Investors' suit over Campus Labs far from over

Enlarge Photo

Dan Miner

Reporter- Buffalo Business First

Email  |  Twitter  |  LinkedIn  |  Google+

Several years after the high-profile acquisition of Campus Labs, financial experts will likely be called in to settle the matter of how much its initial investors should have been paid.

Those investors — Amherst attorney William Reich and University at Buffalo professor Moises Sudit — claim their payout was far lower than it should have been, even lower than what they'd been offered in 2007 when Campus Labs was buying out many of its investors.

Instead of about $100,000 apiece, Reich and Sudit's attorney said the payout should have been more like $580,000 each, according to their ownership in an employee incentive plan.

The amount of the plan, and the agreements that were made in 2007, are the central dispute of complex commercial litigation which is proceeding at two levels, in front of a state Supreme Court Judge, Timothy Walker, and to a panel of Appellate Division judges in Rochester.

Another layer of drama: one of the defendants is Reich's son.

Eric Reich co-founded Campus Labs in 2001 with Michael Weisman, growing it into one of the most successful tech startups in Buffalo's history. They became prominent symbols of how tech entrepreneurship can work in Western New York when they exited in 2012 after a $38.5 million sale to Connecticut-based Higher One.

Investors and employees were paid out according to their shares in an employee incentive plan.

Sudit and William Reich say they each owned 18.7 percent of that plan, which should have totaled $3.1 million. That would give them each $579,900 payouts, instead of roughly $100,000 they were offered, and solve the riddle of how two investors could actually take a lower payout after several years of company growth and an acquisition.

Dan Miner is Business First's enterprise reporter. He also covers education and public companies.