OpenWeb founder’s attempt to regain CEO role fails in court
OpenWeb founder’s attempt to regain CEO role fails in court
The judge cites a concealed resignation letter and confirms the board acted within its rights.
The District Court in Tel Aviv rejected Nadav Shoval's request for an injunction against OpenWeb, the company he co-founded, and ordered him to pay NIS 50,000 (approxiately $13,300) in legal expenses. The court ruled that Shoval's dismissal as CEO was lawful, confirming his removal from the company.
The court cited Shoval’s conduct and concealment of an essential document as primary reasons for rejecting his request. Specifically, the court referred to a letter Shoval had sent to the board of directors in which he agreed to resign from his position in exchange for the accelerated exercise of his shares and options. Shoval, who claimed he never offered to resign, failed to include this letter in his lawsuit.
"The lack of clean hands, as demonstrated by the omission of relevant data or documents, can be a decisive factor in rejecting a request for interim relief. In this case, it is sufficient to reject the request outright, especially when additional considerations also lead to the same conclusion," the court stated.
The court further explained that Shoval’s letter, which the parties disputed as either a resignation or a demand for rectifying a breach, was sent as part of an email to Omar Ziegler, the chairman of the board. The email outlined Shoval’s proposal for a transition period during which he committed to cooperate while demanding various payments, primarily the sale of his shares. The company estimated that fulfilling Shoval’s demands would amount to tens of millions of dollars.
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The court also criticized the nature of Shoval’s application, stating: "The request was submitted improperly, alleging violations of rights that seemingly do not exist and seeking remedies without justification. The company’s board of directors lawfully decided to remove Shoval as CEO. The court cannot compel the board to revisit and reverse its decision."
The court added that Shoval forfeited his rights as CEO when he agreed to terms that allowed investors to inject significant funds into the company, allegedly benefiting him as well. Furthermore, as Shoval is no longer employed by the company, his ability to appoint two directors is also nullified, a point that would not have affected the board's decision in any case. The court concluded that OpenWeb is entitled to proceed with the decisions of its board, including the appointment of a new CEO. However, this does not preclude Shoval and other parties from pursuing claims in the main legal proceedings.
Following the ruling, Shoval stated, "We are studying the decision and considering all legal options available to us. It should be emphasized that this is a temporary decision, and the lawsuit filed against the directors remains ongoing. I intend to continue pursuing it."
Two months ago, OpenWeb announced the appointment of Tim Harvey as interim CEO, replacing Shoval, who had served as CEO since the company’s founding. On the same day, Shoval issued a statement to employees asserting that he had neither resigned nor been fired and remained the CEO. Approximately a month later, Shoval filed a lawsuit against some of the company’s shareholders and board members, alleging improper conduct. He claimed the board violated the Companies Law and the company's articles of association by convening meetings without notifying him or his appointed directors.
In response, OpenWeb dismissed Shoval’s lawsuit as a baseless attempt to create drama. "This is a common situation in many commercial companies where the board of directors loses faith in the CEO and decides to terminate their role," the company stated. OpenWeb also submitted an email Shoval sent, which he had omitted in his court application. In the email, Shoval wrote that he was willing to resign and assist in the process of finding a replacement by June 2025, on the condition that the investors purchase his shares at $15 per share within three days. Additionally, Shoval requested the purchase of his remaining shares 30 days after his departure and the acceleration of his option vesting.
