
Ask HN: Have you ever been sued by your startup? - throwaway10283
So, I'm being sued by a startup that I used to work for.  I don't want to go in to the details for obvious reasons, but it's been really stressful and difficult.<p>I was recruited to work as the first employee for this startup, spent a good deal of time and effort on it, and then had the founder turn around and sue me.  They're demanding more money from me than I was ever paid to begin with, because of some vague damages that I (allegedly intentionally) caused.<p>All of his claims are patently false (and I have documentation to that point), and boils down to the founder trying to scapegoat me for his own mistakes.  However, he's independently wealthy and knows that I don't have much money and likely won't be able to defend myself.  So, in essence, it feels like an adult form of bullying.<p>I have no idea what to do.  I can't afford an attorney.  I'm also concerned that there's this public mark on my record (e.g., a future employer googles me and finds this lawsuit).<p>So, what do I do?  Have any of you been in a similar place with an early-stage startup?  How do it go?  Why do people suck so much?<p>EDIT: I was apparently responding to too many questions, and am rate limited, so I can't respond anymore.<p>I am a student and I have called my student legal services.  This case is too big for them to handle.  In the words of one of the people I spoke with, "you would have been better off getting a DWI."<p>It is a lawsuit in federal court, not just a threatening letter.  I have considered going pro se, but I'm too concerned about following proper procedure.<p>I was W2 not 1099.  I've reviewed my employment agreements, and that's part of what makes this whole thing baseless.  Without going into details, their allegations suggest that my employment agreements require me to do things that they don't actually specify.  It's akin to firing a airline pilot because they didn't serve enough soda to the passengers.<p>Thanks specifically to the users that recommended Grellas.  I'm speaking with him later today :)
======
paulsutter
You can't afford _not_ to have an attorney. Most give free 30-minute
consultations, start there.

Get the best attorney you can. Good lawyers cost much less than mediocre
lawyers, even if they have a higher hourly rate. Good lawyers have plenty of
clients and have more flexibility with how much they actually bill you.

A letter or two from your lawyer may resolve the whole mess. Anything you
write could easily make things worse. The legal system is a dangerous jungle
you've never seen before. You need expert help to navigate it.

EDIT: to find a lawyer, ask smart businesspeople for a referral

~~~
throwaway10283
Obviously I can't not defend myself, but it's difficult when I'm already
living off a student's budget. Do you have any recommendations or ideas for
good and reasonable-priced attorneys?

~~~
jacquesm
You _really_ need a good lawyer. No other options there. I'm not sure if he's
still active here but you could contact George Grellas (who is both nice,
exceptionally knowledgeable and approachable) and ask him what to do, he was
quite active here on HN for a while, 2 minutes of googling will locate him. 5
minutes of his time will be worth more than all the (well intentioned) advice
you're going to get here.

Without details nobody will be able to give you advice beyond 'get a lawyer'
and I fully understand why you don't want to give out any more info here.

The one bit of info I can give you, once you have a lawyer, give him _all_ the
information that you can find on this, don't leave anything that you feel is
not relevant, a late surprise in a thing like this can be costly.

Best of luck!

~~~
throwaway10283
Thanks for the name! I'll look him up. And, obviously I didn't expect people
to provide specific legal advice, but just in general how to handle these
situations, and if anybody has actually been through it before.

~~~
jacquesm
Handling the situation is the easy part. Locate lawyer, give them all the
relevant info, watch two lawyers exchange a bunch of letters and then
hopefully it either goes away once the other party is convinced the case is
baseless, or it will go to trial. Stop communicating directly with the
plaintiff or their lawyers until you have a lawyer.

The best defence is to make sure they realize that you can't pluck feathers
from a frog.

Any weaknesses you have should be offset by your contractual terms (assuming
there was a contract).

Since you say you were employed they would have to work very hard to prove
malice on your part, especially since they decided to keep you on as long as
they did. Any damage they claim you caused should be easy to prove for them,
hard to defend against by you if it is to stick, but without more specifics
that's unknown.

For the record I have been the plaintiff in a case like this, where an
employee decided to blackmail me and turn off a website overnight locking me
out of the server. Needless to say that didn't end very well for said
employee, not because I'm rich and he was weak but because he was a jerk that
did something he never should have done: assume that blackmail is a viable
option.

