
At My Wit’s End: Jason Calacanis Threatens To Sue Us - ssclafani
http://techcrunch.com/2010/11/03/at-my-wits-end-jason-calacanis-threatens-to-sue-us/
======
grellas
For those interested in some of the legal technicalities, a few thoughts.

Timing is very important here.

In essence, Mr. Calacanis and TC had formed an LLC to run the TC50 conference,
were therefore co-members (i.e., partners) and equal owners of that LLC, and
had reached a point in 2009 where they had serious tensions between them
concerning the venture. Whatever the true story, it appears that they entered
into a formal settlement agreement, with global releases granted to one
another, earlier this year by which the LLC was dissolved and the parties were
allowed to go their separate ways without either of them being able to make
legal claims against the other.

That in theory ends it all and should eliminate all future legal claims
relating to the venture. Indeed, it is almost certain that the releases
included the standard provision found in all California releases by which all
parties would have agreed to release all claims, known _and unknown_ and by
which each party would have agreed and acknowledged to accept the risk of
giving a full release even if later events revealed facts that might have
materially altered that person's decision to grant the release in the first
place.

So what happened?

AOL agrees to acquire TC, signs a definitive agreement to do so, and enters
into an escrow/due diligence period preceding the closing during which TC and
Mr. Arrington must warrant and represent, among other things, that the
stock/assets being transferred are free of legal claims or liabilities that
might affect AOL as buyer in the deal or, if not, that such claims are
disclosed and accepted by the buyer.

If serious legal claims arise during this period, (1) the deal might be killed
if the prospective acquirer decides that the existence of such claims
materially impairs the value of what is being acquired, or (2) the selling
parties must agree to indemnify the acquirer from all such claims and (almost
invariably) an amount is reserved and held back at the closing to serve as a
fund by which to satisfy such liabilities following the closing. While I have
no idea about details, this might mean in, say, a $60M deal, that AOL might
insist on a hold-back amount of as much as a third of the purchase price to
cover this sort of risk (if the value of the TC50 conference is a _major_ part
of what it is acquiring in relation to the other TC assets, this percentage
could be higher).

So what about the legal releases signed by Mr. Calacanis? Shouldn't this end
the possibility of legal claims?

Yes and no. Yes, in that a court would find that all such claims _have_ been
released unless the settlement agreement can be rescinded on some lawfully
cognizable ground. But no, in that any agreement can be set aside if it was
entered into based upon fraudulent misrepresentations, mutual mistake and a
few other grounds justifying rescission.

And that is what Mr. Calacanis is asserting here: that he would never have
entered into the settlement had he known the material facts concerning the
impending AOL acquisition, which he claims were not disclosed to him in
connection with the settlement. He takes this a step further by asserting that
Mr. Arrington and TC had fiduciary duties under laws pertaining to LLCs to
disclose whatever material facts they knew about that impending acquisition.
In other words, this was not a mere arms-length negotiation by which each
party could go for maximum advantage by employing any sharp tactics available
to it. When fiduciary duties apply, one party is deemed to repose trust in
another and that other party has a duty not to abuse that trust. Put all this
together and Mr. Calacanis is basically claiming that he was taken advantage
of and misled into signing the settlement document, that he has a right to
rescind it, and that it is therefore open season on his right to file a
lawsuit over the whole mess.

I don't believe, in this context, that Mr. Arrington is publicizing this in
order to get hits for his site or simply because he is a "drama queen." I
believe he sees this sort of claim, timed in this way, as something that can
have a large impact on his potential for closing the AOL deal or at least for
closing it on favorable terms and, therefore, his tactic seems to be to
attempt to portray it as a shakedown suit and to use that to gain leverage for
his position.

Mr. Arrington is a fighter and I'm sure means it when he says he intends, in
effect, to take this to the mat. He might be undercut in this effort, though,
if AOL uses this as a reason to pull or modify its offer. This is where the
true drama lies in this matter, in my view. I believe this puts Mr. Arrington
under enormous pressure and probably explains why the claim is being asserted
in this context. If it threatens to disrupt the deal, it might take a
significant sum of money to make it go away.

