Amid Threat of Reprisals in Facebook Case, Ceglia Lawyer Vows Appeal

, The Litigation Daily

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Mark Zuckerberg
Mark Zuckerberg

After a long wait, a judge has dismissed Paul Ceglia's lawsuit alleging that a decade-old contract with Facebook Inc. founder Mark Zuckerberg entitles him to half of the social networking company. But the clock is still ticking on whether Facebook's legal team will follow through on an earlier threat to go after Ceglia's lawyers for their roles in the case.

In a boilerplate two-page order issued late Tuesday, U.S. District Judge Richard Arcara in Buffalo adopted a magistrate judge's recommendation that he dismiss Ceglia's 2010 breach of contract case against Zuckerberg and Facebook, once valued at $21 billion. The magistrate judge ruled back in March 2013 that Ceglia's purported contract was forged. Final judgment was entered in the case on Wednesday.

With Ceglia already facing criminal charges for pursuing the case, Arcara's ruling doesn't exactly come as a surprise. Facebook lead counsel Orin Snyder of Gibson, Dunn & Crutcher has been insisting for more than two years that a forensic review of Ceglia's computer leaves no doubt that he took an unrelated contract, altered it, and tried to pass it off as an agreement in which a college-aged Zuckerberg promised him a stake in Facebook. The evidence was enough to convince the U.S. attorney's office in Manhattan to bring a criminal fraud case against Ceglia in October 2012. Ceglia, who posted bail, lost a motion to dismiss in early March. He's represented in the case by a public defender.

In late 2012, after filing six motions to compel in the civil case, Gibson Dunn produced a supposed smoking gun document dubbed the "Kasowitz letter": an email in which attorneys at Kasowitz Benson Torres & Friedman said they were immediately withdrawing from representing Ceglia because they too concluded that he's a con man. At least nine other law firms have taken Ceglia's case only to later drop him as a client, including DLA Piper, Milberg and Lippes Mathias Wexler Friedman.

Facebook wrote in a motion in late 2012 that the company "intends to hold accountable all those who aided in Ceglia's fraud—including his attorneys and former attorneys." The so-called Kasowitz letter could potentially bolster such efforts. In it, Kasowitz Benson partner Aaron Marks told cocounsel at Lippes Mathias that he had an ethical obligation to withdraw, and he seemed to encourage the Lippes Mathias lawyers to do the same if they reached similar conclusions about Ceglia's credibility.

Not all of Ceglia's lawyers have left his side, and some have opted to join the case quite recently. An attorney in Hornell, N.Y., Paul Argentieri, has represented Ceglia from the start. A prominent San Francisco litigator, Joseph Alioto, entered the case in April 2013. And Holmdel, N.J.–based solo practitioner Gil Messina filed an appearance for Ceglia just 11 days ago.

Alioto told us he's not worried about Snyder's feisty statement. "I'm not afraid of him," Alioto said. "What's he going to do, have one of his buddies at the U.S. attorney's office indict me, like they did with Ceglia?" (Snyder is a former prosecutor.)

Alioto also promised that Ceglia would appeal. He said Ceglia has retained well-qualified experts who concluded that Ceglia's contract is real and that Zuckerberg signed it. Alioto said that the magistrate judge ignored that evidence and didn't allow Ceglia discovery.

"One of these guys is lying," Alioto said, referring to Zuckerberg and his client. "This is what juries are for. They decide who is telling the truth," he said. "Zuckerberg has never once been under a cross-examination. The questions are simple: Is that your signature? Did you initial that? Put him on the stand, and the jury would clobber him."

"This ruling vindicates what we have said from the outset: this case is a fraud," Facebook general counsel Colin Stretch said in a statement. Gibson Dunn's Snyder didn't return a call seeking comment.

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