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

Filing 788

REPLY (re 776 MOTION for Attorney Fees Partially Under Seal/Redacted ) in Support of Motion for Disbursement of Settlement Proceeds to Finnegan Henderson for Attorneys Fees and Costs filed byFinnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.. (Baldwin, Merri) (Filed on 11/9/2011)

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1 2 3 4 5 6 7 8 9 10 MERRI A. BALDWIN, SBN 141957 Chapman, Popik & White, LLP 650 California Street, 19th Floor San Francisco, CA 94108 Phone (415) 352-3000 Fax (415) 352-3030 E-Mail: THOMAS B. MASON* Zuckerman Spaeder LLP 1800 “M” Street, N.W., Suite 1000 Washington, DC 20036 Telephone: (202) 778-1800 Facsimile: (202) 822-8106 E-Mail: Attorneys for Finnegan, Henderson, Farabow, Garrett & Dunner, LLP 11 12 IN THE UNITED STATES DISTRICT COURT 13 NORTHERN DISTRICT OF CALIFORNIA -- SAN FRANCISCO DIVISION 14 15 THE FACEBOOK, INC., et al., 16 17 18 19 20 Plaintiffs, vs. CONNECTU, INC., et al., Defendants. Case No.: 5:07:-cv-01389 JW REPLY IN SUPPORT OF MOTION FOR DISBURSEMENT OF SETTLEMENT PROCEEDS TO FINNEGAN HENDERSON FOR ATTORNEYS FEES AND COSTS Hearing Date: Time: Courtroom: Judge: November 28, 2011 9:00 a.m. 9 Hon. James S. Ware 21 22 23 As set forth in its opening brief, Finnegan Henderson Farabow Garrett & Dunner LLP 24 (“Finnegan”) has an attorney’s lien against the settlement proceeds currently in trust pursuant to this 25 Court’s November 21, 2008 Amended Judgment, in order to secure payment for legal services it 26 provided to the Founders. The Founders themselves do not contest the lien and agree that Finnegan is 27 entitled to immediate payment from the settlement proceeds. 28 REPLY IN SUPPORT OF MOTION FOR DISBURSEMENT OF SETTLEMENT PROCEEDS, ET AL. CASE NO. 5:07:-CV-01389 JV 1 1 Remarkably, Facebook, Inc. and Mark Zuckerberg oppose this basic relief. They claim that 2 payment of Finnegan’s long-outstanding fees must be delayed further (and indefinitely) because (1) an 3 individual named Wayne Chang (who himself has declined to assert a position in this Court) has filed a 4 lawsuit against the Founders in Massachusetts state court claiming that he is entitled to a share of the 5 settlement and (2) the Founders have filed discovery motions in their Massachusetts case against 6 Facebook and Zuckerberg. As explained below, these points are meritless. They give Facebook and 7 Zuckerberg no basis to interfere with the payment of Finnegan’s fees.1 8 A. Wayne Chang’s Massachusetts Allegations 9 Wayne Chang is not before this Court. He has made no appearance before this Court regarding 10 the settlement proceeds. Nor has he made any submission to this Court regarding the settlement 11 proceeds. He most certainly has made no request of this Court to block disbursement of the settlement 12 proceeds. Significantly, Mr. Chang has taken no such action before this Court notwithstanding that he 13 and his counsel have had full knowledge for nearly two years of the trust established by this Court and 14 notwithstanding that they were supplied with a copy of this Court’s November 1, 2011 order, which 15 imposed a deadline for opposing disbursement.2 Mr. Chang and his counsel clearly have made an 16 informed and studied decision not to lodge any objections with this Court and not to seek any relief 17 from this Court at this time. Accordingly, there is no basis to block disbursement of the trust proceeds 18 1 21 In their consolidated opposition to the various motions for disbursement, Facebook and Zuckerberg object to disbursement of the stock portion of the proceeds for the additional reason that the Founders seek changes to the legends on the stock certificates. This argument does not in any way pertain to Finnegan and does not in any way concern the cash portion of the proceeds to which Finnegan’s motion relates. 