What I Learned from Fighting a 12-Month-Long Lawsuit

legal

Entrepreneurs tend to talk about the glory moments. You know… about raising millions of dollars from investors or selling their companies.

Sadly, there isn’t much you can learn from those glory stories, which is why I rarely discuss them. Instead, I focus on sharing my mistakes because if you can avoid making the ones I made, you’ll increase your chances of succeeding.

One of the toughest parts about my entrepreneurial journey very few people know about was spending a year fighting a class action lawsuit (it’s just a fancy word for multiple lawsuits combined into one) and the Federal Trade Commission.

Download this printable cheat sheet of 8 lessons learned from fighting a 12-month long lawsuit.

Before I get into what I learned, let me give you the back story…

My startup

Over five years ago, my co-founder and I started an analytics company, KISSmetrics. Our goal was to help companies increase the lifetime value of their customers.

When we launched, we had no competitors. Through our network, we were able to land a few big accounts like Amazon and Microsoft as well as large startups like Hulu and Spotify.

The business was growing at a healthy pace. During this time, we raised only $4 million dollars, and my co-founder and I still owned a large chunk of the company.

Due to our frugal nature, we weren’t losing much money each month, and we still had over a million dollars in our bank account. With our growth numbers, it was looking like we were going to break even while still having over $750,000 left in the bank account.

But then the negative press started to hit…

The Wired Magazine article

In July 2011, Wired Magazine wrote an article talking about our practice of placing undeletable cookies on people’s computers. More specifically, they were discussing our flash cookie technology, which helped us track people across multiple devices such as web, mobile, etc.

A lot of other sources picked up the article such as the Wall Street Journal, New York Times, ABC TV, Inc Magazine, Boing Boing, Huffington Post, and dozens of other large publications. Some of these media properties claimed we were sharing data among customers and breaching privacy laws.

Within a few days, we were notified that we are now in a class action lawsuit. To make matters worse, they dragged 20 or so of our clients in the lawsuit, and lawyers were going after them too.

Flash cookie technology

My co-founder and I aren’t technical. We both have business backgrounds, which means neither of us knows how to code. Nonetheless, whatever happens in our company is our responsibility, no matter what.

The flash cookie stuff wasn’t a core part of our technology, and one of the main reasons we were using it was because it saved us money. When your hosting bill is in the 6 figures a month and you are a startup, you do whatever it takes to reduce your costs.

Using this technology helped us reduce our server costs. Once the article hit, we did stop using the flash cookie technology as it wasn’t a core part of KISSmetrics.

Dealing with insurance

One of the best things I learned from raising venture capital is that investors require your company to get insurance. The three main policies they have you buy each year are:

  1. Errors and omissions insurance – this covers any errors you or any of your employees make within the company. So, if someone sues you, they step in, kind of like your car insurance.
  2. Board and officers liability – this insurance covers your board as well as investors.
  3. Life insurance – if you die, the company will inherit the money from your life insurance policy.

When most people buy insurance, they look at the total coverage amount and forget to look at the fine print. And that’s what we did too… We made sure we were covered for millions of dollars, but we didn’t pay attention to the fine print.

Our insurance company was a subsidiary of Berkshire Hathaway, and they provided us with a lawyer. The only issue was they picked a lawyer who was affordable and had little to no experience in web-related matters.

Naturally, we wanted to pick our own lawyer… with more web experience. Luckily, we had great mentors and investors who helped us find the right law firm, Gibson Dunn, who specialize in privacy-related legal matters. They appointed a lawyer by the name of Ashlie Beringer, who is currently deputy counsel at Facebook.

That’s when we faced another set of problems. The legal fees ranged from $700 to $1,250 an hour, but the insurance company wouldn’t cover them. Why? Because we didn’t read the fine print, which prevented us from choosing our own counsel.

The big lesson I learned here is that when you are dealing with insurance providers, make sure your policy is flexible enough to allow you to pick your own attorney. The insurance company’s goal is to spend the least amount of money, which means the lawyers they appoint might not be your first pick.

First mediation meeting

Before things go to court, you typically go to mediation to try to settle your lawsuit out of court.

During my first mediation meeting, I faced 4 lawyers suing us (they were combined into one case, hence the name “class action”) as well as 20 of my customers. We were represented by the lawyer the insurance company provided us with and by the lawyer we hired to represent our company. To top it off, a lawyer representing Berkshire Hathaway was also present, whose goal was to save the insurance company money.

During our first meeting, I learned that the insurance companies are extremely smart… if they weren’t, Berkshire Hathaway wouldn’t be a 300-billion-dollar company. They have clauses in your insurance contracts stating you can’t assign over your insurance policy to the people suing you, which means you have to fight the lawsuit instead of just having the insurance company cough up the settlement money.

And because they knew we were paying for our own lawyer, who was more qualified than the one they provided, they wanted to drag this process out as long as possible to minimize their own expenses.

Once the first mediation meeting kicked off, I realized the lawsuit wasn’t going to be settled that day. Instead, this whole process got dragged out for over a year.

Lawyers are smart

A class action attorney’s job is to go after the money. No matter what they say, they are just looking for money because if they win, they get paid, and if they don’t, they walk away with nothing.

I’m not saying the lawyers we were going up against offered us this, but in general, when you are sued by your clients, lawyers will typically let you go free and clear as long as you sign a piece of paper saying they can go after your clients without you getting in the way.

