Lawsuit vs. Zuckerberg, Facebook to Stay in Federal Court

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."