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.
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.
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 :/
Never forget, your equity is a lottery ticket.
Please explain how GM would renegotiate their equity stakes pro rata? I've never come across this.