By Joel Rosenblatt
(c) 2011 Bloomberg News
Tuesday, January 11, 2011; 1:21 PM
The ex-Harvard University classmates, twins Cameron and Tyler Winklevoss, asked a three-judge panel of the U.S. Court of Appeals in San Francisco to void the 2008 agreement based on claims closely held Facebook didn't disclose an accurate valuation of its shares before agreeing to pay them $65 million in stock and cash. In the same year, a lower court ruled the accord was binding.
Jerome Falk, a partner at Howard Rice Nemerovski Canady Falk & Rabkin in San Francisco representing the Winklevosses and their partner, Divya Narendra, said his argument is also based on claims the hand-written, two-page term sheet for the settlement agreement was incomplete and unenforceable.
"The lawyers for both sides made a mistake," Falk said in an interview before today's hearing. "The mistake was entering into a transaction with business issues that needed to be addressed and weren't. They ended up with an agreement that's vulnerable to the attack we're making on it."
Facebook, based in Palo Alto, California, says the settlement should be enforced and the appeal thrown out because the Winklevosses suffer from a "bout of settlers' remorse," and are now asking the court "to relieve them of the deal they struck to plunge back into scorched-earth litigation," according to a company court filing.
Falk said the 2008 settlement is now worth $100 million more than its original amount after Goldman Sachs Group Inc. invested $450 million in the social networking site, boosting the company's valuation to $50 billion. The Goldman Sachs investment was first reported this month.
The case is The Facebook Inc. and Mark Zuckerberg v. ConnectU Inc., 08-16745, U.S. Court of Appeals for the Ninth Circuit (San Francisco).