In the end that one was resolved out-of-court by the time the defendants
lawyer had a chance to talk some sense into the defendant.

~~~
wfunction
> "Needless to say that didn't end very well for said employee"

Did you mean employer?

~~~
mitchellhislop
>"For the record I have been the plaintiff in a case like this, where an
employee decided to blackmail me ..."

I bet he meant employee.

~~~
wfunction
Ah, my mistake, I misread the sentences; thanks.

------
nlh
It is absolutely an adult form of bullying. Filing a lawsuit, though many will
trivialize it, is anything but trivial. It requires time, energy, and most
importantly, $$ to be spent on a lawyer. I'm still amazed that so many people
go through with it for petty matters or fights.

I've had customers rent a car from my company, damage it, and then sue us to
try and recover the damages after we bill them for it. They spend double the
cost of the damages to have their lawyer file the lawsuit, and every one has
lost the lawsuit so far. So why do they even bother? Because it gives people
in a less-powerful position some semblance of control/power (which, by no
coincidence, is where bullying often comes from.) - "This car was damaged
under my watch, they used my deposit to bill me, I signed a contract agreeing
to this scenario, but I'm not happy about any of this and I'm used to getting
my way, so I'm going to sue."

Anyway - that's not advice, just background. My advice - if the situation is
indeed as you present, is that as painful as it is, you need to defend
yourself. If you don't, you risk the court entering what's called a 'default
judgment', which is basically a loss on your part.

I'm not sure what the amount is (you said it's more than you were paid, but I
don't know what order of magnitude that is) - if it's small-claims-scale, you
do not need a lawyer and you can defend yourself in person in court. If it's
above the small-claims threshold, you'll need to take it a step further.

In either case, I suggest you at least speak to a lawyer first. It will cost
something, but it won't cost thousands to have a conversation, and it may not
even cost that much to respond.

One thing that's important to remember: It gets VERY VERY VERY expensive to
take a lawsuit beyond the initial filing and angry-letter-exchanging phase.
Nobody wants to go there - not the plaintiff, and not the defendant. Filing a
response costs time and money, but after that, a world of pain gets opened up
with discovery, etc. etc. And that's on both sides -- to the tune of tens to
hundreds of thousands of dollars. So honestly, very few people actually want
to go that far unless there is a lot of money at stake.

So likely, you'll want to at least make contact with the plaintiff and figure
out what they really want (it might be nothing more than making you pay for a
lawyer to respond), but either way - get a lawyer and at least have a
conversation.

~~~
rayiner
(None of this should be construed to be legal advice...)

If it's in federal court on what seems like a breach of contract claim, then
it's probably there on diversity jurisdiction and thus the amount of claimed
damages is over $75,000. So probably not something he can take to small
claims, unfortunately.

The real question is, who sues a student for > $75,000 for breaching an
employment agreement?

~~~
larrys
"The real question is, who sues a student for > $75,000 for breaching an
employment agreement?"

I suspect that there is more going on here than meets the eye or has been
disclosed exactly for that reason. [1] Notwithstanding the parent's comment
about the games people play it's really hard to make a judgement (as with
anything) w/o hearing the info from both sides.

Now had the OP not been using a throwaway account you could at least infer
some legitimacy (however slim) because the poster would be known at least a
bit. (Or maybe more than slim if the commenter was well known to the HN
community). That is not the case here. This is not to say that the employer
doesn't suck and that the case is frivolous but merely to point out a possible
reality.

[1] I've been doing business for a long long time and have come in contact
with many nutty people obviously but in general the limiting factor as has
been pointed out is the amount of effort and money it takes to file and carry
through with a law suit is not trivial. Would also add at this point is that
it is typical to receive the "scary lawyer letter" prior to the filing of a
lawsuit and the OP doesn't mention receiving that.

