Olympic rowing twins Cameron and Tyler Winklevoss are pushing ahead with another suit against Facebook, a day after they decided not to appeal [to the] U.S. Supreme Court [a] ruling [by the Ninth Circuit] upholding their $65 million settlement with Facebook and its founder Mark Zuckerberg.
I added the edits above because the original report was just wrong.
The continuation of the Winklevosses’ suit caught a lot of people off-guard: how can the Winklevosses continue a lawsuit in one court when another court has already held that they settled all of their claims?
Grab a cup of coffee and pick up your wands, we’re going beyond 1L Civil Procedure.
Some Background On The Two Lawsuits And The Settlement Agreement
A brief recap: there are two lawsuits involving the Winklevoss twins and Facebook, a lawsuit they filed in Massachusetts federal court (that’s the ConnectU case central to The Social Network) and a lawsuit Facebook filed against them in California federal court which, the Ninth Circuit summarized,
alleg[ed] that the Winklevosses and ConnectU hacked into Facebook to purloin user data, and tried to steal users by spamming them. The ensuing litigation involved several other parties and gave bread to many lawyers, but the details are not particularly relevant here.
Indeed. That Ninth Circuit opinion was quite boring by legal standards: it held that the one-and-one-third page term sheet that the ConnectU plaintiffs signed with the Facebook defendants following a mediation — in which the ConnectU plaintiffs released all their claims in exchange for cash and a piece of Facebook — was enforceable. The ConnectU plaintiffs came up with a couple clever arguments, like the claim that Facebook misrepresented its value and thus violated securities laws, but none of those really mattered: that one-and-one-third page term sheet was good enough to create an enforceable settlement.
That’s the opinion the Winklevosses were appealing to the Supreme Court. Not a bad idea to give that appeal up — their odds of success were minuscule, given that the case didn’t raise any particularly novel or interesting questions of law. It was your standard argument over whether or not a party would be bound by an initial settlement that was not reduced to a longer, finalized document to their satisfaction. (The answer is usually “yes.”)
The California case is thus done and gone, with a Ninth Circuit opinion affirming that the settlement included provisions under which:
The parties also 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.”
Ordinarily, there’s nothing more to do. The Winklevosses released and settled all of their claims, including the ones in Massachusetts. Typically, if there are multiple cases and one case ends with an agreement or opinion holding that all claims are released, the plaintiff files a praecipe or stipulation to dismiss the case. If they don’t, the defendant files a pro forma page-or-two motion moving to enforce the settlement and dismiss the case.
Using Fed.R.Civ.P. 60(b) To Revive A Lawsuit After You Lose
So, what gives? Can the Winklevosses really set aside the settlement agreement, despite the Ninth Circuit’s ruling enforcing it?
In relevant part, Federal Rule of Civil Procedure 60(b) states:
On motion and upon such terms as are just, the court may relieve a party … from a final judgment, order, or proceeding for the following reasons: … (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party….
As an April 20, 2011 status letter the Winklevosses filed with the Massachusetts court says:
The [ConnectU] Founders respectfully submit that Fed.R.Civ.P. 60(b) and Anderson v. Cryovac, Inc., 862 F.2d 910, 928-930 (1st Cir. 1988) warrant an inquiry into whether the Facebook Defendants intentionally or inadvertently suppressed evidence.
Ironically, if you’re in the United States, then you’re likely familiar with the case the Winklevosses rely on, Anderson v. Cryovac, Inc., 862 F.2d 910, 928-930 (1st Cir. 1988), even if you’re not a lawyer. It’s part of the appeal in the environmental contamination / toxic torts case that was the subject of A Civil Action.