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Hey, Facebook! Who Owns Ya, Baby?

Just as Facebook must have sighed in relief as a three-judge appeals court panel tossed the Winklevoss twins' lawsuit over company ownership, back came another. Paul Ceglia, a convicted felon who is facing fraud and grand larceny charges in another case, brought in a boatload of claimed email evidence, according to Business Insider, and has DLA Piper, the world's largest law firm, representing him.

Many have dismissed Ceglia as having fabricated his claims and a purported contract with Facebook CEO Mark Zuckerberg. However, given that Piper has the resources to vet the new evidence, there might just be something to it. And if so, Facebook could find itself skewered by the same legal logic that sank the Winklevosses.

According to Ceglia's complain, he originally fronted $1,000 to Zuckerberg to build in return for a 50 percent interest. Ceglia then alleges that Zuckerberg

embarked upon a secret scheme to misappropriate the General Partnership's assets and opportunities for himself ... by concealing the website's success from Ceglia and misrepresenting to Ceglia that Harvard students were not interested in the website, that he was losing interest in the venture and was considering abandoning it.

The complaint contains excerpts from emails that Ceglia claims he and Zuckerberg exchanged back in the day. Facebook says that it is certain the emails are faked, and perhaps they are. Then again, Piper is a law firm with extensive resources and attorneys with the skepticism borne of long experience. You'd hope that, at a minimium, the firm would do its due diligence by analyzing the emails and the system where they originated. An even smarter approach would have been to see if there might be archived back-ups of the emails on some third-party server.

Depending on the level of verification Piper could muster, this claim could be devastating to Facebook, especially as the emails seem to show Zuckerberg admitting that Ceglia had actually amassed an 80 percent control of the company (allegedly because Zuckerberg was late getting the site live). The problem facing Facebook is the same one as faced the Winklevoss twins. As Chief Judge Alex Kozinski wrote for the court:

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. And the courts might have obliged, had the Winklevosses not settled their dispute and signed a release of all claims against Facebook.
In other words, if a court finds the contract valid, then Zuckerberg had signed a bad deal that he wish had been different, but that's not enough to invalidate it. And if Ceglia has legal control, the legitimacy of every deal that Zuckerberg undertook, including all the venture money, grants of stock to employees, and the like, would go up in smoke.

Not that it would ever get to court. Ceglia appears to be a man with a big problem: in legal hot water for allegedly defrauding his customers. If Facebook can't beat this quickly, figure on a settlement, with enough money changing hands to get Ceglia out of trouble and to put smiles on the faces of Piper's partners. Even several hundred million dollars would be a cheap price for Facebook and its investors to avoid risking a legal challenge to the existence of the company as it now stands.


Image: Flickr user Nick Bastian Tempe, AZ, CC 2.0.
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