The Facebook, Inc., et al v. ConnectU, Inc., et al

Filing 184

Filed (ECF) Intervenors Divya Narendra, Cameron Winklevoss and Tyler Winklevoss in 08-16745, Appellants Divya Narendra, Cameron Winklevoss and Tyler Winklevoss in 08-16873, 09-15021 Motion to stay the mandate. Date of service: 05/27/2011. [7767662] [08-16745, 08-16873, 09-15021] (SMS)

CA Nos. 08-16745, 08-16873, 09-15021 (consolidated)
DC No. C 07-01389 JWW

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
THE FACEBOOK, INC.; MARK ZUCKERBERG,
Plaintiffs-Appellees,
DIVYA NARENDRA; CAMERON WINKLEVOSS;
TYLER WINKLEVOSS,
Intervenors,
v.
PACIFIC NORTHWEST SOFTWARE, INC.;
WAYNE CHANG; WINSTON WILLIAMS,

Defendants.
Appeal From Judgment Of The United States District Court
For The Northern District Of California
(Hon. James Ware, Presiding)
MOTION TO STAY ISSUANCE OF MANDATE
JEROME B. FALK, JR.
SEAN M. SELEGUE
SHAUDY DANAYE-ELMI
NOAH S. ROSENTHAL
HOWARD RICE NEMEROVSKI CANADY
FALK & RABKIN
A Professional Corporation
Three Embarcadero Center, 7th Floor
San Francisco, California 94111
Telephone: [phone]

Attorneys For Appellants and
Intervenors Divya Narendra, Cameron
Winklevoss and Tyler Winklevoss

Appellants

and

Intervenors

Cameron

Winklevoss,

Tyler

Winklevoss and Divya Narendra (“Appellants”) hereby move this
Court to stay issuance of a mandate in the above-captioned appeal.
This request is made to prevent potentially unnecessary proceedings
from going forward in the District of Massachusetts, and in light of
Appellants’ intention to file a petition for writ of certiorari in the
Supreme Court.1

I.
STAYING ISSUANCE OF THE MANDATE
WOULD PREVENT UNCERTAINTY AND
INEFFICIENCY IN A RELATED MATTER.
As noted in Appellants’ Opening Brief, the disputed settlement at
issue on this appeal related to two cases, one in the Northern District
of California and another in the District of Massachusetts.

In

September 2009, the Massachusetts court put the action before it on
hold pending completion of proceedings in the Ninth Circuit.
Request for Judicial Notice in Support of Appellants/Intervenors’
Motion to Stay Issuance of Mandate (“RJN”) Ex. A at 2.

The

Massachusetts court noted that “there [was] no need to keep these
cases active in this Court while the fundamental question of the
1

Appellees have informed us that they intend to oppose this
Motion.

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enforceability of the settlement agreement moves toward resolution
[in the Ninth Circuit].”

To that end, the Massachusetts court

terminated all pending motions before it and ordered that those
motions could be “reassert[ed] . . . no later than 30 days after the
issuance of any mandate of the United States Court of Appeals for
the Ninth Circuit.” Id. at 2-3.
Among the motions that the Massachusetts court terminated pursuant to the above-described order was Appellants’ motion to impose
a sanction of non-dismissal due to the failure of Facebook and
Mr. Zuckerberg to produce certain documents in discovery. Recently,
in a status report to the Massachusetts court, Appellants stated their
intention to file a Rule 60 motion based on discovery misconduct in
the event that the disputed settlement is not rescinded. RJN Ex. B.
Under the Massachusetts court’s order, those matters will proceed
there if this Court issues a mandate.
Appellants believe that it is sensible for the Massachusetts proceedings to remain on hold until the Supreme Court rules on their
anticipated petition for certiorari. If certiorari is granted and the
settlement is ultimately rescinded as Appellants request, then any
proceedings that have taken place in Massachusetts based on the
assumption that the settlement was enforceable would either be
moot or need to be reconsidered in light of the new development that

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the settlement has been rescinded.