~~~
niggler
"Now had the OP not been using a throwaway account you could at least infer
some legitimacy (however slim) because the poster would be known at least a
bit. "

Absolute idiocy. Especially with ongoing litigation, it's a really bad idea to
associate your name with the situation

~~~
larrys
The reason for the poster not using their name doesn't matter relative to my
comment which has to do with the fact that if you knew them or something about
them you might give more weight _to what they have said_ in the absence of all
the information being considered.

Obviously there is a reason they aren't using their identity.

Would you feel the same if you heard a story from a friend you knew and
trusted vs. overheard a story being told from a complete stranger? That's the
point I am making. That you are more likely to believe something from someone
you know something about rather than a complete stranger. Has nothing to do
with why they have decided to not reveal their identity. What about my comment
indicates to you that I think _they should_ have revealed who they are
exactly?

If I revealed my identity and I was actually a well known person you might
give more credence (and respect) instead of reacting with "idiocy" to what
I've said. And that would make sense. Just like people will react to what PG
says with more respect then a random HN poster and cut more slack.

Thanks for saying "absolute idiocy" and assuming that I don't know something
as simple and obvious as "it's a really bad idea to associate your name with
the situation".

------
isalmon
>> Have you ever been sued by your startup?

Yes I have been in exactly the same situation.

Went all the way, they filed every possible paper they could file, but they
did not succeed. Based on your description, I don't think that in your case it
was actually filed yet (correct me if I'm wrong). In some cases they will just
try to scary you, but if you don't break - they won't file. If they do - well,
find a good lawyer (somebody already mentioned Grellas here).

Right now the first thing that you should do is go and talk to SEVERAL
lawyers. Find the ones that have free initial consultation, spend 30 minutes
with them, they will tell you what your options are. If there's a possibility
for a counter suit - you should probably do that.

Also, read your employment agreement several times. In a lot of cases there's
a statement that the defeated party will pay attorney's fees. In a lot of
cases there is a statement that the company will pay all the fees except first
$100-$500. And in a lot of cases the case must be filed with the arbitration,
which is much cheaper and if you don't have money to pay for your lawyer - you
might have a better chance there.

~~~
Mahn
Talking to _several_ lawyers is indeed important; personally I had once a
crappy lawyer telling me my case was hopeless, when it couldn't have been
farther from the truth; it's best to have several opinions to understand where
does one stand.

------
mortov
First, you _do_ need a lawyer. _Do not_ write or say anything directly as that
_will_ bite you in the ass. Hard. If there are scheduled court dates already,
make sure you turn up and tell the judge you are seeking time to gain advice
and representation and have limited funds. They will generally be sympathetic
to that - they _won't_ be sympathetic to a no-show.

If you have no money and no assets (you've just commented you are a student),
there is not much to be got from suing you so it's not such a hot strategy on
his part.

Depending on where you are (you don't say), there can be legal clinics or even
unions/professional bodies who can help out or have on-call lawyers for basic
advice and to point you in the right direction. Perhaps the instutution you
are studying with may have something to go to first.

I suspect a sensible lawyer would start with a counter suit and some
publicity. The fresh oxygen of publicity often curbs bad and bullying behavior
- just look at last week's HN for an example of that.

------
georgespencer
I'd like to help out with the costs. My email address is in my profile.

------
jd
I don't think you have to worry much about this being a public mark on your
record. Bogus lawsuits happen all the time, and especially if the lawsuit is
dismissed or if you win it nobody will care a few years from now. So I would
focus instead on surviving this lawsuit while taking as little damage as
possible. So lawyer up.

~~~
throwaway10283
Thanks! Another thought I had was to countersue with equally as damning
comments. If there's going to be a public document with really bad allegations
against me out there, then there should be an equally bad (yet more true)
public document with allegations against the company and founder.

~~~
jd
Additionally, if you're willing to go to the dark side...

If he's independently wealthy he probably has a lot more to lose than you do.
You can use this as leverage. If you can get him in a position where he may
lose a lot then you can probably get him to back off and drop the lawsuit.

So be willing and prepared to fight dirty (but still get a lawyer). He's
bullying you, and against bullies it's often a good strategy to escalate
beyond the comfort zone of the bully. He can afford to sue you because he
doesn't feel vulnerable; losing the lawsuit isn't the end of the world to him.
This is what you must change. Find a way towards mutually assured destruction.