22 2 19 20 23 24 25 26 27 28 Indeed, in a legal brief Finnegan filed against Mr. Chang nearly 21 months ago in his Massachusetts lawsuit, Finnegan itself brought to Mr. Chang’s (and his counsel’s) attention the order entered by this Court establishing the trust. See Ex. 3 to Mason Decl. at 2, 5, 7-8 (Docket Entry 776-4). In doing so, Finnegan expressly warned Mr. Chang that he “would only have himself to blame” if he did not assert a claim in this Court to the trust proceeds. Id. at 8. Seven months ago, the Massachusetts judge presiding over Mr. Chang’s lawsuit similarly advised Mr. Chang of his right to assert a claim under this Court’s November 21, 2008 Amended Judgment. See Ex. 2 to Mason Decl. at 12 nn. 7, 8 (Docket Entry 776-3). And one week ago, the law firm designated by this Court as trustee of the proceeds (Boies, Schiller & Flexner LLP) supplied Mr. Chang’s counsel with a copy of this Court’s Order of November 1, 2011, which set forth the deadline for objecting to disbursement of the trust proceeds. See Barrett Decl. at ¶ 8 (Docket Entry 779). REPLY IN SUPPORT OF MOTION FOR DISBURSEMENT OF SETTLEMENT PROCEEDS, ET AL. CASE NO. 5:07:-CV-01389 JV 2 1 by virtue of Mr. Chang and certainly no basis to afford Facebook and Zuckerberg standing to make 2 arguments on Mr. Chang’s behalf that Mr. Chang himself has elected not to make. 3 And in any event, under no circumstances would Mr. Chang even have a claim to the portion of 4 the settlement proceeds sought by Finnegan. Even assuming Mr. Chang prevailed on his claims against 5 the Founders and proved that he was entitled to a share of the settlement proceeds, it is well-settled that 6 he – like any other beneficiary of a settlement – only would be entitled to a share of what remains after 7 all attorneys’ liens have been satisfied.3 For this reason as well, Chang’s Massachusetts claims provide 8 no basis to block disbursement to Finnegan. 9 Notwithstanding Facebook and Zuckerberg’s suggestions to the contrary, these positions are 10 entirely consistent with the positions Finnegan took in Mr. Chang’s Massachusetts lawsuit. In its 11 motion to dismiss in that action, Finnegan explained to the Massachusetts court that Mr. Chang could 12 be a “lawful claimant” under this Court’s Amended Judgment if, among other things, he filed some 13 form of a claim with this Court. See Ex. 3 to Mason Decl. at 8 (Docket Entry 776-4). Mr. Chang, 14 however, has declined to take that step. Moreover, Finnegan never remotely suggested to the 15 Massachusetts court that Mr. Chang, under any circumstances, would be a lawful claimant to the 16 portion of the settlement proceeds owed to attorneys. 17 //// 18 //// 19 20 21 22 23 24 25 26 27 28 3 Again asserting claims on Mr. Chang’s behalf that Mr. Chang himself has elected not to assert, Facebook and Zuckerberg suggest that Mr. Chang’s alleged (and unasserted) interest in the proceeds should take priority over Finnegan’s lien, because Facebook and Zuckerberg believe that Mr. Chang filed his Massachusetts lawsuit before Finnegan notified this Court of its lien. See Opp. at 8. But while Facebook and Zuckerberg rely on Waltrip v. Kimberlin, 164 Cal. App. 4th 517, 526 (2008) for this position, Waltrip offers them no support. The opinion makes clear that attorney liens have priority over all but a limited set of liens, principally those of judgment creditors that have been filed in accordance with statutory directives. 