Connectu, Inc. v. Facebook, Inc. et al
Filing
345
Opposition re #338 MOTION Motion For Access To Pleadings And Discovery Files filed by Facebook, Inc., Christopher Hughes, Andrew McCollum, Dustin Moskovitz, Mark Zuckerberg. (Attachments: #1 Affidavit Declaration of Monte Cooper, #2 Exhibit Ex. 1 to Cooper Decl., #3 Exhibit Ex. 2 to Cooper Decl., #4 Exhibit Ex. 3 to Cooper Decl., #5 Exhibit Ex. 4 to Cooper Decl., #6 Exhibit Ex. 5 to Cooper Decl., #7 Exhibit Ex. 6 to Cooper Decl., #8 Exhibit Ex. 7 to Cooper Decl., #9 Exhibit Ex. 8 to Cooper Decl., #10 Exhibit Ex. 9 to Cooper Decl., #11 Exhibit SEALED Ex. 10 to Cooper Decl., #12 Exhibit Ex. 11 to Cooper Decl., #13 Exhibit Ex. 12 to Cooper Decl., #14 Exhibit Ex. 13 to Cooper Decl.)(Chatterjee, I.) (Attachment 11 replaced on 7/19/2011) (York, Steve).
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
CONNECTU, INC., CAMERON
WINKLEVOSS, TYLER WINKLEVOSS,
AND DIVYA NARENDRA,
Civil Action No. 1:07-CV-10593-DPW
Plaintiff,
v.
FACEBOOK, INC., MARK ZUCKERBERG,
EDUARDO SAVERIN, DUSTIN
MOSKOVITZ, ANDREW MCCOLLUM, and
FACEBOOK, LLC,
Defendants.
CONNECTU LLC,
Civil Action No. 1:04-CV-11923 (DPW)
The CU Founders,
v.
MARK ZUCKERBERG, EDUARDO
SAVERIN, DUSTIN MOSKOVITZ, ANDREW
MCCOLLUM, CHRISTOPHER HUGHES, and
FACEBOOK, INC.,
Defendants.
MARK ZUCKERBERG, and FACEBOOK,
INC.,
Counterclaimants,
v.
CONNECTU LLC, Counterdefendant, and
CAMERON WINKLEVOSS, TYLER
WINKLEVOSS, and DIVYA NARENDRA,
Additional Counterdefendants.
FACEBOOK DEFENDANTS’ OPPOSITION TO PLAINTIFFS’ MOTION FOR ACCESS
TO PLEADINGS AND DISCOVERY FILE
REDACTED
TABLE OF CONTENTS
Page
I.
INTRODUCTION ............................................................................................................. 1
II.
FACTUAL BACKGROUND ............................................................................................ 1
A.
B.
Discovery Commences In The 2007 Action .......................................................... 4
C.
The Parties Agree To Stay Proceedings In Light Of Global Mediation ................ 7
D.
The CU Founders Proceed Knowing Instant Messages Had Not Yet Been
Produced ................................................................................................................ 7
E.
CU Founder Receives Email Regarding Facebook Production ............................. 8
F.
The CU Founders Settle The Case And Raise The “Discovery Issue”.................. 9
G.
III.
The Case Was Originally About Code, Not Documents ....................................... 2
The Protective Order ............................................................................................ 12
ARGUMENT ................................................................................................................... 13
A.
Access to Protected Materials Is Unnecessary..................................................... 13
B.
Plaintiffs’ Waived Their Claim By Releasing All Claims ................................... 14
C.
Plaintiffs Are Precluded From Relitigating Their Discovery Dispute In
This Court ............................................................................................................ 15
D.
Settling A Case During Discovery Does Not Provide Grounds For Rule
60(b) Relief .......................................................................................................... 17
1.
2.
IV.
The CU Founders Cannot Prove Misconduct .......................................... 17
Facebook’s Unfinished Production Did Not Interfere With
Plaintiffs’ Ability To Prepare For Mediation........................................... 19
CONCLUSION ................................................................................................................ 20
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TABLE OF AUTHORITIES
Page(s)
CASES
Ackermann v. United States,
340 U.S. 193 (1950) ...........................................................................................................15, 16
Ames True Temper, Inc. v. Myers Industries, Inc.,
Case No. 05-1694, 2007 WL 4268697 (W.D. Pa. Nov. 30, 2007) ....................................17, 18
Anderson v. Cryovac,
862 F.2d 910 (1st Cir. 1988) ....................................................................................................17
Bandai America, Inc. v. Bally Midway Mfg. Co.,
775 F.2d 70 (3d Cir. 1985).......................................................................................................18
Breneman v. United States ex rel. FAA,
381 F.3d 33 (1st Cir. 2004) ................................................................................................15, 16
Facebook, Inc. v. Pacific Northwest Software, Inc.,
640 F.3d 1034 (9th Cir. 2011) ......................................................................................... passim
Gonzalez-Pina v. Guillermo Rodriguez,
407 F.3d 425 (1st Cir. 2005) ..............................................................................................15, 16
Info-Hold v. Sound Merchandising, Inc.,
538 F.3d 448 (6th Cir. 2008) ....................................................................................................18
Katz v. Township of Westfall,
Civ. No. 3:CV-03-2377, 2007 WL 1366780 (M.D. Pa May 7, 2007) .....................................18
Kerwit Medical Products, Inc. v. N&H Instruments, Inc.,
616 F.2d 833 (5th Cir. 1980) ....................................................................................................18
Manning v. Trustees of Tufts College,
613 F.2d 1200 (1st Cir. 1980) ..................................................................................................18
Marshall v. Board of Ed. Bergenfield,
N.J., 575 F.3d 417, 424 (3rd Cir. 1978) .............................................................................15, 16
MCI Telecommunications Corp. v. Matrix Comms. Corp.,
171 F.R.D. 7 (D.Mass. 1997) ...................................................................................................17
Pearson v. First NH Mort. Corp.,
200 F.3d 30 (1st Cir. 1999) ......................................................................................................17
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Petro-Ventures, Inc. v. Takessian,
967 F.2d 1337 (9th Cir. 1992) ...........................................................................................14, 15
Piergrossi v. Karcewiski,
No. Civ. A. 93-4190, 1995 WL 393804 (E.D. Pa. June 30, 1995) ..........................................18
Ramallo Bros. Printing, Inc. v. El Dia, Inc.,
490 F.3d 86 (1st Cir. 2007) .......................................................................................................17
Roger Edwards, LLC v. Fiddes & Son Ltd.,
427 F.3d 129 (1st Cir. 2005) .....................................................................................................17
Sampson v. Radio Corp. of America,
434 F.2d 315 (2d Cir. 1970)...............................................................................................17, 18
Seattle Times Co. v. Rhinehart,
467 U.S. 20 (1984) ...................................................................................................................13
Total Containment, Inc. v. Environ Products, Inc.,
No. Civ. A 91-7911, 1996 WL 239877 (E.D. Pa. May 6, 1996) .............................................18
Weilbacher v. J. H. Winchester & Co., Inc.,
197 F.2d 303 (2d Cir. 1952).....................................................................................................17
Weldon v. United States,
70 F.3d 1, 3 (2d. Cir. 1995)......................................................................................................16
STATUTES
FRCP 60 .........................................................................................................................................11
Rule 26(c).......................................................................................................................................13
Rule 56(f) .......................................................................................................................................19
Rule 60(b) .............................................................................................................................. passim
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I.
INTRODUCTION
This motion—for access to confidential litigation and discovery files to fish for a Rule
60(b) motion—is the last gasp of the eighth law firm to represent three plaintiffs who chose to
settle this case and release all claims. As the Ninth Circuit recently observed in confirming the
breadth and enforceability of that release: “At some point, litigation must come to an end. That
point has now been reached.” Facebook, Inc. v. Pacific Northwest Software, Inc., 640 F.3d
1034, 1042 (9th Cir. 2011) (emphasis added). In the face of that holding, the plaintiffs, referred
to here as the “CU Founders,” provide no legitimate reason to proceed further, and instead seem
to want to keep the settlement money and stock yet disrupt the bargained-for dismissal of this
case. As the Ninth Circuit has held, the settlement agreement is valid and must be honored. This
Court should drop the curtain, end the drama, and confirm this litigation has come to an end.
The CU Founders are unwilling to abide by the instruction of the Ninth Circuit and
instead want to revisit six-year-old discovery disputes to try to “investigate” a potential Rule
60(b) motion. The CU Founders admit they have no proof that any discovery abuse actually
occurred. The law does not allow for “investigation” to support a Rule 60(b) motion for the type
of pre-settlement discovery activity the CU Founders identify. As both this Court and Chief
Judge Ware previously found, the CU Founders in February of 2008 knew that document
production was not yet complete when they proposed a stay of discovery, engaged in mediation,
and entered into a binding Settlement Agreement releasing all claims. Moreover, the CU
Founders’ prior counsel were aware of the same supposed discovery delays the CU Founders
now allege and raised the same meritless allegations of discovery misconduct in their efforts to
back out of the Settlement Agreement. They lost. The CU Founders’ motion should be denied.
II.
FACTUAL BACKGROUND
At the heart of the CU Founders’ request for access to the confidential litigation files is
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their lengthy mischaracterization of the discovery activity between April 2005 and February
2008. See Mot. at 10-17. What the CU Founders do not tell this Court is that they knew, prior to
mediating these cases, that the discovery process was not yet complete and that significant
documents had yet to be produced by both sides. Indeed, shortly before mediation, the CU
Founders asked this Court to refrain from resolving Facebook’s then-pending motions for
summary judgment because discovery was incomplete. Dkt. No. 182. The record is clear,
moreover, that the CU Founders believed at the time that
was in the immediate production queue. Dkt. No. 200, Chatterjee Decl.,
Exs, 8, 10; Dkt. No. 181 at 8. Armed with this knowledge, the CU Founders asked to stay
discovery, to continue hearings, and to mediate the case. They then entered into a Settlement
Agreement resolving the case—one that, as the Ninth Circuit emphasized, “appears quite
favorable in light of recent market activity,” (Facebook, 640 F.3d at 1042) and, more importantly
for present purposes, released all claims against “Facebook and its related parties.” Dkt. No.
206, Ex. A at 3.
A.
The Case Was Originally About Code, Not Documents1
As this Court may recall, the CU Founders, through their first set of lawyers (Finnegan
Henderson),2 focused their legal theories on meritless assertions of code theft by defendants,
1
All references to Docket Entry Numbers are to those in Case No. 1:07-cv-10593-DPW, unless
otherwise indicated. References to Docket Entry Numbers in Case No. 1:04-cv-11923-DPW are
in the form “04 Case, Dkt. No. ___.”
2
Finnegan Henderson (1) represented ConnectU and the CU Founders when this case
commenced, with Griesinger, Tighe & Maffei (2) acting as local counsel. Quinn Emanuel
Urquhart Oliver & Hedges (3) replaced the Finnegan firm as lead counsel in September 2007.
Boies Schiller (4) replaced Quinn Emanuel to upset the Settlement Agreement in or around April
2008. The CU Founders engaged O’Shea & Associates (5) to represent them in their arbitration
against Quinn Emanuel, and also to challenge the settlement agreement in California with Boies.
The CU Founders next engaged Howard Rice (6) in 2009 to handle their appeal to the Ninth
Circuit Court of Appeals, and Sally & Fitch (7) the same year to act as local counsel for O’Shea.
Meade & Schrag LLP (8) now represent the CU Founders.
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particularly Mark Zuckerberg. Not surprisingly, the initial discovery by the CU Founders
centered on their efforts to obtain code from Facebook and Mr. Zuckerberg.3 One of the most
contested discovery issues was whether the CU Founders’ expert could image the defendants’
computer hard drives to search for code. 04 Case, Dkt. Nos. 38, 148, 159. As part of their
efforts to obtain such imaging, the CU Founders disavowed any intent to use the recovered
information to locate any electronic communications, such as emails or instant messages. See 04
Case, Dkt. No. 38-1, at p. 13-26, fn. 6.
At the first hearing on one of plaintiff’s five motions to compel (see 04 Case, Dkt. Nos.
37, 52, 68, 121, 126), held on November 18, 2005, the CU Founders focused on their request to
image the hard drives to search for code.4 At that hearing, Facebook’s counsel Neel Chatterjee
represented to the Court that it had imaged the hard drives to locate the code sought by the CU
Founders.5 See Declaration of Monte Cooper (“Cooper Decl.), Ex. 1, at 18:10-22:22. The CU
Founders re-emphasized at the hearing that they were interested in imaging the hard drives “to
look only for code.” Id. at 26:22-23. The Court’s comments at the hearing also reflect that it
understood that the discussion concerned production of code, and nothing else. See Cooper
Decl. Ex. 1, at 19:23-25 (THE COURT: “I take it there’s no dispute that they’re entitled to the
source codes and the only issue is whether they exist or not, is that true or not?”). Over the next
3
The term “Facebook” in this brief refers generally to all defendants. Individual defendants are
identified by their last name.
4
At the time, ConnectU LLC was the sole plaintiff in the 04 case, although the CU Founders
were counterclaim defendants. ConnectU LLC was operated by the CU Founders, all of whom
were members of the company.
5
The CU Founders misleadingly quote the exchange that occurred between Mr. Chatterjee and
the Court, leaving the impression that discussion covered more than source code. See Mot. at
11-12. As reflected by an omitted portion of the November 18, 2005 discussion, the “deleted
items” and “additional material” referenced by Mr. Chatterjee and highlighted by the CU
Founders in their motion unambiguously refers to the search for code. See Cooper Decl. Ex. 1,
at 18:11-20:15.
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six months, Facebook’s counsel sent extensive correspondence and filed various status reports
confirming that the discussion centered on locating code. See Mot. at 12-15; 04 Case, Dkt. Nos.
148, 159.
The ongoing efforts to locate code from the imaged devices also was the subject of
discussion at a second hearing, held on March 3, 2006. Cooper Decl. Ex. 2. At that hearing,
Facebook noted that it had “made a gargantuan effort to recover all source code” because “[a]t
the hearing that was held in November the issue was source code.” Id. at 32:1-6. Facebook also
specifically said that the CU Founders had not received “any of the data that exists [on the hard
drives] that is not source code.” Id. at 32:12-24.
At the March 3, 2006 hearing, the Court also addressed the numerous other discovery
motions raised by the CU Founders. With respect to those requests, the Court only ruled on one
motion related to interrogatory responses. 04 Case, Dkt. No. 164. However, at the hearing, the
Court agreed with Facebook that the plaintiff’s discovery requests were overbroad, and that the
CU Founders were engaged in a “fishing expedition.” See Cooper Decl. Ex. 2 at 124:7-24;
136:7-14.
Shortly thereafter, discovery was largely stayed until August 2007 in order to resolve
Facebook’s then pending motion to dismiss. See 04 Case, Dkt. Nos. 94, 100. Specifically, the
Court limited all discovery to certain jurisdictional issues raised in Facebook’s motion through
orders dated May 1, 2006, August 24, 2006 and September 25, 2006, respectively. See Dkt. Nos.
172, 230, 9/25/06 Elec. Order (Cooper Decl. Ex. 3). On March 28, 2007, this Court dismissed
the 04 case on jurisdictional grounds. 04 Case, Dkt. No. 289.
