Tinder swipes left on Match

With closing arguments expected to begin next week, the Tinder/Match trial has once again proven that when things go wrong in the world of online dating, they go very, very wrong.

With the Ashley Madison dumpster fire still in our collective memory, the founder of Tinder is suing for $2 billion, alleging that two companies -- Barry Diller’s IAC/InterActiveGroup and Match Group -- artificially devalued Tinder before the group could exercise stock options in the online dating platform. They claim the companies created and communicated false information to investment bankers and covered up sexual misconduct accusations against a former Match Group executive as part of the scheme.

Sean Rad (arguably the best name ever for the founder of a dating app) and the other Tinder co-founders, who at the time of sale owned 20 percent of the company, argue that Diller and his team undertook activities to deeply undervalue Tinder at $3 billion. Rad’s claim is that Diller repeatedly lied to the banks and this dramatically reduced the acquisition price. 

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IAC and Match hired high-profile lawyer Bill Carmody to represent them here. The same Bill Carmody that put $480 million in the pocket of WeWork’s comically villainous Adam Newman in a claim against SoftBank. And, yes, the same Bill Carmody that represented Uber against Waymo. 

The case, Rad v. IAC/InterActiveCorp, has taken several dramatic turns. While the trial was still in opening arguments on November 8th, IAC/Match called twice for a mistrial and failed both times. Character assassination has been the rule of the day throughout the trial, with a landscape of destroyed emails, personal vendettas, and  the requisite penis drawing

The case was expected to have wrapped up by Thanksgiving, but the Tinder founders are going to have to delay their feast a few days as the bad blood continues to boil in the courtroom. 

On Monday, Rad accused former Match Group CEO Greg Blatt of grabbing him during a break in the trial. Laughably -- but showing how intense and polarized this case is -- the incident between the two has been described as everything ranging from a failed attempt at a fist pump to an assault by Barry Diller’s henchman

So it’s understandable that it’s easy for people to see this case as perfect fodder for a Netflix series on American greed. The legal documents in the suit tell a story of a company looking to acquire another successful company in their particular vertical -- here, the massive online dating space. Rather than pay fairly for the company, Diller and his companies created an elaborate fiction in the form of an unrealistic worst-case financial scenario for Tinder that valued the company at $3 billion, where a much more rosy yet still realistic valuation would have seen Tinder valued at up to $12 billion. 

Victory for Match/IAC here would be paying out significantly less than the $2 billion Rad claims that he and others in the suit are out of pocket given the facts of the claim. 

As Charlie Cartwright, a Florida lawyer points out: "It’s possible that a case such as this, with so much at stake, could still settle before the judge puts the outcome in the hands of the jury."

While both sides are resolved to win this heated case, settlement makes a lot of sense as Match simply doesn’t have $2 billion cash on hand, though it doesn surprisingly have access to well over $1 billion. A legal and regulatory analyst recently told the New York Post that a realistic settlement would be in the $300-$700 million range, yet a spokesperson for Match Group said that was entirely speculative. 

It’s probably not inaccurate speculation. Ultimately, it’s not like the Tinder founders and other executives haven’t done very well from running and selling Tinder anyway. So, for them, while the money is important, a moral victory wrapped in a healthy settlement figure might be the tasty and satisfying holiday feast they’re waiting for. 

This would also keep the case out of the hands of a jury. It’s important not to gloss over the fact that people are very polarized about not only apps that match people, but the characters who make these apps and run these businesses. The Ashley Madison scandal is recent enough for a jury to remember not only an app that ruined livesbut the nature of the people behind the business

Whether the case settles or is handed to a jury, the real issue here is that Tinder generated a massive amount of revenue over the years and grew into a very successful company. It’s just a question of how the ultimate pie that was actually created should have be equitably divided if the value of Tinder wasn’t manipulated. 

Photo Credit: Ascannio/Shutterstock

Aron Solomon, JD, is the Chief Legal Analyst forEsquire Digital and the Editor of Today’s Esquire. He has taught entrepreneurship at McGill University and the University of Pennsylvania, and was elected to Fastcase 50, recognizing the top 50 legal innovators in the world. Aron has been featured in CBS News, USA Today, ESPNTechCrunch, The Hill, BuzzFeed, Fortune, Venture Beat, The Independent, Yahoo!, ABA Journal, Law.com, The Boston Globe, and many other leading publications. 

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