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Small shareholder sues Uber

Uber has seen its fair share of lawsuits in the last few years. Some of the lawsuits are arguably growing pains for a company that virtually exploded in size once it hit an apparently massively underserved and untapped market around the nation.

Uber has had to navigate, among other things, a complex system of employment laws that vary from state to state and made it difficult to determine the correct status of its drivers as independent contractors.

However, other lawsuits might have been avoided with more careful planning and good legal advice (as well as a company executive willing to take that advice). The most recent lawsuit comes from a relatively small shareholder -- a retirement fund that has a $2 million stake in the company.

Representatives of the fund say that Uber has engaged in illicit business practices that put the investment at unnecessary risk and make the company's long-term stability uncertain. At issue is the company's now-former chief executive officer's apparent disregard for the laws of business.

This, by extension, has caused the company to endure numerous lawsuits from drivers, passengers, other companies and other investors. It has also put the company under the scrutiny of the federal government for potential legal violations.

The current lawsuit brings a number of new claims against the company, which is now under new management:

  • The company didn't tell potential investors when it created a likely illegal software designed to escape police detection.
  • The company hid a program that was designed to ferret out secrets from Lyft, its biggest rival.
  • The company purposefully misled potential investors about its revenue and growth.
  • It also purposefully misled investors about the strength of its competition.
  • The company had a corporate culture that was thick with sexual discrimination and a wanton lawlessness so pervasive it put the entire business at risk.

While Uber is already showing signs of change under the new leadership, it still has a legal mess to untangle that may be a legacy from it's former chief executive officer that lasts for quite some time.

Other companies can do well to watch what happens from here -- and realize that explosive growth doesn't equal invincibility. The benefits of listening to business counsel each step of the way can often pay off for a company long into the future.

Source: Cnet.com, "Uber shareholder sues over 'illicit business practices'," Dara Kerr, Sep. 26, 2017

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