But apparently, OpenGov was the largest company GTY was targeting for the deal. And after GTY proceeded without including it, OpenGov and GTY are now suing each other in federal court.
The deal was a kind of “reverse IPO,” where GTY was formed as a shell company and had an initial public offering in 2016 in order to raise money. It then set out to acquire companies with that money, giving those companies a path to going public without having an IPO of their own.
According to OpenGov’s complaint, filed in the U.S. District Court of Northern California, GTY President and Chief Financial Officer Harry You offered to put OpenGov at the center of the deal — OpenGov would be acquired for at least $225 million and OpenGov CEO Zac Bookman would be made CEO of the new company. As part of that potential deal, OpenGov signed a confidentiality agreement with GTY and then shared its corporate strategy with it.
That strategy involved acquiring several companies, which OpenGov introduced GTY to. Those six companies then became involved in the GTY deal, but OpenGov was cut out.
OpenGov’s claims against GTY include fraud and breach of contract, since a portion of the confidentiality agreement specified that GTY wouldn’t use any of the information OpenGov shared with it unless it was “in connection with … a potential transaction with [OpenGov].”
“GTY Holdings’ breach of the Confidentiality Agreement and wrongful acquisition of OpenGov’s confidential and proprietary information … threatens to allow the GTY Defendants unlawfully to establish a competing company using intellectual property the GTY Defendants have not developed” the document reads.
The filing also states that “the GTY Defendants courted Mr. Bookman with lavish dinners and invitations to exclusive events, like game seven of the NBA Finals.” The last two NBA Finals, both between the Cleveland Cavaliers and the Golden State Warriors, ended before reaching seven games.
The company is asking the court for monetary damages as well as to establish “a constructive trust over OpenGov’s interest in [GTY], or over their increased value due to the business combination, or over their profits,” as well as “disgorgement of (GTY’s) unjust enrichment.”
GTY’s complaint, filed in the U.S. District Court of Southern New York one day before OpenGov’s lawsuit was filed in California, alleged that OpenGov had already approached GTY and demanded $50 million for breach of contract. The filing argued that GTY never breached the contract and that the information OpenGov gave it wasn’t proprietary.
It also states that its decision not to acquire OpenGov was "based on, among other things, the information OpenGov provided to GTY Holdings and OpenGov's failure to respond timely to GTY Holdings."
The document also points out that due to the nature of “special purpose acquisition companies” like GTY, the company must complete its mergers with the other companies by May 1, 2019 or return all of its shareholders’ money and dissolve itself.
“Spurned by its exclusion from GTY Holdings's business combination, OpenGov has demanded an excessive payment — knowing full well that time is of the essence and GTY Holdings must consummate its proposed business transaction quickly due to its SPAC restrictions — and has threatened to seek injunctive relief of some sort which could interfere with GTY Holdings's upcoming transactions,” the filing reads.
GTY has asked the California court to transfer the case OpenGov filed to the New York court.
Representatives of GTY and OpenGov did not respond to emails and phone calls requesting comment.
OpenGov v. GTY by Ben Miller on Scribd
GTY v. OpenGov by Ben Miller on Scribd
