Color Labs And Bill Nguyen Sued By Ex-Employee Alleging Retaliation, Emotional Distress

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Adam Witherspoon (pictured left in his LinkedIn profile photo), a founding employee of Color Labs who was laid off during the photo and video sharing startup’s recent wind-down period, is filing suit today against the company and its CEO Bill Nguyen.

Witherspoon alleges that he has been the victim of retaliation and “intentional infliction of emotional distress” and is seeking damages including payback for lost wages and benefits and for “humiliation, mental anguish, and emotional distress,” along with other types of relief.

We’ve obtained the legal document, which is currently being filed in Superior Court in Santa Clara. It is embedded in full below.

Along with the formal complaints, the lawsuit, which was filed by San Francisco law firm Dhillon & Smith, goes into serious detail regarding Color’s internal culture and alleged issues about the board’s oversight of the company. Frankly, it looks like incredibly salacious stuff.

One key thing to note is that the suit says that Color’s assets have indeed been sold to Apple, something that has not been confirmed on the record by either company to date. Witherspoon claims in his suit that he was the only technical employee at Color who was blocked from joining Apple in October. Today, Color’s website notes that its app will no longer be available after December 31st, 2012.

Much of the suit deals with allegations that seem of a personal nature — the relationship between Nguyen’s and Witherspoon’s children, for example, is recounted in detail. Along with these types of allegations, however, are claims that personal improprieties often blended into Color’s business dealings. Here is one such example:

“In or around late 2011, [then Color CFO Alyssa] Solomon began noticing discrepancies in Color’s finances. Upon information and belief, Defendant Nguyen was spending corporate funds on numerous personal items, such as charging personal items on Color’s American Express card and putting his family’s nanny, Sally Orr, and his family’s Lake Tahoe‐based ski instructor, Hillary Governer, on Color’s payroll.

In retaliation for Solomon’s investigation into his misuse of Color’s corporate funds and other fiduciary misconduct, Defendant Nguyen expressed his intent to fire Solomon in front of Color employees on numerous occasions. Color employees, including Plaintiff Witherspoon, had no doubt that Solomon was on her way out as a direct result of Nguyen’s vindictive threats.”

The suit also details the time when Nguyen began to step back from day-to-day operations this past summer. According to Witherspoon’s account, the situation was more of a formal departure than Nguyen and Color’s representatives have publicly stated:

“On or about July 17, 2012, Board member Doug Leone sent an email apprising employees of a company‐wide meeting later in the day. At the meeting, all of the Board members were present, as was Defendant Nguyen. Leone announced that Defendant Nguyen would step aside from running Color’s day‐to‐day operations. Leone indicated regretfully that it was the Board’s fault that things had gotten to that point and that the Board should have been more involved with the way Color was run. Upon information and belief, Leone persuaded the Board to initiate an investigation against Defendant Nguyen.”

Of course, with all the drama that has surrounded Color and its charismatic and controversial CEO in recent months, it was perhaps inevitable that the company would attract lawsuits. After all, though the photo and video sharing startup had weathered a fair share of public problems from the time it was founded to the recent wind-down of its operations and employees, Color and its investors still held on to some serious assets and money left over from its more than $41 million in venture funding. And often nowadays, turmoil + financial assets = target for litigation.

We’ve reached out to Color for comment on the suit, and will update this with anything we hear back. Here is the suit in full: