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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MERRI A. BALDWIN, SBN 141957
Chapman, Popik & White, LLP
650 California Street, 19th Floor
San Francisco, CA 94108
Phone [phone]
Fax [phone]
E-Mail: [e-mail]
THOMAS B. MASON*
Zuckerman Spaeder LLP
1800 “M” Street, N.W., Suite 1000
Washington, DC 20036
Telephone: [phone]
Facsimile: [phone]
E-Mail: [e-mail]
Attorneys for Finnegan, Henderson, Farabow,
Garrett & Dunner, LLP

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IN THE UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA -- SAN FRANCISCO DIVISION

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THE FACEBOOK, INC., et al.,

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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.
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Hon. James S. Ware

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As set forth in its opening brief, Finnegan Henderson Farabow Garrett & Dunner LLP

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(“Finnegan”) has an attorney’s lien against the settlement proceeds currently in trust pursuant to this

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Court’s November 21, 2008 Amended Judgment, in order to secure payment for legal services it

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provided to the Founders. The Founders themselves do not contest the lien and agree that Finnegan is

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entitled to immediate payment from the settlement proceeds.

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REPLY IN SUPPORT OF MOTION FOR DISBURSEMENT OF SETTLEMENT PROCEEDS, ET AL.

CASE NO. 5:07:-CV-01389 JV

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Remarkably, Facebook, Inc. and Mark Zuckerberg oppose this basic relief. They claim that

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payment of Finnegan’s long-outstanding fees must be delayed further (and indefinitely) because (1) an

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individual named Wayne Chang (who himself has declined to assert a position in this Court) has filed a

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lawsuit against the Founders in Massachusetts state court claiming that he is entitled to a share of the

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settlement and (2) the Founders have filed discovery motions in their Massachusetts case against

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Facebook and Zuckerberg. As explained below, these points are meritless. They give Facebook and

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Zuckerberg no basis to interfere with the payment of Finnegan’s fees.1

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A.

Wayne Chang’s Massachusetts Allegations

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Wayne Chang is not before this Court. He has made no appearance before this Court regarding

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the settlement proceeds. Nor has he made any submission to this Court regarding the settlement

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proceeds. He most certainly has made no request of this Court to block disbursement of the settlement

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proceeds. Significantly, Mr. Chang has taken no such action before this Court notwithstanding that he

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and his counsel have had full knowledge for nearly two years of the trust established by this Court and

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notwithstanding that they were supplied with a copy of this Court’s November 1, 2011 order, which

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imposed a deadline for opposing disbursement.2 Mr. Chang and his counsel clearly have made an

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informed and studied decision not to lodge any objections with this Court and not to seek any relief

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from this Court at this time. Accordingly, there is no basis to block disbursement of the trust proceeds

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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.

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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.

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by virtue of Mr. Chang and certainly no basis to afford Facebook and Zuckerberg standing to make

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arguments on Mr. Chang’s behalf that Mr. Chang himself has elected not to make.

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And in any event, under no circumstances would Mr. Chang even have a claim to the portion of

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the settlement proceeds sought by Finnegan. Even assuming Mr. Chang prevailed on his claims against

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the Founders and proved that he was entitled to a share of the settlement proceeds, it is well-settled that

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he – like any other beneficiary of a settlement – only would be entitled to a share of what remains after

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all attorneys’ liens have been satisfied.3 For this reason as well, Chang’s Massachusetts claims provide

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no basis to block disbursement to Finnegan.

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Notwithstanding Facebook and Zuckerberg’s suggestions to the contrary, these positions are

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entirely consistent with the positions Finnegan took in Mr. Chang’s Massachusetts lawsuit. In its

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motion to dismiss in that action, Finnegan explained to the Massachusetts court that Mr. Chang could

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be a “lawful claimant” under this Court’s Amended Judgment if, among other things, he filed some

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form of a claim with this Court. See Ex. 3 to Mason Decl. at 8 (Docket Entry 776-4). Mr. Chang,

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however, has declined to take that step. Moreover, Finnegan never remotely suggested to the

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Massachusetts court that Mr. Chang, under any circumstances, would be a lawful claimant to the

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portion of the settlement proceeds owed to attorneys.

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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

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B.

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The Founders’ Massachusetts Motions Practice
Nor do the Founders’ pending discovery motions against Facebook give Facebook a basis

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to block payment of Finnegan’s legal fees from the trust proceeds. The motions do not concern

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Finnegan in any way, and Finnegan played no role in them. Moreover, the motions make plain

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that the Founders seek nothing from Facebook at this time other than mere discovery because the

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Founders “cannot know what relief to request” until they obtain further information. Ex. 6 to

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Chatterjee Decl. at 22 (Docket Entry 784). The speculative possibility that these motions, if

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granted, will lead to some form of indeterminate relief against Facebook and Zuckerberg, at

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some indeterminate time, is not sufficient to block the disbursement of the proceeds of a

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settlement that this Court determined long ago was immediately enforceable. See November 21,

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2008 Order at 4 (Docket Entry 664).

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In this regard, the trust was not established for the purpose of protecting Facebook and

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Zuckerberg from unanticipated future litigation with the Founders. Rather, it was established for

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the sole and exclusive purpose of protecting third parties – namely, attorney lienholders and any

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other lawful claimants. Id. at 3. By seeking the protection of the trust for themselves because

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they fear that the Founders may obtain relief against them in Massachusetts, Facebook and

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Zuckerberg are attempting to put the trust created by this Court to a use that was never intended.

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They seek, in effect, a stay of execution, the concept of which this Court already rejected. Id. at

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4.

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The fallacy of Facebook and Zuckerberg’s position is underscored by the fact that

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Facebook sought and received years ago the ConnectU stock that it was entitled to under the

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settlement. See November 21, 2008 Amended Judgment (Docket Entry 665). Facebook not only

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received this consideration and assumed control of ConnectU, but it put this controlling interest

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to strategic use, using it to obtain the disqualification of Finnegan from its representation of the

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Founders and to force the Founders to retain new counsel. See September 2, 2009 Order (Docket

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Entry 704). Having already received the tangible assets that they were entitled to under the

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settlement, and having already used those assets to their own advantage and to the irreparable

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detriment of the Founders and Finnegan, Facebook and Zuckerberg have no basis to block
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CASE NO. 5:07:-CV-01389 JV

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disbursement of the limited portion of the settlement proceeds necessary to satisfy Finnegan’s

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attorney’s lien.

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For these reasons and those set forth in its opening brief, Finnegan respectfully requests

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that the Court enter an order requiring the disbursement of the funds necessary to satisfy and

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extinguish Finnegan’s lien for attorneys’ fees and cost.

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Date: November 9, 2011

Respectfully submitted,

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CHAPMAN, POPIK & WHITE, LLP

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By

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OF COUNSEL:

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THOMAS B. MASON*
Zuckerman Spaeder LLP
1800 M Street, N.W.
Washington, D.C. 20036
Phone: [phone]
Facsimile: [phone]

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/s/ Merri A. Baldwin
MERRI A. BALDWIN

*Admitted Pro Hac Vice

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REPLY IN SUPPORT OF MOTION FOR DISBURSEMENT OF SETTLEMENT PROCEEDS, ET AL.

CASE NO. 5:07:-CV-01389 JV

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