B.
Discovery Commences In The 2007 Action
The CU Founders filed a new complaint on March 28, 2007 and an amended complaint
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on August 8, 2007. Dkt. Nos. 1, 71.6 The CU Founders re-noticed the unresolved motions to
compel from the 04 case. Dkt. No. 8. On June 12, 2007, the Court ordered the parties to meet
in-person to attempt to resolve the discovery disputes. Dkt. No. 61.
On July 6, 2007, the parties met and conferred regarding all pending discovery issues.
The CU Founders entered into many agreements related to document production and hard drive
imaging to search for code. Dkts Nos. 65, 79. To resolve the computer imaging dispute,
Facebook agreed to allow the CU Founders’ expert forensically to image certain hard drives to
search for code, and nothing else. Dkts. 65, 79, 94.
The parties heavily negotiated this agreement, and the Court held a hearing on it on
September 13, 2007. At the hearing, the CU Founders’ own attorney acknowledged that they
had come to realize that there were more than 790 gigabytes, or 790 billion bytes of information,
on the relevant hard drives, and most of it was not code. Cooper Decl. Ex. 4 at 5:6-21. Counsel
compared this to 750,000 Harold Robbins novels. Id. at 6:20-7:5. Recognizing the sheer volume
of information was overwhelming, the CU Founders’ counsel also repeatedly emphasized that,
consistent with his prior representations, the CU Founders only wanted the imaging to locate
code, and not “emails, letters to girlfriends, or anything else” that might also be contained in the
790 gigabytes of data. Id. at 5:25-6:3; 22:6-16; 28:3-11. The Court issued a ruling on the
Protocol immediately following this hearing, which limited the CU Founders’ expert to
searching for the specific missing code that the CU Founders’ counsel had identified. Dkt. No.
103. The ensuing Court order has generally been referred to as the “Protocol.” The expert began
work under the Protocol within days of its issuance.
After the meet and confer efforts in the summer of 2007, Facebook began a rolling
6
It was through the amended complaint filed August 8, 2007 that the CU Founders became
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production of documents at extensive effort and expense, which included review and production
of materials from the 790 gigabytes of data on the imaged hard drives. See Dkt. No. 200,
Chatterjee Decl. in Support of Opp’n to Emergency Mot., ¶ 10
Dkt. 200,
Chatterjee Decl., Exs. 5-7.
Id., Ex. 7.
Dkt. No. 200, Opp. to Emergency
Motion, at 4.
Dkt. No. 200, Chatterjee Decl. ¶ 10 & Exs. 3, 5-7, 9. For example, in December
2007, Facebook’s production efforts were stymied because of the inadvertent release by the First
Circuit—and subsequent publication by a third party—of highly sensitive personal documents
that originally were sealed in the Court’s files. See Dkt. No. 162. As a result of that disclosure,
Facebook needed to re-review documents then pending production and redact additional private
information due to the heightened confidentiality concerns.
named plaintiffs in these proceedings.
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See Dkt. No. 200, Opp. to Emergency Motion, at 3-4.
Id., Chatterjee Decl.
¶¶ 9-10.
C.
The Parties Agree To Stay Proceedings In Light Of Global Mediation
In late January 2008, the Northern District of California court ordered the parties to
mediation. Cooper Decl., Ex. 6, at § 1; Ex. 7, at 28:25-30:3. The CU Founders’ counsel then
agreed to a global mediation covering both the California and Massachusetts actions.
Importantly,
. Dkt. No. 200, Chatterjee Decl., Exs. 10-11. Facebook agreed. Id.,
Exs. 11, 33. As a result, both sides—neither of which had completed production—stopped
document production.7
D.
The CU Founders Proceed Knowing Instant Messages Had Not Yet Been
Produced
Shortly after staying discovery, the
See Dkt.
7
The CU Founders’ own document production, like Facebook’s production, was ongoing at the
time of mediation. In the California action, in which discovery was reciprocally exchanged and
used with the Massachusetts action, Facebook had three motions to compel discovery from the
CU Founders pending as of February 22, 2008, one of which sought to compel compliance with
a court order for the production of highly material documents. The parties also had numerous
disputes with respect to the CU Founders’ own discovery and production in Massachusetts. See
Dkt. 200, Chatterjee Decl., Ex. 7. For instance, on November 19, 2007, the Court ordered the
CU Founders to supplement their interrogatory responses concerning their copyright contentions,
and just two days before mediation occurred, on February 20, 2008, this Court also granted
Facebook’s motion to compel imaging of the ConnectU Founders’ own hard drives. See Cooper
Decl. Exs, 5, 12. None of the imaging or documentation that Facebook sought was produced by
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No 200, Chatterjee Decl. ¶¶ 9-10 & Exs. 5-7. On February 13, 2008 (after the discovery stay
pending mediation, but before the mediation itself took place), the CU Founders filed a Renewed
56(f) Application (Dkt. No. 181) discussing the outstanding discovery, including
Dkt. No. 181, Wolfson Decl., ¶¶ 10-12 (emphasis in original).
Dkt. No. 181 at 7.
E.
