To anyone more familiar with the law: is this the type of thing that could be recovered later?
I think the lawyer was smart enough to ask for an amount that he'd be okay with, but kept it small enough to make paying it easy enough to not warrant the startup being distracted.
But say the amount was more and the amount was low enough to pay the guy off, but high enough to be concerned about. Maybe you still pay it right away because you have to in order to get your funding, but is there any case law that supports recovering this money later on because the startup was essentially held hostage by the lawyer?
It seems fairly reasonable that a contract made under duress could not be enforced, or could at least be brought up at a later date.
As a general rule, money paid pursuant to a settlement agreement is gone for good. The bar for duress is pretty high--specifically, it usually (always?) requires a threat of bodily harm.
And, even if you could somehow prove a settlement agreement to be unenforceable, what would be the point? For one thing, you'd cancel the release of liability you obtained. And secondly, you already performed your part of the agreement (paying the money). In general, I wouldn't see any benefit in this course of action.
This is right, I don't think duress is relevant here.
As a hypothetical, if the company hadn't already paid the $5k, just agreed to do so in the future, they could have some legal arguments for not actually paying after the round closed. See http://www.lawnix.com/cases/alaska-packers-domenico.html.
(Of course, that's talking about whether or not there's any tenuously-supportable legal argument. Back in the real world, they should obviously just pay him.)
There is no duress here; they reached out to him about how getting him to waive his claims. He had no obligation to do so. Likewise, they had no obligation to accept his offer and could have simply decided to risk it.
IOW, there's a snowball's chance in Saudi Arabia that these guys will be able to recover any money they pay to the "lawyer" to settle his "claims" against them.
The lesson to take away: have an employment agreement with everyone you bring in to work for you, even if it's just a simple one page document.
I think the lawyer was smart enough to ask for an amount that he'd be okay with, but kept it small enough to make paying it easy enough to not warrant the startup being distracted.
But say the amount was more and the amount was low enough to pay the guy off, but high enough to be concerned about. Maybe you still pay it right away because you have to in order to get your funding, but is there any case law that supports recovering this money later on because the startup was essentially held hostage by the lawyer?
It seems fairly reasonable that a contract made under duress could not be enforced, or could at least be brought up at a later date.