How can I go after my backstabbing business partner?

June 17, 2006 5:56 AM

What can I do about a business partner who ran off with an idea?

My "friend" and I have worked together on startup ideas and other projects for three years. One of us would have an idea, we'd flesh it out together and see what stuck. There was never anything agreed-upon, but anything that was brought to outside investors/partners was 50-50 on paper.

This latest idea was his, and admittedly a hot one. We fleshed it out over two months, wrote a business plan, etc. In the biz plan we outlined ownership percentages -- his slightly higher because it was his idea.

Partner of mine managed to hoodwink some software company into looking at our stuff, and they loved it. They wanted to "buy" us -- hire us to build our product under their banner. I let partner handle the communication, because he had a relationship with them, but I led our negotiations -- meaning after their first offer (low salaries, low stock), when partner o' mine was considering it, I said "absolutely not." Then I set out our strategy for getting more out of them.

It worked. But here's the rub. Out of the blue, my friend negotiated a deal for himself, getting him 1/3 ownership of the combined company -- and left me completely out to dry.

So the question(s), finally: What can I do about this? Sue? Tie things up in red tape? Live and let go?

A big part of me is considering going tete-a-tete with my former friend and his new jackasses by starting a competing company (they're going to blow it), but I'd like to have some quasi-legal input before I talk to a lawyer about red-taping their asses, too. I assume that since they simply hired him, and we had no signed agreement or real company, I've no legs to stand on. But could I just annoy them via lawsuit threats for a while?

But maybe also someone will have some cool advice for letting go or avenging this seriously horrific backstabbing. Besides "let it fester until it eats away at your soul," because I won't do that!

posted by anonymous to work & money (13 comments total)

You need an attorney.
posted by caddis at 6:34 AM on June 17, 2006

Lawyer lawyer lawyer.

AND be sure to have all contracts and communications documented accurately on hand.
posted by iTristan at 7:39 AM on June 17, 2006

i can offer no advice other than that above.

The tags are fantastic though.
posted by ClanvidHorse at 7:55 AM on June 17, 2006

You could hire a writer and sell your story for a movie deal.

I'm sure if you have the means and patience, there's virtually no end to the legal and red-tape hassles you can cause them. Get a lawyer. IANAL, but as others have said, round up any records of this deal you have. Put them all in one place. Make physical and electronic backup copies. You may want to record all communications with them from now on. You also may want to just postpone any further communications with them until you have a lawyer to see what their advice is.
posted by gauchodaspampas at 9:22 AM on June 17, 2006

(IAAL, but not your lawyer, and this is not legal advice:) If you want to sue, I can tell you from reading these facts that I think you have a solid case. You guys had a partnership, and he had a fiduciary relationship to you which he pretty clearly broke.

A lawyer who knows more about this field of law (which would be absolutely necessary if you actually went the lawsuit route) would be able to tell you a lot more. So, suing is an option, if it's what you want.
posted by kingjoeshmoe at 9:24 AM on June 17, 2006

Act quickly and get a good lawyer. Look for emails, witnesses, any kind of documentation. I had a friend in a similar position but he acted too slowly and never saw a penny.
posted by BigBrownBear at 9:44 AM on June 17, 2006

I don't mean to rain on your parade, but I'd be careful about how much you get your hopes up, and accordingly how much you should be willing to invest in legal action.

Here are some of the issues that you need to discuss with a lawyer in the first one-hour consultation, and make sure that the lawyer has a firm and (to you) persuasive argument for why he can succeed and get you a good, cost-effective outcome.

If the "idea was his" and you and you and he didn't have a pre-existing legal partnership when he came up with the idea which might sweep in the idea as part of the partnership's corporate opportunity, it's not clear that you ever acquired any legal interest in the idea.

A court would have to agree that evidence you describe as "[i]n the biz plan we outlined ownership percentages -- his slightly higher because it was his idea" proves that he transferred the idea to your partnership (or transferred part of the idea to you personally) in exchange for your work for the partnership. I suspect that he would argue that the business plan and all the surrounding discussions were simply negotiations and discussions that never were actually consummated in an actual transfer.

Even assuming you could carry this burden of proof and convince the court that you and he had, and had consummated, a verbal contract, it's not clear to me that you were actually economically damaged. Your contemplation of starting a competing company suggests that you don't think the idea has any protectible quality of intellectual property, since if it did, you couldn't compete for the duration of the patent, copyright, trade secret, etc. In other words, the idea itself might not be provably worth anything. If that's the case, than all that this company did is hire your friend and not you because they thought your friend could competently execute on it. It's highly unlikely that a court would find that your friend had an employment contract with you or your partnership that would keep him from working for someone else, if the court has previously found that what he was hired to work upon was public domain intellectual property.
posted by MattD at 10:24 AM on June 17, 2006

Your emails may serve as a contract, depending on what they say, what state you're in, and probably other stuff, too. So archive all of the key pieces of mail, print them out, and head to a lawyer.

Also decide what you want out of a settlement: to get back in with them (your partner and the new company. not likely given the tags you chose, but...), to stop them from developing the idea, to pay you a heck of a lot of money to go away, to get "cut in" on the profits that they see from the money.

If you believe that the business will fail, I'd just get a chunk of change up front for all of the work you did (i.e., work on previous ideas, this biz plan, the negotiation, etc.) and then walk away. Your lawyer will take either a chunk of the money you receive or a flat fee for representing you. But figure out up front what outcomes you'd like him or her to work for.

IANAL, YMMV, this is not advice of anykind, etc. etc.
posted by zpousman at 10:29 AM on June 17, 2006

iTristan writes "Lawyer lawyer lawyer. "

Mushroom!


Er.. yeah. Get yourself a lawyer, one who specializes in IP issues.
posted by dirtynumbangelboy at 10:52 AM on June 17, 2006 [1 favorite]

You probably also want to take a bit of time to get past the emotional stuff that's still infringing on your judgement. (Based on the tags.) Approaching this in a dispassionate, business-focused way is going to (1) be healthier for you in the long run (2) make it easier to work productively with your partner, if that's possible and (3) make it easier to work productively with a lawyer, if that's necessary.

A lot of times, people, even people with whom you've partnered, see these decisions as "just business". Not saying there wasn't an ethical breach here, but most people aren't going to hear "you're a lying snake who betrayed me" as a starting point for compromising with you.

You might be in the right, but it doesn't matter. You're going to have to swallow some pride regardless to get the resolution you're looking for.
posted by anildash at 12:53 PM on June 17, 2006

Nail down anything at all that looks like documentation, sent end received emails, etc. When you lawyer up, don't get greedy, Have an idea of the value of your work and look to be compensated fairly. And talk to friends or a therapist to deal with the loss and betrayal. If you use a lawyer as a therapist, it will be expen$ive.
posted by theora55 at 4:00 PM on June 17, 2006

dirtynumbangelboy writes

"iTristan writes "Lawyer lawyer lawyer. "

Mushroom!

Er.. yeah. Get yourself a lawyer, one who specializes in IP issues."

Snaaaaaaake, ooooohhhh snaaaaaaaakkkkeee!
posted by iTristan at 12:17 PM on June 18, 2006

Reframe your question as "What can I do about a business partner who ran off with his idea?"
posted by zackdog at 8:59 PM on June 23, 2006