I am not certain I understand how the reputation damage is supposed to occur in this case.

According to the article Sequoia had a long standing willingness to play hardball. A reputation earned through consistent long term behavior.

It's hard to see how a one time event in extreme circumstances leads to a change in reputation. Presumably any rational founder would assume that any rational VC firm would act the same way in similarly extreme circumstances. One doesn't earn a reputation by being struck by lightning or spraining your ankle falling over a turkey in a city street or any unrepeated unlikely events.

And, if you believe you can clearly prove "fraud, break of contract, and breach of fiduciary duty" presumably you are only discouraging bad actors with whom you wouldn't want to get into bed with in any event.