Appeals court revives Zocdoc co-founder's lawsuit alleging he was forced out of the company

Zocdoc co-founder Cyrus Massoumi's legal fight to try to get reinstalled as CEO lives on after an appeals court reinstated his complaint.

The appellate division's first judicial department of the Supreme Court of the State of New York reversed a previous dismissal of the case late last month, according to an order reviewed by Fierce Healthcare. 

Massoumi, also a former CEO at the company, filed a lawsuit in September 2020 that painted a picture of a deceptive power struggle going on behind the scenes at the digital health company.

Zocdoc, founded in 2007, is a popular online platform that allows patients to search for doctors and book appointments.

Massoumi—who served as CEO from 2007 to 2015—alleged in the complaint that co-founders Oliver Kharraz, who is the current CEO, Nick Ganju, currently a board member, and Chief Business Officer Netta Samroengraja orchestrated "an elaborate series of lies and deceptions" to oust him from the company.

New York Supreme Court Judge Jennifer Schecter threw out Massoumi's lawsuit in December 2020 and sided with the executives' claims that Massoumi's complaint should be litigated in Delaware rather than New York.

Zocdoc's principal place of business is in New York but it is incorporated in Delaware.

In that dismissal, the judge cited a confidentiality and non-disclosure agreement that Massoumi signed in connection with his demand, as a stockholder, to inspect Zocdoc’s books and records. The NDA requires that a demanding stockholder who wishes to file a claim based on “confidential inspection material” must do so in Delaware. 

In the reversal, the appeals court determined the non-disclosure agreement clause requiring the complaint be filed in Delaware does not apply, since the complaint doesn't involve confidential inspection material.

“This is an important victory, as it will allow me to have my day in court to show how my company was fraudulently taken from me and how that has negatively affected our valued patients," Massoumi said in an emailed statement.

Massoumi is suing the three Zocdoc executives based on allegations of fraud and conspiracy to commit fraud.

In the lawsuit filed in the New York Supreme Court back in 2020, Massoumi alleges "Zocdoc is now a shadow of the company it once was, mired in a steep financial decline, failing to raise further capital, and taking on debt with crippling interest rates."

The lawsuit alleges that in 2015, Kharraz, Ganju and Samroengraja orchestrated "an elaborate, multi-step scheme" to remove Massoumi from his roles at Zocdoc and steal control of the company from him.

The complaint alleges that prior to a November 2015 board meeting, Kharraz and Samroengraja misled Massoumi about the agenda, even preparing bogus PowerPoint slides and presentations to make it seem like a run-of-the-mill meeting.

During that meeting, the executives removed Massoumi as Zocdoc CEO, replaced him with Kharraz, and instituted governance changes that cemented Kharraz’s and Ganju’s control of Zocdoc.

Massoumi also alleges that he suffered a significant loss in the value of his Zocdoc shares.

He is seeking unspecified monetary damages and to be reinstalled as CEO.

In an emailed statement, a Zocdoc spokesperson said, "This procedural ruling is not a decision on the merits of Mr. Massoumi’s case or the validity of his claims. We are confident that the facts and the law will indeed show this lawsuit is meritless. We intend to vigorously defend against these claims and look forward to presenting our case. Zocdoc has a bright future ahead, and we remain focused on giving power to the patient and growing our business."