Stock option expertIntroduction:

On August 14, a group of Tinder founders, employees, and executives filed suit against the dating application’s parent and subsidiary companies. See, e.g., Dave Simpson, “Tinder Founders Sue Match For $2B Over Stock Options,” Law360, Aug. 14, 2018, at https://www.law360.com/articles/1073180/tinder-founders-sue-match-for-2b-over-stock-options. The case was brought in New York state court and alleges that two companies, IAC and Match Group, Inc., intentionally tampered with and adversely influenced the valuation of the Tinder application. See id. The plaintiffs contend that the devaluation transpired so that Tinder’s stock options would become less lucrative. See id. This article analyzes the Tinder lawsuit and examines the role of expert witnesses in suits pertaining to stock options and financial manipulation.

Discussion:

According to the ten plaintiffs who brought suit, IAC and Match Group, Inc. should be made to pay at least $2 billion in damages. Polina Marinova, “Team Sheet—Wednesday, August 15,” Fortune, Aug. 15, 2018. The plaintiffs allege that the companies “robbed Tinder employees by manipulating financial information, undermining Tinder’s valuation and unlawfully stripping away their Tinder stock options.” Dan Mangan, “Tinder founders sue IAC for billions claiming company ‘robbed’ them of stock options,”CNBC, Aug. 14, 2018, at https://www.cnbc.com/2018/08/14/tinder-founders-sue-iac-claiming-company-robbed-them-of-stock-options.html.

In a case of this nature, a number of legal issues must be resolved. Factfinders must determine whether several burdens have been met to justify a favorable ruling for the plaintiffs and the damages requested.

One aspect of the situation that will be closely examined concerns the nature of the defendant’s conduct. In the Tinder case, the plaintiffs asserted that the defendants’ actions, with respect to the valuation of the company and its stock options, were intentional. See, e.g., Dave Simpson, supra. In order to demonstrate such intent, the plaintiffs have furnished information that IAC “manufactured a fake Tinder valuation of USD 3 billion” which was unchanged from two years earlier, despite its revenues having grown 600 per cent and user base grown 50 per cent.” Business Standard, “Tinder founders sue parent alleging cheating on stock options,” Aug. 15, 2018.

In cases that concern manipulation of financial information, stock options, and business devaluation, the parties involved will require expert witness evidence to support their claims. Experts in business valuation, stocks and negotiable instruments, and financial manipulation may help amass data and provide authoritative testimony to demonstrate a defendant’s intent in litigation of this nature. The defendants have called the plaintiffs’ allegations “’meritless.’” See, e.g., Dan Mangan, supra. In order to support such a response, IAC and Match, Inc. will need expert assistance to provide an alternative explanation for potential financial volatility and stock option values decreasing. For example, experts might offer evidence of similar situations, in which devaluation was a result of something that was not within the defendants’ control. Empirical and anecdotal data can assist both sides in resolving the question of intent to create volatility of Tinder and its stock options.

Aside from the issue of intent, the plaintiffs have argued that IAC “’made contractual promises to recruit and retain the men and women who built Tinder,” and “’[t]he evidence is overwhelming that when it came time to pay the Tinder employees what they rightfully earned, the defendants lied, bullied, and violated their contractual duties.”’ Id. If the defendants engaged in a contract of the type described by the plaintiffs, a breach would entitle the aggrieved parties to compensation. Breaches of contract can incur different remedies, from equitable relief to monetary damages.

For factfinders to determine whether a breach of contract occurred, and if so, what kind of relief to provide, they may require expert witnesses’ assistance. The defendants claimed they did not violate any contracts with the plaintiffs. See, e.g., Dan Mangan, supra. The defense further asserted that the plaintiffs have already been handsomely compensated under the terms of the agreement between the parties. See, e.g., id. Experts in contracts, employment agreements, business and security valuation, and related fields can help determine if the defendants’ alleged compensation constituted adherence to the contract, and if so, whether the compensation was adequate.

The plaintiffs contend that the contract at issue was part of an employee benefits package, so experts in employment benefits and business valuation can help judges and juries to decide what type of damages should be awarded in the event that the plaintiffs prove the other elements of their case. The plaintiffs have enumerated several ways in which they claim their employment and promised benefits were interfered with by the defense. One such tactic, according to the plaintiffs, involved lying to and bullying employees. See, e.g., Business Standard, supra. Experts with backgrounds in business ethics and professionalism may be able to help determine whether the defendants’ conduct was inappropriate and whether it was a means in which to avoid providing employee benefits. Experts familiar with bullying and intimidation in a corporate environment may be able to shed light on whether this component of the plaintiffs’ complaint involves behavior that constitutes an attempt to deter employees from accessing their benefits, or whether the alleged behavior merely reflects a difference of opinion that may be common in business dealings.

The plaintiffs claim that the defendants planned to devalue and eventually eliminate their stock options. See id. The complaint argues that IAC “’extinguished Tinder stock options entitling the employees to valuations in 2017, 2018, 2020 and 2021,’ which let the defendants pocket the money that otherwise would have been owed to the plaintiffs.” Dan Mangan, supra. This particular allegation has a number of components to be considered, including whether the plaintiffs were entitled to the claimed valuations as part of their benefits package, whether the defendants intentionally devalued Tinder and/or its stock options, and whether the plaintiffs sustained losses of a particular amount. Each of these issues can be addressed by experts in business valuation, employment compensation, and negotiable instruments. Particularly with respect to the plaintiffs’ assertion that they were entitled to money the defendants kept for themselves, experts can help assess potential lost earnings and compensation.

Conclusion:

The Tinder litigation has ignited significant controversy and may become a battle of the experts. For attorneys practicing in the fields of stock options/securities and other financial manipulation, business valuation, and employment contracts/benefits, this case may provide insight to build a strong case. Expert witnesses offer invaluable guidance and evidence and can help lawyers achieve successful outcomes.