Chancery Court Tosses Claims Against Winklevoss Twins Over $1.3M Magazine Investment
Photo: Sergey Tryapitsyn
The Delaware Court of Chancery has dismissed counterclaims against internet entrepreneurs Cameron and Tyler Winklevoss, ruling that allegations the twins had failed to publicly promote their $1.3 million investment in a magazine venture had been filed too late.
Friday’s ruling, from Vice Chancellor Joseph R. Slights III, came in the brother's Winklevoss Capital Fund's 2018 lawsuit accusing one-time partner Stephen Shaw of mismanaging Treats!, a Delaware limited liability company, which operates a print and digital magazine depicting nude and semi-nude photography of models and celebrities.
Shaw responded last year by filing counterclaims for fraud and promissory estoppel against the Winklevoss twins, claiming in court documents that they had refused to honor an agreement in 2012 to promote the magazine, following their depiction in Aaron Sorkin's film "The Social Network," which portrayed the early days of Facebook. Instead, Shaw said, Cameron and Tyler had strung Treats! along for months in order to gain access to his social circles for their own purposes and later demanded to be bought out for their investment.
According to court documents, Shaw grew frustrated with the Winklevoss twins' involvement by December 2012, after he turned down Tyler's request to arrange a "special casting" with models so that he could "shag" them. At the time, the brothers had also been pressing Shaw and his team to promote Hukkster, an online e-commerce company that they had also invested in, Shaw said.
However, Slights said Friday that Shaw's allegations were time-barred by Delaware's three-year statute of limitations on claims for fraud and promissory estoppel, and the case, he said, fit the rare conditions for applying the equitable doctrine of laches at the pleading stage.
According to Slights' opinion, Shaw had privately accused the Winklevoss twins as early as June 2013 of breaking their promise to promote the Treats! brand, but still chose not to pursue his claims for nearly five years.
"Defendants had every opportunity to do just that, but they inexplicably chose not to until after plaintiffs filed this lawsuit well beyond the expiration of the statute of limitations on the counterclaims," Slights wrote in a 29-page memorandum opinion.
While Delaware case law does allow late-filed claims to proceed under "unusual conditions" or extraordinary circumstances," Slights said none of those factors existed in regard to Shaw's allegations.
"Defendants have not carried their burden under any of the tolling theories they have proffered for the simple reason that facts giving rise to their counterclaims were never hidden from them," he said.
"Defendants were well aware of these potential claims; they simply failed to file them on time."
Slight's has yet to rule on Winklevoss Capital Fund's claims against Shaw and Treats!
An attorney for Shaw did not immediately respond to a call Monday seeking comment on the ruling. An attorney for the Winklevoss brothers was not immediately available to comment.
The Winklevoss twins are represented by Charles J. Harder of Harder in Beverly Hills, California, and P. Clarkson Collins Jr. and Albert J. Carroll of Morris James in Wilmington.
Shaw and Treats! are represented by Carlos F. Gonzalez of Rimon in Coral Gables, Florida, and Matthew Pace from the firm's New York office. Richard G. Placey of Montgomery McCracken Walker & Rhoads in Wilmington is acting as local counsel.
The case is captioned Winklevoss Capital Fund v. Shaw.
