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Zuckerberg admits working for man claiming Facebook ownership

• chaosmachine 16y ago
  Of all the speculation on what could kill Facebook, did anyone ever imagine it might be a "wood fuel salesman" from New York? Sometimes truth is stranger than fiction.
  • keltex 16y ago
    It will never kill Facebook. Facebook as an entity will still exist. Sure there might be a change in ownership, lawsuits, etc. But nobody involved would want to threaten the functional business / golden goose which is Facebook.
    • liuliu 16y ago
      Good intent doesn't always end up with good result. Maybe this guy doesn't want Facebook to die, but without Zuck, the company culture, the engineers will flee away rapidly. It will never be a good change to hand a tech company to a "wood fuel salesman".
      • angstrom 16y ago
        Well, he did have the foresight to invest a mere $1000 in a potentially worthless venture, but more surprisingly, he had the patience to hang on to it. It would make for a rather infamous turn of events either way.
    • andreyf 16y ago
      I don't think he'd threaten it, but rather would just immediately liquidate his share, and move on his merry way.
  • mkramlich 16y ago
    Unless the fiction is a Cohen Brothers movie. In that I could see Facebook being killed off by a wood fuel salesman from New York.
    • stcredzero 16y ago
      Hopefully, no woodchippers will be involved in this story.
• deleted 16y ago
  [deleted]
• mark_l_watson 16y ago
  It sounds to me that FB should settle for a nice wad of cash, and make this all go away. Given a decent offer, my advice to Ceglia would be to take it. That said, a lot of people invested in FB in good faith, so perhaps any payments should come from Zuckerberg himself? I am usually not so interested in legal proceedings, but this may get interesting.
  • jacksoncarter 16y ago
    What exactly would be a decent offer considering the valuation of FB?
    • ImFatYoureFat 16y ago
      There is something to be said for the power of litigation. Presumably this guy does not have millions of dollars to spend fighting legal battles for the next ten years no matter how much the evidence is in his favor. Facebook and Zuckerberg do.
      • skmurphy 16y ago
        There is enough money at stake that a legal team could take this on a contingency fee basis. The visibility involved in being on the legal team, coupled with the high probability of some kind of settlement if it dragged on, means that there may be many attorneys who would be willing to prosecute the suit.
    • jerf 16y ago
      "Fuck you" money, basically. The difference between $FU and 2 x $FU is pretty insignificant, so haggling past that point is irrational, but the difference between 10 x $FU and 0 - huge lawyer fees is enormous and the probability of coming up worse than empty way too high. In his position, I'd take a "large" cash (or easily-liquidated) settlement over almost anything available via litigation, even seemingly enormous portions of the company. Of course, I also don't think Facebook's star is going to exponentially rise over the next three or four years, so I may not be in the majority here.
    • 16y ago
• Charuru 16y ago
  If Zuck was a more empathizable character I would feel really really sorry for him. This is the sort of youth mistake that really gets you.
• amichail 16y ago
  Why would a Harvard student give up 50%+ of ownership for a mere $1000?
  • defen 16y ago
    $1000 of weed/beer in exchange for 50% of a worthless venture probably sounded ok at the time.
    • apsurd 16y ago
      No, that's still a stupid proposition. Most Harvard students are presumbly pretty damned well off in the first place. Also, now that we've seen Zuck after the fact, you can't deny he is reasonably intelligent. Seems like a completely non-standard move imo. Even though I surely could use the money I'm way too arrogant to give up 50% of something I'm working on. I think the entire planet knows how arrogant Zuck is (not necessarily a bad thing).
      • defen 16y ago
        There are plenty of students from well-off families - that doesn't mean that they personally have access to a lot of cash to spend on whatever they want. Regardless, I wasn't trying to give an actual accounting of Zuckerberg's thought process. It was more of an attempt at an easy joke about the proclivities of the average 19 year-old college student.
      • kenjackson 16y ago
        If I was 19 yo I'm not so sure I wouldn't give up 50% of a company for $1k. Remember, at age 19, you haven't actually created anything of value. This $1k seems like a free computer at the time. And in the off chance this company does well, 50% of $1B is $500M. I'm happy to just have my $500M. Or at least I would be at the time I'm hypothesizing about this company. Of course, Mark wouldn't take that deal now if he started a new company. But I bet you can still find a relatively bright student somewhere who would.
