Prosper president Dave Ellis responded that the allegations amount to "sensationalized" versions of events that have gone uncorroborated by Hudgens' former coworkers.
"They just roll their eyes and say, 'This is ridiculous . . . That's not how it went down,' " Ellis said.
The suit claims that Hudgens' team leader, Joshua Christopherson, asked for volunteers in May for "a new motivational exercise," which he did not describe. Hudgens, who was 26 at the time, volunteered in order to "prove his loyalty and determination," the suit claims.
Christopherson led the sales team to the top of a hill near the office and told Hudgens to lie down with his head downhill, the suit claims. Christopherson then told the rest of the team to hold Hudgens by the arms and legs.
Christopherson poured water from a gallon jug over Hudgens' mouth and nostrils - like the interrogation strategy known as "waterboarding" - and told the team members to hold Hudgens down as he struggled, the suit alleges.
"At the conclusion of his abusive demonstration, Christopherson told the team that he wanted them to work as hard on making sales as Chad had worked to breathe while he was being waterboarded," the suit alleges.
Ellis said the exercise was a dramatization of a story in which a young man asks Socrates to become his teacher. Socrates responds by plunging the student's head underwater and telling him he will learn once his desire for knowledge is as great as his desire to breathe.
However, Ellis said Christopherson explained the exercise before Hudgens volunteered, no one held Hudgens down and Hudgens was free to get up if he was uncomfortable.
"It was meant to be a team-building exercise," Ellis said. "Everybody was . . . involved and enthusiastic."
Hudgens claims he complained to Prosper managers about the exercise, but no action was taken against Christopherson until Hudgens left Prosper.
Prosper attorney George Brunt said Hudgens lodged the complaint six weeks after the exercise; in the meantime, Hudgens joined his team on a water skiing retreat and drove the boat, Brunt said. Ellis said Christopherson was suspended for two weeks while managers investigated Hudgens' complaint. Christopherson returned to work and remains the sales team leader, Ellis said.
"It's incredible to even suggest that he would put anyone under a level of discomfort," Ellis said. "He's a really nice, pleasant, polite young man. He's very dedicated and takes his job very seriously."
However, the suit claims Christopherson "intentionally engaged in physically and emotionally abusive conduct" to punish workers who did not meet company performance goals.
"Prosper's management passed by and through Christopherson's team area and was able to see mustaches on its employees, missing chairs and Christopherson's paddle," the suit alleges.
Ellis said no managers have said they saw the activities described in Hudgens' suit, and the employees reported they are "more along the lines of fun."
"It's voluntary, it's humorous, it's team and camaraderie-building," Ellis said.
Hudgens left Prosper because of sleeplessness, anxiety and depression he experienced after the waterboarding, the suit claims. He required psychological counseling for emotional trauma, the suit claims.
The suit accuses Christopherson and Prosper of assault and battery, intentional infliction of emotional distress and wrongful termination. It and accuses Christopherson of interfering with Hudgens employment relationship with Prosper.
Prosper "provides executive-level coaching for individuals," according to its Web site. Personal coaches offer mentoring that focuses on business and finance.
"Our mission is to provide our students with the education and hands-on experiences they need to achieve their personal and professional goals," the Web site claims. "We strive to make the road to personal achievement meaningful, rewarding, and enjoyable."