Amazon just paid a little under a billion dollars for Zappos, a shoe-company with legendary customer service. Of interest to those of us in the litigation business is this post at peHUB:

One of the sources says Zappos was financially strong enough to wait for the IPO market to recover, if it chose to go that route. The source, a Zappos shareholder who has seen the company’s income statement reports, said that the company did over $1 billion in gross revenue in 2008, $625 million in net revenue and had an EBITA greater than $40 million.

Zappos had raised $49.1 million from venture investors since its inception, most of it from Sequoia, according Thomson Reuters (publisher of PEHub.com). The Zappos shareholder, who says he has seen the company’s capitalization tables, says Sequoia had a 3x or 3.5x liquidity preference associated with the shares it purchased.

“When Mike [Moritz, a GP with Sequoia] came in, he came in at a high valuation, but he countered that with a very high liquidation preference,” the shareholder says. “It puts management on one side of the table and investors on the other. Then there’s always pressure to sell the company.”

At least two sources who do not hold board seats, but are directly involved with Zappos, indicated that Moritz and Zappos CEO Tony Hsieh came into conflict about the company’s future. Moritz, the sources say, wanted Zappos to sell while Hsieh wanted to remain independent.

Such a dispute, if true (Zappos has sort-of denied it), could have  turned into a bitter lawsuit that, at the least, frustrated the sale to Amazon.

It didn’t. Perhaps that’s because Zappos’ management just didn’t want to do that.

But perhaps it’s also because, from the get-go, the parties realized that their interests were not entirely aligned, and so intentionally framed the deal in a way that recognized and dealt with this conflict, rather than papering over it or punting it to the future.

Sure, it was easier for Sequoia and Zappos to see this coming, since venture capitalists (and most private equity investors) understand the inherent conflict between management and investors when it comes time for an exit, and so routinely frame their contracts around it.

Nonetheless, it’s a good example for every business, investor and partner who gets caught up in the exuberance of signing onto a project without stopping to think about the likely disputes down the line. The more you think about these potential disputes, the less time you’ll spend dealing with people like me.