Ceglia v. Zuckerberg et al

Filing 22

NOTICE OF FILING OF OFFICIAL TRANSCRIPT of Proceedings held on July 20, 2010, before Judge Richard J. Arcara. Court Reporter/Transcriber Yvonne M. Garrison, Telephone number 716-847-2477. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER.. Redaction Request due 8/13/2010. Redacted Transcript Deadline set for 8/23/2010. Release of Transcript Restriction set for 10/21/2010. (DLC)

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Ceglia v. Zuckerberg et al Doc. 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Court Reporter: APPEARANCES: UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK ---------------------------------------PAUL D. CEGLIA, Plaintiff, - vs - Docket Number 10-CV-569 MARK ELLIOT ZUCKERBERG, Individually, and FACEBOOK, INC. Defendants. ---------------------------------------TRANSCRIPT OF ORAL ARGUMENT BEFORE THE HONORABLE RICHARD J. ARCARA UNITED STATES DISTRICT JUDGE For the Plaintiff: PAUL A. ARGENTIERI, ESQ., TERRENCE M. CONNORS, ESQ., and JAMES W. GRABLE, JR., ESQ. For the Defendants: LISA T. SIMPSON, ESQ. MICHAEL B. POWERS, ESQ. and SEAN C. McPHEE, ESQ. YVONNE M. GARRISON, RPR Official Court Reporter U.S.D.C., W.D.N.Y. 68 Court Street Buffalo, New York 14202 716-847-2477 Taken on July 20, 2010 at 11:09 a.m. Dockets.Justia.com Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 simple. THE CLERK: Civil Action 2010-569A, Ceglia versus Zuckerberg and other parties, oral argument on defendant's motion to vacate and dissolve temporary restraining order. Counsel, please state your name and the party you represent for the record. MR. CONNORS: Good morning. Terrence M. Connors, We're representing Paul James W. Grable, and Paul Argentieri. Ceglia. MR. POWERS: Good morning, Your Honor. I'm Mike Powers from Phillips Lytle; Sean McPhee from Phillips Lytle; and Lisa Simpson from Orrick, Herrington for Facebook. THE COURT: Is everyone admitted? Yes, Your Honor. MS. SIMPSON: THE COURT: Ms. Simpson, you're up. Yes, Your Honor. Let's go. MS. SIMPSON: THE COURT: Okay. MS. SIMPSON: THE COURT: Good morning, Your Honor. Good morning. I think the issues here today are quite The first is whether this TRO MS. SIMPSON: There really are two. is expired, and we think that it is; the second issue is if this TRO is not expired, whether it comports with the Federal Rules, and the answer to that is that it does not. As Your Honor's probably aware from reading the papers, this TRO was obtained on July -- or June 30th in the Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 State Court of Allegany County. It was obtained ex parte. Defendant's were not provided any notice of the hearing. The order itself was part of an order to show cause by which the plaintiffs sought permanent injunctive relief and accounting. It was not in anticipation of what we could tell But what was part of this was a preliminary injunction. document that the Court signed was a one-paragraph temporary retraining order that was incredibly broad. What it did was it actually says that it restrains Facebook from transferring, selling or assigning any of its assets. THE COURT: This is a very -- I think they agree with that. How did he agree with that? MS. SIMPSON: THE COURT: that. MS. SIMPSON: THE COURT: No, I think the plaintiff agrees with They agree that it's too broad. I think that's the impression that I got from reading the papers, that they agreed to have it modified. MS. SIMPSON: Yes, Your Honor. But the question isn't whether to modify it, the question is whether the TRO, as issued, is defective. THE COURT: Okay. And, indeed, it is. MS. SIMPSON: And I'd like to start first with the fact that we really don't think it's in place anymore. If you look at the state court order, it is very clear on its face that the TRO Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 was intended to be in place until July 9. hearing from the parties. It doesn't say until It doesn't say until the parties It doesn't say, you know, at the What it says is until appear to discuss this issue. resolution of the issues on this motion. July 9. It's a straightforward date. THE COURT: then what happened? MS. SIMPSON: Once it came over here in federal court Well, once it came over here in federal Once you get to federal court, court the rule is very clear. under removal, where there's a TRO in place, it is true that the TRO carries over to the federal court, but only to the extent that it would have been in place in the state court. THE COURT: You don't think it goes over 14 additional days from the time it's removed here? MS. SIMPSON: No, the