How not to sue a Facebook billionaire
Paul Ceglia, who hired Mark Zuckerberg as a computer programmer before Zuckerberg founded Facebook wanted to wring a quick settlement out of his claim to own a piece of Facebook. But his plan went awry. Here're a few rules for how not to go after the billionaire founder of a social media giant.business Updated: Apr 02, 2012 12:41 IST
If Paul Ceglia - the onetime wood pellet salesman from upstate New York who hired Mark Zuckerberg as a computer programmer before Zuckerberg founded Facebook - thought he'd wring a quick settlement out of his claim to own a piece of Facebook by virtue of a two-page contract Zuckerberg signed in 2003, boy did he think wrong.
Facebook's long-awaited motion to dismiss, finally filed Monday in federal court in Buffalo, asserts that Ceglia was out for an easy score based on a doctored version of the 2003 contract.
But it's not easy to put one over on Zuckerberg or his lawyers at Gibson, Dunn & Crutcher. Facebook's 74-page dismissal motion is a virtual compendium of the tiny mistakes (alleged) frausters can make and the ways determined defendants can find them out.
I should say upfront that Ceglia's lawyers at Boland Legal and Milberg dispute Facebook's assertion that Ceglia is a con man. Milberg is a recent addition to Ceglia's ever-changing legal roster, but Team Ceglia has intimated that if anyone has manipulated the evidence in this case, it's Zuckerberg, a legendary computer whiz. Here's the official comment from Ceglia's lawyers on Monday's motion to dismiss:
We have made a preliminary review of Facebook's motion, which attempts to have this matter ended before Facebook has to provide any discovery and before going to a jury. The Federal Rules of Evidence say a jury should weigh the evidence in this case, including experts' declarations in Mr. Ceglia's favor about the authenticity of his contract with Mr. Zuckerberg. Mr. Ceglia deserves his day in court, where the jury will resolve this dispute over the ownership of Facebook.
Point taken. For now Ceglia is merely an accused fraudster, at least when it comes to the Facebook case. His lawyers haven't filed a point-by-point response to the Facebook dismissal motion. Nevertheless, here are some Ceglia-inspired rules for how not to go after the billionaire founder of a social media giant.
Rule 1: Don't leave a version of the contract between you and the billionaire on your parents' computer unless that version matches what you've presented to the court.
According to Facebook, it found the original version of the 2003 contract between Ceglia and Zuckerberg - which makes no reference to the yet-unfounded company Facebook - on a computer belonging to Ceglia's parents. Gibson, Dunn has referred to that document as a smoking gun that proves Ceglia forged the contract he has cited in the litigation.
Corollary to Rule 1: Don't leave seven additional drafts of your allegedly doctored contract - as well as a "hex editor" program that permits digital manipulation of raw data - vulnerable to discovery by the sorts of forensic experts a billionaire tech defendant can be reliably expected to hire. Yep, Gibson, Dunn asserts Ceglia did that, too.
Rule 2: Don't send a Facebook-free version of the 2003 contract in an email to a lawyer at Sidley Austin, which will store the email on its server and later produce it to Facebook.
After Zuckerberg stopped working for Ceglia, he and Ceglia squabbled over about $10,000 that Ceglia supposedly owed Zuckerberg. In 2004, when Zuckerberg was demanding his full payment, Ceglia exchanged emails with a then-Sidley lawyer named James Kole, asking for help.
According to Facebook's motion to dismiss, one of those 2004 emails attached the same version of the 2003 contract that Facebook's forensic experts discovered on Ceglia's parents' computer. Facebook also asserts that its forensic experts discovered evidence that Ceglia scanned the contract found on the Sidley server to his computer minutes before he sent it to Kole.
Rule 3: If you're going to "bake" your contract to make it look older than it is, don't forget to age the whole document.
Facebook claims in its motion to dismiss that Ceglia exposed the purported contract granting him rights to half of Zuckerberg's Facebook stake to intense light to make it appear as though it dated back to 2003, but forgot to fade the parts of the pages hidden by the clips used to hang them.
This is just one of the forensic flaws that Facebook claims to have found in Ceglia's version of his contract with Zuckerberg.
Rule 4: Remember daylight saving.
All of us have some embarrassing story about forgetting to spring forward or fall back in accordance with daylight saving, but if Facebook is right, Ceglia's alleged slip-up is much worse than embarrassing.
Ceglia had alleged that in a series of emails, he counseled Zuckerberg on how to get Facebook off the ground. DLA Piper cited those purported emails in an amended complaint by Ceglia in 2010. It later turned out that Ceglia no longer had any record of sending or receiving the supposed emails - nor, for that matter, was there any evidence of those particular emails on Harvard's server, despite the presence of dozens of other emails between Zuckerberg and Ceglia.
Ceglia had an explanation: He said he hadn't saved the emails per se, but had cut and pasted the text of the messages into Word files that dated back to 2003 and 2004. But according to Facebook's motion to dismiss, Ceglia only made it appear as though he created the Word files years ago by resetting the system clock on the computer he used.
Facebook argued that he made a crucial mistake in backdating the Word documents: The date on the purported emails shows them to have been sent between October 2003 and April 2004 under Eastern Daylight Time. In fact, Eastern Standard Time was in effect, and, according to Facebook, Ceglia's Word files would have shown the right time if he hadn't manipulated the system clock.
Rule 5: Always check your facts.
One of the purported email exchanges between Ceglia and Zuckerberg took place on the momentous day of Feb. 4, 2004, the birthday of Facebook (then called Thefacebook.com). Ceglia claimed that Zuckerberg sent him an email at 8:27 in the morning announcing that the website was up, and he sent Zuckerberg a return message at 10:30 a.m. saying the site looked great.
The problem: Zuckerberg launched the Thefacebook.com on Harvard's server on the afternoon of February 4 - not in the morning - and Ceglia couldn't have seen it because he didn't have access to Harvard's server.
Rule 6: Don't let on that you're out for a quick settlement.
Facebook's dismissal motion asserts that only days after the suit was originally filed in state court in Buffalo, Ceglia's lawyer told Facebook's then-counsel from Orrick, Herrington & Sutcliffe that the two should immediately meet to discuss a settlement. Later in 2010, after Zuckerberg and Facebook made it clear they had no interest in settling, Ceglia and his then-lawyers sent to "multiple top-tier law firms" what amounts a pitch for them to take the case.
The objective? "Paul is seeking a law firm to represent him in a) immediate settlement negotiations and b) the lawsuit going forward." At the time, and, indeed, at no time, have there ever been settlement negotiations between Ceglia and Facebook.
According to a previous Gibson, Dunn filing in the case, Kasowitz Benson Torres & Friedman reviewed the Ceglia pitch and refused to take the case. On the Case has previously reported that a partner at Quinn Emanuel Urquhart & Sullivan also corresponded by email with Ceglia in late 2010, although we don't know what's in those emails.
(We may someday; they're under review by the judge in Ceglia's case.) Obviously, Quinn Emanuel never agreed to represent Ceglia. DLA Piper, on the other hand, apparently signed on to the case in response to Ceglia's pitch and filed Ceglia's amended complaint before withdrawing last summer.
I've previously posed the question of whether DLA could face a Rule 11 sanctions motion from Facebook, and got mixed responses from the legal experts I consulted, some of whom credited DLA Piper for resigning when questions arose about Ceglia's credibility. I nevertheless said in that post that I'd be surprised if Facebook didn't eventually bring a sanctions motion. Based on Monday's motion to dismiss, I'll be even more surprised. (A DLA spokesperson declined to comment.)