1) Don't do business with Jason Calcanis. This is not the first time I've heard Calcanis-related drama, won't be the last. Not that I ever was going to do business with him, nor him with me mind.

2) Don't do business with Michael Arrington. He washes his dirty laundry on a very public blog without regard for his business associates (in this case, AOL).

Drama never leads to good business practice.

Timing is very important here.

In essence, Mr. Calacanis and TC had formed an LLC to run the TC50 conference, were therefore co-members (i.e., partners) and equal owners of that LLC, and had reached a point in 2009 where they had serious tensions between them concerning the venture. Whatever the true story, it appears that they entered into a formal settlement agreement, with global releases granted to one another, earlier this year by which the LLC was dissolved and the parties were allowed to go their separate ways without either of them being able to make legal claims against the other.

That in theory ends it all and should eliminate all future legal claims relating to the venture. Indeed, it is almost certain that the releases included the standard provision found in all California releases by which all parties would have agreed to release all claims, known and unknown and by which each party would have agreed and acknowledged to accept the risk of giving a full release even if later events revealed facts that might have materially altered that person's decision to grant the release in the first place.

So what happened?

AOL agrees to acquire TC, signs a definitive agreement to do so, and enters into an escrow/due diligence period preceding the closing during which TC and Mr. Arrington must warrant and represent, among other things, that the stock/assets being transferred are free of legal claims or liabilities that might affect AOL as buyer in the deal or, if not, that such claims are disclosed and accepted by the buyer.

If serious legal claims arise during this period, (1) the deal might be killed if the prospective acquirer decides that the existence of such claims materially impairs the value of what is being acquired, or (2) the selling parties must agree to indemnify the acquirer from all such claims and (almost invariably) an amount is reserved and held back at the closing to serve as a fund by which to satisfy such liabilities following the closing. While I have no idea about details, this might mean in, say, a $60M deal, that AOL might insist on a hold-back amount of as much as a third of the purchase price to cover this sort of risk (if the value of the TC50 conference is a major part of what it is acquiring in relation to the other TC assets, this percentage could be higher).

So what about the legal releases signed by Mr. Calacanis? Shouldn't this end the possibility of legal claims?

Yes and no. Yes, in that a court would find that all such claims have been released unless the settlement agreement can be rescinded on some lawfully cognizable ground. But no, in that any agreement can be set aside if it was entered into based upon fraudulent misrepresentations, mutual mistake and a few other grounds justifying rescission.

And that is what Mr. Calacanis is asserting here: that he would never have entered into the settlement had he known the material facts concerning the impending AOL acquisition, which he claims were not disclosed to him in connection with the settlement. He takes this a step further by asserting that Mr. Arrington and TC had fiduciary duties under laws pertaining to LLCs to disclose whatever material facts they knew about that impending acquisition. In other words, this was not a mere arms-length negotiation by which each party could go for maximum advantage by employing any sharp tactics available to it. When fiduciary duties apply, one party is deemed to repose trust in another and that other party has a duty not to abuse that trust. Put all this together and Mr. Calacanis is basically claiming that he was taken advantage of and misled into signing the settlement document, that he has a right to rescind it, and that it is therefore open season on his right to file a lawsuit over the whole mess.

I don't believe, in this context, that Mr. Arrington is publicizing this in order to get hits for his site or simply because he is a "drama queen." I believe he sees this sort of claim, timed in this way, as something that can have a large impact on his potential for closing the AOL deal or at least for closing it on favorable terms and, therefore, his tactic seems to be to attempt to portray it as a shakedown suit and to use that to gain leverage for his position.

Mr. Arrington is a fighter and I'm sure means it when he says he intends, in effect, to take this to the mat. He might be undercut in this effort, though, if AOL uses this as a reason to pull or modify its offer. This is where the true drama lies in this matter, in my view. I believe this puts Mr. Arrington under enormous pressure and probably explains why the claim is being asserted in this context. If it threatens to disrupt the deal, it might take a significant sum of money to make it go away.

By the way, the law firm asserting this claim on behalf of Mr. Calacanis is a first-class firm. If this does get filed, it will be seen as a legal threat that must be taken seriously by AOL if it is to go through with this deal.

"They gave him an intelligence test. The first question on the math part had to do with boats on a river: Port Smith is 100 miles upstream of Port Jones. The river flows at 5 miles per hour. The boat goes through water at 10 miles per hour. How long does it take to go from Port Smith to Port Jones? How long to come back?

Lawrence immediately saw that it was a trick question. You would have to be some kind of idiot to make the facile assumption that the current would add or subtract 5 miles per hour to or from the speed of the boat. Clearly, 5 miles per hour was nothing more than the average speed. The current would be faster in the middle of the river and slower at the banks. More complicated variations could be expected at bends in the river. Basically it was a question of hydrodynamics, which could be tackled using certain well-known systems of differential equations. Lawrence dove into the problem, rapidly (or so he thought) covering both sides of ten sheets of paper with calculations. Along the way, he realized that one of his assumptions, in combination with the simplified Navier-Stokes equations, had led him into an exploration of a particularly interesting family of partial differential equations. Before he knew it, he had proved a new theorem. If that didn't prove his intelligence, what would?

Then the time bell rang and the papers were collected. Lawrence managed to hang onto his scratch paper. He took it back to his dorm, typed it up, and mailed it to one of the more approachable math professors at Princeton, who promptly arranged for it to be published in a Parisian mathematics journal.

Lawrence received two free, freshly printed copies of the journal a few months later, in San Diego, California, during mail call on board a large ship called the U.S.S. Nevada. The ship had a band, and the Navy had given Lawrence the job of playing the glockenspiel in it, because their testing procedures had proven that he was not intelligent enough to do anything else."

Ok, seriously, this is getting ridiculous. Who the hell goes across the country compiling a list of the top ten nursery schools? I'm not convinced that such ratings are useful for universities, never mind high schools or lower tiers of education. The concept of a top-ten list of preschools just blows my mind.

(I still think it's great that PG is contributing to this in such a unique fashion, though.)

The war is over. You lost.

Love,

The Crushing Imperialist Juggernaut of Common Usage.

We are a community of Hackers. We set out to change the world, create things, build value. Why then should we be interested in petty clashes of Silicon Valley drama queens? What difference does it make who hates whom and who sues whom? How does it influence my new startup?

Before upvoting something, consider: does reading this story make me a better hacker?

While the rest of the U.S. is consumed with mid-term election results, World Series celebrations, fantasy football, Survivor, and Justin Bieber thinking he can dance with 5th graders, we hackers pay little attention and keep on working.

Then you guys come along with fresh hacker-friendly drama. Thank you! It's been 3 weeks since Angelgate, and things were beginning to get monotonous alt-tabbing between my IDE, my debugger, my test runs, email, and hacker news.

</sarcasm>

Now that the sarcasm tag has been lifted, let me say what I really think:

Why is it that those of you who have so much spend so much energy being drama queens? We hackers struggle every day, sometimes for years, building stuff, but if we fart wrong during a pitch, you send us on our way as if nothing we ever did matters. Anyone who comes to this board can bitch and moan about a million different things, but most of us don't; we just keep on working.

Why don't you all just STFU and do the same. There's already too much drama and too much work to be done. When Silicon Valley turns into Hollywood or Washington, D.C., we should all start worrying.

See you in Congress Nate.