Given the uncertainty and

judicial inefficiency that would result if the mandate issued now, this
Court should grant the Founders’ motion to stay issuance of the
mandate. See CHRISTOPHER A. GOELZ & MEREDITH J. WATTS, NINTH
CIRCUIT CIVIL APPELLATE PRACTICE ¶10:523 (2011) (“Any situation in
which there are equitable grounds to retain jurisdiction in the Ninth
Circuit may justify a stay”).2

II.
APPELLANTS INTEND TO FILE A PETITION
FOR WRIT OF CERTIORARI THAT IS NOT
FRIVOLOUS AND WHICH WILL PRESENT
SUBSTANTIAL QUESTIONS.
In addition, Rule 41(d)(2) of the Federal Rules of Appellate
Procedure contemplates that a stay may be appropriate pending the
filing of a petition for a writ of certiorari in the Supreme Court. The
grounds on which Appellants intend to seek certiorari are
substantial and set forth in Appellants’ Petition For Rehearing En

2

This relief would not only benefit Appellants; Appellees Facebook
and Zuckerberg would likewise be relieved of the obligation to
respond to the motions that will proceed in Massachusetts if this
Court does not stay issuance of the mandate.

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Banc. Although the Court declined to rehear this appeal en banc, the
issues presented by Appellants present important questions and
presentation of them to the Supreme Court for review could not be
considered frivolous. See LOCAL R. 41-1 (stay of mandate will not be
granted if grounds for seeking certiorari are frivolous).

First, Appellants’ petition for writ of certioriari will focus on a
conflict between this Court’s holding that an agreement settling
federal claims (whose validity is therefore a question of federal law)
that contains a general release is immune from challenge on the
ground that the agreement was procured by fraud, or whether, as
countless federal and state courts around the country have held, a
release does not bar such a defense. See Dice v. Akron, C. & Y. R. R.,
342 U.S. 359, 362 (1952); Brown v. County of Genesee, 872 F.2d 169,
174 (6th Cir. 1989); Nicklin v. Henderson, 352 F.3d 1077, 1081 (6th
Cir. 2003); Mallory v. Eyrich, 922 F.2d 1273, 1280 (6th Cir. 1991);

Estate of Jones v. Comm’r, 795 F.2d 566, 573 (6th Cir. 1986); Ron
Greenspan Volkswagen, Inc. v. Ford Motor Land Dev. Corp., 32 Cal.
App. 4th 985, 996 (1995); Manderville v. PCG&S Group, Inc., 146
Cal. App. 4th 1486, 1499-1502 (2007); Jones v. Roth, 31 So. 3d 115,
117 (Ala. Civ. App. 2009); Esteves v. Esteves, 680 A.2d 398, 401 &
n.1 (D.C. 1996); James v. Chicago Transit Auth., 356 N.E.2d 834, 836
(Ill. Ct. App. 1976); Krantz v. Univ. of Kansas, 21 P.3d 561, 567

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(Kan. 2001); Associated Ins. Serv. v. Garcia, 307 S.W.3d 58, 69 (Ky.
2010); Millet v. Millet, 888 So. 2d 291, 293-94 (La. Ct. App. 2004);

Shinberg v. Garfinkle, 278 N.E.2d 738, 742 (Mass. 1972); In re
Estate of Lobaina, 705 N.W.2d 34, 36 (Mich. Ct. App. 2005); Nolan ex
rel. Nolan v. Lee Ho, 577 A.2d 143, 146 (N.J. 1990); Galasso v.
Galasso, 320 N.E.2d 618, 618 (N.Y. 1974); Morgan v. Vandevers Dry
Goods Co., 370 P.2d 830, 834 (Okla. 1962); Rugemer v. Rhea, 957
P.2d 184, 187 (Or. Ct. App. 1998); Pennsbury Village Assocs. v.

McIntyre, 11 A.3d 906, 914-15 (Pa. 2011); Boyd v. Boyd, 67 S.W.3d
398, 404-05 (Tex. App. 2002); Howard v. Howard, 163 A.2d 861, 865
(Vt. 1960); Nationwide Mut. Ins. Co. v. Martin, 171 S.E.2d 239, 242
(Va. 1969); Haller v. Wallis, 573 P.2d 1302, 1306 (Wash. 1978); Smith

v. Monongahela Power Co., 429 S.E.2d 643, 652 (W.Va. 1993); Phone
Partners Ltd. P’ship v. C.F. Commc’ns Corp., 542 N.W.2d 159, 161
(Wis. Ct. App. 1995); see also First Nat’l Bank of Cincinnati v.

Pepper, 454 F.2d 626, 632 (2d Cir. 1972) (applying New York law).
Because the decision of the Court sharply conflicts with federal (and
state) authority, the Petition will present a substantial question for
review.