If he's just a bully he's very likely to back off if you put up a fight.

~~~
SoftwareMaven
I wouldn't consider counter-suing in this case to be the dark side. In fact,
it may be the best way to get legal representation with little out-of-pocket
spend, since the lawyer could work off a percentage of the potential damages.

------
wildlogic
Hello. I have both been sued by a startup and defended myself pro-se (in a
different criminal case). I was paid a small sum to do some work, which I did.
I delivered the work to contract, but when I did not want to do the additional
work involved with actually setting all their stuff up and getting everything
deployed, they sued. I didn't have the time or money to deal with it, so I
ignored it all, they ended up getting a default judgement against me for
double what I was originally paid. I just figured I wouldn't pay them, but
they were lawyers so they got my wages garnished (25% of each paycheck). Paid
my last part of the garnishment last week.

Don't worry about going pro se from a procedural standpoint - judges are quite
accommodating (and frankly, amused) by those of us who choose to represent
themselves. I did an exhaustive amount of research prior to trial, and the
district attorneys were grossly under-prepared for the case, so I was able to
easily put them to shame. Put time into your opening, closing, and preparing
your witnesses (including yourself). Watch a few episodes of Law and Order. It
actually ends up being a pretty awesome story, whichever way it turns out.

The whole situation is terrible, I've been there. Whatever happens, just know
that it's all not a huge deal however it turns out. My current employer didn't
have any issues with the suit or with the garnishment, it was fortunate that
they gave me the chance to explain myself.

Let me know if you have any questions about anything, b@pan.sx, happy to
discuss.

~~~
mlent
The vast majority of people who represent themselves pro se lose. Lawyers are
sneaky and will use your lack of domain knowledge to hurt you unfairly. You
need to get a lawyer to balance it out. The judge is not there to be your
advocate.

------
dreamdu5t
I once paid for lawyer services by building them a website. Just find a lawyer
and deal with payment later.

~~~
gknoy
Great suggestion for a possible way for someone on a shoestring budget to
compensate a lawyer for their time. Thanks for the reminder that negotiation
has power nearly everywhere.

------
strlen
0) LAWYER. Get one. Do whatever she says, including ignore this comment
(except for this line).

1) Do not "meet" with the the party suing you or the lawfirm representing them
on your own. Do not sign anything they extend to you to "make it go away."
Send all communications from them to your LAWYER first, never respond on your
own.

2) LAWYER

Now, it seems that the party suing you is not in it for your money as they
know you can't pay; besides, the lawsuit itself costs money, possibly more
money than any judge or jury would reasonably award. Instead they're probably
looking to:

I) Hurt you

II) Sue your current, previous, future, etc... employers who might actually
have money.

III) Both

If you sign something admitting guilt (even if you don't realize it), there is
a chance (depending on what they've accused you of, _probably_ not the case
for breach of contract but _I am not a lawyer_ ) they _might_ use it to start
a criminal trial against you (which meets goal I). It is highly unlikely that
this trial will happen or that you'll serve any jail time if it does, but it
will be absolutely painful.

You've now also opened up the potential for your current employer to be sued
(meeting goal II). In turn, your current employer, has the right to sue you
(again, helping meet I) and in this case probably for good reason: either
you're honest in having caused damage or you've given false testimony.

What the party suing you is counting on is for you to NOT get a LAWYER and to
prevail against you in a system that is adversarial. I'm a big fan of the
adversarial legal system: it works great for criminal cases where you're
guaranteed many rights, most important presumption of evidence, and a
defender. However the way it's currently practiced in civil cases is flawed:
the goal is for attorney on the either side to win, rather than for both
parties to work diligent towards uncovering the truth, but most people don't
realize it.

On the other hand, if you do get a LAWYER and are found innocent, the other
party will cover your legal fees. If you and your LAWYER settle without going
to trial, the legal fees will also be much lower (and you will not have to pay
damages).

If you lose, the lawyer can make the loss hurt less: e.g., lessen the damages,
avoid a situation that opens you to a criminal trial, etc...

So: LAWYER.

Disclaimer: have never been sued personally, know entrepreneurs who have. Not
a lawyer but curious about law. Everyone should also read every comment by
grellas and rayiner. If anything said in this comment contradicts the advice
of a reputable lawyer you've hired, follow her advice instead.

~~~
mratzloff
"On the other hand, if you do get a LAWYER and are found innocent, the other
party will cover your legal fees."

