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

Filing 662

Declaration of Evan A. Parke in Support of 661 Memorandum in Opposition, by Defendants, filed byConnectU LLC. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E)(Related document(s) 661 ) (Holtzman, Steven) (Filed on 11/14/2008)

EXHIBIT E

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UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

THE FACEBOOK , I N C. A N D MARK ZUCKERBERG , PLAINTIFFS, V S. CONNECTU, I N C. (FORMERLY KNOWN AS CONNECTU, L L C), PACIFIC NORTHWEST SOFTWARE, I N C., WINSTON WILLIAMS, AND WAYNE CHANG, DEFENDANT.

13 14 15 16 17 18 19 20 21 22 23 24 25 A P P E A R A N C E S: FOR THE PLAINTIFF :

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C- 07- 01389 JW SAN JOSE , CALIFORNIA OCTOBER 28, 2008 PAGES 1- 76

TRANSCRIPT OF PROCEEDINGS BEFORE THE HONORABLE JAMES WARE UNITED STATES DISTRICT JUDGE

ORRICK , HERRINGTON & SUTCLIFFE BY: I . NEEL CHATTERJEE 1000 MARSH ROAD MENLO PARK, CALIFORNIA 94025

APPEARANCES CONTINUED ON NEXT PAGE

OFFICIAL COURT REPORTER : L E E- ANNE SHORTRIDGE , C S R, C R R CERTIFICATE NUMBER 9595

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 2 SPECIAL MASTER : BY: R A N D Y GARTEISER 555 TWIN DOLPHIN D R I V E SUITE 560 REDWOOD SHORES, CALIFORNIA 94065 GEORGE C. FISHER 2600 E L C A M I N O REAL, SUITE 410 PALO ALTO , CALIFORNIA 94306 F O R Q U I N N, EMANUEL: QUINN, EMANUEL, URQUHART , OLIVER & HEDGES , LLP BY: B R U C E E . V A N DALSEM 865 SOUTH FIGUEROA S T R E E T 10T H F L O O R LOS ANGELES, CALIFORNIA 90017 BY: EVAN A N D R E W P A R K E 5301 WISCONSIN AVENUE , N .W. WASHINGTON, D.C . 20015 APPEARANCES (CONTINUED) FOR DEFENDANTS : BOIES, SCHILLER & FLEXNER, LLP BY: D A V I D A . BARRETT 575 LEXINGTON A V E N U E, 7T H F L O O R NEW YORK, N E W YORK 1 0 0 2 2

11:18:01 11:18:05 11:18:07 11:18:11 11:18:16 11:18:19 11:18:23 11:18:26 11:18:30 11:18:33 11:18:34 11:18:37 11:18:39 11:18:42 11:18:44 11:18:47 11:18:50 11:18:54 11:18:55 11:18:57 11:18:59 11:19:01 11:19:04 11:19:06 11:19:06

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CLAIMANTS THAT MIGHT EXIST IN T H E W O R L D AGAINST , AGAINST THE CONNECTU PARTIES. A N D I T H I N K, YOU KNOW, IF T H E C O U R T I S, Y O U KNOW , I N C L I N E D T O MOVE IN THAT DIRECTION , THAT WITH RESPECT T O F A C E B O O K, YOU KNOW, CASH MEANS CASH. I T D O E S N'T MEAN A C H E C K PAYABLE TO T W O I T D O E S N'T MEAN A C H E C K I N A TRUST . I T M E A N S - - Y O U KNOW, IN THIS CASE IT WOULD BE SOME RATHER LARGE SUITC A S E S, BUT THAT' S LITERALLY WHAT THEY SAID. A N D IF THEY W A N T E D TO PROTECT THEMSELVES AGAINST THESE KINDS OF CLAIMS , A S T H E COURT HAS SAID IN OTHER CONTEXTS, THAT SHOULD HAVE BEEN SOMETHING THAT WAS INCLUDED I N THE AGREEMENT . S O I F, IF THERE' S A POTENTIAL PROBLEM F O R FACEBOOK -- A N D, AGAIN, I THINK IT' S A VERY REMOTE O N E - - I T'S R E A L L Y A PROBLEM OF THEIR OWN M A K I N G I N THAT REGARD . T H E COURT: T H A N K Y O U, COUNSEL.