  • tlrobinson 16y ago
• grellas 16y ago
  The nature this case in relation to how it is being reported fascinates me. Let me summarize while making a few observations: 1. A guy comes out of nowhere and files a lawsuit in a state court in Allegany County, New York (population: about 50,000 - http://quickfacts.census.gov/qfd/states/36/36003.html http://quickfacts.census.gov/qfd/states/36/36003.html). 2. The lawsuit is filed on June 30, 2010 and consists of a grand total of 2 pages of allegations, coupled with a request for relief (see http://www.scribd.com/doc/34239119/Ceglia-v-Zuckerberg-complaint http://www.scribd.com/doc/34239119/Ceglia-v-Zuckerberg-compl...). 3. Among the substantive allegations are absurdly wrong ones (from a lawyer standpoint), such as the allegation in paragraph 3 that Facebook is a "domestic corporation" in New York. Facebook is in fact a foreign corporation that is qualified to do business in New York, as is shown by the very attachment the lawyer appends to the complaint itself (Exhibit B). I make this point only to highlight a certain level of sloppiness that attends this whole matter. This is hardly a mark of top-flight lawyering. 4. The contract states that it is entered into as a "Purchase agreement and 'work made for hire' that reflects two separate business ventures," the first for something called StreetFax Database and the second for the "continued development of the software, programs, and for the purchase and design of a suitable website for the project Seller has already initiated that is designed to offer the students of Harvard university [sic] access to a website similar to a live functioning yearbook with the working title 'The Face Book'." Mr. Ceglia was to pay to Mr. Zuckerberg $1,000 for the work he did on StreetFax and an additional $1,000 for the work he did on "The Face Book." In turn, Mr. Ceglia was to receive (with respect to the "Face Book" work, the following: "It is agreed that the Purchaser will own a half interest (50%) in the software, programming language and business interests derived from the expansion of that service to a larger audience." The contract then provides that "the agreed upon completion for the expanded project with working title 'The Face Book' shall be January 1, 2004 and an additional 1% interest in the business will be due the buyer for each day the website is delayed from that date." 5. The agreement appears to be a canned document and is poorly drafted. Since its terms appear to be heavily slanted in favor of Mr. Ceglia, it is probably fair to assume that this was his form of contract which he presented to Mr. Zuckerberg (then a student) to sign. 6. The complaint then alleges that the website was completed on February 4, 2004 (paragraph 7) and asserts that Mr. Ceglia is therefore entitled to an extra 34% of "the business," (paragraph 8) or 84% in total. 7. A few comments on the above: (a) can anyone say "vagueness" and "uncertainty" as serious problems with this contract? with no company formed at the time, this is a guy who essentially hired Mr. Zuckerberg to develop a website that was to be like a "live yearbook" and who claims that he is to have an 84% stake in any future expansion of that idea to be made by Mr. Zuckerberg, no matter what form it took and no matter who else contributed value to build that business; this in essence is a claim by Mr. Ceglia that, at any time and under under any circumstances, he can pull a piece of paper out of his pocket and claim a perpetual non-dilutable stake in somebody's company based on a work-for-hire contract for a small development fee done before that company was even to be formed; thus, every founder who might work in that company, even for years, every investor who might invest in it, and every other stakeholder (including innocent purchasers for value who bought shares in the company in secondary trading), all such persons were to work, sweat, and toil, taking huge risks all the while, and all were to be subject to dilution - except for Mr. Ceglia, who could take his sweet time and come forward at any time with his claim of an 84% non-dilutable interest; (b) if not vagueness, how about an unenforceable penalty? How would you react to someone who told you he would pay $1,000 for some development work and then take 1% of your company for every day delay in completing the project? Such terms are outrageous to say the least and probably serve to render the entire contract unenforceable, particular when the contract as a whole amounts to an alleged non-dilutable stake in a business no matter what future form it might take; (c) how about statutes of limitations? New York apparently has a 6-year statute for breach of a written agreement. If the work was done by February 4, 2004, then Mr. Zuckerberg's obligation to perform would have started on that date. The complaint was filed on June 30, 2010, well past the 6-year deadline. Thus, on its face, the claim appears to be time-barred. One can of course allege facts for why the statute did not begin to run until a later date. This complaint fails to do so. (d) Other equitable defenses would almost certainly apply so as to preclude assertion of any claim for equitable relief after such a long delay (laches being the most obvious - I discussed this in an earlier comment, http://news.ycombinator.com/item?id=1509601 http://news.ycombinator.com/item?id=1509601). Thus, all in all, a lawsuit full of holes is built up by sensationalist reporting into a supposed major threat to Facebook and to Mr. Zuckerberg. This is where the reporting becomes interesting. I think this relates to a strong impulse to see Mr. Zuckerberg get some sort of comeuppance for whatever reason. The case got major headlines nationwide because a judge in a small state court entered a TRO, with the reports touting the idea that this gave the claim more gravitas because judges do not enter a TRO lightly. Yet this judge did just that. He entered the order even though the defendants had been given no notice of the application and even though the plaintiff made no showing whatever of likelihood of success on the merits and of alleged irreparable harm