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Comment by jasonkester | Hacker News Reader

There's a simple reason why this works for small businesses: nobody sues a guy with no money.

So if you're a sole proprietor scraping by and you piss off a giant company with lawyers enough that they want to file a lawsuit against you, well, what's the upside for them if they win? Tens of thousands of dollars in expenses on their side, and roughly zero dollars in recovered costs from the business they destroyed or the guy they sent in to bankruptcy.

Unless their goal is simply revenge, there's really no reason for them to follow through with such a course of action.

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Never underestimate the pettiness of executives in companies with a lot of money. I've been on the receiving end of a meritless revenge lawsuit.

The net result was that it shut our startup down and turned many of the employees against the founder on a personal level. I was lucky to be able to cut my legal fees with some of my coworkers by sharing a lawyer, but I still ended up being out a few thousand dollars prior to settling (the company had to shut down and disband). Had we fought it, it would have costed a lot more than that.

--edit-- Trivia: Since we're talking about Pud's post, I'm pretty sure the company that sued me was a company that had many employees bitch about it on f*ckedcompany.com, although it was never a company that got "featured" by Pud himself.

Agree 100%. I had the misfortune to run across someone who took great pleasure in bullying people with his lawyers, a profoundly dishonest and unpleasant person. It's hard to overstate how damaging these people can be. Ever since then, I've made a point of doing public record searches on people to check if they have a history of suing people, which has enabled me to dodge a couple bullets since then.

Spot on.

  "Unless their goal is simply revenge"

As they've implied in The Godfather, taking things personally is bad for business. Companies that make money do whatever is necessary to keep the flow going. Revenge is a detour to this process so unless they're trying to stifle competition or the like, destroying someone isn't worth it.

Revenge is bad for business.

People who are in revenge mode don't care what's good for business. It makes them feel better and that matters more. In the case of suing former employees, it also sends a clear message to existing employees.

>In the case of suing former employees, it also sends a clear message to existing employees.

Yes, but I'm not sure "run" is the message an you want to send to your employees.

More often than not, executives/companies think they're doing you a favor by giving you a job, even the ones who pretend to care about their employees.

This post puzzles me. How are companies not doing you a favor by GIVING you a job?

Your post puzzles me as well. Just because we use the word "giving" doesn't mean that any of the connotations of that word actually apply to the situation. Employment is an arrangement of mutual benefit. In some cases an employer might give a job to a friend as a favor, when the friend is not the most qualified for the job. In any case, if someone gives you a job as a favor, they are doing it wrong.

>> Employment is an arrangement of mutual benefit

That's how I look at it, but I've encountered way more employers (across multiple industries, in companies of all sizes) who have the mentality of "people should feel lucky that they have a job with us". This attitude is even worse during an economic downturn.

Generally true, but often the motivation is not revenge or recouping financial loss; it's deterrence.

Examples that come to mind are the MPAA/RIAA suing individuals for copyright infringement and developers for distributing P2P software, Sony suing individuals for modifying game consoles, and although not a civil suit, Goldman Sachs having Sergey Aleynikov criminally charged.

All quite depressing examples unfortunately.

Patent trolls also often have a modus operandi where they will sue a small company that they know doesn't have money to defend themselves, soak it for everything it's worth, and then use the money from that to launch a lawsuit against a much bigger company like Google, Microsoft, or Apple.

Someone with 500k and a few employed certainly has money. This story was sheer luck and is only showing off that.

I don't think you fully appreciate how expensive it is to go to court.

He knows more about court expenses, than you know about what he knows. Just say "It's expensive to go to court", or better, just don't comment.

Completely off-topic, but your comment made me wonder:

Is there any way to formalize expressions like "he knows more about X than you know about Y", where X and Y are different domains? Is there a way to quantify it, to answer questions like "how much more"? Do we have any kind of well-defined "unit of knowledge"?

Does anyone here knows of relevant math branch that talks about these questions?

http://en.wikipedia.org/wiki/Measure_(mathematics)

A measure is a function on the subsets of a space which yields a non-negative real number. For example, a measure of the triangle with vertices (0,0), (2,0), and (6,0), is 6, the area of that triangle. Measure satisfies certain nice properties, such as if A is a subset of B, then the measure of A is no more than the measure of B.

So, I guess if you can define a reasonable measure on the spaces X and Y, you can measure collections of X and collections of Y, and use the real numbers to determine which is "more".

But this doesn't strike me as useful in any way other than the fun of abstract mathematics. :-)

A big part of the game is played before the matter is even played out in the court system. This part is much less expensive.

It's one thing to be threatened with a lawsuit, but it's another matter once the paperwork is filed.

When I was hit with a revenge suit during the first bubble, the single, asset-free me had a different reaction than some of my peers who had families and much more to lose.

There's a lot of psychological warfare going on. When a process server shows up at your doorstep and serves papers to your spouse at your partially-paid-for house, things take a turn. Any sense of righteous defiance you might have starts to waver at this point.

The plaintiff in my situation got a lot for the 20-30K they probably spent on suing us. Without going to court, they shut down an entire company and made over a half-dozen people unemployed -- edit: while making them pay for their own legal fees too --. And they got the satisfaction of a "moral" victory for chump change. Never mind that most of their claims were bunk.

So, in a nutshell, it's not always about going to court.

> "I'm not sure what the lesson is here."

At least the author's frank about it.

According to the linked story at the time he said "so sue me" he had made ~$32k gross revenue and had no employees.

He made his $400k and hired the employee much later.

He never actually said "so sue me", though. He was told, probably correctly, that at his size, there's no point in getting a perfect contract that precisely covers what happens in every one in a million possibility to the satisfaction of every party. Ignore the rare possibilities of the contract and just do the work, knowing that if you hit one of those rare possibilities and violate it, then their only real recourse is to sue you, which probably costs more than it's worth. It's about being aware that you can say "so sue me" instead of worrying about covering every risk in the contract.

Right. An honest, competent, and communicative contractor will not prompt a revenge lawsuit, because even if things go wrong, they will not blow up into 100k+ problems without the client knowing the risks of continuing down that road.

Unless you cause an egregious 50k+ of damage, suing is probably idiotic. And how can that even happen? The client would/should refuse to make the last payment if the work sucks. ("So sue me" works in both directions.) So it has to be a nearly complete fail for suing to make much sense.

It could be possible to run across a very incompetent executive who is desperate for a scapegoat...but that is probably rare. Such a suit is unlikely to see the inside of a courtroom, because it is a delaying tactic of an executive whose career is probably already circling the drain.

500 k is nothing for a Fortune 500 company. When they work with a small company they know it might be write off (ie the small company cannot deliver and the money spent is wasted).

So they won't sue but they have internal processes that say everybody must sign "The Contract".

I disagree he got lucky. "Pud" is brilliant. Isn't this the guy that created TinyLetter, Adbrite, F-company? This stuff is legendary.

It's why big companies often prefer to spend more money with big suppliers. It often gets mistaken as them being ripped off when in fact they have their eyes wide open.

Yes, big suppliers do have "skin in the game" and also big companies have long relationships with big suppliers. Many have Approved Vendor Lists and to do business with them you have to be approved first.

An additional upside for them is, it sets an example. If MegaCorp gains a reputation for being revenge-driven life ruiners, then future contractors will know the stakes are serious, and they'll be less likely to violate their contracts.

Not that I consider that strategy cost-effective in general. For one thing, it's bad PR. (Unless you're some kind of wizard that can spin it like, "we're principled and don't let bullies walk all over us. That's why we hold people to their promises")

They will also be less likely to attract future contractors.

Playing the devil's advocate here: if contractors self-select themselves out of being hired because they're not sure they can get the job done, then all the better! The remaining applicant pool will be stronger on average.

No the applicant pool will be more bullish. In many cases that might mean weaker (i.e., unable to estimate work effort properly).

seconded. I wouldn't even have to quote Machiavelli to say that it's important to show your future contractors(or your peers) what you are capable of, to force them to think twice before arranging anything with you.

Will it reduce the number of incoming contractors? Probably. Will the contractors who'll still chime in be more likely reliable, after considering what they're agreeing with? Very likely.

Probably. Will the contractors who'll still chime in be more likely reliable, after considering what they're agreeing with?

I doubt it. They're just as likely to be selecting for future contractors who are overly confident / cocky by nature, and/or ones who don't understand how to estimate software projects, and who don't have a good feel/understanding for the risks involved.

> Will it reduce the number of incoming contractors? Probably. Will the contractors who'll still chime in be more likely reliable, after considering what they're agreeing with? Very likely.

Wouldn't it more likely select contractors that have good liability shields and get to charge a premium for working for an asshole company because there are less people willing to do the work? This is how patent trolls are set up with no assets to lose.

They may be stronger, or maybe not. They certainly will learn to inflate the price to include lawyers fees.

Are you hiring a contractor to get work done? Or are you allowing the head of your legal department to pad his resume, while your department is paying for many in house lawyer hours plus (via the contract) many out of house lawyer hours?

This is only true if the job market is a seller's market. If it's a buyer's market, it only prevents the smarter ones from wanting to work with that type of company.

Q: Does LLC or Inc. allow the organization to take the hit (or fold) while leaving the founders relatively safe?

Yes, that's the entire point, it shields you from all liability. If you perjure yourself, you're still personally liable, but for things such as money owed by the business, you're not personally liable unless if you personally guarantee something (i.e. a company credit card that you guarantee with your social).

Yes, that is the point of them.

If you are planning on creating one you should speak with an accountant and attorney to make sure you know the rules. If a corp or LLC is being used simply as a front a suing party can "pierce the corporate veil" and come after you personally.

That only works if the company signs a contract, if you sign so pretending that says you can be held accountable then you can be held accountable. Most often seen with loans.

This doesn't seem to deter patent trolls going after no-name startups and individual App Store apps.

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