
A $5000 Chair - kentonwhite
http://battlehardened.wordpress.com/2012/02/07/a-5000-chair/
======
dsr_
It wasn't the chair that cost $5K. It was the lack of the most basic possible
written employment agreement.

~~~
josefresco
Who was going to write that agreement ... The lawyer they were hiring? Please,
their biggest mistake was doing business with an attorney at all. I've made
that mistake before and had the same experience where the "big deal" was
always one meeting away. 3 years later and this d-bag lawyer was in my office
letting me go (I hired him). Lawyers are like hired killers, unless your
hiring them to kill someone else, your the one who's gonna get axed.

~~~
mseebach
The fact that you hired _and then failed to fire for three years_ an employee
of a given profession does not translate in any way to a general advise to
never do business with lawyers.

It DOES, however, translate to a general advise to think hard about what skill
sets your startup needs, and when.

------
wtvanhest
"How can you honestly not remember this guy's name" - A commenter from the
original post.

This comment makes me think about whether this story is even true. I'd say it
probably isn't based on that one statement alone. How can the guy not remember
the lawyer's name? He has emails exchanged and the guy supposedly stole money
from him. I like to forget negative stuff, but I can assure you I would
remember this guy's name.

~~~
pyre
It could just be a way to side-step calls to 'out' the guy.

~~~
megablast
Why lie? It doesn't obfuscate the story any more than just saying 'not his
real name'.

~~~
pyre
Well, it could be a combination. Maybe he doesn't recall the name off the top
of his head, and he's not going to dig it out of old emails because he has no
intention of 'outing' the guy.

~~~
wtvanhest
It could be but it isn't likely.

------
danko
At first, I read this and thought to myself -- "charming, but they didn't
really pay $5K for the chair, so much as for their lack of proper legal
documentation."

Then I thought on it a bit more and realized -- it _was_ the chair that cost
them $5K, because if they hadn't established the paper trail via the e-mail
chain about giving the chair back, they wouldn't have had the hangup on
'without prejudice'.

Be careful with email, folks. In the end, that _is_ your paper trail.

~~~
kahawe
Isn't there something about email not being strong evidence in a trial because
it is way too easy to fake? At least in Euroland, a lot of things still run on
fax for that very reason.

------
bitanarch
One of the lessons I've learned in my startup life (2 years) was to never deal
with people who aren't competent with execution - what's the right thing to
do, how to reason about it in a logical way, how to do it, how to finish it,
contingency plans, etc.

"Try him out for the junk drawer job in the startup — CEO" is a terribly easy
mistake to make, when you're still at early stage with nothing to show. I've
done this for almost all the positions in my previous companies - programmers,
"product" guy, all the way up to the CEO and investors look-alikes, and I
regretted it every time.

When my CEO was still a business school student of a certain prestigious
university, I thought he's well connected and would be a valuable partner
later. The company did well for a time - but mostly besides him. Once he took
over the reins, everything went downhill and the company never came back to
its former glory - despite the CEO's claims of "funding is near", "I'm good
friends with <insert big name here> and he'll cough up $50k without a blink"
for a full 2 years. Every time I called him out for non-performance, he plays
the "CTO is not a team player" card. But I believed him, for 2 years - all the
way until he badmouthed his partner - me - to his friends right in front of my
eyes. And for quite some time I actually thought I should keep the company
breakup somewhat secret. Silly me.

Bad "product" guy... got him because he's a friend and he looked somewhat
experienced. Ok.. now we've agreed the product would do this and that, now
draw me something please? Uhh... wtf is that? He stayed for a few months, was
fired, but caused the company some trouble after that.

Bad programmers.. went through quite a few of them, mostly contracted. Some
even from big named universities with very impressive looking resumes. Again,
hired them because of a sense of urgency (e.g. need to demo X to VCs soon!),
so I lowered my bar to what I thought I could get. Wrong - those ended up
wasting time rather than contributing.

At the end of the two years, I think I must have went through 2 dozens of
people, co-founders included. Of the 2 dozens, only 2 of the choices were
right - one programmer, one junior product guy. The others are all a waste of
time.

If I were to do a startup again, I'd be super careful at picking who I work
with. PG's advice at getting a co-founder? Yes it's definitely needed. But
trying to do something investors like while sacrificing quality? That's the #1
startup mistake to make, IMHO. Don't do that.

