ContractsProf Blog

Did Zuckerberg Sign Away 84% of Facebook?

Wunderkind Mark Zuckerberg (who dreamed up Facebook in his college dorm room) is facing a lawsuit by Paul Ceglia, a man who claims that he has a contractual right to an 84% stake in the company.  The Wall Street Journal reported:

In his suit, Mr. Ceglia claims he signed a contract with Mr. Zuckerberg on April 28, 2003, to develop and design a website, paying a $1,000 fee but getting a 50% stake in the product. The contract stipulated that Mr. Ceglia would get an additional 1% interest in the business for every day after Jan. 1, 2004, until it was completed.

In a statement, a spokesman for closely held Facebook said, "We believe this suit is completely frivolous and we will fight it vigorously."

Mr. Ceglia didn't return calls seeking comment. His lawyer, Paul A. Argentieri, also didn't return a call for comment.

It's unclear how Mr. Ceglia might have become involved with Mr. Zuckerberg.

A copy of the contract seen by The Wall Street Journal says it is "for the purchase and design of a suitable website for the project Seller [Mr. Zuckerberg] has already initiated that is designed to offer the students of Harvard university [sic] access to a wesite [sic] similar to a live functioning yearbook with the working title of 'The Face Book.'"

There is a factual question whether Zuckerberg ever signed the purported contract.  Copies of the document appear to bear his signature.  Is it a forgery?  In court, Zuckerberg’s attorney stated that she was “unsure” whether Zuckerberg signed the contract.  In an interview with CBS’ Diane Sawyer, Zuckerberg said that he never signed the contract:

Assuming, however, that the document did not say anything about how/when it became binding as a contract, the objective theory of contract formation certainly makes it is possible for Zuckerberg to manifest assent without actually signing the document. 

That said, the whole discussion could become academic because, as Prof. Victor Goldberg (Columbia) told the WSJ, Ceglia might have a problem with the 6-year statute of limitations for breach of contract. 

UPDATE: Here's the complaint, which contains a copy of the "work for hire" contract.

[Meredith R. Miller]

BP's Contracts with Environmental Scientists

Is BP taking key scientists "out of circulation" by retaining as many experts as possible and having them agree to confidentiality?  CNN filed this report:

 

 [Meredith R. Miller]

Another 2011 Conference: Save the Date!

 Mark your calendars for another promising conference: "Contract as Promise" Symposium on March 25, 2011 at Suffolk University School of Law in Boston.  Jeffrey Lipshaw provides this overview, and promises (sorry!) further details:

In 1981, Professor Charles Fried published a book on contract theory entitled Contract as Promise.  For almost thirty years, the book has been the seminal work on the moral or deontological justification for the state's enforcement of private promises.  No scholarly discussion of the field can be complete without addressing its claims, whether one agrees or not with its original and provocative stand.  

On Friday, March 25, 2011, Suffolk University Law School in Boston will mark the thirtieth anniversary of the book's publication with a day-long symposium, "Contract as Promise at 30:  The Future of Contract Theory."  After reflections from Professor Fried, some of the academy's foremost contract theorists will offer papers and commentary, with ample opportunity for questions and discussion.  Participants presently scheduled include the Honorable Richard Posner, Randy Barnett, Barbara Fried, T.M. Scanlon, Jean Braucher, Richard Craswell, Avery Katz, Henry Smith, Lisa Bernstein, Seana Shiffrin, Daniel Markovits, Juliet Kostritsky, John C.P. Goldberg, Rachel Arnow-Richman, Curtis Bridgeman, Nathan Oman, Roy Kreitner, Gregory Klass, Carol Chomsky, and Robert Scott. 

This is an opportune moment to step back, review the alternative approaches to contract theory that have developed since 1981, and to offer views about future doctrinal or inter-disciplinary developments, whether based in moral philosophy, welfare economics, sociology, or other disciplines.  The papers and proceedings will be published in a forthcoming issue of the Suffolk Law Review.

[Meredith R. Miller]

Now in Print

Douglas G. Baird, The Holmesian Bad Man's First Critic, 44 Tulsa L. Rev. 739 (2009).

Matthew K. Bell, Forget What You Intended: Surprisingly Strict Liability and COGSA Versus Carmack, 37 Transp. L.J. 57 (2010).

Molly Brooks, The "Seller-Friendly" Approach to MAC Clause Analysis Should be Replaced by a "Reality-Friendly" Approach, 87 U. Det. Mercy L. Rev. 83 (2010).

Edwin Butterfoss & H. Allen Blair, Where is Emily Litella When You Need Her?: The Unsuccessful Effort to Craft a General Theory of Obligation of Promise for Benefit Received, 28 Quinnipiac L. Rev. 385 (2010).

David Cabrelli & Rebecca Zahn, Challenging Unfair Terms: Some Recent Developments, [2010] Jurid. Rev. 115.

Ross Dillon, A Bale of Wool, [2010] N.Z.L.J. 145.

