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Facebook Ownership Claimant Ceglia Loses His Third Legal Team in Dispute

Paul Ceglia, the New York man who claims a 2003 contract entitles him to half the holdings of Facebook Inc. founder Mark Zuckerberg, lost his third legal team after allegedly telling them to violate a court order.

Jeffrey Lake, a San Diego lawyer whose firm represents Ceglia in the suit, filed papers in federal court in Buffalo, New York, yesterday to withdraw from the case and asking for a three-week delay to allow a new legal team to “come up to speed.”

“Paul Ceglia is currently in discussions with several attorneys concerning substitution of new counsel in this case,” Lake said in an affidavit filed with the court. “It is my understanding that these attorneys are diligently coming up to speed with the facts and proceedings in an effort to effectively represent Paul Ceglia in future proceedings.”

The move comes after Facebook asked a federal judge to impose sanctions on Ceglia for allegedly failing to turn over evidence and telling his lawyers not to comply with a court order. Since filing the suit in June 2010, Ceglia has had three sets of lead counsel leave the case. At least two other law firms declined to represent Ceglia after reviewing his evidence.

Paul Argentieri, the Hornell, New York, lawyer who filed the original complaint in state court in Belmont, New York, remains on Ceglia’s legal team. Lake didn’t return a call and e- mail messages seeking comment on his withdrawal.

Digital Expert

“I have retained an expert in digital technology as an attorney and am very excited by the direction we are taking,” Ceglia said in an e-mail today. “It is difficult in any circumstance to get a lawyer to do what you tell them and that is twice as true when they are working on a contingency fee.”

Ceglia said he is working to ensure that he’s in full compliance with the court’s order. He said he was reluctant to give Facebook his e-mail passwords after company lawyers disclosed passwords he had provided earlier.

On Sept. 1, Facebook’s lawyers included passwords to Ceglia’s Web-based e-mail accounts in a public court filing. The papers were removed from the public file the next day and Ceglia, who is in Ireland, changed the passwords, his lawyers said at the time. Facebook said Ceglia had failed to designate his e-mail information as confidential.

New Lawyer

Facebook, which operates the world’s biggest social- networking site, asked U.S. Magistrate Judge Leslie Foschio in papers filed Oct. 14 to punish Ceglia and his lawyers for failing to produce all the e-mail accounts and passwords he has used since 2003. Ceglia’s lawyers said in court papers Oct. 7 that their client instructed them “not to comply” with that part of Foschio’s order, issued in August.

“The decision by Ceglia’s lawyers to turn on their client and publicly accuse him of wrongdoing by disclosing their confidential communications with him -- as part of an effort to protect themselves and shift the blame to their client -- raises serious questions as to whether they have violated their professional duties and may continue to represent Ceglia in this matter,” Facebook said in its filing.

In his suit, filed in June 2010, Ceglia claims he and Zuckerberg signed a contract in 2003 making them partners at the start of Palo Alto, California-based Facebook. The company calls Ceglia’s suit a fraud.

Ceglia claims he communicated with Zuckerberg in 2003 and 2004 using Internet-based e-mail accounts. He says he cut and pasted their correspondence into word-processing documents, which he printed and saved.

2003 Contract

Both sides agree that Zuckerberg signed a contract with Ceglia in 2003, when Zuckerberg was a freshman at Harvard University, to do computer coding for StreetFax.com, a company Ceglia was trying to start. Ceglia claims the contract included a provision giving him a partnership stake in Facebook in exchange for some start-up money.

Facebook claims the e-mails are fabricated. The company said its computer experts found the genuine contract between Ceglia and Zuckerberg, which concerns only the StreetFax work, on one of Ceglia’s computers. The contract makes no mention of Facebook, according to the company.

Facebook said Ceglia e-mailed what it calls the “authentic contract” to a lawyer at the firm Sidley Austin LLP in 2004.

On Aug. 18, Foschio ordered Ceglia to turn over evidence including computers, electronic copies of the contract and e- mails and removable computer storage devices. The order also required Ceglia to provide access to his Internet-based e-mail accounts, including his msn.com, gmail.com, tmail.com and adelphia.net accounts.

“Mr. Ceglia instructed me not to comply with this provision and to bring the issue before District Judge Arcara,” Lake said in an Oct. 7 court filing, referring to Richard Arcara, the judge overseeing the case.

The case is Ceglia v. Zuckerberg, 1:10-cv-00569, U.S. District Court, Western District of New York (Buffalo).

To contact the reporter on this story: Bob Van Voris in Manhattan federal court at rvanvoris@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha mhytha@bloomberg.net

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