Lawsuit vs. Zuckerberg, Facebook to Stay in Federal Court

By Chris Preimesberger  |  Posted 2011-04-11 Print this article Print

A New York software developer, who claims to have rights to 50 percent of the Facebook founder's equity in Facebook, will have to litigate in federal court. Facebook claims fraud.

An appellate court judge ruled April 11 that because Facebook co-founder and CEO Mark Zuckerberg is now a resident of California, a New York man's lawsuit claiming part ownership of Facebook should remain in federal court rather than be moved to a New York state court.

The plaintiff, Paul Ceglia, also filed a second complaint April 11, contending that he has emailed proof from Zuckerberg validating his claims.

The lawsuit that was brought in state court in 2010 by Ceglia, of Buffalo, N.Y.-who claims a 2003 contract he had with New York native Zuckerberg entitles him to 50 percent of Zuckerberg's equity interest in Facebook-was moved to federal court two weeks ago.

It should not be moved again to a state court, ruled U.S. District Judge Richard Arcara in Buffalo.

In the April 11 complaint, Ceglia claims he contributed "his time, ideas, knowhow, and other 'sweat equity'" to the origin of Facebook and never received due compensation. He also claimed that Zuckerberg deceived him by lying about the early success of "TheFacebook" at Harvard University, where he was an 18-year-old student at the time.

Ceglia had claimed the Facebook CEO, whose parents still live in New York, is still a legal resident of that state. Zuckerberg, 26, moved to Los Gatos, Calif., a half-hour drive from the company's Palo Alto headquarters, in 2010 but had resided in Palo Alto for six years before that.

"As of 2010, when this lawsuit was filed, Facebook had over 500 million active users and employed over 1,600 people," Arcara wrote in his decision. "It is simply incomprehensible that Zuckerberg intends to abandon his life, friends and daily management of his multibillion-dollar company to return to New York and live near his parents."

Zuckerberg has lived in California continuously since 2004, has a driver's license issued by the state, votes, pays taxes and receives his mail in the state, Arcara said.

Ceglia, who was not a Harvard University classmate of Zuckerberg's, claims that he has a contract with Zuckerberg for development of the software program language and Website concept that became Facebook, Ceglia attorney Robert W. Brownlie of DLA Piper told eWEEK.

Ceglia was a "small entrepreneur" in western New York at the time he knew Zuckerberg, Brownlie said.

"We are pleased that the court agreed with us that this case belongs in the federal court," Facebook spokesman Andrew Noyes said in a company statement.

"This is a fraudulent lawsuit brought by a scam artist, and we look forward to defending it in federal court."

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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