CU Founder Receives Email Regarding Facebook Production
One week before mediation, plaintiff Cameron Winklevoss received an email which read:
the CU Founders before settlement.
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Dkt. No. 292, Ex. 8.
Id., Ex. 9 at 11-12 (bracketing added).
Id., Ex.
10.
Id., Ex. 9 at 12.
F.
The CU Founders Settle The Case And Raise The “Discovery Issue”
the CU Founders mediated the cases. The CU
Founders were represented by six attorneys from two prominent law firms, all of whom also
knew about these facts. The parties ultimately reached a resolution and settled all disputes
between the parties. Dkt. 200, Chatterjee Decl., Ex. 1, ¶¶ 1, 2. See also Facebook, 640 F.3d at
1036-38. The CU Founders also agreed that “[a]ll parties get mutual releases as broad as
possible and all cases are dismissed with prejudice.” Dkt. No. 206, Ex. A at 3.
The CU Founders then had a bout of buyer’s remorse. Facebook was forced to file a
motion to enforce the Settlement Agreement in California. See Dkt. 191. In response, plaintiff
ConnectU (powered by the CU Founders) fired Quinn Emanuel, engaged its fourth law firm
(Boies Schiller), and filed an “emergency motion” in this Court
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Dkt. 195.
In its Emergency Motion,
Cooper Decl. Ex. 8 at 7:18-19, 59:3-11.
Dkt. No. 195, Hornick Decl., at ¶¶ 2, 3.
The Court declined to entertain plaintiff’s motion but did find the forensic expert’s
actions to be a transgression of the Protocol. Cooper Decl. Ex. 8 at 92:8-11. At the hearing, the
CU Founders’ counsel urged the Court to find that the Facebook Defendants had “willfully
withheld documents that should have been disclosed.” Id. at 40:15-20. The Court rejected the
CU Founders’ claim and noted that discovery was “rolling” and Facebook had “not come to the
concluding point at which they were obligated to make that disclosure.” Id. at 40:21-24. The
Court referred the “discovery” matter to the Northern District of California, concluding that “. . .
if being aware of the universe of potential disputes between the parties, Judge Ware,
nevertheless, chooses to enforce the settlement term agreement, that will be the end of the two
cases pending before me.” Id. at 93:7-12. Following the hearing, the Court issued a
Memorandum and Order in which it found:
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From all that appears, the parties were prepared to settle their
disputes then, despite the fact that aspects of discovery in this case
- most pertinently for present purposes, document production - had
not been completed and unresolved discovery issues remained
outstanding.
Dkt. 204 at 4. The Court then forwarded its June 3, 2008 Memorandum and Order, along with
the hearing transcript, to Judge Ware. 6/11/08 Dkt. Entry (Cooper Decl. Ex. 9).
The CU Founders then presented their “discovery” grievance to Judge Ware as part of
their opposition to Facebook’s motion to enforce the Settlement Agreement,
See Cooper Dec. Ex. 10, Sur-Reply Brief, at 12. See
also id. at 13 & n.5. On June 25, 2008, Judge Ware rejected the CU Founders’ argument and
issued an order enforcing the Settlement Agreement. Dkt. 206, Ex. A. In that Order,
Judge Ware noted that “the parties elected to proceed with their settlement negotiations knowing
they lacked potentially relevant information.” Dkt. 206, Ex. A at 10-11 (citing this Court’s
6/3/08 Memorandum and Order, 2). The CU Founders, using their sixth law firm (Howard
Rice), later appealed other aspects of the June 25, 2008 Order to the Ninth Circuit, but elected
not to pursue any argument related to so-called “discovery abuse.”
Instead of appealing, on November 21, 2008, the CU Founders re-raised in a motion in
this Court the same arguments contained in their prior “emergency” motion. Dkt. No. 219. The
November motion, titled Motion for Sanction of Non-Dismissal, or In the Alternative to Vacate
Final Judgment Pursuant to FRCP 60, raised the same issue the CU Founders appear to raise
now: Facebook and its counsel “intentionally suppressed smoking gun documents for over 2 ½
years.” Dkt. No. 219 at 16. That motion was terminated a year later in an Order finding:
In this lawyer-rich environment, the parties have filed parallel
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proceedings and motions in this court attempting to conduct a
second front to their conflict, which at this point is governed by the
judgment of the Northern District of California to which I am
obligated to give preclusive effect despite the pendency of appeal.
See generally Wright, Miller & Government, Federal Practice and
Procedure 2d § 4434 at 78-94 (2002) (noting rule and the
substantial difficulties which arise from the rule that a final trialcourt judgment operates as res judicata while an appeal is
pending).
Dkt. No. 274 at 2.8
G.
The Protective Order
The Ninth Circuit issued an opinion affirming Judge Ware’s order enforcing the
Settlement Agreement on April 11, 2011, amended it in denying rehearing en banc on May 16,
2011, and issued its mandate on June 24, 2011. See Dkt. Nos. 335, 04 case 335. As part of their
agreement, the Court emphasized, “[t]he parties [ ] agreed to grant each other ‘mutual releases as
broad as possible,’ and the Winklevosses represented and warranted that ‘[t]hey have no further
right to assert against Facebook’ and ‘no further claims against Facebook & its related parties.’”
