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> Smart people don't settle if a claim is baseless. Baseless claims get thrown out quickly and easily.

That isn't true at all.

If you have a larger merger hanging in the balance or if the lawsuit would be expensive and long, it can make sense to settle even if you're "right." A lot of businesses settle for things which they may be innocent of because it makes financial sense (and there are a lot of smart lawyers around filing lawsuits every day knowing they're ultimately baseless but still cheaper to settle).

Mergers are a prime time for frivolous lawsuits because people know that the business will be under undue pressure to settle it so the merger can go through.

PS - This post isn't about this specific case, I don't know if it is frivolous or justified, I am talking more broadly.

>> "That isn't true at all."

In fact, it's false. The majority of cases, both criminal and civil, are settled in the US before going to trial.

How many cases are thrown out versus those that are filed? Is a baseless case immediately frivolous and dismissed or does it take tens or hundreds of hours of billable time to show a judge that it is baseless?

The latter! And, even apart from the billable hours, you can lose months just to court delays.

More importantly: these aren't especially easy cases to dismiss. To first approximation: getting a case dismissed requires an argument that regardless of any evidence that might be admitted at trial, the opponent can't possibly prevail simply on legal grounds.

Here we have the case of someone who claims to have had a partnership agreement that predates Cruise's incorporation. That agreement may have been oral, or it may have been memorialized in some casual way.

It's also important to observe that it's Cruise suing here, not the person claiming an equity stake. That's because the person making that claim can wait until the least convenient possible time to file suit. The leverage they have in this case is probably just torpedoing the deal, not relief in court.

It's a bit more complicated than that. Approximately 100% of civil cases see a motion to dismiss early on, essentially the legal argument that the suit is obviously unfounded. Since it wastes everyone's time, attorneys don't tend to bring those sorts of suits, so the great majority of motions to dismiss don't go through. Judges tend to think that the suits actually brought to court should be heard out.

So while settling isn't at all an admission to the claims of the case, it's at least done in recognition that a reasonable person would probably want to hear out both sides of the argument before deciding.

It is a pretty strict standard, and I'm not a lawyer so I couldn't say what exactly would qualify for dismissal outright. Maybe something like "this person has never even met my client" or "this company doesn't even exist".

"the law under which you are suing does not exist"

but short of one of these it's pretty easy to make a plausible case. the standard in civil cases is 'preponderance of evidence' rather than 'beyond a reasonable doubt'

Preponderance of the Evidence vs. Beyond a Reasonable Doubt: http://www.legalmatch.com/law-library/article/preponderance-...

Typical basic motions to dismiss usually fall into these main categories:

1. This isn't the right court (jurisdiction)

2. We're not the right parties (standing/jurisdiction)

3. It's too late (statute of limitations)

4. No law has been broken (failure to state claim)

5. Nobody was really harmed (failure to state claim)

Typically it's numbers 4 and 5 that would matter for a frivolous lawsuit. If you want to see what that kind of lawsuit and a successful motion to dismiss look like here's a good example:

https://cases.justia.com/new-york/other-courts/2013-ny-slip-...

Depends on why the case is baseless. There are three inflection points in a civil suit: motion to dismiss, summary judgment, and trial. Motion to dismiss is relatively quick and considers only a limited universe of evidence: basically, just the allegations in the complaint, answer, and certain attachments. You may win on a motion to dismiss based on a legal issue (i.e. "you can't sue for that" or "the law doesn't make that illegal") or when the plaintiff can't even make credible allegations that would give rise to liability if they were true. Summary judgment is where you can get claims where the allegations can't be substantiated with enough evidence for a jury to reasonably find them credible. Trial is where evidence is weighed to find what is more likely than not to be true.

Getting to summary judgment is usually pretty expensive because it usually comes after discovery (reviewing peoples' emails, deposing witnesses, etc). It would be very difficult to dispose of a case like this before summary judgment, because the issues are all factual: what was the nature of the agreement between these co-founders?

Which is another reason to paper these things up from the beginning. It's very expensive to figure out after the fact what two people thought the arrangement between them was. When you have an agreement in writing, you can: 1) put in an arbitration clause which might let you get you the benefit of resolving the dispute in the more loosey-goosey world of arbitration; and 2) might give you hope of getting rid of a case on a motion to dismiss on the basis of the terms of the contract.

