Equity Compensation and Non-Competes: The debate is once again heating up.

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Lawsuit alleges that Visible Measures yanked first employee's stock options after he left Posted by Scott Kirsner February 14, 2012 05:23 PM
By Scott Kirsner, Globe Columnist

 
When Rishi Dean announced that he was leaving Visible Measures last year, the company's founder sent out the usual laudatory e-mail. Dean had been the first employee at Visible Measures, a Boston start-up that measures online video viewership, and Brian Shin, the company's founder and CEO, wrote, "Rishi's impact here can literally be summed up by saying that without him, there is no way that we get [sic] to the point where we are today. Period."

 
Dean left the company last June to go work at Nanigans, a Boston start-up that helps its customers run ad campaigns on Facebook. Not too long after that, according to a lawsuit that Dean filed in December in Massachusetts Superior Court, his former employer decided to terminate stock options that are worth about $2 million. Visible Measures claimed that Dean had violated the terms of his non-compete agreement (Nanigans and Visible Measures are rivals in a broad sense, in that both sell services to marketers) and his non-solicitation agreement (even though Dean claims not to have solicited any Visible Measures employees or customers), as well as that he disclosed confidential information about Visible Measures. Dean (pictured at right) says none of that happened. Dean worked at Visible Measures for the company's first five years, and while Shin tried to persuade him to stay at the company, according to the suit, neither he nor anyone at Visible Measures expressed concern that Nanigans was a competitor.

 
Dean's lawsuit asserts that he was one of the largest holders of Visible Measures stock options at the time he left, and that Shin and the company's board "each will gain personally from the wrongful termination of Dean's stock options, because their stock or options will not be diluted through Dean's exercise of his stock options." You can read the full text of Dean's legal complaint here.

 
The case underscores one crucial lesson of anything related to equity or employee agreements: get it in writing. While Dean apparently had a cordial conversation with Visible Measures' finance VP about extending the period during which he could exercise his options - giving him 90 days after he left the company to do so, for tax reasons - he never got written confirmation of an extension.
Last October, Dean received a letter informing him that because of his "misconduct," he wouldn't be able to turn any of his outstanding Visible Measures options into stock.
CEO Brian Shin wouldn't consent to an interview about the case, but he did agree to answer questions via e-mail. He wrote:
Visible Measures scrupulously adhered to its commitments to Rishi Dean and was entirely within its rights in terminating his options based on the facts of this unfortunate situation. Employee stock option agreements (like Rishi's) often stipulate that they may be cancelled if an employee violates an agreement with the company or engages in misconduct. The Board of Visible Measures determined after very careful

 
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Lawsuit alleges that Visible Measures yanked first employee's s... http://www.boston.com/business/technology/innoeco/2012/02/l...
consideration, and with clear and substantial evidence, that Rishi Dean engaged in misconduct that violated agreements he had with the company and was serious enough to invalidate his stock options - this is the case regardless of whether or not Nanigans is a competitor.
We may eventually find out what a jury thinks about this particular dispute between a founder and his first employee.
(Here's a now-pretty-ironic interview with Dean from last March, talking about "collaboration and culture" at Visible Measures.)