Zenefits just made a brilliant legal move to try and block a lawsuit from its huge rival ADP

Zenefits COO David SacksZenefitsZenefits COO David Sacks

Zenefits has officially filed its legal response to a defamation lawsuit filed against it by ADP. And the legal move was brilliant.

Zenefits filed a motion to dismiss the suit using California’s “anti-SLAPP (Strategic Lawsuits Against Public Participation)” statute.

The Anti-SLAPP statue is intended to stop a lawsuit being used as a weapon to harass an outspoken critic, according to the Public Participation Project, an organisation angling to get federal anti-SLAPP legislation passed.

This was a smart counter move by Zenefits because simply filing an Anti-SLAPP motion in California can be enough to stop a plaintiff from the discovery phase, where lawyers can force the defendant to wrack up a huge legal bill by burying the defendant in things like depositions, document demands, third-party subpoenas, and the like, according to law blog Popehat.

As we previously reported, the fight between Zenefits, one of the fastest-growing HR tech startups, and 60-year-old payroll giant ADP began in early June when ADP started blocking “thousands” of their joint customers from accessing their ADP payroll accounts through the Zenefits software.

ADP CEO Carlos RodriguezADPADP CEO Carlos Rodriguez

Zenefits claims they were blindsided by the move.

“They shut us off, and then we found out about it. We were scrambling the next day after being shut-off to find out what was going on,” COO David Sacks told Business Insider.

And then the brawl went public.

Zenefits sent out a mass email to the affected customers accusing ADP of blocking Zenefits for competitive reasons. ADP posted a point-by-point rebuttal on its website, filled with accusations against Zenefits. Zenefits fired up an Internet petition. ADP filed a lawsuit.

Zenefits and ADP had been strained partners for two years. They competed in some areas like selling insurance services and HR software, Sacks says, but Zenefits was ADP’s partner selling payroll services.

We previously reported on the he said/she details of this case, but Sacks made an interesting point to us.

“ADP’s conduct is very much part of a pattern we’re seeing. This is the way the old economy fights back. The old economy is about saying you have no choice. Like Tesla being banned in New Jersey, or Uber being outlawed in cities, or the problems Airbnb has had. That’s the old economy way of dealing with new products: to throw up legal and regulatory roadblocks,” he said.

So we’ll have to see what happens in the future when these young companies mature. Will they forgo using lawsuits against the upstarts that will inevitably one day take root against them?

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