~~~
rdtsc
> Bad programmers.. went through quite a few of them, mostly contracted. Some
> even from big named universities with very impressive looking resumes

This is baffling to me. We hired some graduates from big named universities
and I am constantly amazed at their incompetence. Now they don't lack
enthusiasm and are good talkers but not great doers.

We also hurried and hired because we had large contracts coming up and
management has slipped and fell into the trap of "well one experience
programmer left, we can hire 3 graduates to replace him for about the same
salary!". I don't mind that we grow and train our own but these are not a
replacement for a experienced engineers.

~~~
tmh88j
>We hired some graduates from big named universities and I am constantly
amazed at their incompetence.

I experienced the same exact thing due to my ignorance of programming. I
wanted to launch an idea that a friend and I came up with, but neither of us
knew how to program. A friend of a friend attended a top university for CS so
we assumed he competent. Two-three months after joining us he had not done
much except write code full of bugs and didn't understand the concept of OOP.
He had some half-assed PHP scripts written; that's about it. When I confronted
him he said "it's too hard, I can't do what you guys want." Well, needless to
say we were both upset because we pretty much wasted 3 months. I was so
frustrated one day that I decided to look up some PHP tutorials and see if I
could fix his code. Well, after a couple tutorials I felt pretty comfortable
and said "screw his code, I'll write my own." Three months following that
(puts us to about a month ago) and I finished nearly 75% of the coding for our
website and I feel pretty good knowing that I was able to do what this guy
said couldn't be done (also knowing he has a CS degree and I don't).

I learned that you can't pass responsibility to anyone during crucial times
unless you truly know that person's abilities , or if you know the basics well
enough to keep tabs on that person (who hopefully knows more than you).

------
staunch
They got rid of an asshole for a mere $5k. I've seen people pay 100x more than
that in extreme cases.

A great bargain!

~~~
Confusion
I see no reason whatsoever to suppose this guy was an asshole. He may have
been mistaken about what he could bring to the table to be a part of this
startup, but that doesn't make one an asshole.

As 'wheels' says in another comment: he did some work and now that there is
money, he thinks it is reasonable he gets some payment for that work. The
amount he asked for is reasonable as well.

~~~
GFischer
The article says they "bounced ideas off him". That usually has a cost if a
lawyer is involved.

So he did do some work as you say, it ended up costing them.

------
ssharp
To anyone more familiar with the law: is this the type of thing that could be
recovered later?

I think the lawyer was smart enough to ask for an amount that he'd be okay
with, but kept it small enough to make paying it easy enough to not warrant
the startup being distracted.

But say the amount was more and the amount was low enough to pay the guy off,
but high enough to be concerned about. Maybe you still pay it right away
because you have to in order to get your funding, but is there any case law
that supports recovering this money later on because the startup was
essentially held hostage by the lawyer?

It seems fairly reasonable that a contract made under duress could not be
enforced, or could at least be brought up at a later date.

~~~
jarrett
As a general rule, money paid pursuant to a settlement agreement is gone for
good. The bar for duress is pretty high--specifically, it usually (always?)
requires a threat of bodily harm.

And, even if you could somehow prove a settlement agreement to be
unenforceable, what would be the point? For one thing, you'd cancel the
release of liability you obtained. And secondly, you already performed your
part of the agreement (paying the money). In general, I wouldn't see any
benefit in this course of action.

~~~
asr
This is right, I don't think duress is relevant here.

As a hypothetical, if the company hadn't already paid the $5k, just agreed to
do so in the future, they could have some legal arguments for not actually
paying after the round closed. See <http://www.lawnix.com/cases/alaska-
packers-domenico.html>.

(Of course, that's talking about whether or not there's any tenuously-
supportable legal argument. Back in the real world, they should obviously just
pay him.)

IANAL. TINLA.

------
capkutay
It's interesting that saying "without prejudice" is a keyword for "I'll sue
you later if it's worth my while". It seems like lawyers get a lot of power
purely from that fact that our legal system makes no sense and they can just
warp it against you at any time.

~~~
brazzy
The legal System does make Sense, it's just too complex to be completely
consistent.

Good lawyers are basically hackers of the legal System who work with (or
around) These inconsistencies. Some use this power for good, others for bad
ends.

