Like many, we’d written off Paul Ceglia, the upstate New Yorker suing Mark Zuckerberg for a 50 percent ownership stake in Facebook.
He’s burned through so many legal teams that we’ve lost count. He made off for Ireland more than six months ago, shirking his court appearances. And, as one source put it, he may be “a nice guy, but prone to exaggeration.”
But now a reputable law firm with a track record of wins against major corporations has given Mr. Ceglia its vote of confidence—confidence that there is at least enough evidence to shake down Facebook for a tidy settlement as the company prepares for its IPO.
For a while it seemed like Judge Leslie Foschio, who presided over the case filed in the Western District of New York, issued ruling after ruling in favor of Facebook. On July 1, Judge Foschio granted Facebook’s motion for expedited discovery, giving the social networking giant access to Mr. Ceglia’s email while denying the plaintiff’s team’s requests for access to Mr. Zuckerberg’s personal records. When Mr. Ceglia dallied in turning over the requested data, the judge slapped him with $80,777 in fines.
“The defense got a lot of access. The plaintiffs had no access,” a source from Mr. Ceglia’s side with knowledge of the case told Betabeat. “The defense had an advantage and after all this time have not filed a motion to dismiss.”
Facebook says it plans to file for dismissal, but has yet to do so since the case started in June 2010. The social network’s legal team has said it wants to be absolutely sure of a favorable ruling. The most likely outcome is dismissal or, if Milberg’s good enough, a settlement nowhere near what 50 percent of the company would be worth.
But the scary-sounding and longrunning lawsuit still has the potential to spook investors, not to mention the dirt that could come out of Mr. Zuckerberg’s emails while at Harvard. Which may be part of the reason why a legit law firm has stepped forward now!
And needless to say, it would not be ideal for a company about to go public if Facebook tried to get the case dismissed and… the judge said no.
The case is certainly looking brighter for Mr. Ceglia than it has in a long time. (Will the Saga of Paul Ceglia, Man Who Claims to Own Half of Facebook, End in January? this blog wrote in December. Now we know the answer.) The judge’s latest decision, which moves the case on to the next phase, discovery, is much more favorable. At least one expert’s testimony, Larry Stewart, a “Chief Forensic Scientist,” found evidence that the contract with Mr. Zuckerberg produced by Mr. Ceglia was authentic. (Facebook had claimed Mr. Ceglia took page 2 of the original contract and stapled it to a forged page 1.)
Facebook’s attorneys were not available for comment.
With the addition of Milberg LLP, it seems Mr. Ceglia may have himself a case yet. The law firm is certainly aggressive; it recently participated in a case against Sirius XM that ended in a settlement that awarded no damages to the plaintiffs but won $13 million in attorney’s fees.
The next court date is on April 4th, when both sides must present a plan for discovery.
“We took a good hard look at all of the information available, including evidence in Mr. Ceglia’s favor, and we believe he deserves to have his day in court,” Mr. Dumain said in a statement. “We look forward to examining records from computers that Mr. Zuckerberg used when he was a freshman at Harvard and other records that will help answer questions about the ownership of Facebook. We hope that the court will rule that the time has come for that process to begin.”
“Defense counsel previously told the court and media that Facebook would move to dismiss this case, so we are pleased that the judge has scheduled a conference to address the deadlines for the commencement and completion of discovery,” Mr. Dumain continued. “It should be up to a jury to weigh the contradictory claims, including evidence that supports Mr. Ceglia’s case, such as his e-mail correspondence with Mr. Zuckerberg and experts’ testimony about the authenticity of the contract.”
Mr. Ceglia hired Mr. Zuckerberg off Craigslist in 2003 to work on his project StreetFax.com. The plaintiff alleges that the contract said Mr. Ceglia would pay Mr. Zuckerberg $1,000 for “the software, program and for the purchase and design of a suitable website for the project [Mr. Zuckerberg] has already initiated that is designed to offer the students of Harvard University access to a website similar to a functioning yearbook with the working title of ‘The Face Book.’” The contract further provided that in exchange, Mr. Ceglia “will own a half interest (50%) in the software, programming language and business interests derived from the expansion of that service to a larger audience,” the complaint alleges.
Even if he loses, at least the middling entrepreneur now has his own Wikipedia entry.