The Winklevosses are not the first parties bested by a competitor who then seek to gain through litigation what they were unable to achieve in the marketplace. With the help of a team of lawyers and a financial adviser, they made a deal that appears quite favorable in light of recent market activity. For whatever reason, they now want to back out. Like the district court, we see no basis for allowing them to do so. At some point, litigation must come to an end. That point has now been reached.”
But several things about the decision merit a reconsideration of whether the Winklevosses really lost this suit. In the first place, the lawsuit was over a settlement between Zuckerberg and the Winklevosses, in which Zuckerberg agreed to pay the twins $20 million in cash and more than 1.2 million shares of Facebook. The twins claimed that they were deceived about the value of those shares—and that this deceit violated the anti-fraud and insider trading regulations. The court did not rule that the Winklevosses were not deceived or that insider trading did not occur. It just ruled that, for technical legal reasons, the twins were not allowed to bring evidence of this deceit to court.
In other words, the Winklevosses can walk away continuing to claim that they were cheated by Zuckerberg's lawyers—and were denied their day in court.
Perhaps more importantly, they are walking away very wealthy men. The shares were initially valued at $8.88 a share (the Winklevosses claim they were told they were worth almost $36 a share, hence the lawsuit). But these days they're probably worth far more than that—as much as $150 a share. The New York Times says that this puts the stock portion of the settlement at a $180 million valuation. Yesterday's decision means the Winklevosses are stuck with that $180 million.
The lawyer for the twins is promising to appeal the decision. Unfortunately for him, Kozinski is not only the best judge on the ninth circuit, he's one of the brightest legal minds in the United States. If he says the Winklevoss case is dead, it most likely is.
(Full disclosure: I have socialized with the Winklevosses several times. I like them. I have also had a drink with Kozinski, although that was several years ago and I'm not sure he'd remember it. Oh, and also, I have a Facebook page, just like everyone else. Finally, I wish I had done something that would cause me to own 1.2 million shares of Facebook.)
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