test that's set out, both in Ultracashmere and Carrabus both cited in our -- or Carrabus both cited in our brief, and the Granny Goose case by the Supreme Court, say that what happens is you look at the shorter of the duration of what was supposed to happen in the state court or what's going to happen in the federal court. what we're looking at -THE COURT: affect? MS. SIMPSON: Well, any -- under 1450, 28 Section Doesn't Granny Goose say it stays in And so 1450, an order that was put into place in the state court -- Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 you -removal? THE COURT: Okay. -- upon removal carries over to the MS. SIMPSON: federal court. Our position is that that same very day was also the day that the TRO expired. THE COURT: Doesn't the time run from the date of the MS. SIMPSON: THE COURT: The time under the Federal Rules, yes. So 14 days from the date it was removed. Under the Federal Rules, it would be But our position is that the MS. SIMPSON: 14 days from the date of removal. state court order, itself, on its face -THE COURT: No matter, even if I don't agree with MS. SIMPSON: THE COURT: Yes. -- it expired on Friday? Yes, Your Honor. Assuming it's 14 days. MS. SIMPSON: THE COURT: This Friday. Yes. MS. SIMPSON: THE COURT: You're taking the position it doesn't It's whatever the time was, July -July 9th. extend it until Friday. MS. SIMPSON: THE COURT: July 9th. Yes. MS. SIMPSON: THE COURT: Well, continue your argument. Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MS. SIMPSON: Okay. So either the TRO expired on July 9th, which is our position, in which case we're here, you know, just making sure that that is indeed the case, or, as Your Honor points out, it does expire on Friday. But since we're here arguing about this TRO I don't think that we should wait until Friday for a resolution of this issue because of the mass defects that are in place with this TRO. It is not following the Federal Rules at all. And, once again, when we look -- when we bring a TRO over from the state court and consider it in federal court the Federal Rules apply and that is very clearly set forth in the Granny Goose case. So we look at the Federal Rules of Procedure. look at Rule 65. We And when we look at Rule 65 we see that this TRO has numerous procedural defects before we even get to the standard for a TRO. The order does not describe plaintiff's injury, it does not state why the harm was irreparable, it does not state why the TRO issued without notice. requirements set forth in 65(b). It does not state the reasons why it issued. not state its terms specifically. It does Those are all And it does not describe in And reasonable detail the acts to be restrained by Facebook. those are all requirements set forth by 65(d). those procedural requirements are met here. Not one of And with all of those procedural deficiencies, the Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 TRO fails before we get any further. And that's the case in the Rabbi decision which is cited in our papers. If we move on past that, and again, we shouldn't even be getting to these questions because the TRO is so procedurally deficient on its face, but if we move to the issues that -- that generally govern whether a TRO should issue, the standard is pretty clear. A TRO can issue if there is irreparable and immediate injury and if there was likelihood of success on the merits or, alternatively, if there are serious questions as to the success on the merits and the equity weigh in favor of an injunction. THE COURT: I'm just -- you mentioned about notice. Yes. MS. SIMPSON: THE COURT: And issuing a TRO without written or oral notice to adverse party or its attorney only if: Specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition; and the movant's attorney certifies in writing any efforts made to give notice and the reasons why it should not be required. You're saying those requirements weren't done? MS. SIMPSON: Honor. THE COURT: So your position is that notice had to be Those requirements were not met, Your Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 given? MS. SIMPSON: Well, it either had to be given, or if you look at 65(b)(2), where it says you have to state why -THE COURT: And that wasn't done here? Notice did not, no. All right. MS. SIMPSON: THE COURT: Okay. MR. CONNORS: moment? THE COURT: Your Honor, may I interpret for a I would appreciate hearing just one side at a time, Mr. Connors. Go ahead. MS. SIMPSON: So, moving on to the standards for a TRO, and as I mentioned, those are immediate irreparable harm, likelihood of success on the