Too much sharing.
That’s one of the beefs investors of a Denver company have with their former CEO, whom they accuse of taking confidential information to a second startup he launched while still the head honcho.
Shareholders in Denver-based Mobile Accord sued James Eberhard last week, accusing him of failing to disclose that he was founding a second firm called Fluid Market, an Uber-like app for sharing household items and tools like a lawnmower or blender.
The investors, Joseph Fink and Charles MacDonald, also claim Eberhard gave his new startup access to Mobile Accord data in exchange for a small stake in Fluid, according to the lawsuit.
Fink and MacDonald argue that deal put Eberhard’s interests ahead of shareholders and fits into a “pattern of faithless misconduct.” They want the court to kick Eberhard off Mobile Accord’s board, stop him from soliciting their investors and customers, and award them $15 million in damages.
Eberhard spent the better part of a decade at Mobile Accord, which makes software to send money and fill-in surveys over text message. He joined the business in 2007 when his software business became a Mobile Accord subsidiary, rising to CEO and chairman in 2011.
Eberhard’s sister Jenifer Snyder, who also worked on the data-for-shares deal on behalf of Mobile Accord, and Fluid Market also are defendants in the dispute filed May 1 in Denver District Court.
In court documents, Fink and MacDonald claim the siblings “secretly decided to start up Fluid while they were senior corporate officers” at Mobile Accord in November 2015.
The shareholders allege that within a year, Eberhard and Snyder were “covertly approaching” Mobile Accord investors, including two Mobile Accord board members, to solicit investment for Fluid.
In the midst of fundraising for Fluid, according to the complaint, Snyder drafted an agreement to share Mobile Accord’s “entire database and customer contacts list with Fluid” in exchange for a 5 percent stake in the app startup.
In November 2016, Mobile Accord began to suspect Snyder and Eberhard were working both sides of the deal after a Fluid press release. MacDonald confronted Eberhard in an email included in court documents:
I can’t tell you how disappointing it is, after you described to the entire MAI board that Fluid Market is ‘just some startup I provided some seed capital to,’ that three minutes of clicking around on the web reveals that in actuality you are co-founder and Chairman of the Board of FM. WTF.
Eberhard initially told Mobile Accord he was only “a small investor” in Fluid, Fink and MacDonald claim, but later said he had been “ambiguous about how much of Fluid he owned.” Mobile Accord has asked Eberhard to pony up Fluid financial documents in order to review the data-for-shares swap.
Reached by phone, Eberhard declined comment. But he has replied to allegations in court, saying that Fluid and Mobile Accord “are different businesses, with different customers, that do not compete in any way.”
Eberhard argues that soliciting the same investors isn’t the same as absconding with trade secrets, and claims Mobile Accord did not prohibit him from starting or investing in other businesses.
“The identity of investors Eberhard knew is not a trade secret, and those investors’ decisions to invest in more than one company started by Eberhard is not actionable – because those investments did not harm MAI,” according to the reply in court.
Eberhard and his co-defendants are represented by Orion Armon and Janna Fischer of Cooley.
Fink and MacDonald don’t have the votes to remove Eberhard from the Mobile Accord board internally, they say, alleging that two additional board members have a conflict of interest because they invested in Fluid.
Attorneys Frederick J. Baumann and Adam L. Massaro of Lewis Roca Rothgerber Christie are representing Fink and MacDonald in the dispute. Fink and MacDonald did not return messages seeking comment.
Additional Fluid Market investors include Grotech Ventures, New Enterprise Associates and Correlation Ventures.