Chances are you’ve visited or at least heard of The Huffington Post, the eponymous blog and news-aggregation site started by Arianna Huffington and others, which has expanded to include in-depth coverage on an ever-growing number of subjects.
In the February issue of Vanity Fair, William D. Cohan writes about a dispute over who is responsible for the success of HuffPost, which Cohan says is worth an unconfirmed $350 million, based on projected 2011 revenues of $60 million.
The background is that Democratic political operatives Peter Daou and James Boyce maintain that they were involved in the creation and development of HuffPost, along with Huffington and Ken Lerer, who provided financing for the site, but never received any credit or equity or compensation for their efforts, particularly after HuffPost became so successful. Both continued to write for the site, however, which started in 2005.
In 2010, Daou and Boyce emailed Huffington and asked for recognition/compensation for their efforts in the development and success of the site. They conceded that they had not previously raised the issue, but justified their inaction by saying that they expected Huffington to recognize their efforts and act accordingly.
After Huffington rejected their request in an email, Dauo and Boyce filed suit in the Supreme Court of New York on November 15, 2010. Here is their complaint, along with a memorandum identified in the complaint as the "1460" memorandum (reflecting an early proposed name for the site referring to the number of days between presidential elections), which they maintain demonstrates that they were intimately involved in the site’s creation and development.
The defendants, who are Huffington, Lerer, and the TheHuffingtonPost.com, Inc., have responded to the complaint, but I do not have a copy of that pleading. I am trying to get it, and if I do, I’ll post it.
So what is the lesson that can be learned from this case, even at this point? It’s simple. If you have a viable claim, regardless of the type of case, you need to decide whether to assert the claim, and if you choose to go forward, you need to assert your claim promptly.
Daou and Boyce claim not only that they were waiting on Huffington to acknowledge their efforts, but that they had clients "who might have been offended by a public confrontation with Huffington." Maybe that’s true, but Daou and Boyce are sophisticated businessmen who, at some point, had to know that Huffington wasn’t going to give them any credit for the site or pay them for their efforts. The site launched in May 2005, so how long is it reasonable for them to wait?
Their complaint alleges claims for breach of contract by Huffington and Lerer, breach of fiduciary duty by Huffington and Lerer, idea misappropriation, breach of implied contract (in the alternative), unjust enrichment (in the alternative), quantum meruit (in the alternative), fraud against Huffington and Lerer (in the alternative), and negligent misrepresentation against Huffington and Lerer (in the alternative).
Every type of claim has a statute of limitations that governs when it must be asserted. For example, a personal injury claim in West Virginia must be asserted within two years of the date of occurrence (I’m leaving out the application of the discovery rule). Breach of contract claims typically have more generous statutes of limitations: in West Virginia, there is a ten-year statute of limitations applicable to claims arising under written contracts, and a five-year statute for claims arising under oral contracts. But just because you have a significant period of time to assert a claim doesn’t mean that you shouldn’t act promptly.
It’s too early to say whether Daou and Boyce will succeed. The publicity that they have received thus far probably hurts them more than helps them, as it gives Huffington less room to maneuver to settle — at least for now. But the larger problem Daou and Boyce face is proving that they asserted their claims in a timely manner. They have to avoid the effect of laches, which is an affirmative defense that bars a party from asserting its rights on the grounds it did not do so in a timely manner (even if the party acted within the applicable statute of limitations), and the statutes of limitations that apply to their claims. Given their inaction for several years, they may have a hard time convincing a judge or a jury that they were diligent in asserting their rights.
(Daou and Boyce’s lawsuit has drawn inevitable comparisons to the one filed by Cameron and Tyler Winklevoss, who claimed that Mark Zuckerberg breached an agreement with them by misappropriating their ideas when he started Facebook. There may be similarities, but as the Winklevosses have sued to overturn the settlement of their lawsuit against Zuckerberg on the grounds they were defrauded as to the actual value of the original settlement, their travails probably illustrate better the need to make sure you have nailed down what you’re getting when you agree to settle.)