merits, we don't get much past the immediacy requirement here. There is no reason why this individual, Mr. Ceglia, waited for over six years to assert his rights. The requirements under a TRO are that these rights be asserted immediately and there has to be some urgency and some need for a TRO to protect the parties. There's no plausible reason why there's an urgency here. And Mr. Ceglia didn't even attempt to explain the delay that has taken -- you know, that has taken him six years to bring this to our attention. That missing element of the TRO pictured here is critical and crucial and it actually -- we don't even need to Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 go past that. Without that kind of immediacy or urgency there really is no basis for a TRO here. And that is set forth in the Kalipharma case and the arm -- Amhad case, both cited in our brief, where in the Kalipharma case it was only seven months and the Court said seven months, that's way too long to wait for a TRO. We have over six years here, which is much longer than seven months. THE COURT: When does the time start to run? The time? MS. SIMPSON: THE COURT: The seven years or the six years? Oh, it begins to run in February of Plaintiff asserted in their MS. SIMPSON: '04, according to plaintiff. papers that the contract was entered into in April of '03. THE COURT: When did the breach occur? The breach occurred, according to MS. SIMPSON: plaintiff, in February, '04 when the Facebook site was complete and the ownership interest was not transferred. THE COURT: contract. MS. SIMPSON: you the contract. Your Honor, I would love to explain to Do me one favor. Explain to me this We have some serious questions -Tell me about the facts as you Maybe that THE COURT: understand -- or maybe I should ask the plaintiff. would be better. But, as you understand it, because I'm trying to get Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 a grasp for what happened back in 2004. MS. SIMPSON: THE COURT: Yes, Your Honor. As you understand them. We have serious questions about the MS. SIMPSON: authenticity of this contract, Your Honor. THE COURT: Okay. Well, that's not right now. But just so -- background, so I can get a better feel what happened here. MS. SIMPSON: THE COURT: Well, Your Honor, as far as I know -- Give me a little history of this. Mr. Zuckerberg did indeed have a That -- MS. SIMPSON: contract with Mr. Ceglia. THE COURT: started. MS. SIMPSON: background. THE COURT: Give me the background of how this all I actually don't know the entire Okay. What the contract asserts is that there So I MS. SIMPSON: was a relationship about Facebook and there is not one. can't give you -THE COURT: There is not one? There is not one, no. MS. SIMPSON: THE COURT: time? Well, your client was how old at the I'm trying to figure out what happened. MS. SIMPSON: He was 18. Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 idea. THE COURT: Eighteen? Eighteen. MS. SIMPSON: THE COURT: And he's a student somewhere? He's a student at Harvard. MS. SIMPSON: THE COURT: Harvard. He's a freshman at Harvard. MS. SIMPSON: THE COURT: Tell me what's going on so I can get an MS. SIMPSON: computer coder. THE COURT: He's a freshman at Harvard. He's a Okay. And, from our understanding, he was MS. SIMPSON: contacted by Ceglia or he contacted Ceglia and was -- agreed to do work -THE COURT: How did that come about? -- on a project for Ceglia. MS. SIMPSON: I actually don't know the details of that. THE COURT: All right. So I just took a three-days course on computers and I still don't know a lot about them, okay. about. But he's a student at Harvard. MS. SIMPSON: THE COURT: And he's doing what? So I'm trying to understand exactly how this all came He is looking for money. Okay. All right. MS. SIMPSON: And one of his skills was being able to Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 code. So he agreed to code for Mr. Ceglia with respect to a project called Street Fax. THE COURT: Called what? Street Fax. MS. SIMPSON: THE COURT: Street back? Street Fax, F-A-X, which is actually MS. SIMPSON: one of the projects mentioned in the document submitted by plaintiff. THE COURT: Okay. You'll see the document -- MS. SIMPSON: THE COURT: That's the one that's real hard to read? Yes, the one that's very hard to read. MS. SIMPSON: It has two parts and part is in relation to Street Fax and the other part is directly relating to Facebook. THE COURT: Okay. Mr. Ceglia and Mr. Zuckerberg did work MS. SIMPSON: together on the Street Fax project for a period of time. Whether it was pursuant to this particular contract, we