By the way, the law firm asserting this claim on behalf of Mr. Calacanis is a
first-class firm. If this does get filed, it will be seen as a legal threat
that must be taken seriously by AOL if it is to go through with this deal.

~~~
cletus
Thank you for this post. I lack the legal background (direct or indirect) to
articulate what you have as well as you have.

My point, which was basically what your point is, is that the timeline looks
very much like Arrington was positioning for the AOL sale and thus was
(arguably) misrepresenting his position in dealings such as dissolving the
TC50 conference.

Arrington claims he offered 10% of TC to Jason in 2008. That's interesting
because it's a de facto admission that Jason did add value to TechCrunch (or,
more accurately, the _partnership_ for TC50 did).

So if the offer of 10% was made, the question becomes: was that a fair offer?
Look at it this way: if TC generates $10 million revenue a year but $6 million
of that comes from the TC50 conference (these are all made up numbers), then a
50% share in that conference is worth at least 30%, possibly more depending on
the profit rather than revenue split.

Arrington's post is very calculated. It basically places all the blame on
Jason. Nothing is ever that clearcut so that's what I mean when I say there is
a real stink to this post.

Not that I blame Arrington for not being impartial. For something that may end
in litigation you don't want to give away anything before you start. He's a
lawyer. He knows this. It's why I'm somewhat surprised that he made this post
at all since any good lawyer would normally tell you "say nothing".

It makes me think the real audience for this post was AOL.

------
edw519
Thank you for this wonderful post! I was beginning to feel left out.

While the rest of the U.S. is consumed with mid-term election results, World
Series celebrations, fantasy football, Survivor, and Justin Bieber thinking he
can dance with 5th graders, we hackers pay little attention and keep on
working.

Then you guys come along with fresh hacker-friendly drama. Thank you! It's
been 3 weeks since Angelgate, and things were beginning to get monotonous alt-
tabbing between my IDE, my debugger, my test runs, email, and hacker news.

</sarcasm>

Now that the sarcasm tag has been lifted, let me say what I really think:

Why is it that those of you who have so much spend so much energy being drama
queens? We hackers struggle every day, sometimes for years, building stuff,
but if we fart wrong during a pitch, you send us on our way as if nothing we
ever did matters. Anyone who comes to this board can bitch and moan about a
million different things, but most of us don't; we just keep on working.

Why don't you all just STFU and do the same. There's already too much drama
and too much work to be done. When Silicon Valley turns into Hollywood or
Washington, D.C., we should all start worrying.

~~~
mattmaroon
Because this is what drives traffic to blogs. He's hacking here, just not
code. It's also a little game theory, as Arrington's willingness to publish
anything anyone does to screw him probably also makes people think twice about
doing so.

Also, it's not unimportant to startups. Jason is an angel investor. If this is
even half true, I'd avoid having Jason invest in my startup. You can divorce
your wife more easily than you can divorce your investors.

~~~
gxti
> It's also a little game theory

There's certainly interesting game theory at work here, the problem is
presenting Arrington's "play" as factual news. I would consider grellas' meta-
analytical comment here to be HN material, while the TC article actually
posted here is just drama.

------
iuguy
I draw two things from this:

1) Don't do business with Jason Calcanis. This is not the first time I've
heard Calcanis-related drama, won't be the last. Not that I ever was going to
do business with him, nor him with me mind.

2) Don't do business with Michael Arrington. He washes his dirty laundry on a
very public blog without regard for his business associates (in this case,
AOL).

Drama never leads to good business practice.

~~~
philk
If someone has been publically slandering you and is now threatening legal
action I think you're well within your rights to fight back however you see
fit.

~~~
kbatten
How far does "however you see fit" go? Escalation to the nuclear option is
rarely, if ever the correct course of action.

~~~
gyardley
I suspect in TechCrunch's case publicizing every lawsuit threat acts as a
deterrent, resulting in much less legal hassle than they'd face otherwise.

------
jwr
I really wish this kind of tabloid news didn't make it to the top of Hacker
News.

We are a community of Hackers. We set out to change the world, create things,
build value. Why then should we be interested in petty clashes of Silicon
Valley drama queens? What difference does it make who hates whom and who sues
whom? How does it influence my new startup?