PARTIES.

D I D YOU WANT TO ADDRESS T H E COURT ON BEHALF O F Q U I N N, EMANUEL? M R. VAN D A L S E M: IF T H E C O U R T I S I N C L I N E D

TO HEAR US, I WOULD LIKE T O, YOUR H O N O R. T H E COURT: O F COURSE. A N D T H E REASON I SAY 48

M R. VAN D A L S E M:

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THAT IS WE' RE NOT A PARTY AND WE HAVEN 'T INTERVENED, A N D I 'LL TOUCH UPON WHY WE HAVEN 'T DONE THAT IN MY REMARKS. I AGREE WITH WHAT M R. BARRETT SAYS WITH ONE SIGNIFICANT EXCEPTION, AND THAT SIGNIFICANT EXCEPTION I S THAT T H E C O U R T'S PROPOSAL S E T F O R T H I N T H E O S C WOULD ALTER THE S T A T U S Q U O THAT W O U L D HAVE EXISTED BUT F O R THIS DISPUTE. Q U I N N, EMANUEL H A S A CONTRACTUAL LIEN OVER THIS R E C O V E R Y, AND IN T H E N O R M A L COURSE , R E A L L Y BECAUSE OF T H E L E V I N CASE WHICH WE 'VE CITED , A DEFENDANT PAYING A PLAINTIFF WILL ISSUE THE PAYMENT INSTRUMENTS, BE THEY CHECKS OR OTHERWISE, JOINTLY TO THE PLAINTIFF A N D THEIR COUNSEL. A N D THE R E A S O N THEY DO THAT IS BECAUSE T H E L E VI N CASE IN CALIFORNIA HOLDS THAT I F THEY 'RE ON N O T I C E O F A CONTRACTUAL RIGHT OF T H E LAWYERS TO RECEIVE A PORTION OF THAT MONEY AND THEY FAIL T O INCLUDE THE LAWYERS AS A P A Y E E, THEN T H E DEFENDANT , IN THIS CASE F A C E B O O K, FACES POTENTIAL LIABILITY. S O I N THE NORMAL COURSE O F THINGS, HAD THIS SETTLEMENT N O T BEEN CONTESTED AND IN T H E ABSENCE OF SOME WRITTEN INSTRUCTION TO FACEBOOK TO DO OTHERWISE, FACEBOOK WOULD HAVE I S S U E D THE CONSIDERATION JOINTLY T O C O N N E C T U, ITS FOUNDERS , 49

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A N D T H E FIRM. AND I THINK FACEBOOK HAS TAKEN THAT POSITION HERE AND H A S CONFIRMED THAT THAT 'S WHAT WOULD HAVE HAPPENED IN THE N O R M A L C O U R S E. I F T H E COURT FOLLOWS THROUGH ON WHAT IT S T A T E D I N T H E OSC , I T W O U L D B E DELIVERING T H E CONSIDERATION FROM FACEBOOK DIRECTLY T O THE CONNECTU FOUNDERS WHO COULD - - WHO WOULD THEN B E FREE TO DO WITH I T W H A T E V E R THEY WISH, A N D THAT WOULD ALTER T H E S T A T U S QUO THAT WOULD HAVE EXISTED BUT FOR THIS DISPUTE . A N D THAT - - I N M Y OPINION , THAT IS N O T SOMETHING T H E COURT SHOULD DO BECAUSE IT WOULD DESTROY THE LIEN RIGHT. I AGREE WITH MR. BARRETT THAT I T I S N O T F O R THIS COURT TO ADJUDICATE ANY PORTION OF THE DISPUTE BETWEEN Q U I N N, EMANUEL A N D ITS F O R M E R CLIENTS. T H E R E'S AN ARBITRATION C L A U S E. WE HAVE

COMMENCED A N A R B I T R A T I O N I N N E W YORK B E F O R E THE TRIPLE A . THEY T R I E D T O E N J O I N IT. THAT WAS DEFEATED. JUSTICE LOWE I N THE

SUPREME COURT IN NEW YORK HELD THAT T H E M A T T E R WAS ARBITRABLE. THEY 'VE ASSERTED COUNTERCLAIMS.