A lot of my friends were put in this position when their businesses were facing class action lawsuits, and I knew going into the lawsuit that I wasn’t willing to do anything like this. From an ethics standpoint, it didn’t feel right, which was why I was willing to do whatever it took to protect my customers. So, I sold all of my assets and moved back in with my parents.

Lawyers would rather have you out of the picture to have the freedom to go after your customers because they make more money going after Fortune 500 businesses than startups.

I am not saying the people suing us tried to pull any of these tricks. I am just trying to prove a point that lawyers are creative.

Federal Trade Commission

Within three months of the mediation, I got a phone call from the FTC. They stated they were investigating us and recommended we get legal counsel.

I didn’t know what to expect as this was new territory for me. I’ve dealt with lawsuits before, but never with government-led investigations.

Although the government moves really slowly, the people I dealt with were friendly and easy to work with. They don’t want to shut down businesses or go after you personally (assuming you did nothing wrong). They just want to protect their citizens.

The FTC wanted to make sure we weren’t sharing data, which we weren’t. They, of course, didn’t just take our word for it. They investigated us fully. During their investigation, they had to borrow some of our team members to answer specific questions, which slowed us down from a product development standpoint. But again, they were understanding.

I also recall them asking us to do specific tasks, which would have required all our engineers to stop their work and would have led us to lose a lot of revenue. Once we explained that to the FTC, they came up with solutions not detrimental to our business.

They were also respectful of our clients and their data privacy rights. They didn’t want our customers’ data. They just wanted to make sure we were following the law.

We had to spend hundreds of thousands of dollars in legal fees just to deal with the FTC, but once they found we weren’t doing anything harmful, they stopped the investigation and let us proceed with our business.

Buyers hate legal messes

Any startup that is growing fast and has a unique technology generates interest from potential acquirers.

Most of the acquirers that approached us weren’t ready to pull the trigger. They just wanted to learn more about the business. These companies tended to be publicly traded. For a publicly traded company, acquiring a company dealing with legal issues and an FTC investigation is a big NO.

Why?

Because they take on any liability you have, which affects their stock price in a negative way. In essence, it’s too much of a risk.

So, if you are in a lawsuit, don’t waste your time talking to potential suitors or trying to raise venture capital as no VC wants to invest in a company dealing with legal issues. Instead, focus your time and energy on growing your business.

Negotiating with insurance

If you ever get sued, you will learn that the lawyers suing you want it over with as fast as you do. It makes sense: the more it drags on, the more time they spend without receiving a dollar.

In essence, they are trying to maximize how much money they make per hour, which means they want to settle quickly.

Assuming you have insurance, it’s cheaper for you to settle than it is to fight it in court as the insurance company typically pays for the settlement.

Now, the insurance company doesn’t want to spend money, so you have to do a few things to get them to move:

  • Let it drag out – don’t expect the insurance company to settle right away. If you drag things out, they end up spending money on legal fees, which puts more pressure on them to settle.
  • It’s all about giving and taking – the insurance company isn’t required to cough up money and settle unless the judge tells them to. But with mediation, there is no judge. You have to deal with the lawyer representing the insurance company. A quicker way to get them to cough up the money is to have your company pay 10% to 20% of the settlement fee and have the insurance company cover the rest.

Conclusion

I spent a bit more than 12 months dealing with lawyers, spending tons of time in mediation rooms, while trying to grow a business that was generating bad press.

In the end, not only were we able to get through it all, but we were able to grow and improve the business. Here’s what I’ve learned from this whole experience:

  • Be transparent with your team – as we were going through this legal situation, we kept each of our team members up to date. They appreciated the transparency, and we lost no employees during this whole ordeal.
  • People forgive and forget – one day, you’ll have a ton of negative press and dozens of people calling to yell at you each day. And the next day, everyone forgets. Why? Because someone else will have the spotlight. Don’t try to fight negative PR. Just keep your mouth shut, and let things pass when possible. And trust me, they will pass. The more you respond, the more fuel you add to the fire.
  • Only one person should be dealing with legal issues – within our company, I was the only one dealing with the legal issues. For this reason, the rest of the team and my co-founder were able to focus on the business, which allowed us to keep improving our product and to grow.
  • Focus on revenue – whether you are in a lawsuit or not, the one thing people value is a company that is growing financially. By continually focusing on product development, marketing, and sales, we were able to grow our revenue. This allowed us to stay in the game.
  • You have no excuses – when life hands you a lemon, you should be making lemonade. No matter how bad of a situation you are in, you can’t give up. Keep fighting, push forward, and execute. Don’t focus on the negatives. Focus on how you can keep improving.

Don’t look at lawsuits or any obstacles that come your way as a negative thing. Instead, see them as a learning experience. They are just roadblocks that you will eventually run into as your company gets larger.

So, what roadblocks have you run into?

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Comments

  1. Although my humble blog is a long way from lawsuits, i did read the post completely, thanks for the valuable personal experience that you’ve shared here.

    • Jacob, thanks for reading it. I want to help people avoid the same mistakes, ultimately. It was a learning experience that taught me a lot.

  2. I was beginning to think my life was hard (I mean, I don’t even have the Christmas lights out yet and it’s freezing outside) and then I read this blogpost. But people forgiving and forgetting really resonated with me. Totally true. I mean, look at Bill Clinton. He plays the saxophone and everyone loves him. As far as roadblocks, I would saying learning SEO is my biggest one my far. Challenges me everyday. But hey, where would we be without a challenge in life? We were made to thrive =)

    • Yes, No matter what happens be optimistic 🙂

      • Laura & Ashiq,
        Thanks for your support and words. I think at the end of the day you just have to be thankful for the things people can’t take away — life and family. Everything else is out of your hands at a certain point.