Please don't make a blanket statement like this. It's true in some countries,
but not everywhere in all situations.

~~~
strlen
The OP is in the United States, likely not in Louisiana, and being sued in a
federal court. I am answering to OP.

That said, if the jurisdiction is different, I am still sure that an hour of
talking to a lawyer (who can explain the laws and if legal fees would be
covered) would still cost less than losing.

Please notice how my comment also says that if there is difference between my
advice and what a lawyer says, take the lawyer's advice.

------
bzalasky
Talk to a lawyer with enough experience in this area to make a judgment call
on your case. Then you'll have a better idea of how to move forward. It could
be saber rattling, or it could be more. Note, I am not a lawyer.

------
rhizome
By "I'm being sued," are you saying that a suit has been filed and you have
been served with papers? Do you have a court date?

~~~
nlh
Excellent point. OP - have you actually been sued / physically served? Or did
you just receive a letter threatening you with a suit?

Huge difference. Both require lawyers, but the former will cost more to
respond to. The latter typically requires nothing more than an equally-
strongly-worded letter right back at them to let them know you're not a
pushover.

Remember - from the plaintiff's side - a letter costs a few $hundred. A filed
suit costs a few $thousand. A fought suit costs $tens of thousands. A long-
fought suit can costs $hundreds of thousands.

------
beakel
It happened to me, and I understand the panic it causes. I joined a startup
after college, got paid less than the minimum wage (no kind of equity in the
company either) because I found out the financial situation of the company had
been misrepresented to me by the co-founder, and I left with the work I hadn't
been paid for as collateral (knowing they were going to let me work the month
out and were unable and unwilling to pay me). I had my suspicions and I found
this out by looking at their conversations on a forum on the server (which I
had the root password to).

First thing they did was call the cops for "computer hacking". Cops laughed it
off obviously. Then they went to their lawyer. They were desperate for money
and thought they could exact revenge. Lawyers really know how to write scary
letters and make it seem that you're in a world of trouble, I hope you're
aware of that. Really what they're doing is trying to get you to reply to
everything they throw at you, so that something can be used against you. They
want an admission of guilt, and then they can force you to settle.

I sought free legal advice from a local charity, but they only operate once a
month so I had to write back before then. I defended my actions and made
allegations against them. Their response was always short, they would never
address what I said to them, and they would always try to trip me up on what I
said (poorly might I add, based on their poor understanding of technology).
One lesson I learned from this is that nothing you say in those letters in
your defence goes in your favour, it is only fodder that can be used against
you.

The lawyer told me that when writing back to them I should put "without
prejudice" on the letters, meaning the letter can't be used as evidence (this
was not in the USA however!). Eventually I threw enough stuff at them about
wages, their taxes and their activities, threatening to take them to the
labour court, that I just stopped hearing from them. In the end they walked
away with probably a $1500 bill from their lawyers and nothing to show for it.
(good enough for them!)

In summary, don't panic, the lawyers are relying on you panicking. Get a
lawyer. If you live in a sane country you can find a free one.

------
temphumanoid
Going through a similar thing (except I was a former founder of the startup).
Grellas is my lawyer, highly recommend him as a thoughtful attorney who is not
just a rubber stamp.

You can email me at mraiqensame@dunflimblag.mailexpire.com which is a
temporary address that expires in 24 hours.

------
thinkcomp
I'd recommend using PlainSite

<http://www.plainsite.org>

to see A) which lawyers and firms have represented your former employer, so
you know who not to call, B) cases based on the same statute as yours, so you
can find lawyers who are experienced in that particular domain, C) information
about the judge in your case, and D) what similar case dockets tend to look
like.

~~~
neurotech1
Good advice, however its good practice to disclose that plainsite.org is your
company/organization, when you post.

~~~
thinkcomp
Everything I suggested doing is free, so I have nothing to gain. Also, there's
no other site that allows you to do what I suggested for free.

But yes, it is my site.

------
atirip
Whats wrong going to court in civil case without an attorney? If you have
strong case, do not be afraid. I have done it and won, but not in the United
State of Attorneys, but in Europe. Act well, judge is gonna even help you to.

~~~
throwaway10283
If it were state court, I'd be more inclined to go it alone, but it's federal
court. I wouldn't be worried about making my case, but would be more worried
about not following the proper rules of civil procedure.

~~~
atirip
Yes, this is valid concern. It has happened here that you just ask to the
judge, that could he/she help you to go through the case. So judge actually
did help, stepped in when something needed to say or similar. If you behave
well, judge has no reason to dismiss or belittle you. Actually, if this is
clearly a bully case, it is easy to win judge to your side. I did exactly
that.

