Arianna Huffington and her co-founder have quietly settled a high profile lawsuit in which two Democratic party consultants alleged that the two used their idea for what became the Huffington Post website, but then cut out them out of the business.
A jury trial trial was set to start this summer but, as first reported by Forbes, the parties on Thursday announced that they had reached a settlement.
The controversy began in late 2010 when Peter Daou and James Boyce, former advisors to Presidential candidate John Kerry, filed a lawsuit stating that they had proposed details for a left-wing political aggregator to compete with the conservative Drudge Report, but that Huffington and Lerer then colluded to launch the website without them. Shortly after its launch, the Huffington Post emerged as a major force in online media, and was sold to AOL for $315 million in the spring of 2011.
The terms of the deal are confidential, but Huffington Post issued a statement that read in part that the plaintiffs “acknowledge that Arianna Huffington and Kenneth Lerer committed no acts of wrongdoing” but also stated that “AOL, Inc. shall pay all sums due and owing under the terms of a settlement.” (emphasis mine)
The statement’s wording, as well as a shareholder notice cited by Forbes that refers to a $9.8 million payout, suggests that AOL paid to settle the suit. On Thursday, Daou also announced the creation of a new foundation to help young women entrepreneurs.
The case and the settlement are significant because the consultants relied primarily on a little known New York state law that allows people to sue for misappropriation of an idea. If they had won before a jury, it could have opened the door for more such claims across various creative industries.
AOL did not immediately reply to a request for comment. In earlier legal filings, Huffington and Lerer have downplayed the significance of Daou and Boyce’s contribution to the site.
While it’s uncertain if Huffington and Lerer would have won or lost at trial, they have had a hard time shaking the case. In 2010, a judge refused to dismiss the misappropriation claim and, in a ruling in 2013, reinstated other claims for fraud and unjust enrichment.
The settlement also eliminates the potential media spectacle of Arianna Huffington, a one-time conservative, explaining the origins of her liberal website before a jury.
This story was updated to include the Huffington Post’s statement, and to correct an earlier suggestion that $9.8 million was paid to shareholders.