Second, Appellants’ petition will raise the question of whether
Section 29(a) of the Exchange Act permits the advance release of a
claim that the settlement, and the release, were obtained by

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securities fraud.

This Court held that it does, but that decision

conflicts with other federal authorities.

See Burgess v. Premier

Corp., 727 F.2d 826, 831 (9th Cir. 1984); Dresner v. Utility.Com, Inc.,
371 F. Supp. 2d 476 (S.D.N.Y. 2005).

Third, Appellants’ petition will present the question of whether, as
this Court held, a mediation confidentiality agreement can be used to
bar all evidence that a settlement was fraudulently induced during a
mediation, or whether, as numerous other federal courts have held,
Section 29(a) of the Exchange Act prohibits indirect as well as direct
waivers of the protections of the Exchange Act.

See Can-Am

Petroleum Co. v. Beck, 331 F.2d 371, 373 (10th Cir. 1964) (“the
remedial aspects of [the Securities Act] cannot be waived either

directly or indirectly”) (emphasis added); see also AES Corp. v. Dow
Chem. Co., 325 F.3d 174, 180 (3d Cir. 2003) (refusing to enforce contract provision that disclaimed reliance on representations in prospectus); McMahan & Co. v. Wherehouse Entm’t, Inc., 65 F.3d 1044,
1051 (2d Cir. 1995) (rejecting argument that clause imposing conditions on recovery merely established “a procedure that must be followed before an action may be brought”); Rogen v. Ilikon, 361 F.2d
260, 265, 268 (1st Cir. 1966) (representation that plaintiff was
familiar with company’s business and was “not relying on any . . .
obligations to make full disclosure” invalid under Section 29(a));

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Special Transp. Servs. v. Balto, 325 F. Supp. 1185, 1187 (D. Minn.
1971) (anti-waiver provision applies to a contract that “waive[s]
statutory liabilities . . . by indirection”). Accordingly, the petition for
writ of certiorari Appellants intend to file raises substantial federal
questions—in each instance on matters in which this Court’s decision
conflicts with decisions of other Circuits.
For the foregoing reasons, Appellants respectfully request that the
Court stay issuance of the mandate, and instruct the Clerk that the
mandate should issue forthwith if the Supreme Court denies
certiorari or upon further order of this Court.
DATED: May 27, 2011.
Respectfully,
JEROME B. FALK, JR.
SEAN M. SELEGUE
SHAUDY DANAYE-ELMI
NOAH S. ROSENTHAL
HOWARD RICE NEMEROVSKI CANADY
FALK & RABKIN
A Professional Corporation
By

/s/ Sean M. SeLegue
SEAN M. SELEGUE

Attorneys For Appellants and
Intervenors Divya Narendra, Cameron
Winklevoss and Tyler Winklevoss
W03 052711-180060001/PB12/1649556/F

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PROOF OF SERVICE

I hereby certify that I electronically filed the foregoing MOTION
TO STAY ISSUANCE OF MANDATE; REQUEST FOR JUDICIAL
NOTICE IN SUPPORT OF MOTION TO STAY ISSUANCE OF
MANDATE with the Clerk of the Court of the United States Court of
Appeals for the Ninth Circuit by using the appellate CM/ECF system
on May 27, 2011.
Participants in the case are registered CM/ECF users and that
service will be accomplished by the appellate CM/ECF system.
I further certify that some of the participants in the case are not
registered CM/ECF users.

On May 27, 2011, the foregoing docu-

ment, described as MOTION TO STAY ISSUANCE OF MANDATE;
REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF MOTION TO
STAY ISSUANCE OF MANDATE, was mailed by placing the
document for deposit in the United States Postal Service through the
regular mail collection process at the law offices of Howard Rice
Nemerovski Canady Falk & Rabkin, located at

Three

Embarcadero

Center,

Seventh

Floor,

San

Francisco,

California, to the following non-CM/ECF participants:
Mark A. Byrne
Byrne & Nixon LLP
800 W. Sixth Street, Suite 430
Los Angeles, CA 90017

Jonathan M. Shaw
Bois, Schiller & Flexner, LLP
5301 Wisconsin Avenue NW
Washington, D.C. 20015

Steven C. Holtzman
Bois, Schiller & Flexner, LLP
1999 Harrison Street, Suite 900
Oakland, CA 94612

/s/ Sean M. SeLegue
SEAN M. SELEGUE

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