That stat doesn't really tell us anything about how easily baseless claims are dismissed, because judges can (and do) schedule pre-trial meetings for the purpose of encouraging a settlement by discussing a case's chances with both parties.

It's pretty wild that parent could have been so wrong, yet so confident.

(and there are a lot of smart lawyers around filing lawsuits every day knowing they're ultimately baseless but still cheaper to settle).

That seems like a rather significant "bug not a feature," of the legal system.

> Still, it’s important to the way Silicon Valley works that such behavior not be tolerated.

All I meant was to express my view there, but you're right, I don't like the way that reads either. I'm going to update it.

> Kyle made an extremely generous offer to settle this claim by offering to give Jeremy a lot of his own money.

I think that happens in nearly all of these cases, which is part of why I find them so upsetting. People know that you can pressure people under extraordinary circumstances, like an acquisition closing, to give you something.

>To re-iterate, I still think this Jeremy guy is most likely full of crap. But I am not a big fan of the attitude and public shaming of YC here. What this tells me is as follows: if I have anything to do with a successful YC company in the future and I get involved in a legal claim that looks unfavorable, some popular top investor could write a blog post shaming me and ruining my reputation for other startups. Not professional if you ask me.

We tried every non-public method we knew of first. When it came time for the seal to be lifted, I wanted people to know how hard Kyle tried to settle. My original plan was to write a general post about this problem with no specifics after this settled, which I didn't like but thought was 95% likely to happen.

The frustration is understandable, it's a shitty situation and I've also had a "useless" "co-founder" try and hold onto equity that didn't vest, after he left and contributed little.

> I think that happens in nearly all of these cases, which is part of why I find them so upsetting. People know that you can pressure people under extraordinary circumstances, like an acquisition closing, to give you something.

Yeah, this is a topic that deserves its own post for sure. Timing-wise though, if Jeremy has any claim at all, he needs to make it now before facing the acquirer's lawyers, so there's that angle too. I definitely think there's some nuance here, and am not sure what a superior system would look like.

> We tried every non-public method we knew of first. When it came time for the seal to be lifted, I wanted people to know how hard Kyle tried to settle.

Do you see the logic of my last point though, why people would perhaps not look favourably of your public disclosure of this topic, even if you're right? Moreover, what was going public on the individual supposed to accomplish? Because it could sort of look like someone in power trying to strong-arm someone not.

Regardless, I wish the Cruise team and yourself the best, and a speedy departure from this issue. It looks like technology and legal claims are going to continue to interact in increasingly complex ways down the road.

>Because it could sort of look like someone in power trying to strong-arm someone not.

If like the post suggests, both sides expect the merger to occur on schedule, what other purpose does going public at this moment serve that wouldn't be better served by a more detailed post after a resolution has been reached?

> I've also had a "useless" "co-founder" try and hold onto equity that didn't vest, after he left and contributed little.

What I am about write is blasphemy in this community, but needs to be said.

Contributions to a startup are not quantifiable. There are truism that float around the startup community like, "Ideas are worthless, execution is everything." these are helpful motivation tools but they create a black and white world, in a universe that is multi-dimensional.

When someone has an idea and someone else executes and the guy with the idea wants his "fair share" or in less extreme cases, like leaving before shares vest, there is this belief that one side is entitled to all equity and the other side didn't contribute anything.

In truth, the other side sees things differently, and that doesn't make one side right and the other wrong. It is never that black and white and general ideas like, "execution is everything" are great as general ideas but don't translate to every situation and each case needs to be evaluated independently.

If someone contributed to a startup and the other side has a different opinion about the value of that contribution. This is what the courts are for. Their job is to help decide, in this specific instance the value of that contribution was and how it relates to the nature of the agreement made between the parties.

Truism are not legal arguments and it's a mistake to assume that situations about contribution levels can be settled with them. Both sides believe they are in the right and are being wronged by the other party.

There are two ways to proceed from there. You can dig your heels in the ground on your position and try to pay to make the problem go away...Or you can accept that the other side also has a leg to stand on... try to understand their position and come to terms that leaves no one happy, but everyone satisified. Thats what compromise is about.

I think the startup community and this post is evidence of it believes that what they know is above the law.

This is a simple case of a dispute about money. Pretending it is about good guys and bad guys is being dishonest to yourself and others.

