Facebook May Sue Lawyers Over Fugitive Ceglia's Lawsuit, Rules Judge

Facebook Inc may pursue a lawsuit against law firms that represented a New York man who recently turned fugitive rather than face federal charges that he tried to defraud founder Mark Zuckerberg out of half of the company, a judge ruled on Monday.

New York Supreme Court Justice Eileen Rakower said Facebook and Zuckerberg could move forward with a lawsuit alleging law firms, including DLA Piper LLP and Milberg LLP, maliciously prosecuted claims by Paul Ceglia that were based on forged documents.

Rakower said that, accepting Facebook's claims as true, its complaint adequately alleged the law firms "knew there was no basis - and therefore no probable cause- for Ceglia's claims."

Facebook in statement said it was pleaded with the ruling and would "continue to hold accountable DLA Piper and the other firms who pursued Paul Ceglia's fraudulent claims against Facebook."

A DLA Piper spokesman did not respond to a request for comment. Milberg's lawyer declined comment, and a lawyer for a third firm, Lippes Mathias Wexler Friedman LLP, did not respond to a request for comment.

The ruling came a week after what would have been the May 4 start of a criminal trial in Manhattan federal court of Ceglia, a 41-year-old wood pellet salesman from Wellsville, New York.

Instead, Ceglia removed his electronic ankle bracelet in early March and disappeared, along with his wife, two children and a dog. His whereabouts remain unknown.

The criminal case arose from Ceglia's June 2010 civil lawsuit in upstate New York against Menlo Park, California-based Facebook and Zuckerberg.

Ceglia alleged that a 2003 contract with Zuckerberg, then a Harvard University freshman who had done programming work for Ceglia's StreetFax.com, entitled him to half of Facebook.

The 2nd U.S. Circuit Court of Appeals in New York last month upheld the dismissal of that lawsuit, saying "overwhelming forensic evidence" showed the contract was forged.

Over the years, the lawsuit was handled by several prominent law firms, including DLA Piper, one of the largest firms in the world.

Facebook sued those firms in October, saying they knew or should have known Ceglia's lawsuit was a fraud, but plowed ahead "for the purpose of extorting a lucrative and unwarranted settlement."

Facebook also said those lawyers stayed with the case even after a lawyer at Kasowitz Benson Torres & Friedman, who also represented Ceglia, warned he had found "smoking-gun" evidence of fraud. Kasowitz Benson soon withdrew from the case.

The case is Facebook Inc v. DLA Piper LLP, New York Supreme Court, No. 653183/2014.

© Thomson Reuters 2015