Before upvoting something, consider: does reading this story make me a better
hacker?

~~~
dolinsky
While I do share your disdain for drama news like this taking up valuable
space on the homepage of HN, instead of us commenting on this story, why
aren't we all merely flagging it and letting the tools in place run their
course? I understand the need to have discussion on the matter of what HN
should consider 'good news', but having it inside of an article that most of
us could care less about and does not make our lives better gives false
credence to a pissing contest between two individuals.

I fully understand the irony in me posting this, btw. :)

~~~
jwr
I did not upvote the story, and I posted my comment to try to convince others
to ignore it as well. As I understand it, this is what HN comments are for:
discussion, exchange of ideas and convincing.

I do hope that by discussing it here I will convince fellow hackers not to
upvote similarly shallow stories in the future.

------
tlrobinson
After watching the latest "This Week in Startups" with Jason hosting Dave
McClure ([http://thisweekin.com/thisweekin-startups/this-week-in-
start...](http://thisweekin.com/thisweekin-startups/this-week-in-
startups-91-with-dave-mcclure-founder-of-500-startups/)) my opinion of Jason
has sunk to an all time low. Jason spent a significant chunk of time trash-
talking Arrington, and egging on Dave to do the same. It all came across as
very childish to me.

That said, my opinion of Arrington isn't much better.

~~~
jacoblyles
That, and he runs a "startup" that is a glorified content scraper.

------
staunch
The only reason TechCrunch50 made so much money is because of the TechCrunch
brand. TechCrunch had a dozen events before that, and they were all very
popular.

Calacanis should have counted himself lucky to make a few million dollars and
then moved on. Arrington offering him 10% (of TC stock?) for walking away was
more than generous.

Calacanis just got greedy. If he was truly convinced he was such a big part of
the conference he wouldn't have anything to cry about. He could start his own
conference and it would be just as popular and lucrative as TC50. Of course
his won't be nearly as popular or lucrative though, and he knows it.

~~~
swombat
In addition, TC has had a number of events outside the US which have been
successful too and had nothing to do with Jason.

------
ComputerGuru
Anyone else tired of the seemingly-endless barrage of hissy-fit tabloid-fodder
stories related to Silicon Valley bigshots?

Things like Musk's marital problems, Arrington's latest enemy of the week,
etc.... it's just all such a ridiculous waste of time when there far more
important things to concern oneself with!

~~~
hristov
Ok I don't care about Musk's marital problems at all, but Arrington's little
dramas are a lot of fun to watch. And very instructive too, as they reveal a
lot about the real Silicon Valley.

------
julianz
I'd really love to see a filtered HN with nothing from or about TechCrunch.
Maybe it's just because I'm thousands of miles away and have hardly ever heard
of the participants or many of the companies involved, but I deeply don't care
about this shit.

~~~
lylejohnson
You might appreciate Giles Bowkett's Hacker Newspaper (<http://hacker-
newspaper.gilesb.com/>), which among other things skips all links to
TechCrunch. See Giles' post about it here:
[http://gilesbowkett.blogspot.com/2009/04/miniapp-hacker-
news...](http://gilesbowkett.blogspot.com/2009/04/miniapp-hacker-
newspaper.html).

------
rumpelstiltskin
Arrington hooks up with Fusion Garage to create the CrunchPad. Fusion garage
cuts him out and goes ahead with their own version titled the JooJoo.
Arrington sues Fusion Garage.

Calacanis hooks up with Arrington to launch TC50. Arrington cuts Calacanis out
and goes ahead with his own version titled TCDisrupt. Calacanis theatens to
sue Arrington.

Karma's a bitch no?

 _Edit: Yes, I know there are some subtle but important differences b/w the
two scenarios, but couldn't help noticing the similarity. And for the record,
this makes them both look bad._

~~~
aberkowitz
Subtle but important differences make the situations incomparable to each
other.

Partnership dissolved in bad faith vs partnership dissolved through legally
binding agreement.

------
steve19
They keep calling each other friends.

WordNet: # S: (n) friend (a person you know well and regard with affection and
trust) "he was my best friend at the university"

They are not friends. They both need to get over this and move on.

~~~
scorpion032
Alternative definition of friend is being an enemy's enemy.

With the number of enemies they have both individually got, I am sure there
are more than a handful of common ones!

~~~
scorpion032
Their "friendship" comes more out of "common hatred" than "mutual trust".

------
twidlit
Funny how in last week's episode of This Week in Startups. The founder of
Unsubscribe.com and Phonetag.com said to Jason that suing anybody is a big
waste of time for everybody involved.

------
nostrademons
Why does TechCrunch seem to attract as much drama as Fandom Wank?

