UPDATE: In a note to us, Facebook reiterated its contention that the emails are fake. It said the phrasing in the response that we refer to below is just a legal technicality. See end of post for full note.
EARLIER: Facebook has filed its response to the lawsuit from an upstate New York wood-pellet salesman named Paul Ceglia who says he owns half the company.
Facebook again blasted Ceglia as “an inveterate scam artist” and denounced the lawsuit as a fraud on the court.
But, more interesting, the company also said in the brief that it does not know whether the emails Ceglia cites to back up his claim are fake.
When Ceglia filed his amended lawsuit last month, you’ll recall, Facebook blasted the whole thing as a complete fabrication–including the emails.
In its legal response, however, Facebook seems less certain about those emails. In fact, it admits that it just plain doesn’t know.
In the brief, after the indignant introduction blasting Paul Ceglia and denouncing the purported contract he produced as a “cut-and-paste” fabrication, Facebook’s response addresses each one of Ceglia’s allegations individually. And in almost every case, Facebook’s responses are structured as follows:
Zuckerberg denies the allegations…. Facebook denies the allegations on the basis that it lacks knowledge or information sufficient to form a belief as to the truth of the allegations contained therein.
What does that mean?
It means that “Zuckerberg” and “Facebook” are acknowledging that they are different defendants, with different knowledge and interests. And it suggests Facebook is saying it doesn’t know whether the emails are fake.
Ceglia’s lawsuit, you’ll recall, is against Mark Zuckerberg and Facebook. These two parties are not the same entity. Mark Zuckerberg entered into a contract with Paul Ceglia long before Facebook existed, either as a web site or a corporate entity. And what you’re seeing in the language above is that Facebook and Mark Zuckerberg have different interests in and knowledge about the alleged facts in this lawsuit and that they are now responding to them differently.”Zuckerberg denies the allegations…. Facebook denies the allegations on the basis that it lacks knowledge or information sufficient to form a belief as to the truth of the allegations contained therein.”
Specifically, what that language appears to mean is that Mark Zuckerberg says the emails are fake but that Facebook, Mark Zuckerberg’s employer, has no way of knowing whether this is in fact the case.
So Facebook is no longer asserting–at least legally–that the emails are fake.
This is a different position than Facebook took a month ago, when the emails appeared.
So what has happened between now and then?
We don’t know, but here’s our guess.
[credit provider=”ceoworld.biz” url=”http://ceoworld.biz/ceo/wp-content/uploads/2009/09/Mark-Zuckerberg.jpg”]
Our guess is that the emails that Ceglia cites were not found on the hard drive that Mark Zuckerberg used during the period in question, which was already produced and examined in the Winklevoss case. (Emails and instant messages from this hard drive, you’ll recall, were used as evidence in the Winklevoss lawsuit.)If the emails had been found on this hard drive, Facebook would know they were real and would not be saying it “lacks knowledge or information sufficient to form a belief” about them. Similarly, if the emails were originally real but had been modified (forged) by Ceglia, Facebook would know this and would presumably have said so.
But Facebook says it doesn’t have enough information to determine whether the emails are fake. So we suspect the emails were not found on Zuckerberg’s hard drive.
This could mean one of two things:
1) The emails are indeed fake.
2) Mark Zuckerberg might have deleted the emails (back in 2004).
The way the relationship between Mark Zuckerberg and Paul Ceglia deteriorated between the end of 2003 and the summer of 2004, we have no trouble believing that Mark might have deleted the emails. (He was a 19 year old kid then, remember, and his other emails and IMs from the period paint a picture of someone whose behaviour was not bound by a high standard of ethics and business conduct.)
The modern-day Facebook, one of the two defendants in this case, was not incorporated until July 2004, around the time that Mark Zuckerberg allegedly sent his last email to Paul Ceglia saying he felt bad about the deterioration in their relationship and offering to repay the money Ceglia had given him. This defendant, Facebook, appears to have no more insight into whether that email or the others in Ceglia’s lawsuit are fake than you or I do.
The other defendant in the case, Mark Zuckerberg, appears to be the only one who knows for sure (other than Ceglia) whether the emails are fake. And Facebook does not, apparently, feel comfortable taking Mark’s word as “knowledge or information sufficient to form a belief” about the veracity of the emails.
In short, Facebook’s response reveals that the interests of Mark Zuckerberg and Facebook in this lawsuit have diverged.
What this means is that if a court ever determined that the emails were real and that Ceglia deserved a huge sum of money to compensate him for being swindled out of half of the company, Facebook would also have been harmed by Mark’s deception.
SO WHAT’S NEXT?
Facebook has asked for the lawsuit to be dismissed. We’re not lawyers, but we suspect it will not be dismissed. (We certainly wouldn’t dismiss it, especially now that Facebook has admitted that it doesn’t know whether the emails are fake.)
If the lawsuit is not dismissed, it will then go to the “discovery” phase, in which the parties exchange evidence with one another, take testimony, and so forth.
It’s possible that, in the discovery phase, Facebook will gather information sufficient enough for it to form a belief that the emails are fake. But it is also possible that it will learn that the emails are real. And the possibility that the company will discover the latter is a significant risk for Facebook and its shareholders, not to mention Mark Zuckerberg.
It is such a significant risk, in fact, that it’s hard to imagine that Facebook will go public with this litigation still unresolved. (What would it say to public shareholders and the SEC? “Some guy says that our CEO is a liar and that he owns half our company, and we don’t know enough to be able to prove him wrong”?)
So, if the lawsuit is not dismissed, we would not be surprised to see it settled for a significant sum of money before it goes to discovery.
UPDATE: Here’s Facebook’s response to this article and our questions. The response comes from Barry Schnitt, the company’s director of communications.
Saw your story and wanted to provide some answers. They’re below. More generally, I think it’s important for you to be consulting a legal expert when reporting on this story. I’m sorry I got the answer to you late and wasn’t up early enough to respond to your follow up questions. However, I think many readers are assuming that your questions and assertions are informed by a professional legal analysis. However, I think most lawyers would tell you what I have below. And, they would explain that there are many reasons why a defendant wouldn’t show their hand in an answer. Again, I’m sorry I couldn’t tell you all that in time for your story but I think your readers would really benefit from some legal analysis before you publish.
To your 3 specific questions, here are the answers:
— First, is Facebook (Facebook, not Mark) backing off its contention that the purported emails are fake?
No. The emails are fake.
— Second, is it fair to say that Facebook’s and Mark’s interests have diverged here?
No. Divergence whatsoever.
— Third, is it fair to assume that Facebook cannot tell from an analysis of Mark’s hard drives from the period (which I gather were analysed in the Winklevoss case) whether the emails are fake?
The emails are fake.
In addition, there is no difference between Mark and Facebook’s position. See the ‘General Denial’ paragraph, which is from both Mark and Facebook, Inc. As to the subsequent paragraph-by-paragraph denial, any differences in the phrasing of the denials are due to the technicalities of legal pleadings. E.g., because Ceglia has structured most of his allegations to pre-date Facebook, Inc., as a technical legal matter the company’s denials need to be phrased differently. But the company’s denials are just as emphatic – see the ‘General Denial’ paragraph, which is from both FB and Mark.