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Is it time for Craigslist Inc. to bring a lawyer on board? Until recently the question might not have seemed pressing. The San Francisco-based company has enjoyed a magical ride along the information superhighway, making millions from its online classified ads. But in April the pavement suddenly got rough. Craigslist was sued by its minority partner, the Internet auction giant eBay Inc., then quickly countersued. Now some observers wonder whether the company needs an attorney riding shotgun.

Craigslist founder Craig Newmark and CEO Jim Buckmaster declined to answer questions about the company's legal affairs, but the subject is clearly on their minds. Asked in May by Management Today what he dislikes most about his job, Buckmaster replied: "Inquiries from the law aren't pleasant."

The company does have outside counsel: Perkins Coie is its go-to firm. Edward Wes, Craigslist's main lawyer there, declined to comment.

But several startup and in-house veterans, while loath to tell Craigslist what to do, point out the benefits of hiring a staff attorney. Gina Bianchini, co-founder and CEO of Ning Inc., a Palo Alto, Calif.-based startup that hosts online social networks, hired her company's first lawyer last October. Bianchini says that while she was initially hesitant to take this step, she found that it paid immediate dividends. "We didn't know what we didn't know," Bianchini explains. Ning has since brought on two more in-house lawyers.

Jay Monahan became the first GC of Vuze Inc., an Internet entertainment startup and also based in Palo Alto, last September. Monahan, who previously worked in-house at The Walt Disney Co. and eBay, says that having an attorney around the office can pay off in unpredictable ways. A simple question like "What's that on your computer screen?" can be the beginning of a discussion that averts disaster, he says.

Still, startups tend to be reluctant about starting up law departments. Early on, they may not be able to afford the expense. But Bianchini says that even later, they may mistakenly believe that it's cheaper to use outside counsel.

Craigslist had to be frugal when it began in 1995. Newmark had a day job as a software engineer at the time. He created the site -- at first limited to a listing of San Francisco Bay Area events -- as a hobby. Newmark now calls himself the chairman and "customer service representative." He brought on Buckmaster in 1999 after reading a resume Buckmaster posted on the site. Within a year the new hire was the company's CEO.

Over the past decade, Craigslist has expanded its scope and now provides local classifieds and discussion forums in 567 cities, in more than 50 countries. The privately held company does not disclose financial data. However, Classified Intelligence LLC (consultants to the online classified ad industry) says that Craigslist's 2008 revenue will be about $80 million -- up from an estimated $55 million in 2007. The vast majority of the site's services are free; the money is derived mainly from job ads in 10 cities and apartment listings in New York.

While Craigslist is no longer a startup, in some ways it continues to act like one, with a decidedly uncorporate approach to business. The company's 26 employees are free to show up whenever they want at Craigslist's offices, an old Victorian house in San Francisco's Sunset neighborhood. And Buckmaster is no ordinary CEO. Because he hates meetings, the company simply doesn't have them, he told Management Today.

Newmark and Buckmaster own 75 percent of Craigslist, which has neither sought nor accepted investors. Folk heroes to many, they have been sharply criticized in the media for not trying to maximize profits. To which they cheerfully plead: guilty as charged.

Until recently that was probably the most serious criticism leveled at them. Law enforcement officials sometimes complain about the way the site is used -- by prostitutes who avail themselves of free advertising, for instance. But it wasn't until eBay entered the picture that Craigslist had to deal with significant legal matters.

The trouble started with a partnership. The basic story, laid out in court documents, is not in dispute. In 2004 an early Craigslist employee wanted to cash out what he asserted was his 25 percent share of the company. There was some disagreement about this claim, but Newmark and Buckmaster conceded his rights, and allowed him to sell his shares to eBay.

In 2005 eBay launched a Web site called Kijiji.com that featured online classified ads for goods and services outside the United States. Two years later, Kijiji added U.S. listings -- and that, in Craigslist's view, crossed a line.

Though the shareholder agreement did not prohibit competition, within weeks Buckmaster wrote eBay, seeking to end their relationship by repurchasing or "otherwise finding a new home for [eBay's] shares." EBay refused, and in late 2007 and early 2008, Newmark and Buckmaster adopted a series of measures that, according to eBay's lawsuit, diluted the value of its minority stake and thwarted its ability to sell its shares to anyone but Newmark and Buckmaster.

EBay now wants a judge to revoke those changes. It filed its suit on April 22 in chancery court in Delaware (Craigslist is incorporated in that state). Craigslist countersued three weeks later in California state court in San Francisco, seeking an order to force eBay to divest its shares.

Since the dispute erupted in public, Buckmaster has written about eBay in his blog on six occasions as of press time. An April 30 post that linked to eBay's complaint included this commentary: "Sadly, we have an uncomfortably conflicted shareholder in our midst, one that is obsessed with dominating online classifieds for the purpose of maximizing its own profits. It's a conflict of interest worth keeping in mind if you decide to give this filing a read."

Was Buckmaster's writing vetted by lawyers? It's impossible to know. But this would seem to be an excellent example of when inside lawyers come in handy. William Lytton, formerly GC at both Tyco International Ltd. and International Paper Co., says he would discourage a CEO from writing about a case. "By and large, it's a pretty dumb thing to make any statements about a case that can come back to bite you," says Lytton, now a consultant.

Mike Godwin, who became the first GC of Wikimedia Foundation Inc. a year ago, says he's confident that no one in his shop would blog about a lawsuit without coming to him. "This is not something I have imposed on them, although I would have," he says. (Wikimedia is the parent of Wikipedia, the online encyclopedia.)

Godwin knows Newmark socially and sees similarities between their organizations, but says that only Craigslist can decide what's best for Craigslist. Wikimedia's board recognized that it needed a legal gatekeeper, but even so, Godwin says that he didn't take the GC post until he was convinced that the employees agreed that they needed one too. Without that, he felt he couldn't be effective.

The same is true for Craigslist, according to Godwin: "They have to be convinced of the need for an in-house counsel. That's part of the process of getting one."

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