Edit: spelling

I agree with most of your post. I was trying my best to find common ground with sama's perspective in his. Because I have had similarly crappy situations that did make me incredibly frustrated. You bring up good points though:

> What I am about write is blasphemy in this community, but needs to be said. > Contributions to a startup are not quantifiable. There are truism that float around the startup community like, "Ideas are worthless, execution is everything." these are helpful motivation tools but they create a black and white world, in a universe that is multi-dimensional.

Amen, who gives a damn how fast you clmb the ladder if it's placed in the wrong spot? And it's such a simplistic point; often times the whole point of execution is to find a better idea. These ideas could be discovered through a combination of mental reflection, talking to customers, building prototype, ...

> I think the startup community and this post is evidence of it believes that what they know is above the law. > This is a simple case of a dispute about money. Pretending it is about good guys and bad guys is being dishonest to yourself and others.

Yep. I don't care how many Airbnb's and Dropbox's you fund, you don't get to say what constitutes good and bad in a community.

At the end of the day, I think Sam got frustrated, acted a bit impulsively, and probably regrets how things turned out with the original post. But hey, mistakes build leaders, so if someone as public as him can reflect on it then all the better.

> so if someone as public as him can reflect on it then all the better.

I eagerly await this much anticipated reflection. For what I can tell he is a sincere, integrity driven, human being. Money has a way to messing with us and causing us to do all sorts of things we regret. I just hope he can see past his blind spots once the initial frustration wears off.

Just delete the post dude, it's for a court to settle not a forum

I'd bet there is a 50% chance that Sam's post will help settle the case before it gets to a judge. Most of the time Judges don't even want to hear the case since legal battles are bad for both sides- they do all sorts of things to force two sides to settle. The guy worked there a month with imo should be the headline- and if there are no facts missing (which is likely and possible) my bet is this will help resolve this before a court acts.

I'm troubled by this post, actually, because of the implication and usage (overt or otherwise) of the HN audience. Especially with an earlier revision with that line about not tolerating such behavior in Silicon Valley, and the general tone of the post including going after the defendant's professionalism. This post smells pretty bad, and is pretty much just dirty laundry or posturing.

This is a really, really surprising post for Sam to write, and I think even he knows it's wrong with the lawyers bit. They would stop him for a multitude of reasons, some legal, some tactical, some ethical. All of them would be valuable legal advice.

I'm troubled by a mix of things here: the wide audience afforded an investor in the plaintiff simply by name recognition in this community, the aforementioned characterizations of the defendant (who most of us have never heard of, and therefore are relying on the post to describe), and the circumvention of process that this post demonstrates, whether intentional or otherwise, not to mention the implicit attempt to steer public sentiment on a person. I'm not ascribing any malice here, to be clear, I'm just still processing the frame of mind that would consider this post a good idea at all. I actually disagree that it should be pulled, because the gun has been fired now (and pulling it makes it worse).

There are only two explanations of overall motive here, and neither is kind. Nobody wins here, Sam, Cruise, Kyle, or Jeremy. Especially not Jeremy, and one need only scroll down to find the number of comments that bought in immediately to Sam's narrative and are talking about refusing to work with Jeremy in any capacity.

What a complete shit deal, all around.

Indeed. This looks a lot more like a high profile investor using his audience to litigate the issue in the court of public opinion and dragging some guys name (who may or may not have a claim to Cruise) through the mud.

Personally, I've seen in the past people who have contributed significantly to projects which later became successful and did not reap the rewards of their work because of, among other things, harassment via the legal system. IMO, this doesn't look good for sama.

> IMO, this doesn't look good for sama.

I'll say it: if I were in a position to take his investment, this post would give me serious, serious pause.

To be clear, I'm all about transparency and talking about things like this in the open, but not like this. There's a lot we need to talk about as an industry, but this doesn't help.

Most founders would LOVE an investor help defend in a situation like this. Typically founders are left charging off into battle countless times with little but moral support. "yeah you go fight that battle for us- thanks and let us know how it goes".

Good for Sam for actually at least attempting to help and take a few of the arrows for the founder/ CEO. Sam is actually taking a bit of risk doing this legally and PR wise and while I'm not saying his approach is perfect (he already edited a few lines) - It took a lot of balls to wade in here, I rarely see investors do so- and I think it will help settle the case faster which is really good for both sides.

