Judge dismisses Zocdoc co-founder's lawsuit against executives over his ousting 5 years ago

justice
A Zocdoc co-founder and former CEO filed a lawsuit in September that painted a picture of a deceptive power struggle going on behind the scenes at the digital health company.(Getty/designer491)

A New York Supreme Court Judge has thrown out former Zocdoc CEO Cyrus Massoumi's lawsuit claiming executives committed fraud for ousting him five years ago.

Judge Jennifer Schecter sided with the executives' claims that Massoumi's complaint should be litigated in Delaware rather than New York, according to court documents filed Dec. 23.

Massoumi filed a lawsuit in September 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—alleges 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.

RELATED: Zocdoc co-founder sues executives for staging 'fraudulent coup' to oust him 5 years ago

The three executives filed a motion to dismiss in October claiming Massoumi's complaint should be litigated in Delaware rather than New York and that his claims of fraud have no standing.

In a statement released by a Zocdoc spokesperson Tuesday, the three executives said, "We’ve always maintained that this was a meritless lawsuit, and we are pleased the New York State Supreme Court put an end to it so quickly. Zocdoc's future is strong and our team remains focused on furthering our mission to give power to the patient—both through in-person care and via telehealth."

A spokesman for Massoumi said that he intends to appeal the decision.

In the lawsuit, Massoumi alleged, "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 alleged 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 claimed that his firing was improper and demanded that the court reinstate him as Zocdoc’s CEO and void “all actions taken by the Zocdoc board since at least December 18, 2015.” According to the complaint, Massoumi said he was not aware of the plans to remove him, otherwise, he would have exercised his options to buy Zocdoc shares and thereby acquire majority control of the company.

RELATED: Zocdoc leadership move to dismiss co-founder's lawsuit, defend company's financial health

Current leadership then shot back at Massoumi's allegations of fraud.

According to court documents filed by the Zocdoc executives, in November 2015, the board of directors for Zocdoc voted to terminate Massoumi from his position as Zocdoc’s CEO for "repeated unprofessional conduct and extremely poor business judgment," according to the executives' legal filing.

Massoumi's firing was not improper because Zocdoc's bylaws do not require advance notice of agenda items for regularly scheduled board meetings. Massoumi also did not own enough stock options to block the vote, according to the legal filing.

Refuting Massoumi's claims that Zocdoc is in financial trouble, the executives detailed Zocdoc's financial turnaround in the past five years.

Zocdoc returned to profitability in July 2020 and continues to operate profitably today, the executives said. 

The company grew its revenue by 36% year over year in the first two months of 2020 and has returned to year-over-year growth despite COVID-19’s disruption.