San Francisco-based blockchain company Ripple Labs Inc. has scored an early victory in its legal spat with rival R3 over a cryptocurrency deal worth more than $1 billion.
On Friday, Judge Joseph Slights of the Delaware Court of Chancery ruled from the bench to dismiss R3’s lawsuit against Ripple on jurisdictional grounds.
R3 sued in early September after Ripple unilaterally terminated an options contract it negotiated with R3 for 5 billion XRP, a cryptocurrency developed by Ripple that—like Bitcoin and other digital assets—has exploded in value over the past year.
The contract gave R3 the right to purchase that amount of XRP for $0.0085 per unit, which would total $42.5 million. According to R3’s lawsuit, the cryptocurrency is now trading at between 22 cents and 23 cents per coin, making the deal worth roughly $1.1 billion.
The contract was executed between R3, Ripple and a Ripple subsidiary called XRP II. Ripple, represented by Quinn Emanuel Urquhart & Sullivan attorney David Grable, argued the case did not belong in Delaware because XRP II is incorporated in California.
Although not a ruling on the merits, the decision is a speed bump for New York-headquartered R3’s suit and increases the chance the case will be adjudicated back on Ripple’s home turf in San Francisco. Ripple filed a complaint in San Francisco Superior Court last month for declaratory judgement to nullify the options contract, just after R3 filed suit in Delaware.
In a tweet on Friday, R3 said: “Jurisdiction to be decided between New York / California. Stay tuned.”
The company, which is represented in the lawsuit by Margaret Keeley and Daniel Shanahan of Williams & Connolly, did not immediately respond to a request for comment. Keeley, reached by phone on Monday, declined to comment.
R3 and Ripple initially seemed to view each other as playing complementary roles. Ripple markets several financial blockchain products focused on making cross-border money transfers faster and less error-prone. R3 billed itself as a blockchain consortium of global financial institutions, and Ripple entered into a partnership deal last year hoping R3 would help connect it with more banks. The XRP options contract was a part of that deal.
But Ripple claims it canceled the contract because R3 failed to deliver on its ends of the deal.
“Almost immediately after the agreements were signed, R3 disappeared as a partner,” according to the lawsuit. Ripple also notes that several big-name financial institutions– including JPMorgan Chase, Goldman Sachs, and Morgan Stanley– left R3’s consortium after their partnership was formed, decreasing the deal’s “value proposition.”
Meanwhile, R3 has moved forward with developing its own blockchain software products, although the two don’t appear to be competing in the same space.
On Oct. 3, R3 announced the launch of Corda 1.0, which aims to allow financial institutions and other businesses to create “smart contracts.” The software “records, manages and executes institutions’ financial agreements in perfect synchrony with their peers, creating a world of frictionless commerce,” the company said in a press release.
R3 earlier this year announced it raised $107 million as part of a Series A fund raise.