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

Filing 772

RESPONSE (re 770 Administrative Motion to File Under Seal ) Administrative Request for Order Disbursing Settlement Proceeds filed byThe Facebook, Inc., Mark Zuckerberg. (Attachments: # 1 Declaration, # 2 Exhibit 1)(Chatterjee, Indra) (Filed on 10/31/2011)

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1 2 3 4 5 6 7 I. NEEL CHATTERJEE (STATE BAR NO. 173985) MONTE COOPER (STATE BAR NO. 196746) THERESA A. SUTTON (STATE BAR NO. 211857) ORRICK, HERRINGTON & SUTCLIFFE LLP 1000 Marsh Road Menlo Park, CA 94025 Telephone: 650-614-7400 Facsimile: 650-614-7401 Attorneys for Plaintiffs THE FACEBOOK, INC. and MARK ZUCKERBERG 8 9 UNITED STATES DISTRICT COURT 10 NORTHERN DISTRICT OF CALIFORNIA 11 SAN FRANCISCO DIVISION 12 13 THE FACEBOOK, INC. and MARK ZUCKERBERG, 14 Plaintiffs, 15 v. 16 17 18 Case No. 5:07-CV-01389-JW PLAINTIFFS’ OPPOSITION TO QUINN EMANUEL’S ADMINISTRATIVE REQUEST FOR ORDER DISBURSING SETTLEMENT PROCEEDS CONNECTU, INC. (formerly known as CONNECTU, LLC) PACIFIC NORTHWEST SOFTWARE, INC. WINSTON WILLIAMS, and WAYNE CHANG, Judge: 19 The Honorable James Ware Defendants. 20 21 22 23 24 25 26 27 28 OPPOSITION TO QUINN EMANUEL REQUEST FOR DISBURSEMENT 5:07-CV-01389-JW 1 I. Plaintiffs Facebook, Inc. and Mark Zuckerberg (“Facebook”) oppose Quinn Emanuel’s 2 3 INTRODUCTION request for an order disbursing settlement proceeds for the following reasons: 4 1. This Court’s Amended Judgment Ordering Specific Performance of Settlement Agreement expressly requires the proceeds to remain in trust for “any lawful claimant.” Other potential lawful claimants exist. Specifically, Wayne Chang, a defendant in this action and beneficiary of the settlement, has sued the ConnectU Founders in Massachusetts Superior Court for “proceeds of the settlement of the Facebook Litigation and the ConnectU Litigation.” 2. The ConnectU Founders are seeking in the District of Massachusetts to vacate the order of dismissal entered as a result this Court’s entering Judgment enforcing the settlement. The Court should not permit the escrow agent to disburse any funds until the ConnectU Founders’ challenges are resolved. 3. The ConnectU Founders have sufficient funds to pay Quinn Emanuel independently of the escrow. 4. Facebook cannot evaluate the propriety of any release of funds at this time, because Quinn Emanuel has in violation of Civil Local Rule 7-11 not served Facebook with all exhibits in support of its Administrative Request. 5 6 7 8 9 10 11 12 13 Facebook is sympathetic to the fact that the ConnectU Founders have not honored their 14 15 contract with Quinn Emanuel. The ConnectU Founders, however, can resolve their indebtedness 16 to Quinn Emanuel without compromising Facebook’s rights. 17 II. ARGUMENT 18 A. 19 The escrow funds should not be release because other potential claimants remain. for 20 example, Wayne Chang was a defendant in this matter who was dismissed with prejudice, on 21 December 15, 2008, pursuant to this Court’s Judgment enforcing the Settlement Agreement. Dkt. 22 No. 667. On November 21, 2008, this Court entered an Amended Judgment in which it ordered 23 Boies Schiller to hold in trust the proceeds of the settlement for the ConnectU Founders and “any 24 lawful claimant.” Dkt. No. 665. Other Lawful Claimants May Exist, Precluding Disbursement. 25 On December 21, 2009, Mr. Chang and The I2HUB Organization sued the ConnectU 26 Founders in Massachusetts Superior Court for breach of contract, among other claims. In his 27 complaint against the ConnectU Founders, Mr. Chang alleges he was deprived of his share of the 28 settlement proceeds at issue here, and seeks damages, including his interest in “the proceeds of -1- OPPOSITION TO QUINN EMANUEL REQUEST FOR DISBURSEMENT 5:07-CV-01389-JW 1 the settlement of the Facebook Litigation and the ConnectU Litigation.” See Dkt. No. 771-1, Ex. 2 2 at 32. In January 2011, the ConnectU Founders agreed that the settlement proceeds “wouldn’t 3 be distributed until [Mr. Chang’s] claim” is resolved.” Id., Ex. 3. It is not. Id. 4 It is essential that the Court be reassured that there are no competing liens being asserted, 5 in order to ensure that no other party is entitled to the assets held in escrow and, accordingly, to 6 eliminate the possibility of claims for underpayment being made against third parties. 