> Most founders would LOVE an investor help defend in a situation like this.

There's a lot of value in having an investor try and solve the problem. That should include offering advice like "don't let this derail the acquisition, make him a reasonable offer and get it all sorted out", and being willing to actively participate in the process of hashing out an agreement.

Sam can, and should, defend the value of Cruise as an entity, but he's gone beyond that to defending Kyle by attacking Jeremy. That's no longer about solving the problem - now it's about people and emotions.

Nobody wins in a court case. If Sam uses PR to put enough attention on what has occurred to settle it that's a legitimate tool. The other side doesn't have that tool but they can come here and post their side of it. As these posts show, plenty of folks here are willing to play Devil's Advocate. I'd love to see the other side - i.e. was there a demand letter and was it sent- and to whom?

I can tell you- the ONLY thing that I can think of that would trouble me is if we find out the guy never even had a lawyer. Then it would appear to be an over reaction. It's not clear exactly what actions the other side has taken (or not done).

But on the face of it- nothing wrong with using PR to settle this. It could also get sympathy from GM and they just get creative around using an escrow to just close without settling any of this.

> This is a really, really surprising post for Sam to write

It's actually not surprising if you follow YC and HN for any length of time. The prevailing tone coming from sama, pg, and the mods at HN is that:

- They and they alone are in a position to speak on behalf of all of "Silicon Valley". - They are above the law (see for example all of the mental backflips and excuses given regarding AirBnB's clear-cut and widespread facilitation of lawbreaking).

You can see this arrogance peeking out here and there, such as the now-deleted statement you highlighted (side note: isn't it also incredibly arrogant to think that they can simply delete things from the internet and pretend they never said them?). It feels like it's been happening more and more lately. I expect that in the absence of any kind of reality check, it will continue to come out more and more.

(side note: isn't it also incredibly arrogant to think that they can simply delete things from the internet and pretend they never said them?).

There is a right to be forgotten, no?

(Presuming this is not facetious.)

Only in the EU, and arguably, not really.

Oddly enough I'm reading this after the AirBnB next door, one of whose many guests has broken their front door, smashed it closed two meters from where I'm sleeping at 1:40AM. YC reaching out from the physical world and I wake up and visit HN.

> We tried every non-public method we knew of first.

Does this include empathizing with his position, considering the possibility that he isn't just greedy and crooked and actually believes he is in the right? Did this include truly putting yourself in his shoes and understanding where he is coming from?

I assume since you are biased to one side, you are not capable of such empathy. I know I wouldn't be. So, this goes to the point of public shaming, do you really think it is justified? Do you really think you are capable of being objective about this?

> I wanted people to know how hard Kyle tried to settle.

Sometimes, trying to settle is actually more hurtful to the other party. It comes from a place of "you are a nuisance, here is some nuisance change to go away." If this was truly about money and greed, he probably would have settled. The fact that Jeremy didn't tells me that he probably feels entitled...which means to really reach him you have to speak to his position, not your own.

I guess the real question becomes...does Jeremy actually believe he is entitled to that stake? If he does, and if you were in his shoes...would you accept a dismissive, though generous, offer or would you sue for what you believe is yours.

I don't know either side, but I can see how both sides would dig their heels in the ground if they both believe they are in the right.

I think airing this dispute out publicly, especially in your position and with your admitted bias, should be rethought and considered...because I can see no good coming from this.

People know that you can pressure people under extraordinary circumstances, like an acquisition closing, to give you something.

Seems like a great opportunity to learn something: don't expose yourself to such risk. Involve lawyers early when fundamentals of your business are concerned. Don't just wait until you really really need to clear everything up fast, because there's a big pot of monery with an expiration date.

I know, hindsight and all that. But still, I don't see a priori why it should be morally wrong to "pressure people" in extraordinary circumstances. Jeremy couldn't build that pressure himself, Cruise started the merger thing and basically handed a loaded weapon to him.

And if it weren't just an individual, but some public company on the other side, there might be fiduciary duties to exercise that "unfair" pressure – not exactly in this situation, but pressuring people isn't amoral per se, I think.

> I wanted people to know how hard Kyle tried to settle.

Why?

