

Ceglia v. Zuckerberg returns, with a bang - biglaw representation, lots of email - anigbrowl
http://www.scribd.com/doc/52829931/cegliavszuck

======
grellas
This is a testament to how skilled lawyering can make a difference.

Original complaint: Cast primarily as a claim against Facebook seeking a court
declaration and judgment that Ceglia was the 80% owner of FB. Claim founded on
a breach of contract. In essence, a claim by an independent contractor that,
for breach of a $1K contract, he is entitled to claim half of what a young kid
promised to give him forever after relating to the subject matter of that
contract. Result: an inherently flaky claim that can readily be ridiculed as
opportunistic and defeated on a variety of legal grounds.

Amended complaint: Cast as a series of claims against Mark Zuckerberg only
(the _sole_ claim against FB as a company is a technical one that seeks to
bind it concerning any judgment declaring that Ceglia has a 50% stake in
anything granted or promised to Mr. Zuckerberg). Claim founded on the idea of
a general partnership as an association of two or more persons to carry on
business as co-owners for profit, with the theme being that one partner
misappropriated for his own use and profit assets belonging to the partnership
and must now account to the wronged partner for 50% of those assets, both as
originally constituted and as enhanced over time. Result: a claim that may or
may not be valid, depending on how the evidence eventually plays out, but
which is _potentially_ credible if the evidence of a true partnership sticks.

In switching the claim from one primarily against FB as a company to one
against Mr. Zuckerberg alone, DLA Piper has put it on much firmer ground and
has created possible winning chances for its client. How it will likely play
out will no longer be determined by one knock-out punch from FB but, instead,
in the trenches, with hand-to-hand fighting over every piece of evidence and
every fine legal point. That is a decidedly bad turn for Mr. Zuckerberg.

The case remains problematic at several levels, not the least of which may be
statutes of limitations grounds on the new theories (New York lawyers can
assess this).

Before we cheer too loudly for Mr. Ceglia, I would note that I have seen many,
many situations over the years in which a less-than-attractive "money guy"
does indeed exploit founders at the formative stage and the contract here
appears to fit within that mode - in essence, a lifetime claim against a
founder concerning the subject matter of an engagement in exchange for a token
money contribution. Whatever one may think of Mr. Zuckerberg, this is utterly
repulsive and will serve as a drag on Mr. Ceglia's case throughout.

~~~
anigbrowl
I was thinking about this in the light of our conversations about this (and
other suits) over the last year - reading the two complaints side-by-side is
quite a study in contrast. The amended complaint seems (to my amateur eyes) to
build the case from the ground up rather than the top down, and invite the
court's opinion rather than peremptorily demanding its acquiescence.

 _in essence, a lifetime claim against a founder concerning the subject matter
of an engagement in exchange for a token money contribution_

Which do you think is worse, from a court's point of view - the long and
predatory-seeming delay in filing the suit, or the insultingly low initial
'investment' of only $1-2000? It would sure have a different feel if Ceglia
had put up even $10,000, which most people would agree was 'real money.'
$1,000 or $2,000 is such a puny sum that MZ can truthfully say it wasn't even
enough to buy food for the lifetime of the relationship.

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joeguilmette
The emails are pretty remarkable. I never really trusted the Winkelvoss twins,
but these direct emails are pretty damning and seem to corroborate the twins'
story. Looks like no matter what happens Ceglia is going to be a very rich
man.

~~~
gojomo
...unless they're fabricated.

~~~
joeguilmette
see as he's represented by such a prestigious law firm i find that highly
unlikely.

~~~
gojomo
Well, if it's so prestigious, let's just award Ceglia the shares now! Oh, but
wait. Facebook's legal team is prestigious too, and is advancing the idea
Ceglia's evidence is phony. Do we simply award the victory to the more
prestigious team?

Even top lawyers can be duped by their earnest-seeming clients and plausible-
looking fabrications.

Especially if Ceglia did engage in some real email with Zuckerberg (that said
something else), it would be possible for him to create plausible-looking
email records with alternate text.

Right now I think it's too early to judge whether that's likely or unlikely.
The whole process will ultimately determine the relative credibility of the
evidence and testimony.

------
anigbrowl
tl;dr Remember Paul Ceglia, the guy who popped up last year with a lawsuit
claiming he had given Mark Zuckerberg $1000 for 50% of Facebook back in 2003,
and had a contract to prove it? Not many people were convinced, and the story
sort of fell off the radar, even though parts of his case seemed persuasive.

Well, now that the Winkelvii* have had their claims rejected, Ceglia is
back...and represented by DLA Piper, one of the largest and most solid law
firms in the US. His amended complaint, filed yesterday, contains a large
number of emails purported to be discussions between himself and Mark
Zuckerberg about ownership of Z.'s stake in Facebook. Besides the (abundant)
entertainment value, it seems this suit just might have legs after all. Back
to the typewriter, Aaron Sorkin - looks like we might have a franchise here!

* I just love saying that.

------
jsdalton
Journalists get paid to muck through legalese like this and translate it into
something readable:

[http://www.businessinsider.com/facebook-lawsuit-paul-
ceglia-...](http://www.businessinsider.com/facebook-lawsuit-paul-ceglia-new-
evidence-2011-4?op=1)

~~~
anigbrowl
I have to admit to a bias against BI...Blodget's tone grates on me. Plus I
actually like reading through legalese, rather than the abstracted version.

------
colinplamondon
Even if he had 50% at the beginning, wouldn't he be in the exact same
situation as Saverin?

Diluted to hell by subsequent rounds of investment, and ending up with .1-1%.
That'd still be an ENORMOUS amount of money, but there's no way he has a claim
on 50% of the _currently issued_ shares.