  3. “KISSmetrics” is a great product, sad to hear that you have to go through a tough phase, thank you very much for sharing your experience. I’m sure this article will save someone else future pain, cheers 🙂

    • Ashiq, glad I could share. At the end of the day everything worked out — which is good. Looking forward to hearing more from you.

  4. Damn.

    Just the headline made my heart beat faster.

    I love the part where you said:
    “when life hands you a lemon, you should be making lemonade. No matter how bad of a situation you are in, you can’t give up. Keep fighting, push forward, and execute. Don’t focus on the negatives. Focus on how you can keep improving.”

    …because you managed to keep your focus in spite of the negative pull of the lawsuit.

    ~darlene

    • Darlene, I think at the end of the day you just have to roll with the obstacles life gives you. It really helped me grow as an individual. Nothing really phases me now.

  5. Wow. That must have been quite a sobering experience. Hopefully, I won’t ever find myself in a situation like that, but it’s nice to know that there’s a practical guide I can refer to here! Thanks for sharing, Neil! =)

  6. Madame Ostrich :

    I don’t really have much to contribute to this conversation, but Jesus Christ what a headache. Thank you for sharing– I definitely don’t want to step into that!

    • Madame Ostrich,
      At the end of the day it helped me become a stronger person. I wouldn’t wish anything like this on you either 😉

      • Why wouldn’t you wish? Don’t you want Madame Ostrich to become a stronger person either?

        Just kidding. Awesome post, Neil. I admire your attitude.

  7. Wow, super interesting article!

    I remember in an interview or conference you spoke about moving back in with your parents.

    Now I see why.

    Glad you, Hiten, and KISSmetrics pulled through!

  8. Wow Neil – scary stuff. Glad you managed to get through it and come out the other site so well.

  9. ‘Merica!

    Ya gotta love it!

  10. Penny Haywood :

    Brave and thoughtful post.
    Re negative PR, you touched on letting it pass. If something is factually wrong, letting it go unchallenged allows it to be perpetuated. Even if they don’t publish a retraction, your simple correction should inhibit repeated falsehoods.
    Good piece.

    Penny Haywood

    • Penny, I agree. If there is something negative written about you the only thing you can do is roll w/ the punches. Thanks for the words of support.

  11. Really interesting to hear about all of this Neil, glad you shared it. I agree that a lot of entrepreneurs seem to only talk about their glory moments and gloss over the uncomfortable moments. You learn more from your mistakes and more people should be as open as you are with matters such as this.

    • Luke, I think it’s important to share your failures so you can help others avoid the same mistakes. At the end of the day it’s important to keep a level head and roll with the punches.

  12. Great post. When you’re an entrepreneur, it can seem like you’re the only one that runs into weird problems. Happens to everyone and you’ve got to fight through. Can’t be an excuse.

  13. I am a freelancer web developer, I’ve made so many websites just this year alone that I dont even remember half of them. I was once talking to a friend, who was an aspiring writer and I ended up making a website for her one early morning. The discussion lasted 20 mins, the website was made in ten, from inception, to domain purchase, setting up a hosting, installing WordPress and setting it up with a 90% custom theme – That’s how fast and crazy things get. I was once commissioned to develop one small section of a large website for an Australian restaurant. The company that hired me was primarily a marketing company, they did SEO work mostly, and I did an interactive menu built in HTML5 using some animation effects, just like the client wanted.

    Lo and behold, six months later, the Australian restaurant sued me for “putting code that tracked visitor data”, which I obviously didn’t do. Turns out the marketing company who hired me did and then they threw me under the bus stating that it was my responsibility and they knew nothing of it. The lawsuit and mediation meetings lasted about a year and a half. Eventually I was able to convince them that I did not, and had no reason to, “track their customers” – A lot of money, time and effort wasted.

    • Interesting post, Nick.

      What kind of tracking code were they talking about? Could that tracking code include retargeting pixels, such as what Facebook offers to advertisers? I hope not!

      Thanks for any insight!

    • Nick, Sorry to hear you had to go through that ordeal. My experiences were very similar and caused me a lot of grief. Looking back though, I don’t regret that I had to go through all of it– it made me a stronger person.

  14. Kelly Weppler :

    Great post. Thanks for sharing your lessons learned about business insurance and law suits.

  15. Gil Amminadav :

    I once got threatened with a lawsuit (also over something that we weren’t doing) and sh** my pants. The prospect of the legal fees alone was terrifying. Good on you for keeping your head in the game and coming out ahead.

    Any advice on finding quality + affordable legal counsel for startups?

    • Gil, It’s a horrifying ordeal — glad you got through it.

      I think you should really try to find someone you trust. Sometimes having friends in the field really helps.

  16. Woah, that sure sounds like hell. Thanks for sharing your experience here.

  17. From my personal experience I would advice you not to be cheap on two people in your company. Your lawyer and your accountant, get the best advice on how to avoid lawsuits. They cost time and money and for a start-up preventive actions are much better than reactionary measures.

    Make sure you have contracts for all the jobs you do and lastly. Choose your partners wisely, they can also sue you 🙂

    • Mbinu, I agree. Those two people will definitely be your strongest advocates and will provide you with everything you need to succeed. At the end of the day it’s important to find people you trust — who do a great job.