Lisa A. Fortin, Note, Why There Should Be a Duty to Mitigate Liquidated Damages Clauses, 38 Hofstra L. Rev. 285 (2009).*

James Gordley, The Origins of Sale: Some Lessons from the Romans, 84 Tul. L. Rev. 1437 (2010).

Sam S. Han, Predicting the Enforceability of Browse-wrap Agreements in Ohio, 36 Ohio N.U. L. Rev. 31 (2010).

Robert A. Hillman & Maureen A. O'Rourke, Principles of the Law of Software Contracts: Some Highlights, 84 Tul. L. Rev. 1519 (2010).**

Kristin L. Hines, Note, Examining Contractual Models for Transferring Environmental Liability: How They Work and Where They are Headed, 11 Vt. J. Envtl. L. 395 (2009).

Martin A. Hogg, Promise: The Neglected Obligation in European Private Law, 59 Int'l & Comp. L.Q. 461 (2010).

Joshua Karton, Contract Law in International Commercial Arbitration: The Case of Suspension of Performance, 58 Int'l & Comp. L.Q. 863 (2009).

Nancy S. Kim, Expanding the Scope of the Principles of the Law of Software Contracts to Include Digital Content, 84 Tul. L. Rev. 1595 (2010).**

Juli Loden, Comment, The Earth is Not Flat, and "A Quasi Contract is Not a Contract at All" -- Tennessee Restitution and Unjust Enrichment Law, 11 Transactions: Tenn. J. Bus. L. 167 (2010).

Susana López-Bayón & Manuel González-Díaz, Indefinite Contract Duration: Evidence from Electronics Subcontracting, 30 Int'l Rev. L. & Econ. 145 (2010).

Andrew C. W. Lund, Opting Out of Good Faith, 37 Fla. St. L. Rev. 393 (2010).

Larry A. DiMatteo & Samuel Flaks, Beyond Rules, 47 Hous. L. Rev. 297 (2010).

Juliet M. Moringiello & William L. Reynolds, What's Software Got to Do with It? The ALIPrinciples of the Law of Software Contracts, 84 Tul. L. Rev. 1541 (2010).**

Otto Sandrock, The Choice Between Forum Selection, Mediation and Arbitration clauses: European Perspectives, 20 Am. Rev. Int'l Arb. 7 (2009).

Hannibal Travis, The Principles of the Law of Software Contracts: At Odds with Copyright, Consumer, and Employment Law?, 84 Tul L. Rev. 1557 (2010).**

Hal R. Varian, Computer Mediated Transactions, 100 Am. Econ. Rev. 1 (2010).

Daniel A. Verrett, Comment, Delay Damages Sufficient for a Maritime Lien?: The Economic Loss Doctrine Brings Certainty to the High Seas, 47 Hous. L. Rev. 463 (2010).

Kate Zdrojeski, Note, International Ice Hockey: Player Poaching and Contract Dispute, 42 Case W. J. Int'l L. 775 (2010).

* - Despite a somewhat awkward title -- the point is to mitigate damages, not mitigate clauses -- this Note is worth a read, arguing that, inter alia, preventing economic waste, a penalty on the breaching party, and windfall profits for the nonbreaching party, as well as promoting consistent remedial principles, should oblige a court (or arbitrator) to not mechanistically assess the damages to which the parties agreed in their contract.

** - These four essays comprise a mini-symposium on the ALI's Principles of the Law of Software Contracts, arising out of a program I organized and moderated at January's AALS Annual Meeting in New Orleans.  (Yes, that's January 2010.)  Bob Hillman, Maureen O'Rourke, and Juliet Moringiello spoke at the program, as did Amy Boss and Florencia Marotta-Wurgler.  Nancy Kim and Hannibal Travis responded to a supplemental call for papers to accompany those the program speakers were contributing to the print symposium.

For those who complain about the sometimes sluggish processes of student-edited law journals (for example here, including the comments), the program was on January 9, final drafts were due February 15, and the print issue arrived in my campus mailbox on June 2.  Unfortunately, this pace proved too brisk for several authors lined up to contribute to the print symposium (including yours truly).  I hope to collect those authors' contributions, revised-as-appropriate versions of these four essays and other essays and articles first appearing elsewhere, and some original shorter response and reply pieces, in a book coming soon -- at least by astronomical or paleontological standards -- from an as-yet-undisclosed legal academic publisher.

[Keith A. Rowley]

Family Matters: Breach of Contract for Failure to Pay College Tuition

The Connecticut Law Tribune reports on a breach of contract claim by a daughter against her father, who failed (as promised) to pay her college tuition.  The Law Tribune reports:

So consider the odd case of Dana Soderberg, who went to court to force her father to live up to a deal to pay her tuition at Southern Connecticut State University. Hamden family lawyer Renee C. Berman handled the lawsuit for Soderberg.

"Nothing that I've researched has shown any cases like this and hopefully there won't be anymore because it's a sad situation," said Berman.

Dana came from what is perhaps an all-too-typical family situation. Her parents, Howard and Deborah Soderberg, of Stratford divorced in 2004. Upon splitting, they agreed that Howard, a property developer, would be responsible for the education costs for their three children, Dana, Amanda and Erik.