Facebook, 640 F.3d 1037. In enforcing that release and holding the CU Founders to their
representation, the Ninth Circuit observed that, “[a]t some point, litigation must come to an end.
That point has now been reached.” Facebook, 640 F.3d at 1042.
Because appeals are now exhausted, pursuant to paragraph 15 of the Second Stipulated
Protective Order (04 Case Dkt. No. 35), the parties are required to “return or destroy” all
documents and deposition transcripts marked confidential within 30 days of completion of the
litigation, which occurred as of the date the mandate from the Ninth Circuit issued. To date,
although the CU Founders themselves acknowledge that “judgment of dismissal [should] be
entered forthwith . . . .” (Dkt. No. 337 at 3), Facebook has received no notice that the CU
8
Even after this order, the CU Founders unsuccessfully tried to get these same materials when
they sued their form counsel, Quinn Emanuel. Cooper Decl. Ex. 11.
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Founders or any of their numerous attorneys intend to comply with their post-litigation
obligations under the Protective Order.
III.
ARGUMENT
A.
Access to Protected Materials Is Unnecessary
The CU Founders do not set forth any legitimate reasons for why access to confidential
materials is warranted by their eighth set of lawyers. According to the Protective Order, the
parties are required to “return or destroy” all documents and deposition transcripts marked
confidential. Dkt. No. 32 at §15. Litigation of this matter ended once the Ninth Circuit issued its
mandate. The CU Founders have not sought to modify the protective order, they are not seeking
further review of the Ninth Circuit’s decision, they concede this matter should be dismissed with
prejudice, and no good cause exists to modify the protective order. As this litigation is over, no
further access by the CU Founders should be allowed.
The only vehicle that would arguably allow for access to protected material is Rule 26(c),
which generally only applies to pre-judgment activities. See Seattle Times Co. v. Rhinehart, 467
U.S. 20, 31 (1984) (finding that litigants do not have “an unrestrained right to disseminate
information that has been obtained though pretrial discovery”). The risk of harm, particularly
given the CU Founders’ insatiable desire for media attention, and the history of leaks in this
matter, provides Facebook with a very strong interest in protecting its confidential materials from
further dissemination and possible disclosure. See Arthur R. Miller Confidentiality, Protective
Orders, and Public Access to the Courts, 105 Harv.L.Rev. 427, 434 (Dec. 1991) (“When the risk
of harm to the owner of the . . . confidential information outweighs the need for discovery,
disclosure cannot be compelled…”).
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Facebook has had repeated problems with opposing counsel refusing to file protected
information under seal despite the Protective Order’s express admonitions.
See Dkt. No. 291, at 2, 17.
Indeed, even material in this Court under seal has nonetheless been disclosed publicly. Cooper
Decl. Ex. 13. Without a particularly compelling showing, the CU Founders should not be
permitted to invade the province of protected documents. The CU Founders are nowhere near
meeting such a burden.
B.
Plaintiffs’ Waived Their Claim By Releasing All Claims
The CU Founders’ request to access pre-settlement files so as to pursue their discovery
claim also fails because the claim itself has been released.
Under the Settlement Agreement:
The parties [ ] agreed to grant each other “mutual releases as broad
as possible,” and the Winklevosses represented and warranted that
“[t]hey have no further right to assert against Facebook” and “no
further claims against Facebook & its related parties.”
Facebook, 640 F.3d at 1037. As the Ninth Circuit held, “[w]hen adversaries ‘in a roughly
equivalent bargaining position and with ready access to counsel’ sign an agreement to ‘establish
[ ] a general peace,’ we enforce the clear terms of the agreement.” Id. at 1039 quoting PetroVentures, Inc. v. Takessian, 967 F.2d 1337, 1342 (9th Cir. 1992). That ruling is binding here.
The Settlement Agreement contained no representation as to discovery compliance or
stock price. Because the waiver was broad and the Settlement Agreement contained no
representations as to the disputed issues, the Ninth Circuit found that the CU Founders had
released their claim for securities fraud. On appeal, the CU Founders argued “that Facebook’s
alleged securities law violations took place in connection with the settlement itself, whereas the
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unknown securities claim in Petro-Ventures arose out of facts that occurred prior to the
settlement,” and thus is not governed by the broad release in the Settlement Agreement.
Facebook, 640 F.3d 1040. The CU Founders reverse direction here and suggest that even claims
that arose before settlement cannot be waived. As the Ninth Circuit found, “[b]oth here and in
Petro-Ventures the parties gave up [ ] claims they didn’t know they had. If the release is
effective in the one case, there’s no principled reason it shouldn’t be effective in the other.”
Facebook, 640 F.3d at 1040.
Moreover, the CU Founders chose not to appeal the District Court’s rulings related to the
Court’s finding that the CU Founders released their other allegations of fraud and misconduct,
such as the issues the CU Founders now seek to investigate. See Ackermann v. United States,
340 U.S. 193, 197-200 (1950) (“By no stretch of imagination can the voluntary, deliberate, free,
untrammeled choice of petitioner not to appeal” bring him within Rule 60(b)); see also Marshall
v. Board of Ed. Bergenfield, N.J., 575 F.3d 417, 424 (3rd Cir. 1978). In fact, the Ninth Circuit
and the District Court found that the CU Founders were fully prepared to settle with incomplete
information. Those rulings are binding upon the CU Founders in this case and should not be
disturbed.