  18. What doesn’t kill you makes you stronger.

    Every man is entitled to having heroes, and after going through this, surviving it and sharing it, you are a hero to a lot of entrepreneurs.

    I’m glad the company is clear and growing, I think KISSmetrics is one of the best analytic solutions for businesses.

    • Borja, thanks for the words of support. I think at the end of the day it all comes down to your how willing people are to fight for themselves. You have to have a clear head and roll with the punches.

  19. Yes, that’s totally a headache when you mess up yourself with legal issues. I had the experience — not legal issues really, God spare me — but things that totally gave me several sleepless nights and continuous shivers in my spines, when bad people mess up my site and drag me into difficult situations.

    But anyway, you dealt with strongly and finally you had a sigh of relief.

    Thanks for sharing your valuable experiences. These definitely help us to be better informed of such situations.

    • Rafi, glad to hear you got through your ordeal. I think business can be extremely stressful — and immensely rewarding at the same time. You have to be able to balance the good and the bad to stay at a happy medium.

  20. Neil, thank you for sharing! As a small business owner, stories like these provide A TON of value. I found it interesting that you said “Don’t try to fight negative PR. Just keep your mouth shut, and let things pass when possible.” Glad they passed 🙂

    Years ago, I faced a potential lawsuit, and it was scary…But thankfully (with the creative help of trusted mentors) we settled outside of court.

    • Cory, glad I could provide some help and guidance. I think you should be on the right track just as long as you get all your angles covered.

      Mentors are definitely a plus!

  21. This is one of the articles i had to read thoroughly from you blog. I’m glad you overcame the obstacles, i have also learned to read fine prints when dealing with insurance and legal documents.

    Cheers

  22. Paul Clifford :

    Wow Neil..I read every word of this post.

    The insurance is a must.. but the fine print on the right to choose the ‘right’ counsel is gold. I’ve been in commercial legal situations before and have seen how non technical lawyers try to understand technical things = nightmare.

    Thanks for sharing this valuable lesson.

    Paul

    • Paul, thanks for taking the time to read through. The fine print is what always gets people — that’s why having a good team is important. I look forward to hearing much more from you.

  23. Navneet Teotia :

    Hi Neil,

    Well, that was a fresh one really. It might have been tough and stressful at that time but I am sure you look at it like a great learning experience.

    You have no control over what’s going to happen, so the best chance is to just fight it but doing it smartly. Panic is the last thing you want to do in these situations.

    Thanks for sharing the experience Neil. I have read your million Dollar mistake post before. Your learnings are our learnings as well 🙂

    • Navneet, at the end of the day if I can help someone avoid the same mistakes I have made then I have done my job.

      Looking forward to hearing much more from you.

  24. Chirag Kulkarni :

    Wow, this post is a seat clincher. How did you deal with the initial shock and stress?

  25. Heartening to see yoir courage and your generosity in sharing something so sensitive. Made my day. All the best

  26. wow.. just wow.. thank you for sharing this story Neil,

    For small webmaster like me, many bad guys using threat to sue web master, and in the end asking for some money. Luckily it’s just a scheme and non of it real.

    “when life hands you a lemon, you should be making lemonade” , love this quote btw

  27. Hey Neil, its good that you came out of those bullshit stuffs.

  28. Wow! That was enlightening. Definitely One of your most interesting posts. I have a lot of respect for the way you courageously shared your lower moments.

    Good job on navigating through the tough times and coming out on top!

    Nisar

    • Nisar, glad you found the post helpful. Thanks for the kind words of support — looking forward to hearing more from you.

  29. Sunrise Guided Visualizations :

    Your honesty is always so refreshing!

    I am both a certificated hypnotherapist and a practicing attorney. Here are two tips:
    1.) Keep the lawyer in the loop from the beginning of your business. People always call us after the mistake has been made. We beg you! Run it by us early.

    2.) Know what your employees are doing. Good communications counts – the “cookie” issue should have been discussed earlier.

    Your article is well done, and you are to be commended!

    • That’s awesome that you are a specialist in both fields. Thanks for the tips they are very helpful. I think transparency matters — as I mentioned in the post.

  30. Thank you for sharing Neil, I have learned a few valuable lessons from your post. I have sat thru few depositions and they suck! Stay strong my friend.

  31. Thanks for sharing..
    You have a typo: insurance company wouldn’t cover our them.

    Good luck

  32. Wow – I had no idea this was happening to you and the KISSmetrics team. Thanks for sharing – I can imagine how much of a PITA that was!

  33. Very interesting story, Neil.

    And trying to understand your story better.
    Can you say what was the core reason for the bad press?

    I think of the following reasons for the negative PR:

    – Your competitors or haters initiated it

    – Someone wanted to win a lawsuit and get some money from your company

    – (philosophically): it is just a matter of how a western business system works – finding weak breaches in companies’ immune system and trying to kill the organisms (companies)

    Thanks again for sharing.

    • Michael, I think honestly — all of those things in conjunction are what caused the lawsuit. It wasn’t one thing in particular. I think there is very little you can do at the end of the day when people are targeting you. You just have to continue to do all the right things and roll with the punches.

