Facebook Seeks End to Ceglia Ownership Suit as IPO Nears

Paul Ceglia
Paul Ceglia poses for a photo outside his home in Wellsville, New York. Photographer: Bob Van Voris/Bloomberg

Facebook Inc. asked a court to throw out Paul Ceglia’s claim to part of the world’s biggest social network without giving him access to evidence including computers that Chief Executive Officer Mark Zuckerberg used at the time he created the company.

Facebook, which in February for filed an initial public offering to raise $5 billion, has asked a federal judge in Buffalo, New York, to dismiss the case before trial and to block Ceglia from demanding evidence. At a hearing today, Ceglia’s lawyers will be able to argue for the case to go forward and for access to evidence held by Facebook and Zuckerberg.

Ceglia, 38, claims a 2003 contract with Zuckerberg made him a partner in Facebook and entitles him to half of the CEO’s holdings in the company. Facebook spent months scrutinizing the alleged contract, computers and e-mail accounts following a pretrial discovery, or evidence-sharing, plan ordered by U.S. Magistrate Judge Leslie Foschio.

“I can see a judge saying to Facebook, you make a very compelling case, but let’s give the other side a chance to do some discovery and explain what’s his side of the story,” said Thomas Rohback, a specialist in complex litigation in the Hartford, Connecticut, office of Axinn, Veltrop & Harkrider LLP.

Facebook is worth an estimated $95.8 billion, according to SharesPost.com, which tracks nonpublic companies. Zuckerberg owns 28.4 percent of the company. Facebook has said that Ceglia’s suit is a fraud and was filed too late. The company has said Ceglia wants to use the litigation to disrupt the IPO and leverage a settlement.

StreetFax Work

The company said it found the true version of the 2003 contract between Ceglia and Zuckerberg on Ceglia’s own computer hard drives. The document refers only to work Zuckerberg did for StreetFax LLC, a company Ceglia was trying to start. It doesn’t mention Facebook, the company said.

The contract provides “incontrovertible proof” that Ceglia’s alleged contract is a fake, Facebook claimed in court papers.

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

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