C.
Plaintiffs Are Precluded From Relitigating Their Discovery Dispute In This
Court
The CU Founders’ latest counsel also are not entitled to confidential material in order to
pursue their discovery claim because the claim is precluded, pursuant to principles of res
judicata and collateral estoppel. Breneman v. United States ex rel. FAA, 381 F.3d 33, 38 (1st
Cir. 2004)9; Gonzalez-Pina v. Guillermo Rodriguez, 407 F.3d 425, 430 (1st Cir. 2005).10 The
9
Res judicata applies where the following are present: “(1) a final judgment on the merits in an
earlier proceeding, (2) sufficient identicality between the causes of action asserted in the earlier
and later suits, and (3) sufficient identicality between the parties in the two actions.” Breneman,
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CU Founders raised the present dispute through the June 2008 Emergency Motion and the
subsequent California enforcement proceedings. Dkt. 195; Dkt 206, Ex. A at 10-11. The parties
presented argument in both forums. At the end of each hearing, the dispute was submitted to the
court for determination. See Dkt. No. 274 at 3; Dkt. 206, Ex. A at 10-11. This Court noted that
the CU Founders’ “second front to their conflict, . . . is governed by the judgment of the
Northern District of California to which I am obligated to give preclusive effect despite the
pendency of appeal.” Dkt. No. 274 at 2 citing, generally, WRIGHT, MILLER & COOPER,
FEDERAL PRACTICE AND PROCEDURE 2d § 4433 at 78-94 (2002). On June 26, 2008,
Judge Ware then rejected the arguments raised in both courts, and found no basis to decline
enforcement. Dkt. No. 206, Ex. A at 10-11. The CU Founders chose not to appeal Judge Ware’s
ruling. See Ackermann, 340 U.S. at 197-200; Marshall, 575 F.3d at 424.
The courts’ rulings foreclose the CU Founders from relitigating their discovery claims in
this Court, whether through Rule 60(b) or otherwise. Res judicata applies to Rule 60(b) motions
just as it does to any effort to relitigate a dispute—i.e., when the issues in dispute could have
been raised or were raised in earlier proceedings. Weldon v. United States, 70 F.3d 1, 3 (2d. Cir.
1995) (applying res judicata because grounds upon which plaintiff claimed fraud in a Rule 60(b)
motion were precluded because they could have been raised in an earlier proceeding). The
present dispute has been “actually litigated” and judgment has been reached on the merits. The
Ninth Circuit affirmed the judgment of the Northern District. Facebook, 640 F.3d at 1042. This
Court is bound by that decision. Breneman, 381 F.3d at 38; Gonzalez-Pina, 407 F.3d at 430;
381 F.3d at 38.
10
Collateral estoppel prohibits relitigation where: (1) the issue to be precluded is the same as
that disputed in a prior proceeding, (2) the issue was actually litigated in the earlier proceeding,
(3) the issue was determined by a valid and binding final judgment or order, and (4) the
determination of the issue in the prior proceeding was essential to the final judgment or order.
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Ramallo Bros, 490 F.3d at 90-91.
D.
Settling A Case During Discovery Does Not Provide Grounds For Rule 60(b)
Relief
Finally, and in all events, the CU Founders also are not entitled to obtain confidential
files in order to pursue their discovery claim under Rule 60(b), because they cannot possibly
meet the showing necessary to support a motion under that Rule. The CU Founders chose to
settle in the middle of discovery—indeed, they asked to stay discovery so that mediation could
proceed.
They also admit they have no basis to assert any “misconduct” but instead want to
“investigate.” “A motion under Rule 60(b) cannot be used to avoid the consequences of a
party’s decision to settle the litigation or to forego an appeal from an adverse ruling.” Sampson v.
Radio Corp. of America, 434 F.2d 315, 317 (2d Cir. 1970); Weilbacher v. J. H. Winchester &
Co., Inc., 197 F.2d 303 (2d Cir. 1952); see also MCI Telecommunications Corp. v. Matrix
Comms. Corp., 171 F.R.D. 7, 9 (D.Mass. 1997) (“in order to prevail under Fed.R.Civ.P. 60(b)(3),
[plaintiff] must demonstrate ‘misconduct-like fraud or misrepresentation-by clear and convincing
evidence, and must then show that the misconduct foreclosed full and fair preparation or
presentation of its case’”) quoting Anderson v. Cryovac, 862 F.2d 910, 923 (1st Cir. 1988);
Pearson v. First NH Mort. Corp., 200 F.3d 30 (1st Cir. 1999); Ames True Temper, Inc. v. Myers
Industries, Inc., Case No. 05-1694, 2007 WL 4268697, at *5 (W.D. Pa. Nov. 30, 2007); Roger
Edwards, LLC v. Fiddes & Son Ltd., 427 F.3d 129, 137 (1st Cir. 2005).
1.