~~~
JCThoughtscream
Glibly, because TechCrunch itself is a wank outlet for Silicon Valley business
drama.

~~~
jakerocheleau
TC turns everyday tech entrepreneurs into glamorous celebs. Hollywood 2.0, if
you will

------
w1ntermute
Here's a mirror in case Mike takes the post down or modifies it:
<http://ompldr.org/vNjEzOA/tc-jasongate.mht>

I tried to take a screenshot using extensions in both Chrome and Firefox, but
got various issues with parts of the page being missing or the extension
giving me an error, so I made an MHT archive using Opera. Perhaps someone with
better luck with the screenshot extensions can use the UnMHT extension to open
the file in Firefox, take a screenshot, and post it.

------
cletus
I wrote a post about the sale of TechCrunch to AOL a month ago:

[http://www.cforcoding.com/2010/10/did-michael-arrington-
scre...](http://www.cforcoding.com/2010/10/did-michael-arrington-screw-
jason.html)

In putting together the timeline there was in my opinion a real stink
surrounding Arrington's actions. It all just seemed too convenient and
coincidental and unsurprisingly to MA's benefit.

I read this post and there is a similar stink. Mike is just too much playing
the hapless victim of a tyrannical ogre to be credible.

TC might have done q lot but Jason brought a lot to the table. Compare and
contrast with the far less exciting Disrupt conference.

Frankly this sob story has for me made jason's version of events far more
credible.

EDIT: sigh, and so the down voting just for my opinion begins...

~~~
nailer
I suspect the downvotes are more for linking to your blog to get the meat of
whatever you're saying.

------
tyng
While I think Arrington is justified to express his views on the matter, he
should certainly start a personal blog that's not affiliated with TC to do it.
Lately he is bringing too much of his personal and company dramas (CrunchPad,
Angel Gate, Jason Calacanis) to the TC world and it's hard for people not to
think he is leveraging TC to his own advantage.

------
fletchowns
Who cares about this other than those directly involved? Why is every bowel
movement over at TechCrunch posted on here lately?

~~~
bl4k
The 59 people who upvoted it do.

The process of promoting stories on HN is democratic, if you don't like it
then get your news elsewhere - don't bitch about it.

~~~
zephyrfalcon
Right now it's not even in the top 25 on programming.reddit.com... but that
might be because it has little to do with programming.

------
rbanffy
It's the second time in my memory TC is in the middle of a soap-opera-style
tech drama. I am starting to suspect the common thing between both stories is
the source of the drama. Either they have a knack for choosing bad
partnerships or they are the unluckiest company on Earth.

------
bbuffone
Arrington is bad at picking his business partners. Enough said

------
random42
I don't believe too much in dispute stories, when there is only one party of
the dispute to represent. The stories are inevitably skewed too much in one
direction.

------
spinlock
Looks like a good reason to really know the people you decide to partner with
before you go into business together.

------
Tichy
I'm sure they'll sort it out somehow.

------
mcantor
internet | grep -v Calacanis

------
michaelhart
I.... hate.... drama....

------
redthrowaway
At this point, I don't even care if Arrington has a legitimate point. His
handling of this affair has led me to believe that he is slimy, immature, and
petulant. Of course, his handling of other affairs had predisposed me to this
conclusion.

------
kevinelliott
Ooh look, a couple of millionaires whining about their little arguments.

Update: Bring on the down votes, as I'm sure many of you worship these guys. I
won't hold back my opinions with thoughts of losing karma. These guys are
having little fits that so many startups have, but using their notoriety to
get attention over it. Don't feed into it!

~~~
ScottWhigham
I don't think people are downvoting b/c they agree/disagree/love/hate/care
about the people or companies in the article; my take on it is that you are
getting downvoted because your comment had no substance and was just sarcastic
whinging. Your comment could have been straight outta YouTube land and I don't
think folks here appreciated it.

~~~
kevinelliott
Perhaps. YC has a history with TC, so I think it bothers fans of these guys as
well. After all, it was posted here, and then up voted. And Calacanis is a
contributing member here.

None the less, I agree that my comment added nothing of value to the
conversation, and that along merits the down votes. But ultimately so did the
original article.

