Facebook Wins ConnectU Appeal, Blames Fee Dispute

[WSJ_law_blog]

What with the striking down of handgun bans and millionaire’s amendments, the LB neglected to mention yesterday’s tech-legal news from the West Coast. San Jose district judge James Ware tossed out an appeal by ConnectU, a small social networking site, to reopen a settlement it struck with Facebook.



ConnectU founders Tyler Winklevoss (left) Cameron Winklevoss (right) and Divya Narendra pose following a news conference in Boston, July 25, 2007. (Credit: Associated Press/Charles Krupa)


Zuckerberg?s former Harvard classmates — ConnectU founders Divya Narendra and the twins Cameron and Tyler Winklevoss — sued Facebook last year, accusing Zuckerburg of stealing their idea when they were all budding overachievers eager to break out of Cambridge. Through mediation, the parties settled for an undisclosed amount of cash and Facebook stock in February. But the ConnectU founders tried to reopen the settlement recently, citing new evidence and accusing Facebook of lying about the value of the company’s common stock. Click here for reports from the NYT and the San Fran Chron.

But for our purposes, the Facebook-ConnectU spat is somewhat less interesting than the dust-up between ConnectU and its Quinn Emanuel lawyers, alluded to in Judge Ware’s ruling and highlighted in this Recorder story. Ware shot down ConnectU’s arguments that Facebook had cheapened the stock portion of the settlement by deliberately concealing Facebook’s true value. Ware wrote that ConnectU had been represented by “reputable counsel” — referring to lawyers at Quinn Emanuel — and could’ve done more due diligence or asked for more assurances during negotiations, but decided not to.

In a statement issued yesterday, Facebook claimed that the dispute over the settlement wasn’t about fraud; it was about ConnectU and its lawyers at Quinn Emanuel. “We were disappointed that we had to litigate the settlement, as we believed we were caught in the middle of a fee dispute between ConnectU’s founders and its former counsel,” the statement read.

Quinn Emanuel’s John Quinn, who was uninvolved in the representation, declined to comment to the Recorder on Facebook’s statement, and ConnectU did not return e-mails seeking comment about the apparent falling out and Ware’s ruling. A spokeswoman from Boies, Schiller & Flexner — which is now representing ConnectU — declined comment. Neel Chatterjee, who led the Orrick team representing Facebook, also declined to comment.

According to the Recorder, ConnectU fired Quinn Emanuel in late April, amid doubts over the February settlement. At the same time, Quinn Emanuel filed a lien against anything ConnectU got from Facebook, to cover its fees and costs.