Leaked Videos Could Lead to Big Payday for Ousted Snapchat Co-Founder
Reggie Brown, Bobby Murphy and Evan Spiegel attended Stanford University together and joined the same fraternity, Kappa Sigma.
Now the three are tangled in a lawsuit over equity in today's hottest startup, Snapchat.
Hundreds of millions of dollars are on the line.
Videos of depositions from the Snapchat lawsuit, obtained by Business Insider, suggest that even the defendants in the Snapchat case believe their former frat brother may deserve "something" for his role in starting the company--an assertion that the company has vehemently denied.
The videos support what sources close to the company say will be the likely resolution of the case: A settlement in which Snapchat's disputed third co-founder, Reggie Brown, receives a significant amount of cash and/or stock from Snapchat--along the lines of the settlement the Winklevoss brothers got when they sued Facebook founder Mark Zuckerberg over the origins of that social network. The Winklevoss settlement took the form of stock that was initially valued at about $65 million. But the value of the shares subsequently soared as Facebook's value increased.
Snapchat is a Venice Beach, California-based mobile app that allows users to send disappearing photo and text messages to each other. More than 400 million photos are being sent on Snapchat daily. Its CEO, Evan Spiegel, has reportedly rebuffed acquisition offers from Facebook and Google for as much as $4 billion.
Reggie Brown first filed a lawsuit against Snapchat's two well-known co-founders, Bobby Murphy and Evan Spiegel, in February. Brown alleged that he was the third co-founder and that he deserved equity in Snapchat, which was already wildly popular.
Brown wants one-third of Snapchat, even though he previously agreed to a smaller 20 percent cut, according to legal documents.
Currently, Brown doesn't own any of Snapchat because he says his co-founders secretly created a new company that cut Brown out entirely, leaving Spiegel with 60 percent of Snapchat and Murphy with 40 percent.
Spiegel's team has denied Brown's claims: "We are aware of the allegations, believe them to be utterly devoid of merit, and will vigorously defend ourselves against this frivolous suit," the company said in a statement.
The suit is currently in the "discovery" period, in which both sides are allowed to demand and receive information about each other's evidence. That means both sides become privy to the other's emails, text messages and more.
The lawyers have also conducted a round of depositions of the parties in the case.
All three Snapchat founders gave their depositions in April. Reggie Brown's occurred first, on April 5. Evan Spiegel's followed on April 8. Bobby Murphy, Snapchat's CTO, went last on April 9.
Depositions can be long and tedious, but a lot of juicy bits come out of the grilling on each side. While some of what was said in those three depositions has been reported, video footage from them has never been published.
Business Insider has obtained a few clips and exhibits from those long days in April. In them, you can see Spiegel and Murphy answer a question one way, get shown a piece of evidence that appears to contradict the statements they just made, and try to explain it.
Brown's deposition doesn't make him look perfect, either. He hasn't had a paying job since his Stanford graduation, and he only filed his lawsuit after Snapchat raised more than $12 million. Snapchat's lawyers also say Brown was hiding patent documents from Murphy and Spiegel, which made them suspicious of him.
The transcripts and video clips indicate that Brown did indeed have an early role in Snapchat. Although he and Spiegel may not have had a written agreement to split equity in the company, multiple lawyers tell Business Insider that oral agreements can be equally binding. If Brown's team can prove a verbal partnership was formed, then he may have a strong case.
(It's important to note that there are tens of hours of footage from the deposition. The clips we have obtained are just a few select clips that total a few minutes and they don't tell the full story.)
The first few clips from the depositions discuss Snapchat's founding story.
Click here to see Spiegel being asked who came up with the idea for disappearing photos. Spiegel credits Brown with the idea.
During Brown's deposition, meanwhile, he was asked to recall his first conversation about Snapchat.
"Basically I told [Evan] I wanted to make an application that sends deleting picture messages," Brown said. "He got excited. He started saying you know, 'That's a million dollar idea! That's a million dollar idea!'"
Brown said the two discussed splitting the company 50/50. Spiegel would be CEO and Brown would be the marketing officer; Brown also said the pair went to the Kappa Sigma house to start looking for a coder.
Brown's story lines up some with Spiegel's recollection of that same initial conversation.
During Spiegel's deposition, he said Brown came to him with the idea for disappearing photos. Spiegel said that conversation was the first time he had ever heard of an app like that. As Spiegel recalled that conversation, he got animated.
Then the interviewer hit a sore spot.
"Did you ask Reggie if you could work on his application with him?" the interviewer asked.
"Work on his application?" Spiegel responded. "With him? No."
Spiegel said he doubted Brown's technical ability to contribute to an app. But he says he never told Brown about that reservation. Instead, he let Brown tag along to hunt for a developer, who would ultimately be his co-defendant, Bobby Murphy.
When asked why he didn't discourage Brown from pursuing a developer Spiegel replied:
"Because [Reggie] was my friend. And he was excited about the project and I wanted to include him."
Murphy and Spiegel were careful with their words during their depositions. Both initially denied that Brown built Snapchat with them. But occasionally, some of the exhibits--pieces of evidence--seemed to undermine their claims.
During Bobby Murphy's deposition, for example, he was asked if he had ever referred to Reggie Brown as an employer of Picaboo, Snapchat's predecessor. Murphy said no. (If Brown had been referred to as an "employer" at Picaboo that would seem to imply he was Spiegel and Murphy's partner.) One minute later, Murphy was shown the following exhibit. It's an automated email from Facebook to Brown that reads: "Bobby Murphy tagged you in Picaboo under Employers."
After viewing the exhibit, Murphy's eyes dart to the left and he twitches his mouth to the side. His head tilts down and as he makes his statement he glances up at the interviewer, looking sheepish.
"Uh ...Well it looks like here that I did something to that effect," Murphy said. "I don't have a specific recollection of this happening ... although I would say that it would have been unclear to me what ... tagging someone as an 'employer' under Facebook would mean."
Spiegel also got tripped up by an exhibit.
When asked if Reggie Brown had been "building" an application with him and Bobby Murphy, Spiegel replied that Brown hadn't.
One minute later, Spiegel was shown an email he sent.
"I just built an app with two friends of mine (certified bros..)" it read.
When asked which two people Spiegel meant in his email from July 2011, Spiegel said "Bobby and Reggie."
See the video here.
But the most compelling argument in Reggie Brown's case may be the following clip from Evan Spiegel's deposition. It hits at the heart of the case.
"Do you think Reggie deserves anything for the contributions he made on the project?" Spiegel was asked.
After seven seconds, Spiegel replied:
"Reggie may deserve something for some of his contributions."
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