With the Winklevoss twins out of the picture, Facebook has redirected its attention to the other guy claiming a piece of Facebook: New York wood-pellet salesman Paul Ceglia. On Thursday, Facebook filed its response to Ceglia's suit, which claims a 50 percent stake in the company based on a contract Mark Zuckerberg signed with him in 2003 in exchange for $2,000 in seed money. In its response, Facebook's lawyers tore into Ceglia in a statement Forbes's Kashmir Hill says was "written as much for the media as for the judge." It reads:
This lawsuit is a brazen and outrageous fraud on the Court. Plaintiff is an inveterate scam artist whose misconduct extends across decades and borders. His latest and most farreaching fraud is the Amended Complaint filed in this action, which is based upon a doctored contract and fabricated evidence. Plaintiff alleges that he recently “discovered” a purported contract that now supposedly entitles him to ownership of 50 percent of Zuckerberg’s interest in Facebook. The purported contract was signed in 2003, yet Plaintiff waited until 2010 to file this action — a seven-year delay during which Plaintiff remained utterly silent while Facebook grew into one of the world’s best-known companies. Plaintiff has now come out of the woodwork seeking billions in damages.
Harsh words indeed! As The New York Times Miguel Helft writes, " It repeats Facebook’s contention that the contract between the two men was doctored and goes on to deny the allegations made by Mr. Ceglia paragraph by paragraph." But this isn't a done deal.
The entire case relies on the authenticity of the contract and the emails between Zuckerberg and Ceglia surrounding the agreement. No one gave this case much notice until April when Ceglia's claim was taken up by DLA Piper, a massive international law firm with 3,000 lawyers and nearly $2 billion in revenue. It seemed astonishing that an "extremely reputable" law firm would take up the case unless it knew the documents were authentic. The intriguing question today, raised by Business Insider's Henry Blodget, is if Facebook itself knows whether the emails are legit.
Though it claims the documents are "doctored" in the introduction, its line-by-line legal response is far less certain, writes Blodget.
Facebook's response addresses each one of Ceglia's allegations individually. And in almost every case, Facebook's responses are structured as follows:
Zuckerberg denies the allegations.... Facebook denies the allegations on the basis that it lacks knowledge or information sufficient to form a belief as to the truth of the allegations contained therein.
The key nuance Blodget points to is how Zuckerberg "denies" the allegations flat out while Facebook denies the allegations because it "lacks knowledge."
"What does that mean?" reasons Blodget. "It means that 'Zuckerberg' and 'Facebook' are acknowledging that they are different defendants, with different knowledge and interests. And it means Facebook is saying it doesn't know whether the emails are fake."
Not knowing if your founder signed away half of the company must be a scary prospect for Facebook and its investors! Blodget, whose been consulting with corporate lawyers on this story, offers his educated guess on what this means the company knows.
Our guess is that the emails that Ceglia cites were not found on the hard drive that Mark Zuckerberg used during the period in question, which was already produced and examined in the Winklevoss case. (Emails and instant messages from this hard drive, you'll recall, were used as evidence in the Winklevoss lawsuit.)
If the emails had been found on this hard drive, Facebook would know they were real and would not be saying it "lacks knowledge or information sufficient to form a belief" about them. Similarly, if the emails were originally real but had been modified (forged) by Ceglia, Facebook would know this and would presumably have said so.
But Facebook says it doesn't have enough information to determine whether the emails are fake. So we suspect the emails were not found on Zuckerberg's hard drive.
This could mean one of two things:1) The emails are indeed fake.
2) Mark Zuckerberg might have deleted the emails (back in 2004).
If the company isn't able to confirm that the documents are fake, Blodget suspects that the company won't be willing to go public with the litigation and will offer a generous settlement to Ceglia. But those decisions won't likely come to a head until the two parties enter the discovery phase. The International Business Times has posted the full text of Facebook's response here.