  34. Salutes and thanks for sharing, I’m glad that you got over it!

    Best wishes moving forward! (Y)

  35. Neil, I got sued by a large Las Vegas casino. I had registered a domain that they felt was confusingly similar to the name of one of their casinos. Scared the hell out of me. The man showed up at my front door, asked me if my name was Randy Ray, then handed me a thick stack of papers, smiled, and said, “You’ve been served.” I remember the paperwork itself was a huge stack of papers, and I would have had to been in court in Vegas in December, near Christmas. I was able to settle matters by handing them the domain and signing an agreement to not register any similar domains in the future.

    Your post was great. I often wonder about how things like this happen, and most people aren’t as forthcoming about legal matters they’ve been involved in as this. Great work, sir.

  36. You sure paint a picture of BEWARE, I find it a little frightening that for no good reason you can land yourself in all sorts of trouble.
    Question is at what stage of developing a online business do you go to the cost of Insurance even though I’ve no idea how much it cost.
    Thanks for sharing this article, it certainly was worth studying.

  37. Vasilis Pasparas :

    it is a very interesting story you shared with us. transparency is the key. many come and go and many try to capitalize on others creating a buzz for the hope of them to be shown .

    thanks for sharing lessons learned Neil.

  38. Sounds like a painful and unnecessary experience to have to go through. Glad to see that you have come out the other side stronger… and still so positive.

    Something the rest of us can remember when we have (usually smaller) setbacks.

  39. Hey Neil,

    In regards to small businesses/startups protecting themselves, maybe you could write a post specifically about that perhaps. I know you mentioned a few things like getting insurance, making sure you can pick the attorney with the insurance company you do get, and only having one person deal with legal issues.

    What about an actionable post of what you recommend on this starting from the beginning of starting the business? I am talking about things such as having a process for DMCA requests, getting an LLC, having a terms of service and privacy policy, etc.

    If you could write a comment about it or update the post with a few things that would be great. Thanks!

    Cheers,
    Caleb

  40. Neil, you give a lot. I know many who would have launched a marketing campaign to sell this valuable advice you just gave. It was a look over your shoulder to see the real world. I transparency that is very daring. I do pray you get much more than you’ve given. You’ve helped many through the years, myself chief of them and I may get back 100 fold. I want you to know I support you and I’m there for you if you ever need support. Thanks again, sincerely, for sharing.

  41. A truly chilling experience you had. This emphasizes why attorneys have such a bad reputation, as they are only going after the money, where there might be some easy path to taking it.

    A very disillusioning disincentive for people simply wanting to start a business and provide a service.

    You and your team obviously handled it well and survived.
    Congratulations!

  42. Sorry to hear what happened but very interesting articles and great lessons Neil. Thanks for sharing. With your principles and outlook on life, no doubt everything will work out well, at the end, for you 🙂 Great spirits.

  43. Timely for me. I’ve got an internet startup just in web development and this has made me think harder about the ‘what ifs’… I’m forwarding your article to the lawyer who is preparing the legal disclaimers for the site!

  44. I just received a letter from a lawyer who is represents a guy’s company I have nothing to do with. Also this company copied one of my website 3 weeks ago which I own over 6 years now.

    This letter claims that this company made my website (did not) and owns the copy right for it.

    This guy is a marketing adviser and we worked together on my marketing plan two times. When we first met my site was running for 2 years..
    But I made it clear for him I don’t want to work with him anymore and now he thinks he owns my website.

    It looks like he will take legal action and I need to defend myself. He can not win but it costs me time and money and the mean time I have to grow my business. Yes and it could last for 12 months +…

    It is hard not to think about it he wants to steal my business. But I have to look forward and make plans for the future.

    • Maybe the answer to prevent this type of problem is to have an agreement, even if only a semi-formal one by email / PDF, clearly stating that so-and-so was engaged for such-and-such?

      I don’t know the background, but do you think such an email would have helped you?

  45. Neil,
    Thanks for sharing the ups and downs of your success. Your authenticity is refreshing and what makes you the trusted expert and talent that you are. Best wishes to you!

  46. Jessie Louthan :

    I like these types of stories because they portray the other side of entrepreneurism, the hard stuff that no one likes to deal with/talk about.

    Although I’m currently freelancing on the side (still have a FT job), I can see something like this becoming an issue in the years to come. Thanks for sharing Neil.

  47. adolf witzeling :

    It takes guts to share your mistakes so others can learn from it. It also take guts to not let “them” take you out of business by not giving up and instead fighting it with whatever’s at your disposal, while keeping it (the business) going. Sir, you got guts!! At the end of the day you might have lost a lot of money but gained a lot of respect which eventually will make up for your losses.

  48. And here I thought all these days that you danced all the way with a golden egg 😉
    BTW talking of reading the fine print ‘which prevented us from choosing our own council’ — > Shouldn’t it be counsel?

  49. Thanks Neil, it’s so humbling to read about this horrible experience. I was really touched by your moving back to you parents house, kind of drove the story home. It’s all good, at the end of the day you are telling a story that many of us will benefit from. Thanks again.

  50. You have a great product and it’s very helpful to people like me. Please keep up the good work. One of the questions I have is how do you “move on” when you have been exploited and manipulated in a business situation like this? When should “prosecution” stop? Shouldn’t this/these people serve as an example/made an example of? Thanks.

  51. Hi Neil, thanks for sharing this with me 🙂 This is such a good experience you shared with us, and I do hope I can surpass my roadblocks when I stumble into them. All I can say is that case obviously not your first roadblock, and will never be your last 🙂
    But I believe you can and will win the challenge!
    Thank you!

  52. Hi Neil,

    Very valuable personal experience! thank you for sharing with us!

