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HBS Star Prof In Court Over Investment

Coupang, a South Korea-based mobile e-commerce business, is the jewel in the investment portfolio of Disruptive Innovation

After he moved back to Utah in the spring of 2013, Shawn Cox continued to do work for Disruptive Innovation. But in 2016, he says in his lawsuit, after requesting that the Christensens send him a Schedule K-1 tax form (a federal form for company partners), he was informed that they’d prefer to buy him out.

Cox says he was open to the offer. But when he asked for certain financial information, he was rebuffed. And that’s when he says the Christensens began “fabricating wildly inconsistent stories in an attempt to claim” that he no longer owned his shares.

First, Cox says, the Christensens said the agreement should be nullified because the value of the shares had increased beyond anyone’s expectations. Then they claimed not to have paid attention when they were signing a 2013 LLC Agreement and Unit Transfer Memorandum. Then they admitted to granting Cox equity in Disruptive Innovation but said they should not have.

Then they threatened to sue.

THE DISPUTE GOES TO COURT — TWICE

Cox beat them to it, suing in federal court in Utah in March 2017, seeking what he says is the value of his shares — $14 million — plus $5 million for other damages as well as attorney fees and other expenses. Scott Ford, an attorney for Disruptive Innovation and the Christensens, told the Salt Lake Tribune in March that the “claims asserted by Mr. Cox are without merit, and we anticipate filing counterclaims as a result of the wrongful conduct on the part of Mr. Cox, who was a fund operations employee.”

A month later, in April, the Christensens counter-sued in Massachusetts, claiming the signed agreement granting Cox his ownership shares should be “invalid and void” because they wouldn’t have signed it “had they known that Cox had listed himself as a Member and Class B Units holder.” But that claim was dismissed in November by Judge Edward Leibensperger of Massachusetts’ Suffolk Superior Court’s Business Litigation Session, who said that failing “to read or review” the document is not “the exercise of ordinary care.” Leibensperger added that he was “troubled by the basic argument that if something’s evident on the face of a document and you’re claiming you were duped when you elected not to read the document.”

Having had most of the claims against him dismissed — only a claim of “breach of fiduciary duty” had cleared the bar of plausibility — Cox filed a set of counterclaims in Massachusetts on Dec. 1.

AND … BACK TO THE JUDGE ONCE MORE

Attempts to reach the Christensens were unsuccessful. Shawn Cox declined to speak while the matter was being litigated. Besides seeking an order enforcing the agreements that the Christensens “knowingly made,” Cox wants the court to declare the Christensens “breached their fiduciary duty” by employing him with the promise of equity they never intended to honor. He also claims that “the Christensens have unjustly enriched themselves” by taking back the shares that he says are his.

Cox, now chief financial officer for a startup social video dating app called Ohi, says the Christensens went too far in their dispute with him by disparaging him to former investors, including those he’d brought over from his own firm to Disruptive Innovation. And, he says, they injured his reputation in Salt Lake City with defamatory statements in the local press. Cox, a Mormon, says his “reputation in both the Mormon community and investment community has been and continues to be irreparably harmed” as a result.

He’s seeking damages for the impact to his reputation, coverage of his legal expenses, and a declaration that his ownership of 6% of the Disruptive Innovation general partnership is valid.

DON’T MISS WHY CLAYTON CHRISTENSEN IS WRONG (AND MICHAEL PORTER IS RIGHT) and THE TOP 50 MANAGEMENT THINKERS

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