Friday, 22 April 2016

Yik Yak Settles With Ousted Cofounder

Yik Yak, the anonymous social app popular with the high-school and college set and said to be valued at $400 million, has settled a lawsuit filed about two years ago by its third cofounder Douglas Warstler, who claimed he had been robbed of one-third of the company.

The settlement terms have not been disclosed. However, in a statement, Yik Yak identifies Warstler as a cofounder of the app. Yik Yak said the settlement between CEO Tyler Droll, COO Brooks Buffington and Warstler brings an end to the lawsuit. The company did not respond to a request for comment by the time of publication.

“We are pleased we were able to come to this resolution, and we acknowledge the contributions Doug made to the early ideas behind Yik Yak,” Droll and Buffington said in the statement.

Warstler, who was a fraternity brother of Droll and Buffington at Furman University in South Carolina, sued the company in November 2014, claiming he was unfairly ousted. The suit, filed in Georgia State Court in Fulton County, alleged that Droll and Buffington kicked out Warstler earlier in the year by dissolving Locus Engineering, a joint partnership that originally built Yik Yak and was split evenly between the three. Droll and Buffington went on to create and own Yik Yak LLC, which oversees the popular application, the suit said. The suit asked for one-third of Yik Yak to be returned to Warstler along with punitive damages, compensatory damages and attorneys’ fees.

Yik Yak, which acts as an anonymous local bulletin board and gossip hub, quickly became popular in high schools and colleges. However, the app is reportedly struggling to grow its user base and has faced setbacks addressing hate speech and threatening content on the service. The company has raised about $75 million to date from investors such as Azure Capital Partners, Sequoia Capital and DCM Ventures, according to Pitch Book. The last round of funding in November 2014 valued Yik Yak at $400.5 million, according to Pitch Book.

The trio started working on the app in October 2013. At that point, Droll and Buffington had graduated, but Warstler, a senior was still at school. The suit said Warstler played a key role in marketing the app among his student network at Furman, where the app first took off. His ousting came suddenly. Buffington texted Warstler in December 2013, offering to buy him out of the company. Then later that month, Buffington emailed Warstler saying he needed to give up his part of the company because Buffington’s parents, who helped fund the app, wanted it that way. Warstler declined.

On Friday, Yik Yak and Warstler jointly filed a motion to the state court of Fulton County for the case to be dismissed. The motion is pending and is expected to be signed by a judge within a few days.

“I’m happy we were able to resolve this case, and I refer you to the press release,” Luan Tran of Lee Tran & Liang, the law firm representing Warstler, said in a phone call.

Such lawsuits aren’t rare among startups. Lee Tran & Liang also represented Snapchat cofounder Reggie Brown in his lawsuit against the wildly popular messaging app. Snapchat CEO Evan Spiegel and cofounder Bobby Murphy settled with Brown in September 2014, but the terms of the agreement were not disclosed. Prior to that settlement, Tran told FORBES that he and his client were seeking “over a billion dollars” in damages.


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