Academic

On Wednesday, I posted about the complaint that eBay filed against craigslist on April 22, 2008 in Delaware state court, alleging breaches of fiduciary duty against eBay as minority shareholder.  On May 13, craigslist responded by filing a separate lawsuit in California state court alleging unfair and unlawful competition, false advertising, trademark infringement and unfair competition, passing off, trademark dilution and breach of fiduciary duty under California law.  Both corporations are incorporated in Delaware but have headquarters and principal places of business in California.

Craigslist's complaint seems to be a lot flash, but maybe not much substance.  I'm not an intellectual property lawyer, so I'll leave for someone else to figure out the merit of the claims arising under IP rights.  The gist of those complaints seem to center around eBay purchasing advertising on Google so that when a user searched Google for "craigslist," the user would receive a list of entries that look like hyperlinks called "Craigslist.com," "Craigslist.org," and "Craigslist."  But, when the user clicked on these hyperlinks, they would go to eBay or its classified service, Kijiji.  I would love to hear whether that usage is actionable.

The complaint also alleges breach of fiduciary duty under California law.  I'm not sure why this was thrown in because surely this would be a claim arising under Delaware law.  The substance of the claim is that eBay, through its agent-director, breached its director-like fiduciary duties to the company by requesting confidential information and using that information to build its own online classified service.  I'm sure this pattern comes up a lot -- minority shareholder (who should not have any fiduciary duties to corporation) has designate on the board (who does have fiduciary duties to the corporation), and the shareholder competes with the corporation.  Is the director liable for the breach, even though the individual shareholder didn't compete, just the shareholder's principal?  I met this issue once while doing some consulting work, but I was convinced there was no breach because of other factors.  In craigslist's complaint, no specific duty is mentioned, only fiduciary duty in general.

What is more interesting about the complaint is the narrative that dominates it.  Craigslist is a small company that provides a community service:  "Craigslist and its 25 San Francisco employees operate websites designed to serve local communities with classified ad placements and other services.  Other than small fess for job postings in ten cities and brokered apratment rentals in one city, craigslist provides its services to the public free of any charge."  When an unnamed third party with what appears to be a specious right to a minority stake was looking for a buyer, Newmark and Buckmaster advised the seller that it would agree to a sale "only to persons who shared a common vision with the company."  Craigslist only considered eBay as a shareholder after many stops and starts wherein eBay held itself out as having the same core value of a loyal community.  Craigslist became concerned that eBay really wanted to engage in a staged acquisition of craigslist, not to help lend expertise to improving craigslist.  eBay made several overt offers to buy eBay, pressured craigslist to allow eBay employees to work out of craigslist offices, and the complaint quotes a board presentation in which "eBay asserted that 'It is critical for the craigslist-eBay relationship that eBay DNA become a part of craigslist and vice versa."  eBay also began to "treat craigslist as if it were one of eBay's subsidiaries," and Newmark and Buckmaster soon "feared that they had a wolf in sheep's clothing in their midst."  You get the feeling you're reading a treatment for the next John Grisham novel, with Matt Damon and Chris O'Donnell (as Newmark and Buckmaster) already signed for the movie.

More later on corporate culture and corporate social responsibility.