

The Facebook Lawsuit: Everybody Calm Down and Remember Your 1L Contracts Class  - keltecp11
http://abovethelaw.com/2010/07/the-facebook-lawsuit-everybody-calm-down-and-remember-your-1l-contracts-class/

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philk
The best analysis of the lawsuit I've seen comes from grellas' brilliant posts
here on HN[1]:

<http://news.ycombinator.com/item?id=1537158>

<http://news.ycombinator.com/item?id=1510528>

[1]Which, as a side note, drives home just how much better HN is than most
other places on the internet, we got lengthy analyses, almost everywhere else
was overrun with re-phrasings of "Oh boy Zuckerberg's fucked now!".

~~~
codexon
I disagree with the doctrine of laches being applied to this case. It doesn't
make any sense for Ceglia to risk time and money to sue for a company that has
just recently become "cash flow positive" let alone break even.

Investors in Facebook should have the concept of "due diligence" applied to
them. Trading in pre-IPO stock is not and should not be safeguarded like
regular equities or FDIC insured bank deposits.

Ultimately this is Zuckerberg's fault, and any settlements from this case
should be paid from his assets.

I think it all rests on whether or not the statute of limitations started
ticking before July 2004. According to New York Civil Practice Law & Rules - §
213, which I believe is pertinent to the case, it mentions "two years from the
time the plaintiff...could with reasonable diligence have discovered it".

~~~
philk
I'd suggest that the doctrine of laches is completely valid in this case.
Facebook isn't just a company that has "recently become cash flow positive",
it's a company that's been highly valued for at least six years. In June 2004
Peter Thiel invested $500K for 7% (giving it a valuation of $7.1M) and Accel
Partners invested $12.7M in May 2005 (valuation ~ $100M). I'm not sure you can
say it would be a waste of time to sue for ownership of Facebook as it existed
at either of those points as it was clearly valued by astute investors.

~~~
codexon
The problem with that line of thinking is that those valuations would have
only been possible with Zuckerberg and his cadre of Harvard branded friends at
the helm of Facebook.

If Ceglia exercised his right to those shares so early in the stage, those
people could have easily been poached by Google or started another company.

Just because Peter Thiel and other investors valued it highly doesn't make it
so. Would you agree with his investment in largely failed Friendster? No one
should be beholden to imaginary valuations by pre-IPO investors who have a
higher tolerance for risk.

~~~
mootothemax
_Just because Peter Thiel and other investors valued it highly doesn't make it
so._

Surely the value of the company's shares is however much investors are willing
to pay for them?

~~~
codexon
That's only true for public shares. $10,000 from Thiel is different from
$10,000 from Joe Sixpack.

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traskjd
I find "remember you <class> 101 course" pretty pointless. Nearly every class
I ever took began with simple stuff and then the following years you learnt
why that was all wrong, not quite the truth, or how you work around those
rules :-)

~~~
blahedo
However, when the "101" answer _does_ turn out to be the right one, it is a
nice shorthand to be able to say "remember your XYZ 101"---i.e. not
_everything_ is an exception. In this sense it's related to the saying "don't
miss the forest for the trees."

------
VengefulCynic
An intelligent attempt to encourage amateurs to avoid speculating about things
they know nothing about. As with anything vaguely complex or esoteric, the
media talking heads are pretending that they can break down a complicated
issue (like contract law) into 30 second talking points and thus end up
oversimplifying and misleading the general public.

Fortunately, this sort of issue (esoteric, complex and intractable to 30
second analysis by 24-hour news networks) tends to fade quickly from the
headlines, so with any luck, we won't have to endure the idiotic platitudes of
news anchors and their paid analysts for much longer.

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jasonlbaptiste
This provides no new insight or any real insight at all. Of course we don't
know what the clarity of the contract is yet. No one is claiming it's clear
either. That's the purpose of the courts and a judge.

~~~
Indepenture
Jason is mark in trouble here... Curious for your personal opinion.

~~~
jasonlbaptiste
Sure, I'll add in my _speculation_ :

IF it's not an entire forgery: There will most likely be a large settlement
here. The guy won't want to go through the legal troubles associated with the
case since it will take years. He's not like Aaron or the twins, which saw
more than just money in the case. Paul Ceglia wants his money. Facebook will
also not want to go to court on this one as the PR drags out and there's a
decent chance that something devastating could happen. The question is: What's
the PR play? If FB settles for a large sum of money very quickly it will just
add to the line of people that Mark "stole" the idea from.

There's also a chance that it's a forgery or gets thrown out on a
technicality. Here's my somewhat logically, but still randomly decided likely
outcome %s:

Facebook Settles For Large Amount of Cash: 45% The entire thing is a forgery:
25% It gets thrown out on a technicality: 30% Goes to court, Facebook loses
(likely in 2012), devastation: 5%

~~~
keltecp11
well articulated j.

~~~
jasonlbaptiste
gracias Pete. Call ya later to wish you good luck on the bar this week.

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insulanus
The point the "The Face Book" might not refer to the initial implementation of
what we now know as "Facebook" is a good point, and I'm sure Facebook's
lawyers will beat it to death.

The idea that not registering the domain name is some kind of proof that you
aren't working on something sounds absurd coming from an obviously intelligent
person. Maybe you could find a judge that is so technically unsophisticated to
let that one fly, but the opposition won't.

I agree with the commenters that way that Paul Ceglia just wants his money. If
he waited this long to attempt to grab a piece of Facebook, it seems unlikely
he'd turn down a large settlement in return for a chance to fight Facebook's
lawyers for the company.

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diziet
I'm really curious if this fellow approached Zuckerburg and tried to settle
this via less public avenues.

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spot
I really don't understand the argument here. "It was a year before he
registered the domain so he probably hadn't thought of it"? Well... except we
have a contract that mentions it.

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mjgoins
I believe the site we now know as facebook was, as recently as a couple years
ago, referred to by its then primary user base, college students, as 'The Face
Book'.

------
code_duck
I hope the guy wins. This would be the most awesome justice I can think of in
my lifetime. Well, if only the plantiff actually deserved to win... but the
defendant, I'm confident he deserves to lose.

~~~
JoachimSchipper
Whether or not Zuckerberg "deserves to be punished", are you really advocating
that all other investors and employees are "acceptable collateral damage"?

~~~
kwyjibo
This doesn't affect the employees, just the investors. You can't blaim Paul
Ceglia for Zuckerberg trying to trick him out.

~~~
JoachimSchipper
Facebook's employees have stock options, have they not? And Ceglia is not
without his own tricks.

(None of the above should be misconstrued as _liking_ Facebook or Zuckerberg;
I'd be pretty happy to see the privacy nightmare that is Facebook disappear,
even if some more-or-less innocent people lost money. I just don't think
dislike of Zuckerberg alone is enough reason.)

~~~
kwyjibo
Just because you were promised a part of "stolen" property doesn't mean that
you are entitled to it afterwards when it gets returned. All their anger
should go against Zuckerberg promising parts he wasn't entitled to, if this
turns out to be true!

Let's see how this goes out :-)

~~~
hugh3
_Just because you were promised a part of "stolen" property doesn't mean that
you are entitled to it afterwards when it gets returned. All their anger
should go against Zuckerberg promising parts he wasn't entitled to, if this
turns out to be true!_

I'd still rather have a million dollars than some righteous indignation.