------
vt3
Congratulations! He has done you a favor by suing you. Just think of it as a
rite of passage. Take the opportunity and learn from it. In five years time
you'll be laughing about it and grateful for the experience.

------
dashr
Are you in the US? Try looking for a local Legal Clinic or Community Law
center that helps employees, via <http://www.probono.net>

------
rdl
Has the startup taken any money? I'd go through a lawyer, but probably a good
way to convince the entrepreneur to be sane is through his investors.

------
alekseyk
Talk to his investors, believe it or not they will be very interested if you
do not go public with this.

------
michaelochurch
This sounds more like extortion than a legitimate lawsuit. He's suing you for
breach of contract when the breached clauses don't exist, and based on false
pretenses, while exploiting an asymmetry in financial resources. I wouldn't be
surprised if a good lawyer would find cause for you to turn around and sue
him.

Lawyer up. Lawyer up. Lawyer up. Do not pass Go, do not collect $200 until you
lawyer up.

------
lgleason
You can't get blood from a stone. Sounds like he is trying to bully you. Try
rational means and as necessary it might make sense to take it public if you
have enough of a chorus of people saying this is not warranted and have
exhausted all other means.

Try to get some pro-bono help first.

~~~
eropple
Do not heed this post. Under no circumstances should you take it public before
it's seen a courtroom unless you have been advised to do so by a _competent_
lawyer.

(It is no-true-Scotsman territory to note that no competent lawyer would ever
do this. It is also accurate.)

------
exim
Did you consider kicking his ass? Seriously.

~~~
jacquesm
> Did you consider kicking his ass? Seriously.

Seriously, you're an idiot. If you escalate to violence the only thing you
will achieve is that on top of being sued for whatever he's being sued for
right now he's going to:

(1) hand a very large trump card or a free victory to the plaintiff in the
other suit

(2) quite possibly end up with a record to boot

~~~
wtvanhest
_Seriously, you're an idiot. If you escalate to violence the only thing you
will achieve is that on top of being sued for whatever he's being sued for
right now he's going to:_

First, maybe he is an idiot, maybe he isn't, but I definitely don't think it
is fair for his comment to be discounted as highly as it is, as quickly.

 _(1) hand a very large trump card or a free victory to the plaintiff in the
other suit_

I am no lawyer, but I doubt highly that a physical altercation will change the
facts of the original lawsuit, so your assumption here seems false.

 _(2) quite possibly end up with a record to boot_ ,

quite possible, but that record will stand as a message to future hostile
parties. I'm not saying that's always good, it may prevent him from getting a
job somewhere, etc., or it may not.

Violence is rarely the answer, but to be so flippant and assume it never is
and say "you're an idiot" is really misunderstanding the power dynamic.

In America, the punishment for violence is high relative to the value in
almost all cases but there are definitely situations where being a violent
aggressor will payoff. I'm not advocating it here, in this case, or any other,
but taking that option off the table completely is immature and shows a lack
of understanding of how the real world can work.

To support my claim, I'll give an example of where violence was used
effectively against me.

-

1) I had a car repainted when in high school (it has a lot of random damage
and I needed to prevent it from rusting.)

2) I negotiated with an independent body shop

3) I had it repainted

4) They didn't do as good of a job as they described.

5) I came back to the body shop, my car was not there, one of the workers had
taken it out on a beer run. He came back with the car and he was still drunk.

6) I confronted him in a professional but frustrated manor.

7) His coworker threatened me.

8) I realized I wasn't going to fight this guy without a weapon and decided to
back down and just drop it.

The threat of violence worked for him and his coworker. Without it, they had
zero negotiating room and the driver would have likely been fired. Could I
have gone to the police? Maybe, but they likely wouldn't have done anything.

~~~
darkarmani
> The threat of violence worked for him and his coworker. Without it, they had
> zero negotiating room and the driver would have likely been fired. Could I
> have gone to the police? Maybe, but they likely wouldn't have done anything.

They police would have done something if they beat you up.

~~~
wtvanhest
As much as I enjoy winning a moral victory from a hospital bed, I think I'll
pass.

Fighting someone with the intention of calling the police afterwards doesn't
make sense to me.

~~~
darkarmani
Where did i ever say you should have fought them?