don't believe so. The -- the exact termination of that relationship was roughly around the end of 2003, as far as we understand. And with respect to the contract that we have in front of us, we have some serious questions because there are many inconsistencies and many undefined terms and things that don't make sense if you look at it on its face. Specifically, you'll see that there's a mention in Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 there of Facebook and then there's another mention in there of Pagebook, and those are inconsistent. The consideration in the There's no contract is directed directly to Pagebook. consideration at all in the contract that relates to Facebook. THE COURT: read this contract. MS. SIMPSON: THE COURT: get background. Precisely, Your Honor. Just one second. It's really hard to Are you saying -- again, I'm trying to I can't figure out -- your client signed this? Our client entered a contract with MS. SIMPSON: Ceglia. Whether he signed this piece of paper we are unsure at this moment. THE COURT: signature on it. MS. SIMPSON: it. THE COURT: And the plaintiff's signature. It does appear to have two signatures It does appear to have a signature on Well, it does appear to have his MS. SIMPSON: on it. We do have questions about that. THE COURT: All right. We'd like to see the original. Do you have a clean copy of this? MS. SIMPSON: THE COURT: Okay. MS. SIMPSON: THE COURT: this? I have the same copy. Mr. Terrence (sic), do you have a copy of Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. CONNORS: THE COURT: I do, Your Honor. I'm trying to read this Can I see it? and I just couldn't read it. MR. CONNORS: better, Your Honor. THE COURT: Do you mind if I take ten minutes? Do We have the same. This one is a little you have a copy of this? MS. SIMPSON: I presume it's similar to yours. (A recess was taken at 11:25 a.m.) (Proceedings continued at 11:38 a.m.) THE COURT: Before I hear from you, Mr. Connors, would you please explain to me this contract? MR. CONNORS: THE COURT: sure I understand it. Sure. Because I read it quickly, and I'm not And I'm sure it's just because of my deficiencies, but I'm having trouble understanding it. MR. CONNORS: insight into that. I would note though, as you're well aware, we became involved on Friday, this past Friday, and filed a notice of appearance on that day. So we're catching up as well, but I Your Honor, I think I can provide some can give you some background information. THE COURT: Yeah, just generally so I can -In the spring of 2003, Paul Ceglia was He was a -- a web designer. MR. CONNORS: about 28 or 29 years at that time. Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 He was involved in collecting and perfecting databases, which he thought would be the future of the internet. 2003 now, so there's still a lot to come. He had this business called Street Fax, F-A-X, and basically what he would do is he would seek to develop a database that would consist of millions of photographs of streets throughout the United States. He would contract with insurance companies so that they'd have that accessible through a click of their mouse. They could get into his database and get a photo. If there's It's back in an auto accident at Main and Court they would be able to get there and take a look at that, saving themselves a lot of money and not having to send the adjusters out and all of those investigators. THE COURT: Is this like Google Earth? A little bit like that, although MR. CONNORS: specifically with respect to streets, Street Fax. THE COURT: Okay. And what he needed in the spring of He needed someone to help him So he advertised. He put out the MR. CONNORS: 2003 was a website engineer. develop the database itself. advertisements on Craigslist. number of bids. And, lo and behold, he got a One of them was from a freshman at Harvard by He was, in addition to the name of Mark Elliot Zuckerberg. being an enrolled student there, was the -- at least claimed to Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 be the captain of their computer team and had the access to the background of Harvard for these types of computer projects. He bid a rather low amount of money. for a $1,000. Said I'll do it I'll help you develop this database, he said, I'm developing an online but I've got a project of my own. yearbook for Harvard kids now. it. I'm thinking about expanding And our guy basically said, yeah, yeah, whatever you want, I'll give you a $1,000 for that, but I want my database. I want you to work on my database. So the function of this contract was primarily to deal with the work for hire that was required by Mark Zuckerberg to perform for Mr. Ceglia. But it also provided for an investment in the project that at that time was a fledgling project, you know, with the dot com bust occurring earlier, probably little chance of success. today. And so the contract language was added that's pretty clear, Your Honor. It says that it's for the continued Who would know it would turn into what it turned into development of the software program. THE COURT: Where are you reading? If you go to -- MR. CONNORS: THE COURT: Paragraph -Two, entire agreement. MR. CONNORS: THE COURT: Okay. Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. CONNORS: First sentence is: It reflects two separate business ventures. That's clearly true. The first is what I want you to do for me, Mr. Zuckerberg, Street Fax database and programming language, that's what I expect from you and your Harvard computer team. Now, the entire agreement reflects two separate business ventures. you're doing for me. That's paragraph 2. The first is what The second is for the continued development of the software program and for the purchase and design of a suitable website for the project seller has already initiated. That's Zuckerberg's project. And he's designing it to offer the students of Harvard University access to a website similar to a live, functioning yearbook with the working title of the Facebook. And then it says it's agreed that the purchaser, Mr. Ceglia, he's identified in the very first phrase, will own a half interest, 50 percent in the software programming language and business interests derived from the expansion of that service, Facebook, to a larger audience. And so what happens eventually, Your Honor, is Street Fax goes into business, doesn't do as well. And then years later Facebook takes off to the point where now it's -- today on the news they say it celebrated its five hundred millionth customer. Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 into it. Judge? And Mr. Ceglia has this contract that, you know, your questions were direct; is that his signature? Zuckerberg's been served for 11 days. They've come up with a number of procedural defenses, but no one ever said it's not his signature, it's a fake or it's a fake contract. Basically we have a contract here that, obviously it's going to be subject to some interpretation, I mean that's what lawsuits are for, but basically it's a fairly clear work-for-hire arrangement detailing two specific projects, and that's essentially the background of the projects. THE COURT: Ma'am. MR. CONNORS: Could I interrupt for one moment, Okay. Thank you. Only to mention this, Your Honor, and obviously it's your call in this. But I know that with respect to TRO's and provisional remedies this Court and all courts are very serious about how they look at these and what they want to do with them because of the nature of the relief that's sought. I reached out to Mr. Powers on Friday after we got I had a very brief conversation with Ms. Simpson a day or two earlier, but I hadn't -- I hadn't entered an appearance. But I reached out to Mike and I said, listen, we ought to step back from this and talk about this before this goes down a track of litigation that, quite frankly, isn't as Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 important to us as the litigation of the contract. Is there some way that we could present to the Court some type of alternative disposition that wouldn't require us to invent the wheel in the TRO, work and litigate that and get involved in some type of a preliminary injunction hearing when there's all sort of other key issues involved, not the least of which is subject matter jurisdiction. There's issues that revolve around the contract itself, discovery. And what I think is we ought to step back from it and try to work out a proposal to give you an agenda as to what would be the key items and the most important items. I think getting bogged down in this TRO issue -- there's issues with the TRO. There's problems. There's no question about that. And since we've gotten and looked at it, we're really willing to acknowledge that. But we need to get to the meat of this dispute, which, we think, the meat of that dispute is this two-page contract. So we think it might work out if we stepped back a little bit and had some discussion about the procedural options available to both sides. THE COURT: Ms. Simpson. Your Honor, we're always happy to have MS. SIMPSON: a discussion. We would never say no to that. One is that we have a stay I do have some concerns. in place of this