A co-founder of dealership software company DealerSocket has agreed to settle a lawsuit he brought against the company he helped start nearly 20 years ago and the private equity company brought in as an investor, according to a court filing signed Monday by a judge in the case.
The settlement may clear the way for DealerSocket, which sells customer relationship management software to car dealers, to proceed with its acquisition of dealership management system provider Auto/Mate. The acquisition, announced in January, had temporarily been held up in court.
Vice Chancellor J. Travis Laster on Monday signed off on an order to lift a temporary restraining order blocking the deal, according to a DealerSocket lawyer and confirmed by the Delaware Court of Chancery.
DealerSocket Co-founder Brad Perry filed the lawsuit in January, accusing private equity company Vista Equity Partners, DealerSocket and several board members of deliberately withholding information about the Auto/Mate acquisition as part of a larger effort to dilute the co-founders’ minority stake. Vista bought a stake in DealerSocket in 2014 and is now majority owner.
David Ross, a lawyer for DealerSocket, filed a letter dated Friday, Feb. 7, in the court, noting that “the parties have reached an agreement to resolve their disputes.” It requested that Laster cancel a hearing that had been scheduled for Tuesday, Feb. 11, on whether to grant an injunction as the litigation proceeded, according to a copy of the letter Ross provided to Automotive News.
“The parties are in the process of fully documenting their settlement and will update the Court as that proceeds,” the letter reads. “All parties, including Plaintiff, have agreed to the terms of the stipulation and proposed order, and Plaintiff has authorized the filing of this letter.”
As of Monday, no details of a settlement were publicly available.
Perry’s co-founder, Jonathan Ord, filed a separate lawsuit in December demanding to inspect DealerSocket’s books. Both co-founders raised questions about fluctuating valuations of DealerSocket.
Perry’s complaint cites a plunge in DealerSocket’s equity valuation last year from $499 million in June to about $28 million by September. That prompted Laster, the judge, to ask in a Jan. 16 hearing whether the lower figure was a typo.
Perry and Ord previously declined interviews through their lawyer, Sanford Michelman. Michelman recently told Automotive News that his clients weren’t necessarily opposed to a deal but hadn’t been given the information they needed to independently evaluate it. Michelman confirmed Monday that Perry’s case was settled but was not immediately available for additional comment.
According to court documents filed in the Perry case, DealerSocket denied the claims as “utter fiction,” adding that “this case is about two individuals seeking to gain leverage in a misguided attempt to buy back the company they sold to Vista.”
In January, DealerSocket announced plans to buy Auto/Mate for an undisclosed price, touting the combined company’s scale and ability to offer dealerships a “full platform solution,” according to a news release at the time. The deal, estimated in a court transcript to be worth roughly $200 million, had been in the works since at least August 2018, according to DealerSocket’s court filings.