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Aug 15 2012

Judge Fines Plaintiff and Lawyer in Quirky Lawsuit Against Facebook

I have been following and blogging about the strange case filed in Federal District Court in Buffalo New York by Paul Ceglia and his lawyer Dean Boland. Ceglia claims he has a written agreement between him and Mark Zuckerberg where Zuckerberg agrees to give him 50% of Facebook in exchange for a small investment and tech support.

All along, I have opined that the case seems like a fraud and that it would only be a matter of time before it got dismissed. Well now, the end is near, as the plaintiff and his lawyer have been ordered for the THIRD time to produce a certain letter that his first lawyer (from the firm of Kasowitz, Benson, Torres & Friedman) sent to two other major law firms who were considering taking over the case.

The Kasowitz letter supposedly explains that they are withdrawing from the case because they have determined that the contract in issue is a fraud. Ouch. So plaintiff and his lawyer decided to not turn the letter over in original discovery, nor to claim it is privileged by listing it in a privilege log. The defendants made a motion for an order requiring plaintiff to turn it over, which was granted and which order plaintiff ignored, and then the defendants made a second motion which was granted and which required the plaintiffs to give the defendants a copy of the Kasowitz letter by July 9, 2012. When they failed to produce it by then and another motion was filed, plaintiff then filed the letter but only with the court in a sealed envelope asking the court to review the letter in chambers to determine whether it was relevant and should be turned over to the defense.

You know its funny, but when a judge orders you in writing to do something, most judges actually mean that you should do it. Judge Leslie Foschio was no exception to this rule and she was not amused by plaintiff’s gamesmanship. She stated “[T]he attempt to goad the court into further review of the Kasowitz letter by its unsolicited submission to the court only served to further delay compliance with this court’s orders. Such conduct is beyond disrespect and will not be countenanced.” She fined both the plaintiff and his lawyer $1,000 each for the misconduct. But she also ordered that they have to reimburse FB’s lawyers for the fees and expenses incurred in having to make this motion to compel production of the Kasowitz letter. Considering that FB’s lawyers Gibson Dunn & Crutcher charge around $1,000 per hour for partners and use 5 lawyers just to change a lightbulb, this bill could be plenty steep.

But even worse, with this letter in hand, Gibson Dunn will undoubtedly argue when the case eventually gets dismissed, that the whole prosecution of the action was a fraud; that the plaintiff and his lawyer knew it was a fraud; and that therefore they have to pay FB back for all their legal fees, which I am sure is into the millions by this point.

What were they thinking?

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