TRO. And if, for some reason, we're abandoning the determination on that TRO today, I would want Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that stay to remain in place. And I'm a little concerned about the suggestion of a conversation -THE COURT: The TRO would actually expire even if -- I know you disagree -- but even the worst of situations for you, I guess, it would be Friday. MS. SIMPSON: expires Friday. Yes. No, I don't disagree that it I'm -- in the longest counting of the days. So I would request that it remain stayed until Friday. But I do have some concerns because I would -- I wouldn't want you not be up front because there is virtually no restraints that Facebook would agree to, you know, to have in place in this case. THE COURT: So if that's what -You haven't talked at all, have you, except on the telephone? Do you want to talk to Mr. Connors for -MS. SIMPSON: I think he's aware of the fact that we are not looking to put a restraint in place of any kind. THE COURT: was? MS. SIMPSON: THE COURT: Perhaps -And his position, as far as you know, Plaintiff wants a TRO. I'm sorry, Your Honor? MS. SIMPSON: THE COURT: Plaintiff wants a TRO of some sort. Right. And we're not willing to put a MS. SIMPSON: TRO in place. Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: Of any kind? Of any kind. MS. SIMPSON: THE COURT: now, or would it? MS. SIMPSON: have a conversation. THE COURT: So it wouldn't do much good to talk right It wasn't my proposal. I'm happy to I don't know what the -Well, I'll tell you what. Go over to Judge Curtin's courtroom and why don't you have a little conversation. I'm going to be here all day. Talk. And if you get into a -- you start swinging at each other, let me know, come on back in here and we'll continue. But certainly if people can talk to each other civilly, maybe you can make some progress without the Court's intervention. If you can't, come on back here and I'm here. So, Denise, would you open up Judge Curtin's courtroom, and just the lawyers will be permitted in there. Nobody else. MS. SIMPSON: THE COURT: agree to some TRO. that position. Yeah -- Maybe Mr. Connors -- or maybe you'll But Judge Curtin always took I don't know. It's always good to have lawyers talk before And it's because lawyers are much the Court gets involved. better at it than judges are. And so why don't you go in there for five minutes. If it's useless, fine. If you want to spend the whole day in Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 there, be my guest. I'm here. Okay. Okay. Your Honor, there are a number MS. SIMPSON: of points I'd like to raise with respect to -THE COURT: left off. MS. SIMPSON: THE COURT: All right. Thank you. I know. We'll just pick up where you All right. We'll take a recess. (A recess was taken at 11:48 a.m.) (Proceedings continued at 1:07 p.m.) THE COURT: All right. Yes. Ms. Simpson. MS. SIMPSON: THE COURT: Mr. Connors. May I? MR. CONNORS: Your Honor, thank you for the opportunity to speak about the subject that's brought us in front of you today. I think we've made some progress. And what we would like to inform you is that both sides agree that there are other issues that we should be focusing on. There is a priority to other parts of this lawsuit other than provisional remedies. In that regard, Your Honor, we recognize and agree that the procedural posture of this case is that there is a stay of the temporary restraining order remaining in place right now; that the parties agree that at the latest the temporary retraining order expires on Friday. That would make any motion to dissolve or modify the temporary Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 restraining order rendered moot as of Friday. agreement with that procedural posture. And we're in The only thing the parties would state to the Court is that for the future, both sides reserve their right to any provisional remedies that they might be entitled to as a matter of law or that they would desire to seek in the future. So that, essentially, what will happen is we'll attend to the business of litigation right now. the case. We'll look at If something happens that we think is -- warrants a provisional remedy, we'll apply to you under the correct rule of Federal Rules of Civil Procedure. In the meantime, we'll look at the other issues, some of which we addressed here today that deal with the lawsuit, the contract, the subject matter jurisdiction, personal jurisdiction, all these issues. THE COURT: Okay. So by operation of law -- well, Friday by operation the stay will be in effect until Friday. of law the TRO will dissolve. Is that the right word, dissolve? MR. CONNORS: MS. SIMPSON: THE COURT: It is, Your Honor. Yes, Your Honor. Use that word -It's the statute. But since the MR. CONNORS: THE COURT: Vacated or something. Supreme Court uses dissolve, I'll use dissolve. Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 run? service. complaint. or -Honor. step? So then an answer is due, I guess. Is that the next MS. SIMPSON: That would be the next step, Your THE COURT: And that will be 20 days from when, today MS. SIMPSON: It's 20 days from the -- I think the The service of the I don't think that changes. THE COURT: Well, that's an issue, too, isn't it? Well, the service issue was concerning MS. SIMPSON: the TRO with respect to Mr. Zuckerberg. THE COURT: Okay. It was not properly served, but he was MS. SIMPSON: served with a complaint. THE COURT: Okay. So when will the 20 days start to MS. SIMPSON: Do you have dates? It is 21 days from service of the summons, I'm sorry. which day that is. I haven't done the math on I will say that defendant most likely intends to make a motion to dismiss and so may request additional time. The date is July 27th, Your Honor. THE COURT: Today is the 20th. Yes. MS. SIMPSON: Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 dismiss? THE COURT: And it's your intent to file a motion to MS. SIMPSON: THE COURT: Correct, Your Honor. So as far as the Court's Okay. concerned, what do you want me to do? MS. SIMPSON: I haven't spoken with plaintiff's I don't know if counsel about that next step yet, Your Honor. he would consent to a brief extension in order for us to do that. Also -THE COURT: Do you want to go back into the chambers? I would consent, Your Honor, to an As I say, there's other issues that I think MR. CONNORS: appropriate extension. might deal with subject matter jurisdiction as well. we probably need to get into some dialogue. If Your Honor could perhaps pick a date to bring us back or report back to you at some point, I think that might be the most advisable method. THE COURT: Give me a date. The other thing I would mention, Your MS. SIMPSON: Honor, is I think that plaintiff may intend to file an amended complaint, in which case it would make more sense, I think, in terms of resources to wait on our motion to dismiss until we see that amended complaint. chatting and get back to you. THE COURT: I'm going to take a five-minute break. So again, we'll probably do some Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 You put together a schedule that is agreeable with both parties, and I will go along with it, I think, unless there's some conflict, okay. MS. SIMPSON: THE COURT: for everything. Yes. Give me the schedule Work out a date. We'll put it in place and you'll prepare an order for me confirming those dates, all right. MS. SIMPSON: THE COURT: can draft the order. back. (A recess was taken at 1:11 p.m.) (Proceedings continued at 1:26 p.m.) THE COURT: Okay. All right. Okay. He Mr. Powers has nothing to do today. I will be back in whenever you want me MR. CONNORS: Your Honor, we have reached agreement, and with the help of your law clerk, on or before August 6th, 2010, parties shall provide the Court with a proposed scheduling order setting forth the dates to answer, move to dismiss, and/or move to remand. In the interim, parties agree that the stay of the TRO shall be in effect until July 23rd, at which time the TRO will expire on its own terms. The parties stipulate that the time to answer shall be extended until September 8th, 2010, unless otherwise extended in stipulated scheduling order, and the plaintiff Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 reserves all rights to move for provisional remedies if appropriate. THE COURT: Do you agree with that, ma'am? I do. MS. SIMPSON: I just have one edit, which I didn't catch in the first round, and that is the time to answer or otherwise move, the second time that's mentioned. I think we did that the first time, but not the second time. THE COURT: Just sit down. Take your time. (Off the record discussion.) MR. CONNORS: Ms. Simpson pointed out that, Your Honor, with respect to the time to answer, she also wants to be able to move to file motions against the complaint as well, so that that stipulation should include the time to answer or move extended until September 8th, 2010. And I pointed out there's an earlier reference to the motions as well, but that will be the subject to a scheduling order proposed to the Court. So we'll have basically a double review over any of those dates. THE COURT: you're thinking about? What about this amended complaint that If