A N D THAT I S T H E PROPER FORUM IN WHICH TO 50

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RESOLVE ALL OF THESE QUESTIONS A S BETWEEN QUINN , EMANUEL AND I T S F O R M E R CLIENTS. WHAT SHOULDN' T H A P P E N IN THE MEANTIME IS T H E F O R M E R CLIENTS O B T A I N ALL OF T H E M O N E Y A N D THEY C A N D O WITH IT WHATEVER THEY -- WITH THAT MONEY WHATEVER THEY WISH ONCE THEY HAVE THEIR HANDS O N I T AND THEREBY DEFEAT OUR LIEN INTEREST. A N D THE COURT 'S OSC WOULD ALTER W H O W O U L D NORMALLY BE T H E PROTECTION F O R Q U I N N, EMANUEL U N D E R THESE CIRCUMSTANCES. T H E COURT: WELL , THE OBLIGATION THAT

Y O U'R E C I T I N G OF A C O N T R A C T U A L LIEN H A S N O T BEEN ADJUDICATED AS OF Y E T; CORRECT? M R. VAN D A L S E M: WELL, T H E LIEN IS

PERFECTED A N D WE' VE CITED CASES UPON EXECUTION OF THE FEE AGREEMENT . THE M O M E N T THAT AGREEMENT W A S

S I G N E D, THE LIEN WAS PERFECTED. T H E COURT: TO BE PERFECTED? M R. VAN D A L S E M: THAT MEANS THAT Q U I N N, WHAT DOES IT MEAN F O R A LIEN

EMANUEL, AS COUNSEL FOR T H E C O N N E C T U PARTIES , H A S A LIEN OVER WHAT WERE THEN C A U S E S OF ACTION , W H I C H WERE THEN C O NV E R T E D INTO T H I N G S OF VALUE AS PART O F THE SETTLEMENT . S O W E HAVE AN ABILITY TO THEN FORECLOSE 51

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ON THAT LIEN, AND CALIFORNIA LAW IS VERY CLEAR THAT WE -- THAT THAT F O R E C L O S U R E PROCEEDING DOES NOT HAPPEN HERE . IT HAS TO H A P P E N I N A N I N D E P E N D E N T

A C T I O N BROUGHT BY T H E LAWYERS AGAINST THE F O R M E R CLIENTS. W E'V E DONE THAT. THAT 'S BEFORE T H E

T R I P L E A IN N E W YORK A N D THAT WILL PROCEED HOWEVER IT PROCEEDS . T H E COURT: T H E -- YOUR - - T H E

OBLIGATION, T H O U G H, IS ONLY T O F A C E B O O K WITH RESPECT TO THE LIEN? M R. VAN D A L S E M: T H E OBLIGATION --

FACEBOOK FACES POTENTIAL LIABILITY IF THESE FUNDS ARE TURNED OVER T O THE CONNECTU PARTIES WITHOUT ACCOUNTING FOR THAT LIEN. T H E COURT: R I G H T. BUT -- AND I GUESS SO

DO T H E F O U N D E R S A N D CONNECTU? M R. VAN D A L S E M: T H E COURT: THAT' S CORRECT . B U T IF THE FUNDS

A L L RIGHT.

ARE NEVER TURNED OVER T O FACEBOOK, WHAT HAPPENS ? M R. VAN D A L S E M: OVER TO CONNECTU? T H E COURT: FACEBOOK . M R. VAN D A L S E M: OH . IF THE FUNDS A R E 52 N O, NEVER TURNED OVER BY YOU MEAN NEVER TURNED