount of money to walk away from.


If he doesn't have the money to pay the attorney out of pocket, he is then most likely going to pay them with a big % of his "winnings", if he does succeed. In which case, the attorneys would fight tooth and nail to get as much as they could "for their client."


I wouldn't read too much into that or anything said in the complaint until the actual source documents are filed and we see the response to the complaint filed in court.

That could very well be the nuisance value of the suit for them in their situation. Trying to judge a case from just the initial complaint is far too incomplete a picture to go on. I'd withhold judgement until there are more facts established that both sides have had a chance to argue over.

Almost everything you read in the media is ill-informed analysis of non-lawyers. Haven't had much good coverage since Groklaw.


I agree that the source documents are important. But the question shouldn't be whether Jeremy's side can produce them. If they couldn't, this lawsuit wouldn't be happening right now. Clearly, they think they have a significant chance of winning. Otherwise, Jeremy wouldn't have turned down $4.5 million.


I'll give you a counterexample: Paul Ceglia[0]

He claimed to own 80% of Facebook after reaching a written agreement with Mark Zuckerberg and filed a lawsuit[1]. He managed to retain some very high profile law firms to pursuit the case on his behalf.

It was only discovered later, by his own representatives, that he had forged the evidence (he had hired Zuckerberg to do some work, but not on Facebook) and the case was dismissed[2].

Facebook went on to sue the lawfirms, Ceglia was charged with fraud and last anybody heard from him he escaped house detention awaiting sentencing and is now a fugitive[3].

The entire case is fascinating

[0] https://en.wikipedia.org/wiki/Paul_Ceglia

[1] http://money.cnn.com/2010/07/20/technology/facebook_ownershi...

[2] http://money.cnn.com/2012/11/30/technology/social/paul-cegli...

[3] http://www.americanlawyer.com/id=1202736579636/Where-in-the-...


I agree with you, but remember that Jeremy turned down the 4.5 before having a chance to consult with his lawyer. So he must have believed he had a significant chance of winning at that point, and his lawyer must now believe there is some chance of winning or he wouldn't take the case, but we don't know that the lawyer would have advised turning down the 4.5.


His beliefs may or may not conform to reality. I don't find it worthwhile to prejudge the cases based on my read of someone's actions. He's not required to act in a rational manner and the less rational a plaintiff's behavior, the more outlandish the claims may be (see also: Paul Ceglia).

So I'm going to stick with no opinion either way and wait for the hard evidence, rather than trying to read the behavior of people I don't know, who may or may not conform to my ideas of rational behavior, which is something we've yet to establish.

This is very important given that flat-out crazy parties (see also: SCO) have tied up the courts for, well, decades based on stuff and nonsense (and mostly the latter). As I can't prove whether plaintiff or defendant are rational until I see evidence, we're stuck with "stay neutral until you get the facts."

I've read plenty of cases and I've yet to see a case where prejudging the parties was a good idea. Contrarily, I've seen plenty of people get excited about nonsense that was laughed out of court later.

So no, there just isn't a good reason to rush to judgement on this or any other case. Whether the plaintiff or defendant is right is something we should wait to decide later, once we have a more complete set of facts.


Are you really both asserting that the mere fact someone is willing to litigate acts as evidence to the merit of their claims?

This is California. Frivolous lawsuits make up a meaningful portion of our GDP.


Certainly turning down a $4.5M settlement suggests you believe there's merit to your claims. Also, reputable lawyers won't take on a case they don't believe they have any chance of winning, and Keker & Van Nest appears to be a reputable firm. So not always, but in this case, basically yes. Admittedly there is a bit of a difference between "chance of winning" and "some merit" (unfortunately) though.


Even SCO hired reputable lawyers. Alas, it's generally the less rational plaintiffs where people give them entirely too much credit.

It's always better to wait for all the facts first. We have no reason to rush to judgement, nor is it a good idea. It simply makes one easier to manipulate, as the truth is most often the last thing to be heard. It's always easier to toss out a few quick lies than to painstakingly document the truth, especially in court.


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.


"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.


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.


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.


Also they will use the original un-edited blog post.


Yes. This looks really bad on Cruise's part. Oy.


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.


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 :/


> 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.


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.


Here is the YC application video from the counter complaint https://www.youtube.com/watch?v=_P6oXe1YI90


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.


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.


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


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


Thanks.


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'.


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.


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.


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


I don't think anyone's arguing about who deserves what, but more about the legal strength.

Loads of people own huge stakes in companies without doing things with them (see most public stocks), that doesn't mean they lose ownership of them.

Sucks but that's how the private ownership cookie crumbles.


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.


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.


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.


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.”"


And the Delaware Department of State confirms CRUISE AUTOMATION, INC. was incorporated on 9/24/2013.


That document has not been released, so that is speculation. I'm sure someone can research their initial filing to find the exact date


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


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.


Doesn't sound like a company was established. And it sounds like he was around for about a month.


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?


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


>If they took this on contingency

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


Yes, also Apple vs HTC (they represented HTC)


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.


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.


> Yet why didn't he continue with the idea by himself if he was so competent?

The complaint clearly explains this. He just got married and needed a job to pay the bills.

I really hope you just missed this.It would be a shame if you are one of the few entitled folks who doesn't understand the real struggle most people feel to support themselves and their family. The type of person who thinks everyone has the same opportunities you do. I really hope you just missed that line in the complaint.


> The only proof he is using to say he was a co-founder is a YC application.

Which, according to Jeremy's complaint, claims that the application was submitted by Kyle and repeatedly described Jeremy as a co-founder and their equity arrangement.

> 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.

That's not how it works, but that aside, this complaint claims that Jeremy provided "self-driving car concepts, technology, intellectual property, and expertise". I don't understand your statement about "he did [not] provide any IP to the company".


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.


What about the incorporation docs? :)


> This is I hope a non-binding document.

There's no such thing as a non-binding document.

A promise or agreement or contract can be binding or non-binding on any or all points. A document is just what it states, something that could potentially document the parties intent and agreement or lack therof.


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.


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.


I can't see how there is any possible explanation of the agreed upon facts that doesn't paint Kyle as making a horrible mistake with respect to ownership rights.

He submitted a YC application that listed them as co-founders, and has no paperwork showing the Jeremy gave up his share (whatever it might have been).

So, the only explanation I can come up with is that " An experienced & successful entrepreneur" took on "an unknown cofounder" without proper paperwork.

That's a pretty surprising set of circumstances, but it seems pretty clear that it happened.


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


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.


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.


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.


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.


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.


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.


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-...


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.


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.


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...


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.


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?


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