Project44 thinks it has a smoking gun; FourKites’ defense based on legal issues
The legal dispute between two leading freight visibility solution providers, project44 and FourKites, is poised to move forward at a status conference in front of Judge James Snyder of the Circuit Court of Cook County next month.
Back in April 2020, project44 sued FourKites for defamation and civil conspiracy, accusing its rival of sending false pseudonymous emails to project44 board members and employees alleging accounting improprieties, fraud and intimidation of former employees. The suit’s progress has been delayed multiple times by COVID-19 but will pick back up in February, when Judge Snyder will ask the parties to resolve technical matters and set a schedule going forward.
The suit stems from two emails sent by Gmail accounts in May 2019 — project44 says that it uncovered proof that the emails came from FourKites India IP addresses and that the accounts were linked to a cellphone number listed by FourKites as an official number on Securities and Exchange Commission (SEC) documents.
The rivalry between the two leading visibility solution providers has always been fierce — project44 and FourKites compete for the same customers and, in many cases, the same employees. Executives from both companies have waged battles in the press, casting aspersions on their competitors’ business models and technology. The first Google Search result for “project44” is a Google ad that says: “Did you mean FourKites?”
But this dispute appears to be the first time that the competition has crossed into potentially tortious behavior.
In the first email, dated May 19, 2019, [email protected] or “Ken Adams” sent a message with the subject line “Accounting improprieties at P44” to Jim Baum, who at the time was an investor at OpenView Partners and project44 board member, and Kevin Diestel, managing director at Sapphire Ventures and project44 board member. The email claims to be from a recently departed project44 employee who wants to warn the p44 board about how the company uses its connections to “a Chicago Mafia” to silence former employees. The email goes on to allege “rampant accounting improprieties” and draws a connection to the departure of project44’s chief financial officer. The email also references a canceled Estes contract and concludes by warning: “There is a widespread discontent brewing [sic] and it’s just a matter of time before people go public and another Theranos happen [sic] in Chicago.”
Jett McCandless, project44’s founder and chief executive officer, spoke to FreightWaves about the damaging effect of the May 19 email, saying that Baum and Diestel took the messages seriously and notified him within minutes of receiving them.
“The email was sent Sunday morning and within minutes I was contacted,” McCandless said. “Of course, it was quickly extinguished since the email’s purpose was to deceive by fabricating evidence. However, it created some doubt and extra reporting for a while.”
In the second email, dated May 27, 2019, [email protected] or “Jason Short” sent a message to new project44 Chief Revenue Officer Tim Bertrand referring to problems with p44’s technology: “At some point you have to stop selling shit and start delivering. You don’t want to be part of the next Ponzi scheme or next theranos [sic].”
McCandless said Bertrand was new to the team at the time.
“We had built some trust but were still just getting to know each other. Being a world-class sales leader, he had a lot of other career options, so I had to do damage control. Presumably, the emails created doubt and questions. Tim is a smart guy, so it didn’t take long for him to realize this was a ploy from a competitor that didn’t want to compete with Tim and p44 combined,” McCandless said.
The complaint filed by project44 notes that the emails accused project44 of maintaining ties to organized crime, intimidating employees, engaging in accounting fraud and lacking a functional technology product. In pre-suit discovery with Google, project44 found that two IP addresses were used to log into both the Ken Adams and Jason Short accounts, proving that the same people were behind both Gmail accounts. The fact that the two emails, sent about a week apart, both contained references to Theranos, the notorious Elizabeth Holmes-founded fraud and bankruptcy, was an initial clue that the accounts were related.
Even more telling was the revelation that included in the subscriber information for the Ken Adams Gmail account was the mobile phone number 847-644-3564, which was listed as an official FourKites phone number on documents filed with the SEC. The complaint also states that one of the IP addresses used to access the Jason Short account belongs to FourKites India and names Sriram Nagaswamy and Rashi Jain as directors of FourKites India.
In the conversation with FreightWaves, McCandless said the cellphone tied to the Gmail accounts had been used in the past by FourKites to try to recruit project44 employees.
Project44 officials denied the claims made in the emails, writing that the company has no ties to organized crime, that its finances are audited by KPMG and Deloitte and that more than 25,000 carriers have used its technology to track their loads.
“None of the information from either email has been proven to be true — and as you can imagine, raising two subsequent rounds of financing since this occurred, there has been substantial financial, legal and business-oriented due diligence,” McCandless said.
FourKites’ outside counsel, Scott Gilbert at Polsinelli, acknowledged filing a motion to dismiss project44’s suit in October, but said, “Beyond that, FourKites does not comment on pending litigation. Should the parties fail to resolve the matter amicably, FourKites will defend itself vigorously.”
Typically, motions to dismiss ask the court to dismiss a suit based on narrow legal grounds even after assuming that what the plaintiff alleges is true, rather than disputing the facts of the allegation. In this case, FourKites said that regardless of whether project44’s allegations were true, they did not meet the standard for defamation or conspiracy.
FourKites asked the court to dismiss project44’s suit based on two main arguments. First, FourKites argued that the emails didn’t rise to the level of defamation per se because they weren’t published to a third party; in effect, FourKites said that project44’s board members — venture capitalist investors — were part of the project44 organization.
“The publication requirement is not satisfied, however, when the communication is made to the person defamed,” Gilbert wrote in the Oct. 13 motion.
Gilbert also wrote that the claims made in the email didn’t have a precise and readily understood meaning.
“The statements in the May 19 email that there is ‘widespread discontent brewing’ and ‘it’s just a matter of time before people go public and another Theranos happen in Chicago’ similarly have no precise and readily understood meaning, much less one that is per se defamatory,” Gilbert wrote.
Finally, FourKites argued that project44 failed to prove civil conspiracy because one element of that tort is “agreement” between parties and that merely showing that two IP addresses had logged into both the Ken Adams and James Short Gmail accounts did not constitute a conspiratorial agreement between multiple individuals.
FourKites’ motion was denied; project44 is seeking $80,000 and legal fees.