  53. I didn’t know why I clicked on the email to read this anyway. But I can see the power of image building here. Build it, write it all, and you get people to read it.

    Thanks for sharing such experience though. Thought me you need to keep you head still up even when you are down below.

  54. Neil (my son is also named Neil),

    So there is a case for another career – Techno-Legal Auditor – a person with enough tech smarts and legal knowledge to audit our web properties and save us the cost and stress of a legal battle.

    Well, the bad part is behind you now…enjoy the Holiday season!

    Best,
    Amod

  55. Terrence Kommal :

    Hi Neil,

    Thanks for an amazing narration, your challenges and successes. I can clearly identify with you although in slightly different respects. I have had my own fair share of legal battles professionally which drove me to try to understand the legal system. The biggest problem as you had mentioned, was having limited experience lawyers or advocates who are highly priced.

    One of my greatest wins so far was beginning to study medical law and law in general. Using the skills acquired in the various litigations I now run a successful medico-legal practice in South Africa, as I am a medical doctor. A new spin on making lemonade! Our firm now assists both plaintiff and defence parties in medical claims and with independent assessments.

    Again as you mentioned reading the fine print is critical, and I suggest everyone either get a legal mind to read your contracts or study a basic course in law to understand “legal English.”

    Thank you for the cue on this story. .and its a great mootivation to write mine.

    Again, thank you for the amazing posts!

    • Terrence, I totally understand how you can relate to this story — seeing as how you are a doctor. Doctors are constantly being bombarded with lawsuits, which makes it tough for them to carry on their day to day. That’s why it’s essential to keep a level head and have the right counsel by your side. Thanks for sharing!

  56. Harleena Singh :

    Thanks Neil for sharing this precious page from the book of your experience. Although the title of the post did not appeal me because I know my blog and business are not at a level for anyone to even consider wasting their time and money with a lawsuit. But I knew that when you wrote it, it will have value. Learnings from masters are like ready-made lemonades!

    In the end, I agree and like your conclusions. The key is perseverance, being calm and in control, optimistic, and be practical and wise.

    There’s probably a lesson for manufacturers or marketers too that do not use or promote anything that you do not understand or know about completely.

    I learned many practical aspects of insurance from this post. I don’t blame the lawyers completely as they are just doing their job. Everybody wants to make or save money, and not everybody is concerned about the right way or the ethics of it. Once they become rich, people forgive and forget the means they used to get rich. That’s the sad part. Life is not only about making money.

    I haven’t faced any major roadblocks but when I do, I’ll treat them as you do – as stepping stones to success. 🙂

    ~ Harleena

    • Harleena, I always enjoy reading your insightful comments. I look forward to hearing much more in the future as well.

      I think at the end of the day what matters most is how well you deal with adversity. That will truly define your greatness, in my opinion.

  57. Partha Bhattacharya :

    I salute you Neil for your openness, positiveness, and dexterity. It’s wonderful to read and learn from this piece. Thank you.

  58. WoW

    Really Inspiring story !!!!1

    I always waits for your posts !!!!

    Very informative and interesting stuff !!!!

  59. very valuable person neil, thanks for share great stuff with us here

  60. Hey Neil,

    Ethics plus guts, and always a humble, learning attitude.
    I can’t wait to make enough money to be able to hire your firm 🙂

    Best,
    Keith

  61. Bro big hug to you . You influence us a lot, u taught us good lesson about ranking in Google and ranking in life thanks brother with love

    naveen chandran

  62. Wow, Neil…That was exceptionally well-stated. I think you just set a new benchmark when it comes to quality posts on the internet. You are a good leader and a refreshing voice of wisdom and reason.

    Keep up the good work and thanks for being the ever-optimistic and positive guy that you are.

    Geoff

  63. Thanks Neil.Sharing they say is caring.It’s so amazing the kind of caring heart you have and no little wonder you have achieved so much at such a tender age.More grease to your elbow.Your write ups are always timely and instructive.Compliments.

  64. Now I see the other side of entrepreneurship, This blog is more than just SEO and digital marketing

  65. Damn Neil! You have the right attitude! I am sorry you had to go through this ordeal but some things are just out of your control; this was one of them! I am glad you got through it and learnt alot in the process. I’ll make sure not to make the same mistakes!

  66. Thanks for sharing Neil. Everyone keeps talking about massive successes, how they are brilliant and smart etc.. This is very rare what I have read here; a sincere and wise sharing. Thanks again.

    • Glad I could help. I think at the end of the day people want to hear balanced approaches. That’s why I take time to share my failures.

  67. It is indeed one of the scariest moment for startup! I am glad that you went through it! Thanks for the great tips and lessons! Appreciated it!

  68. Muhammad Gohar :

    Thanks for sharing your personal experience, I am a young entrepreneurs and we are currently in a phase to pitch our idea to potential VC’s . Your article was really helpful.

  69. No matter what business you are in, people can sue you, even when you have done nothing wrong. This is especially the case if people think there’s a lot of money at the end of the road.

    This is a great post. The only other thing I would add is that setting up the right corporate structure can help protect assets.

    I think I ‘m going to review our insurance policy again – thanks for the revealing details of your experience.

    • Angela, that’s the good and bad thing about our corporate structure — no one is safe or immune. I highly suggest you check out your policy just to be safe.

  70. Hey Neil

    Kudos for your dedication to present not only the nice face of entrepreneurship but also the struggles that come with the job!
    I’m very happy that all worked out well in the end.

