The High Stakes of the Facebook Email Lawsuit

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The once-obscure lawsuit between Mark Zuckerberg and a New York man claiming ownership of 50 percent of Facebook is attracting renewed interest this week with the release of new e-mails between the men that support the plaintiff's claim. As of now, there's no way to tell if the emails are fraudulent or not (Business Insiders's Henry Blodget has a smart rundown of how that discovery process will play out in the coming months). But in either instance, if the emails are deemed fake, like Facebook insists, or if they're the real deal, the impact of that assessment will have major consequences. Here's what's at stake for Zuckerberg, the plaintiff Paul Ceglia and the firm that represents him. 

If the Emails Are Fake

One of the reasons so many people are paying attention to this case is because Ceglia's claim is being taken up by DLA Piper, a massive international law firm with 3,000 lawyers and nearly $2 billion in revenue. It's not just Ceglia who has something to lose here, as Joe Mullin at Paid Content points out. "If the firm is found to be representing a fraudster with outrageous claims against Facebook, the reputational damage could be severe," he writes. "If these e-mails are bogus, this lawsuit is going to end up looking like nothing more than a shakedown attempt—albeit an incredibly bold one. Other tech companies might be reluctant to hire a law firm that associated itself with a fraudulent attack against one of their own." Blodget agrees with Mullin. "One of the few things lawyers get disciplined for, one corporate attorney told us, is encouraging clients to fabricate evidence (or knowingly using fabricated evidence)." As for Ceglia, Blodget says if he did fabricate these documents "he has committed criminal fraud." If Facebook can prove it, it will likely warrant Department of Justice involvement and jail time for Ceglia.

If the Emails Aren't Fake

Besides crowning Ceglia as the "best investor in tech history," as TechCrunch notes, if the emails prove to be authentic it would be massive trouble for Zuckerberg. The reality of Zuckerberg losing half his stake in the company is slim even if the emails were real. Most observers agree that Facebook would push a settlement long before that happened. But still, such a settlement would have major consequences. Facebook and Zuckerberg would have deceived investors "about the ownership of the original intellectual property," writes Blodget. "Facebook's current investors... presumably will not want to risk that their ownership of the company might be placed in question, so they might urge the company to settle the lawsuit before anything is determined by a court. In a settlement, the company would likely cover any settlement costs," he writes. "So, both Mark Zuckerberg and Facebook are exposed."

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