Why is it so important that everyone knows that Kyle is the good guy and Jeremy is the bad guy? You're taking a preemptive step to defend Kyle's reputation by tearing down Jeremy's, for no tangible benefit (and to be honest, at the cost of your reputation and YC's).

What do you think that Kyle or Cruise (or you, or YC) gain from this post?

And even if you really needed to defend your man, there was the opportunity to write a post that said "This suit has been filed, we wish there had been some other way forward but every attempt to resolve this amicably has failed. I have personally been involved in those attempts, and I believe that Kyle, Cruise, and YC have taken every possible step we could to avoid a law suit, without success."

> We tried every non-public method we knew of first

And when you ran out of non-public methods, you filed a suit. And that's where you should have stopped. The post is not about finding a solution, it's about declaring your (and Kyle's) moral superiority in this matter.

> I find them so upsetting

This, I think, is the key statement. You are emotionally (and financially) invested in this, and you want to rant about it publicly, but it's not helpful.

Your emotions have caused you to take steps that don't contribute to the solution, but your job in this is to do everything you can to get to a solution.

I think part of the problem is that Sam isn't able to talk about the tactics that Jeremy might be using, such as "pay me or I screw up the merger."

I think Sam probably should have realized that he couldn't explain why he is so upset and therefore should have just not said anything.

I do agree on one thing though, calling the guy out by name like absolutely reeks. "I'm going to destroy you for attacking one of my investments!!" Please. I think it would have been much better if he never used his name, which of course is now going to show up in Google Searches.

It's already public record since it's a law suit.

Smart people don't settle if a claim is baseless. Baseless claims get thrown out quickly and easily.

This is categorically false. Equity disputes kill deals. Even if you're right, it can take upwards of a year to resolve a claim, especially without documentation. Offering a settlement is usually the rational response.

>> Smart people don't settle if a claim is baseless. Baseless claims get thrown out quickly and easily.

Ok this is not remotely true. Baseless claims in court can go on for years - then they can be appealed and appealed again. It's often offensive to settle but that's why it's called "settling" since you don't have an optimal outcome. Are you just trolling?

That is not what settle means. Settle means "to reach an agreement." You are probably thinking of "compromise."

Agreed. I also was rubbed the wrong way by:

> parted ways ... and well before the company had achieved much of anything.

There are many shareholders of Thumbtack who left voluntary (or not) "well before the company had achieved much of anything," because companies take a long time to achieve big things. That doesn't mean they didn't have critical early contributions or that they aren't entitled to their equity.

I'm not saying that means this guy is entitled to anything, clearly the courts will figure that out, but I think writing off early contributions in a nascent company as having no value is also wrong.

That's right. Late employees build on the shoulders of early employees. The idea that founding team members are somehow inherently less entitled to their equity doesn't make sense. Indeed, they often forgo salaries in exchange for it.

Edit: getting some downvotes. I'd like to hear why you think I'm wrong.

>some popular top investor could write a blog post shaming me and ruining my reputation for other startups. Not professional if you ask me

I think it would have been more professional to state, in neutrality, the status of the legal proceedings - rather than implicitly accuse the man of being greedy by refusing a "generous" settlement.

Yeah, what the hell?

When there are large sums of money at play, who among us wouldn't work in their best interest? If you have a lawyer telling you that there's a case to be made, you would be a complete and utter moron to not take that route. Do you guys think any angel in such a situation would give it a second thought?

Silicon Valley Exceptionalism is the product that YC sells, and boy do they sell it well. They want you to believe that SF is a magical place where you're expected to reject the opinion of a lawyer saying you have a claim to millions of dollars-- because Silicon Valley is a totally chill place, bro. No assholes in the bay!

When large sums of money get involved, lawyers get involved, and your actions are masked by your lawyer. I am not going to judge this guy at all. I feel like the author is trying to make the case that this guy is an asshole, and implicitly, because we all know YC doesn't like to help assholes-- and because that's an agreeable ideal, we're supposed this guy as the enemy.

But maybe it's the case that he's really a good guy that realizes that he has the opportunity to convince a court to award him a life-changing amount of money.

I really hope the motivation between this post is not to give him an ultimatum. I really hope the reasoning is not, "I have the ability to get a post on the front page of HN, and I can use that as leverage to make this guy's lawsuit more of a gamble-- I can drag his name through mud and stick it on the top of HN, such that he will have more difficulty getting a job in SV after this lawsuit. Unless, of course, he drops the case."

