IAC/InterActiveCorp and subsidiary Match Group, which runs Match.com and Tinder, were dealt a blow Tuesday when an appeals court rejected their attempt to dismiss a $2 billion lawsuit by executives at Tinder, according to a report.
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The ruling is a small victory for several current and former employees of Tinder, including three of the dating app’s founders, who have claimed IAC and Match Group blocked employees from exercising stock options and misled them about the app’s valuation.
The judge also ruled that Tinder’s founders and the other plaintiffs were not bound by the valuations of their stakes in the parent company, which they argued in court papers were manipulated to appear lower than they actually were, Reuters reported.
“Although the parties agreed that the value of their stock options would be determined by the valuation process,” the five-judge appeals court panel wrote in a decision obtained by Reuters, “nothing in the agreements provided that the valuation would be binding or final or that the parties would be precluded from fully disputing the valuation in court.”
The dating app’s founders, along with current executives and other employees, claimed in the August 2018 suit that IAC and Match Group cheated them by manipulating financial information to create a lowball estimate of Tinder's value. Tinder is seeking at least $2 billion.
The lawsuit claims that there were written contracts between IAC and Match and Tinder employees, including founders Sean Rad, Justin Mateen and Jonathan Badeen. The contracts required Tinder be valued on specific dates in 2017, 2018, 2020 and 2021 and that the workers be allowed to exercise their stock options and sell them to IAC and Match.
The court papers further allege New York-based IAC and Match instead created false financial information, delayed new products and used other tactics to try to keep Tinder's valuation low. Tinder was then merged into Match Group, which the lawsuit says was a pretext to extinguish Tinder employees' stock options.
Tinder is worth more than $20 billion today, a spokesperson for the plaintiffs' attorney said.
The appeals court’s ruling on Tuesday was in line with New York State Supreme Court Justice Saliann Scarpulla’s June 13 decision, which argued they could pursue certain legal claims, such as prospective economic advantage, breach of contract and intentional interference, Reuters reported.
In a statement provided to FOX Business, an IAC spokesperson said: “This baseless lawsuit has no more merit today than it did over a year ago when it was filed. We look forward to defending ourselves in court.”
Both IAC and Match sued Rad in January 2019 on claims of secretly copying the companies’ information and later submitted a $400 million countersuit, this time for allegedly secretly recording conversations he had with his superiors, according to the news outlet.
The plaintiffs' attorney, Orin Snyder told FOX Business IAC and Match "cheated our clients and engaged in a brazen cover-up."
"We are pleased that the appellate court unanimously upheld the trial court’s decision and rejected IAC’s latest maneuver to avoid a trial," Snyder said in the prepared statement. "The evidence of IAC’s lawless behavior is mounting. We look forward to presenting it to the jury.”
The trial is set for 2020.
The Associated Press and FOX Business reporter Thomas Barrabi contributed to this report.
This article was updated to correctly describe Orin Snyder as the plaintiffs' attorney, rather than Tinder's attorney. It has also been corrected to show that Tinder's valuation was provided by a spokesperson for Snyder's firm, rather than a spokesperson for Tinder's attorney.