Face the Music
The world’s largest social media network, Facebook, is suing leading global law firm DLA Piper (along with other law firms) who represented Paul Ceglia in a previous claim where he alleged he was entitled to an 84% share of Facebook.
Facebook was launched in February 2004 out of a Harvard University dorm room and is now worth over 200 billion dollars, has more than 1.3 billion users and the CEO, Mark Zuckerberg, is one of the richest people in the World. It is therefore not surprising that Mr Zuckerberg has found himself party to many lawsuits over the social network’s founding.
Convicted felon and fraudster Paul Ceglia brought a claim in 2010 alleging he owned an 84% stake in the company based on a contract prepared in 2003. However in April 2014, Ceglia was arrested by the FBI as they discovered the original contract had been contrived to include reference to ‘theFacebook.com’ (the company’s previous name) for the purposes of bringing a fraudulent claim. The original contract merely related to some web development for Zuckerberg on a separate project.
Although Ceglia’s claim was consequently dismissed, and a federal grand jury indicted Ceglia, Facebook are not willing to let matters lie. They now want to hold Ceglia’s lawyers accountable too.
Facebook have filed a lawsuit in New York alleging that DLA Piper, amongst others, conspired to bring the fraudulent lawsuit which was based on an implausible story and fabricated evidence in order to obtain a lucrative settlement against Facebook.
DLA Piper, who were only involved in the 4 year litigation for only 78 days, are not taking these allegations lying down. DLA’s Spokesperson emphasised that,
“This is an entirely baseless lawsuit that has been filed as a tactic to intimidate lawyers from litigation against Facebook.”
The crux of the claim rests on whether Ceglia’s previous legal representatives, Kasowitz Benson, who allegedly discovered the fraud, informed the other lawyers acting for Ceglia (including DLA Piper) of the likely fraud, but continued to pursue the matter regardless. Kasowitz Benson however ceased to act.
DLA Piper, along with other law firms did later withdraw from the case but never disclosed why. Indeed, they may not have been able to disclose their reasons due to their duty of confidentiality owed to Ceglia and the rules relating to attorney-client privilege in the US. However as officers of the Court they are under a duty to disclose information to prevent a crime, or a fraud.
The claim questions the ethical standards of the lawyers involved and will indeed raise issues of legal privilege. Facebook may have taken the world of social media by storm but can a powerful corporate adversary threaten the practices of legal attorneys? One thing is for certain, it will make lawyers think twice about bringing dubious cases and given the reaction of DLA Piper it may be a long time until this matter is laid to rest.