If you are following Snapchat’s recent news, they have a Eduardo Saverin-like situation on their hands. Snapchat is led by CEO Evan Spiegel. Spiegel came up with the idea with Reggie Brown. Eventually Spiegel ousted Reggie Brown from the company because he felt like he was not contributing enough. Spiegel and Brown were fraternity brothers at Kappa Sigma at Stanford when they found another brother named Bobby Murphy to help them build their idea. Snapchat has grown by leaps and bounds so Brown filed a lawsuit against the company. Murphy and Spiegel gave depositions that were leaked to BusinessInsider where they acknowledged that Brown came up with the idea for Snapchat.
Snapchat wants to settle, but it is believed that Brown wants one-third ownership in the company. The first settlement talk took place on May 18th, which is around five weeks after Spiegel and Murphy gave depositions. The settlement talks were right before Snapchat’s round of funding that valued the company at $800 million. The second settlement took place several weeks later. Brown currently does not have any equity in Snapchat.
“On May 18, 2013, the parties agreed to a voluntary ‘stay’ of the case to pursue settlement,” states a court document.
Before the falling out in 2011, Brown and Spiegel were close friends. Several months before the fight that ended their business partnership, Spiegel texted Brown a message that stated “I love and miss you dude.”
If this lawsuit goes to trial at a California state trial, nine of the twelve jurors need to side with Brown for him to win. In a federal court, Brown would need all twelve jurors to side with him to win the case.
This story closely resembles what happened at Facebook. Facebook CEO and co-founder Mark Zuckerberg and founding president Sean Parker ousted co-founder Eduardo Saverin from the company. Saverin’s equity in the company was diluted to a very small fraction. This is when Saverin decided to file a lawsuit against the company and talk to the press. That situation was the subject of the movie The Social Network.