law and legislation
On October 13, 2017, the Delaware Court of Chancery dismissed a case brought by the blockchain firm R3 Holdco against Ripple Labs, another company active in the space, ruling that the court lacked jurisdiction to hear the lawsuit. In a complaint filed September 8, R3 alleged that Ripple breached an option contract when Ripple CEO Brad Garlinghouse informed R3’s CEO that he no longer intended to honor the agreement, which had entitled R3 to a three-year window to buy 5 billion Ripple tokens (XRP) at a fixed price that roughly reflected the token’s market value at the time of signing in September 2016. The specified rate, $0.0085 per XRP, is well below the token’s current valuation of $0.2604 (at press time), meaning that, had R3 exercised the option to purchase the tokens, it could have profited in the neighborhood of $1 billion.
The battle between the two firms now shifts to San Francisco, where Ripple countersued on September 8, and New York, where R3 filed suit on September 11. In an October 13 interview, Garlinghouse claimed that Ripple had “not been served with any court case in New York by R3.”
Ripple, which has been developing private blockchain solutions for the global payments market, claims that it originally agreed to the option contract in order to encourage R3, a consortium of banks working to build a blockchain-based “operating system for financial markets,” to sign a “technology partnership agreement,” essentially a commercial partnership.
In its complaint filed in San Francisco Superior Court, Ripple alleges that R3 fraudulently misled it into believing that R3 intended to “build a long-lasting relationship” through which Ripple would “benefit from R3’s many banking contacts.” Ripple expected that the partnership would help it increase its profile and the value of its token. Ripple also claims that shortly after the contract was signed, “R3 disappeared as a partner” and it became clear “that R3 had no intention of working towards the parties’ Commercial Partnership,” which it had dangled before Ripple in an alleged effort to persuade the firm to sign the option contract. Ripple further alleges that shortly after the contract was signed, “several key banks departed from R3’s consortium,” but “R3 failed to disclose any of these impending issues to Ripple before inducing Ripple to sign.”
R3’s New York complaint for breach of contract is virtually identical to the one it filed in Delaware. R3’s managing director Charley Cooper expressed confidence in his firm’s legal prospects, dismissing the Delaware Chancery Court’s ruling as “procedural.”
Adam Reese is a Los Angeles-based writer interested in technology, domestic and international politics, social issues, infrastructure and the arts. Adam is a full-time staff writer for ETHNews and holds value in Ether.