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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I. NEEL CHATTERJEE (STATE BAR NO. 173985)
[e-mail]
MONTE COOPER (STATE BAR NO. 196746)
[e-mail]
THERESA A. SUTTON (STATE BAR NO. 211857)
[e-mail]
ORRICK, HERRINGTON & SUTCLIFFE LLP
1000 Marsh Road
Menlo Park, CA 94025
Telephone: [phone]
Facsimile:
650-614-7401
Attorneys for Plaintiffs
THE FACEBOOK, INC. and MARK ZUCKERBERG

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN FRANCISCO DIVISION

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THE FACEBOOK, INC. and MARK
ZUCKERBERG,

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Plaintiffs,
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v.
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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:

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The Honorable James Ware

Defendants.
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OPPOSITION TO QUINN EMANUEL
REQUEST FOR DISBURSEMENT
5:07-CV-01389-JW

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I.

Plaintiffs Facebook, Inc. and Mark Zuckerberg (“Facebook”) oppose Quinn Emanuel’s

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INTRODUCTION

request for an order disbursing settlement proceeds for the following reasons:

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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.

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Facebook is sympathetic to the fact that the ConnectU Founders have not honored their

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contract with Quinn Emanuel. The ConnectU Founders, however, can resolve their indebtedness

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to Quinn Emanuel without compromising Facebook’s rights.

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II.

ARGUMENT

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A.

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The escrow funds should not be release because other potential claimants remain. for

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example, Wayne Chang was a defendant in this matter who was dismissed with prejudice, on

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December 15, 2008, pursuant to this Court’s Judgment enforcing the Settlement Agreement. Dkt.

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No. 667. On November 21, 2008, this Court entered an Amended Judgment in which it ordered

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Boies Schiller to hold in trust the proceeds of the settlement for the ConnectU Founders and “any

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lawful claimant.” Dkt. No. 665.

Other Lawful Claimants May Exist, Precluding Disbursement.

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On December 21, 2009, Mr. Chang and The I2HUB Organization sued the ConnectU

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Founders in Massachusetts Superior Court for breach of contract, among other claims. In his

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complaint against the ConnectU Founders, Mr. Chang alleges he was deprived of his share of the

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settlement proceeds at issue here, and seeks damages, including his interest in “the proceeds of
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OPPOSITION TO QUINN EMANUEL
REQUEST FOR DISBURSEMENT
5:07-CV-01389-JW

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the settlement of the Facebook Litigation and the ConnectU Litigation.” See Dkt. No. 771-1, Ex.

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2 at 32. In January 2011, the ConnectU Founders agreed that the settlement proceeds “wouldn’t

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be distributed until [Mr. Chang’s] claim” is resolved.” Id., Ex. 3. It is not. Id.

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It is essential that the Court be reassured that there are no competing liens being asserted,

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in order to ensure that no other party is entitled to the assets held in escrow and, accordingly, to

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eliminate the possibility of claims for underpayment being made against third parties.

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Accordingly, before this Court orders the release of any settlement funds held in escrow by Boies

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Schiller, the Court must determine that no other lawful claimant is entitled to the proceeds. That

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includes Wayne Chang.

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B.

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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.

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771-1, Ex. 1 at 1), and ask that the Court “expeditiously [complete enforcement] in order to

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preserve the bargain embodied in the Term Sheet.” Id. Nonetheless, they recently filed two

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motions in the District of Massachusetts seeking to undo this Court’s Jukly 2, 2008 Judgment

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Enforcing the Settlement Agreement, and intend to strip Facebook of the deal the parties struck

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which was affirmed by the Ninth Circuit. Dkt. No. 771-1, Exs. 4, 5. Until the collateral litigation

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in the District of Massachusetts is over and the validity of this Court’s Judgment is finally and

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completely resolved, Boies Schiller should not be permitted to disburse any of the funds held in

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escrow.

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C.

The ConnectU Founders Are Capable Of Satisfying The Quinn Judgment
Without Disbursing The Settlement Proceeds

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The ConnectU Founders were required to post a bond to cover the amount awarded by the

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New York judgment confirming the arbitration award to Quinn Emanuel while their appeal to the

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New York Supreme Court Appellate Division was pending. See Declaration of Monte M.F.

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Cooper (“Cooper Decl.”), Ex. 1. As that bond reflects, they are capable of satisfying their

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payment obligation to Quinn Emanuel without the present need for disbursement of the settlement

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proceeds. For this reason, Facebook’s rights need not – indeed, should not – be compromised
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OPPOSITION TO QUINN EMANUEL
REQUEST FOR DISBURSEMENT
5:07-CV-01389-JW

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through premature disbursement, while collateral litigation is ongoing and other potential lawful

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claimants are unaccounted for.

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D.

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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

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December 17, 2010, Declaration of Adam B. Wolfson, attached to which supposedly are a

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November 8, 2010 Order, and a November 29, 2010 Judgment, from the Supreme Court of New

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York, Commercial Division, in the matter Quinn Emanuel Urquhart Oliver & Hedges, LLP v.

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Howard Winklevoss, et al., Case No. 13 194 Y 995 08 (N.Y. Supreme Ct.). Dkt. No. 751, Exs. B

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and C, respectively. Neither of these two exhibits has been served on Facebook, as required by

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Local Civil Rule 7-11(a). That Rule provides: “The moving party must deliver the motion and all

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attachments to all other parties on the same day as the motion is filed.” Civil L.R. Rule 7-11(a)

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(emphasis added).

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Indeed, the Certificate of Service filed by Quinn Emanuel with its prior request for

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disbursement does not include counsel for Facebook as among those served with the attachments.

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Dkt. No. 753. Quinn Emanuel does not explain this omission from its service list, even though

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Facebook clearly is a party to these proceedings within the meaning of Civil Local Rule 7-11(a).

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III.

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CONCLUSION
For the foregoing reasons, Facebook respectfully requests that Quinn Emanuel’s

Miscellaneous Administrative Request be denied.

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Dated: October 31, 2011

Orrick, Herrington & Sutcliffe LLP

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/s/ I. Neel Chatterjee /s/
I. Neel Chatterjee
Attorneys for Plaintiffs
THE FACEBOOK, INC. and MARK
ZUCKERBERG

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OPPOSITION TO QUINN EMANUEL
REQUEST FOR DISBURSEMENT
5:07-CV-01389-JW