Legal loggerheads: five epic management lawsuits
09 April 2015 -
When the powers behind the throne serve legal papers on each other, expect a resounding clash of steel
Corporate lawsuits are messy enough when two or more large companies are pitted against each other – but when the dispute is between personalities with internal links, the stress and emotional turmoil rise exponentially. In the past few days, one such example has emerged in the media, with reports indicating that Jim Ratcliffe – chairman and founder of chemicals firm Ineos – is planning to take legal action against his former deputy and co-founder Calum MacLean, on the grounds that MacLean has poached Ineos executives to work at his new firm.
Cases of this type affect every industry – just witness rapper and music mogul Lil Wayne suing his close friend and business partner Brian “Birdman” Williams for £34 million in lost earnings earlier this year.
Sexual harassment, age or racial discrimination, bullying, debates over ownership and questions over misleading contracts are among the many internal management wrangles that have broken up successful partnerships and formed some the world’s biggest executive conflicts.
Here are five of the most epic:
1. Snapchat v co-founder
As co-founders Evan Speigel and Bobby Murphy celebrated becoming billionaires after their company Snapchat – a video and picture-messaging app – reached a $10 billion valuation, they were met with a lawsuit from their old Kappa Sigma fraternity brother Reggie Brown. Mr Brown, also a founder, claimed he had been ousted from the firm despite creating the idea for sending photos that erase themselves after a set time limit. After several failed attempts to settle the case, Snapchat recently agreed to pay Brown a large out-of-court sum for damages, with reports suggesting that the amount may be as large as £335m.
2. Rory McIlroy v former management company
Touted as the true successor to Tiger Woods and golf’s most talented and marketable player, McIlroy was involved in a tough legal battle with Horizon Sports Management. Initially, the four-time major winner terminated his contract with Horizon in 2013 to form his own management company, and sued the firm for failing to deal with his interests correctly. Moreover, the Northern Irishman alleged he was misled into signing the contract. Horizon responded with a countersuit reporting a breach of contract on McIlroy’s part, and said it was owed money in commissions from a number of lucrative deals, such as a Nike sponsorship tie-up. Eventually, McIlroy agreed to pay a settlement with his former management company, reportedly worth £13m.
3. Shareholders v Duke Energy
The $26bn merger of Duke Energy and Progress Energy in 2012 is a prime example of the disgruntlement that can stem from employees and investors. Shareholders agreed to the deal on the basis of Progress CEO Bill Johnson remaining as boss of the new company, but shortly after the merger was completed the combined board – with a Duke majority – voted in Duke chief executive Jim Rogers to replace Johnson immediately. Company shares fell sharply and furious investors launched a lawsuit against Duke. In order to avoid the cost of prolonged litigation, the North Carolina-based firm agreed to pay shareholders around £98m to settle.
4. Brokers v Merrill Lynch & Co
US employee George McReynolds filed a lawsuit on behalf of 700 black brokers against investment bank Merrill Lynch & Co in 2005 for racial discrimination. McReynolds claimed his white colleagues were given more lucrative accounts to work with, while black employees had lower pay and fewer career-advancement opportunities. Following two appeals in the Supreme Court and Merrill Lynch's acquisition by Bank of America in 2009, the finance firm finally agreed to pay the group of plaintiffs a settlement in 2013, reportedly totalling $160m.
5. McCartney v The Beatles and Apple Corps
Although many fans didn’t want to admit it, the end of The Beatles was all but confirmed when Paul McCartney filed a lawsuit against his three bandmates and the group’s parent company, Apple Corps, on 31 December 1970. McCartney argued at the High Court that the landmark band should no longer carry on as a legal entity, claiming that The Beatles were no longer going to record or perform as a group. The suit also addressed the corporate management of the group – with McCartney asserting that he had never seen Apple Corps’ audited accounts since it was founded in April 1967, and opposing the choice of Allen Klein as manager. The lengthy legal negotiations finally wrapped on 9 January 1975, with the official dissolution of the band.
Image of Paul McCartney – probably still surprised at how epic his lawsuit was – courtesy of s_bukley / Shutterstock.