The CU Founders Cannot Prove Misconduct
The fact that a party suffers “buyer’s remorse” because it settled at a time when it knew
Ramallo Bros. Printing, Inc. v. El Dia, Inc., 490 F.3d 86, 90 (1st Cir. 2007).
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that document production was not yet complete is not grounds for a “misconduct” assertion as a
matter of law. A motion to vacate on grounds that a party did not produce documents should be
denied if the party voluntarily elected not to seek such production, and where there is no court
order requiring production. Manning v. Trustees of Tufts College, 613 F.2d 1200, 1204 (1st Cir.
1980). See also Info-Hold v. Sound Merchandising, Inc., 538 F.3d 448, 457-458 (6th Cir. 2008).
Dkt. No. 181, Wolfson Decl., ¶¶ 10-12.
As numerous courts have recognized, when a party settles prior to the close of discovery,
a judgment should not be set aside based on a claim that important documents have not been
produced. Sampson, 434 F.2d at 317; see also Ames True Temper, 2007 WL 4268697, at *3
(“. . . there was nothing to prevent plaintiff from allowing the litigation to proceed to discovery
before it agreed to settle the case, which is was apparently content to do based on the information
available to it at the time. It cannot now claim that the defendants should somehow be held
responsible for failing to disclose information that plaintiff consciously decided to forego
obtaining.”); Kerwit Medical Products, Inc. v. N&H Instruments, Inc., 616 F.2d 833, 837 (5th
Cir. 1980); Bandai America, Inc. v. Bally Midway Mfg. Co., 775 F.2d 70, 74 (3d Cir. 1985)(“In
settling [Bandai] surrendered the right to pursue additional discovery, and . . . [t]he record does
not support the inference that Bandai’s decision to relinquish further discovery related to any
misrepresentation by counsel for Midway”); Piergrossi v. Karcewiski, No. Civ. A. 93-4190,
1995 WL 393804 (E.D. Pa. June 30, 1995); Katz v. Township of Westfall, Civ. No. 3:CV-032377, 2007 WL 1366780 (M.D. Pa May 7, 2007); Total Containment, Inc. v. Environ Products,
Inc., No. Civ. A 91-7911, 1996 WL 239877, at *2 (E.D. Pa. May 6, 1996). That rule applies
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doubly here, where, as explained, the
2.
Facebook’s Unfinished Production Did Not Interfere With Plaintiffs’
Ability To Prepare For Mediation
The CU Founders also cannot conceivably show that incomplete discovery interfered
with their ability to prepare for mediation or prejudiced their rights.
Dkt. No. 292, Ex.
8.
two of the CU Founders interrupted
their training for the Summer Olympics, traveled 3000 miles with father and former classmate,
negotiated with Facebook into the early morning hours, settled this lawsuit, and released all
claims. The CU Founders cannot possibly demonstrate, under these facts, that Facebook
interfered with their full and fair preparation for mediation such that they can undo the settlement
pursuant to Rule 60(b).
As this Court has already observed, “[f]rom all that appears, the parties were prepared to
settle their disputes then, despite the fact that aspects of discovery in this case - most pertinently
for present purposes, document production - had not been completed and unresolved discovery
issues remained outstanding.” Dkt. No. 274 at 2. There is no need for the CU Founders’ eighth
set of lawyers to obtain access to materials solely to investigate a discovery claim that this Court
has already made clear is without merit.
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IV.
CONCLUSION
As the CU Founders have released all claims and are precluded from re-litigating the
issue of whether they were entitled to production of instant messages that they knew in February
2008 had not yet been produced, there is no reason why their latest counsel should obtain access
to confidential files, which cannot yield any basis for relief pursuant to Rule 60(b). For these
reasons, Facebook respectfully requests that the Court deny the CU Founders’ Motion for Access
to Pleadings and Discovery Files.
Dated: July 15, 2011
Respectfully submitted,
/s/ I. Neel Chatterjee /s/
I. Neel Chatterjee (admitted pro hac vice)
Monte Cooper (admitted pro hac vice)
Theresa A. Sutton (admitted pro hac vice)
ORRICK, HERRINGTON & SUTCLIFFE LLP
1000 Marsh Road
Menlo Park, California 94025
Telephone: (650) 614-7400
Facsimile: (650) 614-7401
nchatterjee@orrick.com
mcooper@orrick.com
tsutton@orrick.com
Steven M. Bauer (BBO# 542531)
Sharada Devarasetty (BBO# 672514)
PROSKAUER ROSE, LLP
One International Plaza, 14th Floor
Boston, MA 02110-2600
Telephone: (617) 526-9600
Facsimile:
(617) 526-9899
sbauer@proskauer.com
sdevarasetty@proskauer.com
Attorneys for Mark Zuckerberg, Dustin
Moskovitz, Andrew McCollum, Christopher
Hughes, and Facebook, Inc.
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CERTIFICATE OF SERVICE
I hereby certify that this document(s) filed through the ECF system will be sent
electronically to the registered participants as identified on the Notice of Electronic Filing (NEF)
and paper copies will be sent to those indicated as non registered participants on July 15, 2011.
Dated: July 15, 2011
Respectfully submitted,
/s/ I. Neel Chatterjee /s/
I. Neel Chatterjee
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