Westerdal files counterclaims against Thought Convergence in legal battle.
Name Intelligence founder Jay Westerdal has filed a counterclaim (pdf) against Thought Convergence, Inc. (TCI) in a legal battle over TCI’s acquisition of his company.
In the counterclaim document filed with the California Central District Court, Westerdal claims there were “Myriad of deliberate misrepresentations made by TCI during the negotiation process and execution of the agreement.” Specifically, Westerdal alleges:
-“TCI knowingly misrepresented the stability of its business, its domain parking practices, its reliance on a very small number of customers for the majority of its revenue stream, its revenue loss free fall, its lack of debt, and its use of the banned industry practice of arbitrage”. Westerdal further claims that arbitrage represented a large portion of TCI’s revenues.
-TCI estimated its company value at $200M, which Westerdal claims was “grossly inflated”. That would have valued the stock payments to Name Intelligence’s owners at $32M, according to the documents.
-TCI discussed negotiating an IPO that would include Name Intelligence’s assets.
-There were “significant material adverse changes” to the company between December 31, 2006 and when the agreement was executed on May 2, 2008, contrary to representations made by TCI.
-There were loans made to TCI prior to execution of agreement, which were not disclosed.
-TCI failed to pay Westerdal his $120k annual salary
Furthermore, Westerdal claims he “performed his obligations of employment to NIL under the Offer Letter, or was excused from doing so because of NIL’s breach of the Offer Letter.”
Thought Convergence and Westerdal have agreed to drop DOTMOVIE from the lawsuit (pdf), as Westerdal says it’s not a business entity and has no employees.
Westerdal and Name Intelligence Inc. (a holding company owned by Westerdal) also filed a response (pdf) to TCI’s claims, basically deny all of the negative allegations.
Rob Sequin says
Yikes. Thought Convergence needs to make this go away.
Whatever they owe Jay or vice versa might be small compared to the value of loss to their brand.
Right now it’s all he said/he said but appears that Jay has everything to gain and TC has everything to loose since they are an ongoing concern.
Honestly, I DON’T want to see how this all plays out because the lawyers will win and domainers will loose.
Andrew Allemann says
I personally don’t think many of the claims made by Westerdal are that damning. Not much is quantified, such as the “material adverse” change in the company’s position. We don’t really know what that could mean.
TC made a terrible call letting this go that far. The damage is done and it likely to go downhill further from here on.
Oh my, this looks like it can be a very tedious litigation process.
Domain Investor says
It appears both parties (Ammar and Jay) inflated the market value of their individual companies.
I don’t believe TZ should try to make this go away. The PR damage is already done to both parties.
I’m positive this will be settled out of court. And, the amounts will be much lower.
The average domainer who is making pennies and suffering from a drastic decline in ppc revenue watch these guys fight over an “over inflated” purchase.
Even though it is not valid, many domainers who used TZ (and domaintools paid service) feel this money is coming out of their pockets.
The fun is leaving the industry.
Tan Tran says
Would be interesting to see what comes out during ‘discovery’ if it goes that far. My guess is that TZ won’t want it to go that far.