~~~
thinkcomp
No.

The argument is that all of the material produced as a result of the agreement
is property of the General Partnership, of which Ceglia owns 50%. Therefore,
the entirety of Facebook, Inc. would be part of this partnership.

Eduardo Saverin only got a stake in Facebook, Inc., not the partnership, which
it's unclear if he even knew existed.

------
bcn
DLA Piper means some smart people are starting to believe Ceglia. How likely
is it that folks like Kip Hall <http://www.dlapiper.com/kip_hall> and other
partners at DLA would take a case like this as a pure troll?

~~~
afterburner
Either that or the slim chance of payoff combined with huge payout made it
worth pursuing. If nothing else it means some lawyers get to have their name
attached to a litigation suit with Facebook's name on it. Even if they fail
they can use it on their resumes. As can the company for seeming willing to
tackle big challenges.

This is all devil's advocate stuff mind you.

~~~
anigbrowl
_Even if they fail they can use it on their resumes. As can the company for
seeming willing to tackle big challenges._

DLA Piper is one of the largest and most powerful law firms in the US, and
routinely represents clients such as Wall Street securities firms in multi-
billion dollar suits. I think you should click the link above and have a look
at the existing resume before making such silly remarks...this is not an up-
and-coming law firm in need of wider exposure.

 _pun intended_

~~~
afterburner
My comments apply to small and large firms. They especially apply to ambitious
law firms and lawyers. I imagine DLA Piper satisfies those. This is about
money; DLA Piper isn't doing this out of a sense of justice.

~~~
anigbrowl
Surely it is about the money, but the link above suggests that litigation
against Facebook will only marginally enhance the partner's reputation. What I
am driving at is the idea that mere involvement in a high-profile action is
insufficient benefit to justify the reputational risk, unless there is a
better-than-even chance of success. I don't see how a senior partner at DLA
Piper would want to jeopardize their good name if there were any risk of a
court dismissing the suit as frivolous.

------
catshirt
" _I have recently met with a couple of upperclassmen here at Harvard that are
planning to launch a site very similar ours. If we don't make a move soon, I
think we will lose the advantage if we released before them. I've stalled them
for the time being..._ "

pretty interesting quote from zuckerberg. couldn't this have implications
regarding the winklevoss case?

~~~
anigbrowl
I wondered about that; I haven't read the opinions in the Winkelvoss case yet,
but my guess is that any bad faith on MZ's part had already been established
(so that this new information wouldn't materially alter things in the other
case). It seems very likely that attorneys for Ceglia were waiting on the
outcome of the Winkelvoss case before filing their amended complaint and
revealing additional information.

------
Yana_Convelife
This is obviously a "troll" case that is getting undue attention and
credibility by DLA Piper's representation. To prevent these type of cases in
the future, we, as entrepreneurs, should not give business to DLA Piper and
other firms that take on cases like this to make the point that this is not
ok.

That DLA Piper has taken on the case doesn't mean that the claim is credible.
It only means that they deemed the case credible enough that Facebook likely
will try to kill the case with a big settlement and DLA Piper will get a large
chunk of that because they probably represent Ceglia on contingency basis.

The bigger problem is that by taking on the case, DLA Piper has made the claim
appear more credible not only because of their skillful lawyering, but also
because of their reputation. But the fact still remains that this is a "troll"
case. Zuckerberg built Facebook and implemented his idea to make it big, and
it's rather unfortunate if the outdated "general partnership" business
structure could be applied to an internet company in this way.

It appears that while DLA Piper can use its reputation to make the case more
credible, the fact that the firm took on a "troll" case doesn't affect its
reputation, though it should. When a small law firm that is struggling for its
survival takes on questionable cases that is one thing, but DLA Piper has a
choice even in a bad economy.

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ChuckMcM
Probably not going to land in the jurisdiction of the People's Court :-).

Now me? I'd say "Ok so $3B, we'll give one to the lawyers, one to the taxman,
and the third one we'll just keep for ourselves. And we'll call it a day and
put this nasty bit of business behind us."

But that's just me, a billion post-taxes and legal fees would pretty much
cover any eventuality short of Armageddon :-). If the providence of the email
chain can be validated well, I'm sure the DLA Piper's are thinking they are
looking at a potential billion dollar payout so they may be willing to commit
serious resources to insuring that level of rigor is done.

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AndyJPartridge
If you read through the eMails, it's hard to dispute Zuck pulled a fast one.

So it looks like Ceglia has a good claim on 50% of Zucks share of Facebook:

""By virtue of his 50% ownership interest in the General Partnership, Cegliais
entitled to receive 50% of the total equity interest in Facebook, Inc.
received by, and promisedto Zuckerberg, including, but not limited to, stock,
stock options and restricted stock units.""

------
amitraman1
If they have the actual e-mails, then Zucker will have to pay. It's clear that
he gave 50% to Ceglia but never disclosed the success of the site.

Cegila for his part must be really naive.

~~~
fname
... or really smart for not accepting his $2,000 back and diluting the
partnership.

~~~
duvander
Even if he'd given back the $2k, he'd still have a case if he was coerced with
false information, wouldn't he?