    Regards
    Mihai

  71. Emanuel Charles :

    The post is very educational, now i know what to avoid and what to do.
    Thank you.

  72. Nce post, Thanks bro

  73. Jesus !!! Neil, this is the best article I have read from you, this year, I am more than greatful, you gave me an understanding of what to do next in any venture,

    am partnering with a friend on a shopping mall venture and the tips you shared has given me a handful of ideas to solve vital problems, I may come up against

    Thanks bro !!

  74. Shawn Wilmoth :

    Wow great story. We recently purchased Errors and Omission insurance as a means to protect and plan for growth in our web development and marketing company. We felt that sets apart some of the smaller players that never bother and really makes sure that we are prepared for bigger customers.

    I will say, I did not read all the fine print in my insurance packet. I will now. What a good point to review “who picks the counsel”.

    Thanks Neil. The best business advice comes from stories of turmoil not bliss but is the least often shared. We appreciate letting us look under the hood.

    Yours truly,

    Shawn Wilmoth

    • Shawn, glad I could help out. I think sharing failures is a good way to help people out. That way you can avoid the same mistakes I made. I suggest you thoroughly look through everything when conducting your research of your packet.

  75. Malcolm Finlayson :

    Neil,

    Thanks for a truly helpful story. Also a warning for the rest of us starting companies. It is hard enough trying to keep the buisness going without a headache like this.

    I reminds me to be cautious.

    Cheers

    Malcolm Finlayson

  76. Hi Neil. Thanks for sharing this intimate story with us. I can really relate because of my business’ skirmish with the Department of Justice. It was a long drawn out battle but I went on with life and had then had another battle with craigslist and had my mobile app shut down.

    I learned that as the technology frontier expands, initially there’s no written law of what’s right or wrong so you really just have to go with your gut instinct on matters. And stay away from the boundaries.

    Fighting a legal battle with a government agency is almost like fighting life threatening illness – it can zap all your energy and enthusiasm. So happy it didn’t debilitate you and you’re moving on strong again.

  77. Daniel Taibleson :

    You can feel the frustration oozing out of Neil in this post, but by the end, it’s cathartic purpose has definitely been served and we’re left with a positive message. Read the fine print and Lawyer up!

    But the thing that truly blew me away, was this: “So, I sold all of my assets and moved back in with my parents.”

    Damn.

    There is it folks. Even the people we look to for the best marketing advice on the internet hit unfathomable roadblocks.

    I’m personally going through my own blunder with a side business, and this story has really reminded me to be grateful for what I have, even if I currently feel like pouting for the rest of these dark winter months (he wrote from sunny AZ).

    I think we can all exhale and be a little more grateful today about the fact that we DO NOT have the FTC knocking on our doors. If you do, good luck!

  78. Oh Neil,

    This is such a amazing piece. I can’t believe you sold your assets and moved with your parents.

    Such a wonderful ethical behaviour you have shown. It’s a big learnings for anyone reading this article is to work ethically no matter how much you have in the bank account.

    Hope you renounce from all the setback this legal process has dented in your and your company.

    Sam

  79. Thanks for sharing your story Neil, it increases my admiration for you. I lost all my money in a loan scam for the business I was operating at the time. You would think I would know better having just left the police department after 9 years. I trusted a preacher who introduced me to some investors. As a result of trusting those so called investors with my money I lost my business, my condo, and my retirement. For the past three years I have been working 10 -14 hours a day trying to build a business with no money. I has been brutal. It has caused me to be fearful and cautious, maybe too much. I find it difficult to make progress and many times I have just about given up. Your story is an inspiration and encourages me to try harder and stay focused. Thank you again for sharing such a personal story. I wish you continued success. God Bless.

  80. Thanks for sharing Neil. My bank account was frozen and money was taken by the “CROWN TREASURY SOLICITORS” but I got my company restored and money back.
    I am not giving up and learning alot from Quick Sprout. Thanks for that Neil.

  81. Hi Neil,

    That was a hell of an experience. Lawsuit for using a cookie, that is terrible. Seeing how you handled it and where you are now, it gives chill and inspiration.

    You are amazing. Take care.

  82. AuthoritativeReview :

    Nice article again Neil. I thing every blogger small or big should know what to pursue and what to avoid.

  83. Thanks for sharing your valuable experience….

  84. Angelina Fomina :

    Wow Niel. This is one of the most cringing, yet informative and cautioning articles I have ever read.

    It’s amazing to see how open you are to sharing things that happened as food for thought for others. Glad to hear this part of your life is over and thanks for reminding all of us to focus and keep working through all the tough times.

    This for sure made me think of potential legal issues with my business and ways they can be prevented. Although sometimes you just have to keep smiling and “make lemonade”.

  85. InternetLocalListings :

    Wow, what an incredible story. Thank you so much for being honest and sharing it. It’s a great resource to refer back to and it’s definitely informative. It’s difficult to believe, looking at what you have now, that things had been so rough! And that’s a good thing… means you’re good at taking your own advice to keep “making lemonade”. 🙂

  86. Thank Neil! A value article and it will be necessary for me in the future.
    I always look forward your new posts.

    🙂

  87. This was a brave post to write…and you’re so chill about it!

    If it were me, I’d still be spittin’ blood at the FTC, Wired, the lawyers, and anyone else I thought was collaborating against my business.

    I need to handle adversity in the same way you do.