7 Accordingly, before this Court orders the release of any settlement funds held in escrow by Boies 8 Schiller, the Court must determine that no other lawful claimant is entitled to the proceeds. That 9 includes Wayne Chang. 10 B. 11 12 Funds Should Not Be Disbursed While The CU Founders Challenge The Judgment The ConnectU Founders acknowledge the “propriety of this Court’s judgment,” (Dkt. No. 13 771-1, Ex. 1 at 1), and ask that the Court “expeditiously [complete enforcement] in order to 14 preserve the bargain embodied in the Term Sheet.” Id. Nonetheless, they recently filed two 15 motions in the District of Massachusetts seeking to undo this Court’s Jukly 2, 2008 Judgment 16 Enforcing the Settlement Agreement, and intend to strip Facebook of the deal the parties struck 17 which was affirmed by the Ninth Circuit. Dkt. No. 771-1, Exs. 4, 5. Until the collateral litigation 18 in the District of Massachusetts is over and the validity of this Court’s Judgment is finally and 19 completely resolved, Boies Schiller should not be permitted to disburse any of the funds held in 20 escrow. 21 22 C. The ConnectU Founders Are Capable Of Satisfying The Quinn Judgment Without Disbursing The Settlement Proceeds 23 The ConnectU Founders were required to post a bond to cover the amount awarded by the 24 New York judgment confirming the arbitration award to Quinn Emanuel while their appeal to the 25 New York Supreme Court Appellate Division was pending. See Declaration of Monte M.F. 26 Cooper (“Cooper Decl.”), Ex. 1. As that bond reflects, they are capable of satisfying their 27 payment obligation to Quinn Emanuel without the present need for disbursement of the settlement 28 proceeds. For this reason, Facebook’s rights need not – indeed, should not – be compromised -2- OPPOSITION TO QUINN EMANUEL REQUEST FOR DISBURSEMENT 5:07-CV-01389-JW 1 through premature disbursement, while collateral litigation is ongoing and other potential lawful 2 claimants are unaccounted for. 3 D. 4 5 Quinn Emanuel Has Not Complied With Civil Local Rule 7-11(a) by Serving Facebook with All Papers Paragraph 6 of Quinn Emanuel’s Miscellaneous Administrative Request cites to a 6 December 17, 2010, Declaration of Adam B. Wolfson, attached to which supposedly are a 7 November 8, 2010 Order, and a November 29, 2010 Judgment, from the Supreme Court of New 8 York, Commercial Division, in the matter Quinn Emanuel Urquhart Oliver & Hedges, LLP v. 9 Howard Winklevoss, et al., Case No. 13 194 Y 995 08 (N.Y. Supreme Ct.). Dkt. No. 751, Exs. B 10 and C, respectively. Neither of these two exhibits has been served on Facebook, as required by 11 Local Civil Rule 7-11(a). That Rule provides: “The moving party must deliver the motion and all 12 attachments to all other parties on the same day as the motion is filed.” Civil L.R. Rule 7-11(a) 13 (emphasis added). 14 Indeed, the Certificate of Service filed by Quinn Emanuel with its prior request for 15 disbursement does not include counsel for Facebook as among those served with the attachments. 16 Dkt. No. 753. Quinn Emanuel does not explain this omission from its service list, even though 17 Facebook clearly is a party to these proceedings within the meaning of Civil Local Rule 7-11(a). 18 III. 19 20 CONCLUSION For the foregoing reasons, Facebook respectfully requests that Quinn Emanuel’s Miscellaneous Administrative Request be denied. 21 22 Dated: October 31, 2011 Orrick, Herrington & Sutcliffe LLP 23 /s/ I. Neel Chatterjee /s/ I. Neel Chatterjee Attorneys for Plaintiffs THE FACEBOOK, INC. and MARK ZUCKERBERG 24 25 26 27 28 -3- OPPOSITION TO QUINN EMANUEL REQUEST FOR DISBURSEMENT 5:07-CV-01389-JW

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