------
TwoBit
Their real mistake was dealing with a lawyer in the first place. My dad told
me years ago that you want to avoid dealing with lawyers at all costs, because
most of them are vicious selfish sharks. Sure there are exceptions, but there
are few, if any, occupations with as high a percentage of people like that in
it.

~~~
arethuza
"Of course I've got lawyers. They are like nuclear weapons: I've got em coz
everyone else has. But as soon as you use them they screw everything up."

[Danny DeVito]

The problem is that an awful lot of people and companies will always involve
your lawyers - if you don't get your own lawyers in those circumstances then
you _will_ be screwed.

------
leak
Can someone please enlighten me on how to avoid this kind of situation? Is
this because these guys didn't have any papers signed with the guy about him
being a temp until they decide later?

~~~
rprasad
Yes, that is the entire problem in a nutshell. They hired a lawyer and then
completely failed to use him in a legal capacity.

On that note...they could potentially have a malpractice suit against him for
his failure to advise them on something as basic as an employment agreement.
We'd really need to know a lot more to know if this is the case.

~~~
pavel_lishin
I thought they hired a CEO who happened to have a legal degree and the ability
to practice law in their state.

~~~
mnutt
He filed their incorporation papers for them. Assuming he continued to do
various legal things for them (they presumably didn't get an actual lawyer
later) wouldn't he be effectively their counsel?

There are a lot of unknowns here, but I'm curious if you hire an employee who
has passed the bar in your state, and they perform legal work, does that make
them effectively your lawyer?

~~~
arethuza
Even if it did it would presumably make them the companies lawyer - not
"yours".

~~~
mnutt
Sorry, by "your" I meant the company's.

------
ajhit406
$5000 is a gross understatement of the actual costs at play. Drafting a full
release can sometimes cost thousands of dollars, and the emotional toll and
time-sink of negotiating the terms of release should also be considered.

The author was lucky it only took one phone call and that he didn't mention
the cost of drafting up the release perhaps signifies it didn't cost him too
much.

------
PStamatiou
I thought this was going to be a story about the Eames lounger or Le Corbusier
haha. Know one too many Facebook designer friends that have them..

------
sunchild
I think the investor's lawyer was being overly cautious. Anyway, small price
to pay for peace of mind. Always get a release!

~~~
ww520
Well, he has to prove his worth. If everything sails smoothly, people won't
notice his value. If he caught something however small, he can justify his
bill.

------
hartror
Something I have come across when dealing with frustrated investors. I have
heard it said since and it still gives me butterflies :/

Some more background on the term:
[http://en.wikipedia.org/wiki/Prejudice_(legal_procedure)#Com...](http://en.wikipedia.org/wiki/Prejudice_\(legal_procedure\)#Common_law)

------
stankal
Interesting story with a lesson to remember. But can anyone comment on how did
his or investor's attorney find that email? Is it common practice to give
attorneys full access to all your company's email accounts and then have them
search through for any land mines as part of due diligence? Seems a little
extreme and very labor intensive. And who pays for it?

~~~
romland
In the comments he wrote:

Our lawyer was concerned about the possibility of prior claims against
technology and the company. As we were relatively young he asked for a copy of
correspondence that might fall into that category. So it wasn’t that he went
through every email in our in our inbox. We prescreened and the email from
Bill was one we included in the package which we forwarded.

~~~
stankal
Thanks. I should have scrolled down to the comments before posting.

------
meiji
I was expecting an interesting nugget of info. Too many companies employ
someone to do something vague because they like the person. It rarely works
out and then someone has to deal with the fallout. As loads of others have
said, that was a relatively cheap lesson. People pay hundreds of times that
amount to learn things sometimes.

------
Drbble
The "without prejudice" is phony storytelling. It sounds like they got a legal
threat letter and ignored it.

Also, if this lawyer was good enough to get $5k for nothing, maybe they should
kept him on. Or paid him a fair wage or equity for his work.

------
Mordor
He sounds prejudiced to me :-p

------
damian2000
Only three things are certain in life: death, taxes and lawyers behaving like
a __holes.

------
kahawe
> _Damn. That chair just cost us five grand I remember thinking._

The chair was still only 99 bucks - what cost you only measly 5k was a lesson
in "swimming with sharks" and why you do not frakk around in business matters
and why a lot of things in business (sadly) work and run the way they do...

And chances are he understood the situation and was nothing but an opportunist
and took advantage of it, so you woke those sleeping dogs - but your lesson
should be: make sure such things cannot happen, make sure everyone knows and
understands the terms and get things IN WRITING.

