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(Bloomberg) — A startup that succeeds the once-famous Bluetooth headset maker Jawbone is asking a California court to dismiss a fraud lawsuit against it. The startup said the complaint filed by one of its backers was a series of false assertions describing the investors behind the lawsuit as “particularly self-serving.”
Polymath Holdings, the investment firm that filed the original lawsuit, disputes the claims made in the filing.
Volatile markets fueled legal disputes. After years of rapid growth, venture capital firms are facing a decline in the value of their portfolios and a bigger slowdown in the technology sector. In such an environment, smoldering disagreements that once might have been overlooked could erupt into serious conflagration.
The startup, All.health Inc., was founded when Jawbone shut down its consumer business in 2017 and stopped selling the headphones and stereo that became a cultural touchstone earlier in the decade. . Dubai-based investor Polymath Holdings said in a lawsuit last summer that All.health had overpromised and underdelivered on its technology and production capabilities. In its response to the lawsuit, All.health said it developed cutting-edge products and met production expectations, but it was itself hurt by Polymath and one of its leaders.
Dubai-based investment group Polymath has invested in All.health since 2019. The company makes wearable medical devices that track patients’ health and aims to help those with chronic diseases. Both sides agree that the relationship between the two parties has deteriorated – but they disagree on why.
Polymath claims in its lawsuit that All.health did not properly deliver the promised wristbands, which were designed to help people with conditions such as diabetes. In its response, All.health attributed the growing tensions to disagreements over intellectual property — and said Polymath managing director Ali Hashemi wanted the startup to transfer its intellectual property to a company he controlled, but was blocked. to refusal. All.health also said the disagreement erupted after it decided to focus on the US market instead of the United Arab Emirates.
All.health said it decided to focus on the US in part because Polymath and Hashemi did not provide it with the promised UAE business connections. It also alleges that Hashemi has a conflict of interest due to his leadership role at GluCare Integrated Diabetes Center LLC. GluCare and All.health are partners, but the relationship has resulted in fewer new patients for All.health than expected, the filing said.
A representative for Polymath Holdings denied All.health’s claims and said Hashemi had no conflicts with outside interests or his role at GluCare. “Allegations of conflicts with Polymath Holdings’ other investments are intended to distract from the startup’s failures in accountability, governance and transparency,” the spokesperson said. “All.health raised the alleged conflict only after Mr. Hashemi expressed these concerns.”
All.health’s response in court was specifically aimed at Hashemi. It said he publicly praised the product shortly before he filed lawsuits against companies complaining about the technology. It also cited an unrelated 2014 case in which a three-judge appeals panel in the United Arab Emirates said Hashemi misrepresented his intentions when he asked for information about a startup. In a court transcript, a judge said Hashemi received information about the company saying he was acting on behalf of a wealthy family when he was actually acting on his own behalf.
In an odd twist, the All.health filing also says GluCare removed the names of All.health employees from a scientific paper jointly authored by the two companies. After the relationship soured, GluCare submitted a paper to the journal Diabetes Management without crediting All.health staff or mentioning All.health. The paper is due for publication in late 2021. In court filings, All.health called the removal of the names immoral and a “blatant attempt at revenge.”
A Polymath spokesperson said GluCare removed the names because it “believes [All.health’s] Contributions to this article are negligible. “
All.health, run by former Jawbone CEO Hosain Rahman, has raised a significant amount of money — at least $65 million, according to a 2019 filing. Salesforce Inc. was an early investor in the startup, according to its filing. Other investors include SignalFire, Builders VC and Transformational Healthcare Venture Capital.
The document was not immediately available on the court’s electronic docket. The case is Polymath Holdings v. All Health Inc., CGC22600970, California Superior Court, San Francisco.
©2023 Bloomberg Intelligence
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