that he would suffer if the defendants were not enjoined from transferring assets while the TRO was in effect (see the brief filed by Facebook making these points, http://www.scribd.com/doc/34240120/Ceglia-v-Facebook-Motion-for-Dissolution http://www.scribd.com/doc/34240120/Ceglia-v-Facebook-Motion-...). Without getting into technicalities, this amounts to a court having concluded that the TRO had to be entered to cover a 15-day period in which Mr. Ceglia might otherwise suffer irreparable harm absent a court order barring any transfer of Facebook assets during that period. After a nearly 7-year delay, it is basically absurd that such an order should have been entered. No possible harm could have come to Mr. Ceglia over a 15-day period that would have been any different from whatever risk he had faced for the nearly 7 years pre-dating the order. Thus, the TRO was ill-conceived at best and the federal court to which this case was removed immediately stayed its effect upon getting the case (the parties have since agreed to allow it to expire and die a merciful death). In this piece, then, we get a subtitle stating or implying that the claims made by Facebook's lawyers (that this lawsuit was frivolous) were in themselves frivolous. Why? Because we now have an admission by Mr. Zuckerberg's lawyers that he did indeed sign the contract. This is then touted as some sort of setback for Facebook's case. From a lawyer's standpoint, this is all really weird. This case is full of holes and represents at best a wild swing at Facebook and Mr. Zuckerberg. The contract is worded in a flaky manner. The terms themselves are outrageous by any measure (think about you would react if someone claimed a perpetual stake in whatever you did just because he paid you a small fee for a minor development effort). The lawyering in support is slipshod at best. Yet, in spite of all this, the reporting on it is building continual momentum such that it is perceived as a serious problem for the company and all because a judge entered an ill-conceived TRO and because of the basically irrelevant fact that Mr. Zuckerberg's lawyers admit that he signed the contract (a fact never previously denied). Yes, this all makes for high drama, but it also makes for highly inaccurate reporting on the legal merits of what is happening. At most, in my view, this case represents a nuisance claim against Facebook, as no court in the world is about to prejudice the interests of innocent investors, co-founders, employees and the like for the sake of some guy who comes out of the woodwork after long delays with a wildly worded contract that is of dubious enforceability. While a court might be more open to entertaining a claim against Mr. Zuckerberg personally, even that is so dubious here as to be barely worth considering. There are obviously many people who want to see Mr. Zuckerberg get what is due to him but this will not be the channel by which that might happen, notwithstanding the reporting on the case. In the end, this will be tried to a federal court and not in the blogs. And, in the courts, this thing is going nowhere. I am, by the way, no apologist for Mr. Zuckerberg and have been quite critical of his actions in relation to the whole ConnectU mess (which does pose a serious risk for him and for Facebook, as I discussed in an earlier comment, http://news.ycombinator.com/item?id=1362379 http://news.ycombinator.com/item?id=1362379).
• tlrobinson 16y ago
  If this guy's claims are legitimate, does he own 85% of all of Facebook, or 85% of Zuckerberg's share of Facebook? Presumably he would have been diluted in subsequent funding rounds, etc? What portion of Facebook does Zuckerberg still own?
  • sanxiyn 16y ago
    Wikipedia says 24%.
  • mseebach 16y ago
    IANAL, but perhaps it could be argued that MZs continued work after the "online yearbook" site launched in 02/2004 constituted sweat-equity and thus diluted Ceglia's shares? Anyway, if Ceglia and his lawyers have half a mind, they're after a tiny (compared to 84%) settlement.
• mkramlich 16y ago
  Facebook may be close to becoming a Harvard Business School case on how to create a startup with dangerously murky ownership of IP and equity.
  • jgrahamc 16y ago
    See also Skype.
• spokey 16y ago
  I actually found the last line: Facebook paid [ConnectU] $65m to go away. to be the most interesting. I don't follow the Facebook story very closely, but I had no idea that much money changed hands over the ConnectU thing.
  • megablast 16y ago
    So you never followed the story very closely, but are suprised by some of the facts in the story? I never really read much physics, but was surprised to learn that Gravity = 9.8m/s/s. Does that make much sense?
• stretchwithme 16y ago
  I hate these leeches. "Yeah, I hired him to shovel the driveway, and you didn't do the sidewalk behind the garage, so I own your house now."
  • dhyasama 16y ago
    I hate people that agree to one thing and then do another if it isn't what they want later on. "Yeah, I hired him to shovel my driveway. He said he invented a new shovel called "The Shovel" and needed money to sell it. I invested with him and now he says his new shovel, called "Shovel", is unrelated."
    • stretchwithme 16y ago
      my comments may have been premature
• finiteloop 16y ago
  Please see http://tech.fortune.cnn.com/2010/07/21/the-massive-hole-in-facebooks-latest-legal-challenge/ http://tech.fortune.cnn.com/2010/07/21/the-massive-hole-in-f... We strongly suspect the contract is forged. We have not seen the original (no one has). Thus, we’re focusing on the things that are not open to interpretation and are indisputable -- Mark could not have given interest in a company that didn’t exist or and idea he had not thought of yet and, even if he could, the statute of limitations has expired. Bret Taylor, Facebook CTO
• karlzt 16y ago
  some good comments on slashdot: http://idle.slashdot.org/comments.pl?sid=1727682&cid=32984548 http://idle.slashdot.org/comments.pl?sid=1727682&cid=329...
• jimbobimbo 16y ago
  My bet is Zuck has a contract with Fincher for The Social Network, its sequel and prequel, and maybe even TV series.