you file -- do you intend to maybe file an amended complaint? MR. CONNORS: THE COURT: scheduling? It's definitely something -- What is that going to do to all the Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 more time. MR. CONNORS: Our thought on that when it came up in discussions is that we probably ought to address the matters such as subject matter jurisdiction and remand first, get that buttoned down, and then decide what we're going to do with respect to any -THE COURT: Do you agree with that, ma'am? Yes, Your Honor. MS. SIMPSON: THE COURT: procedural quagmire. What I don't want to do is get into a All these amended complaints, motion to It just doesn't dismiss and which one are we talking about. get easy to work through that sometimes. MS. SIMPSON: THE COURT: Right. So what I'd like to do is try to keep -- I mean, you are all obviously entitled to file whatever motions you deem appropriate. But I'd like to keep it in some kind of order, so I'm not dealing with orders, you know, motions to dismiss, there's amended complaint filed thereafter and then we've got to file another motion to dismiss the amended complaint. And it gets all bogged down in procedure. And, first of all, it's very expensive to do all that, it's time-consuming for the Court. In the long run, strategically, I don't think either side gets an advantage. MS. SIMPSON: THE COURT: Right. So let's go through the time frame one Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 dates. MS. SIMPSON: that for a second. Well, Your Honor, if I could speak to That is precisely why I raised the amended complaint earlier, and I think what we're anticipating doing with our scheduling order is to take those issues in a logical order. So we'll deal with the motion to remand first and plaintiff will decide whether they wish to make that motion. If they do we'll put a briefing schedule in for that. Then we'll deal with the question of whether an amended complaint is going to be filed. And if it is, then And then we'll we'll put in dates for the amended complaint. put in dates for the motion to dismiss, depending on whether there's an amended complaint or a complaint, we'll move to dismiss whichever one the plaintiff has decided to put forth. THE COURT: Go through those dates one more time. I would just say that the date on the MS. SIMPSON: answer that we've put in this stip was -- we had actually requested that the answer date just be stipped out until the date that we put in the scheduling order but folks thought we should have a concrete date in there. date to stick. THE COURT: I think we're better off with concrete So I don't expect that MS. SIMPSON: I don't think that date is going to stick because as soon as we set out the scheduling order it's going to move, depending on what the plaintiff is doing. Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 think. THE COURT: So what do you propose? We can always move it. I think it's fine for now, is what I MR. CONNORS: MS. SIMPSON: THE COURT: Okay. There's going to come a time, just so you know, there's going to come a time when there's going to be a scheduling order put in place that I'm going to put in place and you're going to have to follow that one. MS. SIMPSON: THE COURT: Understood. Right now, because we're at the preliminary stages, I'll let you do it, because you've got to make decisions on procedurally how you want to proceed. But there's going to come a time where I'm going to put an order in and we're going to follow that order. MS. SIMPSON: enter on the 6th. THE COURT: That's by August 6th? Yes. We hope to give you an order you can MS. SIMPSON: THE COURT: And it will set forth all the dates? Yes, Your Honor. MS. SIMPSON: THE COURT: And I guess we're going to hold to those dates, unless there's an amended complaint filed, is that -MS. SIMPSON: Well, I'm hoping that the order will encompass whether an amended complaint will be filed or not. THE COURT: Of course, if I remand it back to the Proceedings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 state court this is all moot. MS. SIMPSON: THE COURT: This is all moot. All right. Anything else? Okay. MR. CONNORS: THE COURT: No, Your Honor. Thank you, very much. Thank you, very much. MS. SIMPSON: (Proceedings concluded at 1:32 p.m.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CERTIFICATION I certify that the foregoing is a correct transcription of the proceedings stenographically recorded by me in this matter. S/Yvonne M. Garrison, RPR YVONNE M. GARRISON, RPR Official Reporter U.S.D.C., W.D.N.Y.

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