  88. Hello Neil,

    If there is one part which you said which really caught my attention and it has to do with the fact that if life gives you a lemon, a lemonade will be the best option.

    I believe you will be coming out successful with your case.

  89. Hello Neil,

    This is going to sound funny to you, but I’ll take your legal experience over mine any day of the week.

    I founded a small company that focused on Government contracting. There are a lot of rules to follow in that space and one of those rules is that they won’t pay you unless their auditors accept your accounting system. That process took over 15 months for us. In the meantime, my co-founder and I continued to work and deferred salaries.

    Now, over a decade later, the Government is claiming that because we did not pay ourselves between Jan. 1, 2004 and Dec. 31, 2004, they are entitled to a refund for the entire year’s work.

    This lawsuit has been going on for three years now and I don’t think even God could guess when it might end because Department Of Justice (haha) simply does not give a frog about how much money they spend on each case – after all, they do have a line of credit with the Chinese government!!!

    So, again, thanks for sharing your experience. When you have a few minutes, check out my blog detailing aspects of this lawsuit on quimbasoftware.wordpress.com.

    Thanks for a great post!

    Bob

  90. What a traumatic experience! So sad that you and others who are unfairly accused (as you were with the data sharing issue) end up settling when you should not have had to pay anything.

    Don’t understand one thing. Don’t MANY companies put cookies in your computer when you visit their websites? Obviously legal for them. What was different about how you were doing it?

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  92. Thanks for sharing Great post Neil.

  93. nice post. ” a soft answer turns away wrath”

  94. Tina Gleisner :

    Thanks for sharing & I will be looking at insurance for my new business soon, so I’ll be back to review this. With an earlier business I learned you have to hire the RIGHT lawyer, as the wording in legal documents is meant to hide things from us. My lawyer saw instantly what I couldn’t sign, and then the fun began.

    I was selling my handyman franchise & the bastards required me to shut down all the handyman blogs I’d sold to other franchise owners. It was costly (time & money) but fortunately their wording didn’t preclude me from rebirthing all the sites minus their logo (in earlier skirmish, I’d already replaced domains with their “trademark name” even though I could prove there were 30+ other sites using same.

    You’re right, we walk away smarter & better prepared for the next battle as there will be a few if you’re pushing the boundaries.

  95. The best thing that you did was play it to Karma by not exposing your customers and taking the heat yourself you established your business principles in practice thats totally awesome. Who wouldn’t get KISSmetrics now or any other product with your name on it?

    Another lesson is always read and understand your contracts never let an agent rush you or the term they like to use “close you!” I’ve learnt this the hard way and its painful.

  96. Mayank Batavia :

    Hi Neil
    Thanks for this post. I’ve read most of your posts, though I seldom comment.
    But this one was special. Your extremely objective way of looking at the painful situation is quite impressive.
    Also loved the way you described lawyers, without stepping on the wrong toes 🙂
    Lawyers are indeed “creative”!
    Cheers.

  97. Steve Estimable :

    This is the kind of behind the scene informations you don’t think and have when you launch an online business.

    Thank You Neil for the blog post.

  98. If you are not facing any difficulties then what’s the pleasure of enjoying success. Forget about the lawsuit now that its over, focus on the future and work hard to turn KISSMetrics into a multi-billion dollar industry.

  99. This article is really interesting! I love it! Check out our new blog post at http://www.intelex.ca/in_311

  100. Ranjita Mandaviya :

    Well, It’s really very big issue for you and nice experience it self.

    Nice article because it’s a real life experience so I like to read it and learn many things from it. Very Useful information.

    Thanks Neil for sharing it.

  101. The United States not only is unusually litigious amoung nations, but also has a long populist tradition of (Big-G) Government intervention into what ought to be private matters, IMHO. It is not enough to have good ideas, keep ones head down and execute so as to satisfy customers. I am sorry, and as a U.S. national with ancestry extending back to this country’s founders, embarrassed that the U.S. legal system caused you so much trouble, Neil.

    I have been in your shoes as co-defendant in three lawsuits myself. Not a bit of fun at all! However, I can say that the system, though slow grinding, doth grind exceedingly fine: In the end, after wasting hundreds of thousands of dollars on legal bills, the Court found Dear Plaintiffs’ arguments entirely without merit in each case. I suppose that was a learning experience for the plaintiffs.

  102. Hi Neil
    Thanks for this post. I’ve read most of your posts, though I seldom comment.
    But this one was special. Your extremely objective way of looking at the painful situation is quite impressive.

  103. sandeep singh :

    You are a strong man!!!!!

  104. Marcus Jovanovich :

    Neil, I have been following you for a while now and have learned so much from you as a marketer…but this may be the best article I have read from you, a real insight into you and your character! Thanks so much for sharing.

  105. Daniel Bakondi :

    There is a lot to learn form this article. There are many people out there suing for a variety of reasons. If you are named in a suit, you need to contact an attorney immediately to understand your rights. By trying to communicate with the other side, you may inadvertently say something they can use against you.
    Regards,
    Attorney Daniel A. Bakondi, Esq.
    http://www.danielbakondi.com
    IMPORTANT NOTICE: No attorney-client nor confidential relationship is created through this communication. Nothing communicated or provided constitutes legal advice nor a legal opinion.
    https://sanfranciscolitigationattorney.wordpress.com/2017/06/05/san-francisco-attorney-for-civil-litigation-and-lawsuit-defense-what-to-do-if-you-or-your-company-has-been-sued/

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