Media Money with Julia Boorstin

Facebook Progress in Lawsuit


As Facebook nears its 500 millionth user, the popular social network has made progress fighting a lawsuit filed by a web designer, Paul Ceglia, claiming he owns an 84 percent stake in the company.

Per Facebook's request, the case was moved to Federal Court — it's now in Buffalo at U.S. District Court, Western District. The two parties agreed to allow the temporary restraining order imposed by a state judge to expire July 23. The judge overseeing the case, Richard Acara, extended the order so the temporary restraining order preventing Zuckerberg from selling any assets, has no effect.

While Facebook hasn't flat-out called the Ceglia's contract a fraud, the company's now raising questions about its legitimacy.

Facebook says in a statement: "Plaintiff has not produced the original of the alleged agreement for anyone, including the court. We have serious questions about the authenticity of the document and, assuming an original exists, we look forward to expressing our opinion about it once we see it."

The timing of when Zuckerberg founded Facebook and the date on Ceglia's alleged contract with Zuckerberg don't line up.
Media Money, CNBC
Julia Boorstin

Facebook filed a "Reply Memorandum in further support of defendants' motion to dissolve the temporary restraining order," which questions the legitimacy of Ceglia's case, citing irregularities in the contract and the claims of the lawsuit.

Here's an excerpt: "Plaintiff seeks to assert specific performance of a contract to which Facebook is not, and has never been, a party. As to Mark Zuckerberg, he is a citizen of California and has no domicile in New York. Further, Zuckerberg was a freshman at Harvard in Massachusetts at the time of the alleged contract.....Even setting aside the many substantial questions surrounding the authenticity of this document, all proprietary rights to anything covered by it (including, on Plaintiff¹s theory, Facebook) have reverted to Mr. Zuckerberg."

There are a number of obvious issues in this suit.

The timing of when Zuckerberg founded Facebook and the date on Ceglia's alleged contract with Zuckerberg don't line up. And the fact that Ceglia took so long to file his suit may get it thrown out in court. It's been more than seven years since Ceglia claims to have signed a contract with CEO Mark Zuckerberg, and the statue of limitations for business contracts in New York state is six years.

Check out my previous blog for more details on Ceglia's own criminal history.

Facebook's overall statement on the suit: "We believe this suit is completely frivolous and we will fight it vigorously."

Questions?  Comments?