Because if that's the motivation, then I think it's pretty clear who is being an asshole.

I don't know anything about the dispute. Sam Altman sounds genuinely angry. That said, I thought YC would alwready have in place strict agreements, especially mandatory arbitration clauses, when they dole out the money?

As to settling, I think about this farmer who was sued by Monsanto for stealing intellectual property.

He, and his wife had a dream of a small organic farm somewhere in the south. They were situated next to a big farm that used Monsanto seeds. Pollen from the adjacent property blew onto his property/crop. Monsanto took some of his corn crop and looked for their patented genes. They found some. (I'm unclear of the science behind their claim. I didn't think just pollen from the Monsanto field could take over an entire separate crop of plants?)

Anyways, the young couple wanted to vociferously fight the suit. Within weeks they were pretty much beaten up by Monsanto lawyers, detectives, and henchmen (paid witnesses).

His neighbor's reluctant advice was unless you want to spend a half million defending your innocence; just settle the Monsanto suit.

They have enough money to keep you in court for years. The neighbor didn't even want to be seen with the guy--Monsanto has detectives in the area, and supposedly keep detailed logs on these farmers.

If anyone is interested it's all in a documentary, called Eating Alabama.

Not disputing you, but I have heard this story recounted a lot in various ways, but when I remember digging deeper into it, there were things that just didn't match up (basically, the amount of crop that could blew to their fields vs what was found out was very different and most likely had to be intentional). Also, if I remember correctly, Monsanto didn't really sue them. There are a lot of contradictory sources around, but from: http://www.dailytech.com/Monsanto+Defeats+Small+Farmers+in+C...

> Wrote the judge, "[the allegations] are unsubstantiated ... given that not one single plaintiff claims to have been so threatened." She also complained that the farmers had "overstate[d] the magnitude of [Monsanto's] patent enforcement", which documents indicated entailed 13 cases last year, which she opined "is hardly significant when compared to the number of farms in the United States, approximately two million."

ps: not taking sides, just letting you know that MAYBE you have been mislead (as I was)

I read the full details of a Monsanto-vs-farmer court case not that long ago that sounded a lot like the one you describe.

If we're talking about the same case, the missing part of the story is that the farmers knew they had Monsanto seeds mixed in to their crop and then intentionally isolated those seeds and replanted only those seeds for the next year. Specifically, they sprayed with pesticides that kill "organic" crops but that Monsanto crops are engineered to be immune to, for the purpose of having genetically-engineered seeds for the next season without paying the required licensing fee.

Maybe it's not the same case. But it's worth being aware that people do present their side of a case in the most positive light, even when they're clearly in the wrong when all of the evidence is revealed. (This could apply to either side in this dispute, FWIW.)

I think it is fine for Sam to post something like this. It's not illegal and people will think twice before opportunistically suing companies that are backed by Sam.

Anyone with power that flexes it will be accused of abusing it. In this instance, I don't think it is abuse (although I can also argue that any use of power is an abuse of it). I appreciate that Sam is willing to flex his power to protect companies he is vested in. It makes me clear on his values.

I also don't think the appropriate response to legal action should be to "leave it up for the courts to decide". Legal action is meant to right injustices, but in the real world people use legal action for all sorts of other reasons, and you're handicapping yourself and living in your ideals if you think people don't use legal action for their own benefit. You're defining a marching formation to go to war and you'll get trounced by people who don't constrain themselves in that way.

Legal action has results well beyond the courtroom. In this case, it can stop a merger. It causes libel. It defames reputation. Even if you win the case, you lose. If you settle out of court, you lose. And there's almost no recourse for unquantifiable damages or loss of reputation caused by the claims.

I'll admit taking legal action is one of the few ways injustice can be righted and that is a value that should be upheld. But, by nature, a system that makes sure injustice is dealt with fairly also is really easy to abuse by pretty much everyone else.

>Smart people don't settle if a claim is baseless. Baseless claims get thrown out quickly and easily.

This. I also don't understand why he never signed a separation agreement.

> nor should you have more say than any other resident in Silicon Valley

I'm fairly sure Sam meant in terms of the startup ecosystem rather than the real estate. I also bet you're aware of that and decided to write that anyway.