164 Cal. App. 4th at 526 (citing Cal. Code of Civ. Proc. §§ 708.410 and 708.420). Chang is not a judgment creditor and has not filed notice of a judgment lien as required by the statute. And in any event, Facebook and Zuckerberg have the facts wrong. Finnegan notified this Court of its lien on July 2, 2008 – approximately 18 months in advance of Mr. Chang’s lawsuit. See July 2, 2008 Hearing Tr. at 31 (Docket Entry 481) (“The Court should be aware that, in fact, Finnegan Henderson has perfected liens with respect to this matter”). Thus, even if Chang’s claim somehow qualified as a judgment lien (which it does not), Chang’s alleged interest still would not have priority over Finnegan’s lien. REPLY IN SUPPORT OF MOTION FOR DISBURSEMENT OF SETTLEMENT PROCEEDS, ET AL. CASE NO. 5:07:-CV-01389 JV 3 1 B. 2 The Founders’ Massachusetts Motions Practice Nor do the Founders’ pending discovery motions against Facebook give Facebook a basis 3 to block payment of Finnegan’s legal fees from the trust proceeds. The motions do not concern 4 Finnegan in any way, and Finnegan played no role in them. Moreover, the motions make plain 5 that the Founders seek nothing from Facebook at this time other than mere discovery because the 6 Founders “cannot know what relief to request” until they obtain further information. Ex. 6 to 7 Chatterjee Decl. at 22 (Docket Entry 784). The speculative possibility that these motions, if 8 granted, will lead to some form of indeterminate relief against Facebook and Zuckerberg, at 9 some indeterminate time, is not sufficient to block the disbursement of the proceeds of a 10 settlement that this Court determined long ago was immediately enforceable. See November 21, 11 2008 Order at 4 (Docket Entry 664). 12 In this regard, the trust was not established for the purpose of protecting Facebook and 13 Zuckerberg from unanticipated future litigation with the Founders. Rather, it was established for 14 the sole and exclusive purpose of protecting third parties – namely, attorney lienholders and any 15 other lawful claimants. Id. at 3. By seeking the protection of the trust for themselves because 16 they fear that the Founders may obtain relief against them in Massachusetts, Facebook and 17 Zuckerberg are attempting to put the trust created by this Court to a use that was never intended. 18 They seek, in effect, a stay of execution, the concept of which this Court already rejected. Id. at 19 4. 20 The fallacy of Facebook and Zuckerberg’s position is underscored by the fact that 21 Facebook sought and received years ago the ConnectU stock that it was entitled to under the 22 settlement. See November 21, 2008 Amended Judgment (Docket Entry 665). Facebook not only 23 received this consideration and assumed control of ConnectU, but it put this controlling interest 24 to strategic use, using it to obtain the disqualification of Finnegan from its representation of the 25 Founders and to force the Founders to retain new counsel. See September 2, 2009 Order (Docket 26 Entry 704). Having already received the tangible assets that they were entitled to under the 27 settlement, and having already used those assets to their own advantage and to the irreparable 28 detriment of the Founders and Finnegan, Facebook and Zuckerberg have no basis to block REPLY IN SUPPORT OF MOTION FOR DISBURSEMENT OF SETTLEMENT PROCEEDS, ET AL. CASE NO. 5:07:-CV-01389 JV 4 1 disbursement of the limited portion of the settlement proceeds necessary to satisfy Finnegan’s 2 attorney’s lien. 3 4 * * * * * For these reasons and those set forth in its opening brief, Finnegan respectfully requests 5 that the Court enter an order requiring the disbursement of the funds necessary to satisfy and 6 extinguish Finnegan’s lien for attorneys’ fees and cost. 7 Date: November 9, 2011 Respectfully submitted, 8 CHAPMAN, POPIK & WHITE, LLP 9 10 By 11 12 OF COUNSEL: 13 16 THOMAS B. MASON* Zuckerman Spaeder LLP 1800 M Street, N.W. Washington, D.C. 20036 Phone: (202) 778-1800 Facsimile: (202) 822-8106 17 /s/ Merri A. Baldwin MERRI A. BALDWIN *Admitted Pro Hac Vice 14 15 18 19 20 21 22 23 24 25 26 27 28 REPLY IN SUPPORT OF MOTION FOR DISBURSEMENT OF SETTLEMENT PROCEEDS, ET AL. CASE NO. 5:07:-CV-01389 JV 5

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