Dana's experience had evidently taught her that her father had a tendency not to follow through with paying for things. So she persuaded him the following year to enter into a written contract obligating him to pay her college tuition until she was 25, along with other school expenses such as textbooks, and her car insurance.

As part of the agreement, Dana would make an effort to apply for student loans and Howard Soderberg would pay off those loans. Co-signing the agreement was Howard's sister, Patricia.

Howard delivered on his word through March 24, 2007. But when it came time for Dana to begin her senior year at Southern Connecticut, Howard Soderberg refused to pay the bills. And so Dana got a $20,000 loan to pay for her last year of college, with her mother co-signing.

Dana graduated and slapped her father with a breach of contract action in New Haven Superior Court.  The Law Tribune continues:

The father represented himself in a two-day trial. He argued that Dana breached their agreement by not making reasonable efforts to apply for student loans, by failing to attend classes full time and by not providing him with receipts for tuition and other school-related expenses.

Howard Soderberg also filed a counterclaim alleging that his daughter dropped courses and pocketed the refunds. He also said she spent money that was supposed to go toward textbooks on personal items.

Attorney Berman said Dana was an art major and needed expensive art supplies for her classes. She said her father was typically late in making tuition payments, which often forced Dana to drop out of certain classes.

Judge Trial Referee William L. Hadden Jr. issued a written opinion earlier this month, ruling that father and daughter had a legitimate contract, that Dana proved to be the more credible party in the lawsuit, and that the father had breached the agreement.

"The plaintiff has proven that she has performed all of her obligations as set forth …" wrote Hadden. "The defendants have failed to prove the claims set forth in their special defenses and in Howard's counterclaim."

Berman said damages totaled around $47,000, including the loan, interest, attorney fees and missed car insurance payments. Berman did not anticipate an appeal.

"They just don't have a relationship," Berman said of Dana and her father. "It has to be weak to begin with if you enter into that agreement.

Berman was struck by Howard Soderberg's emotions -- or lack thereof. "Here his daughter's bringing him to court and there's no sadness, no remorse that his daughter was in this situation having to sue him."

Berman said Dana's father still maintains "somewhat" of a relationship with his other children and has paid for their education.

Family lawyer Thomas D. Colin, of Schoonmaker, George & Colin, P.C. in Greenwich doesn't foresee a rash of young students suing their parents in light of this opinion.

"I've never seen that at all," said Colin. "I don't know how many kids can get their parents to sign contracts with them so I don't know how much that would show up."

Berman, whose client is now a teacher, agreed with that assessment.

"I think this is just a limited situation," Berman said. "This was her way of assuring college would get paid. I think it's a very unique situation. It's not a typical relationship."

The tale raises interesting issues about consideration and (perhaps) promissory estoppel.  I have been unable to locate the written decision – feel free to send it along if you have a copy. (Thanks!)

[Meredith R. Miller]

Movie Futures No Longer in Production - An Update

Previously, we blogged about movie futures.  Cantor Fitzgerald was expecting to open an online futures market that would allow film studios, institutions and moviegoers to place bets on the box-office revenue of Hollywood’s biggest releases. It even had the green light from regulators.

However, it looks like the current financial reform legislation has thrown rotten tomatoes at the plan.  The LA Times reports:

With financial reform legislation that would outlaw trading in box-office futures headed toward final passage, the company is giving up on its plans, said Richard Jaycobs, the executive heading the effort for Cantor Fitzgerald.

"The broader opportunity of motion picture finance is still something we have to evaluate, but we know now we're not going to do futures contracts," he said. "The bill is quite clear."

Though the financial reform bill isn't yet law, its box-office futures provision was made retroactive to June 1 by the House-Senate conference committee that hammered out final language for the bill last week. That would put a stake into both Cantor Exchange and its main competitor, Media Derivatives, which received final approval from the commission June 14.

Jaycobs said his firm was simply overwhelmed by the lobbying power of the Motion Picture Assn. of America, which on behalf of the six major studios persuaded Sen. Blanche Lincoln (D-Ark.) to insert a box-office-futures ban in her original version of the bill. The association also got House-Senate negotiators last week to not only keep the provision but also make it retroactive.

"I've really come to respect the MPAA's ability to be effective on [Capitol] Hill," Jaycobs said.

The major studios and some others in Hollywood had argued that box-office futures markets could create negative publicity for movies before they're released and would be too easy to manipulate. Backers have said they would be a useful financial tool for film investors.

This is how a bill becomes 2000 pages.

[Meredith R. Miller -- h/t Allen Blair (Hamline)]

Save the Date!

The annual spring conference on contract law will be held on February 18 and 19, 2011, at the lovely Stetson Law School.  Save the Date!  

A more formal announcement is forthcoming, with details about registration, hotel accommodations and the call for papers.  In the interim, if you have any questions, you can contact Jamie Fox (and that's Fox, not Foxx).

[Meredith R. Miller]