The nature this case in relation to how it is being reported fascinates me. Let me summarize while making a few observations:

1. A guy comes out of nowhere and files a lawsuit in a state court in Allegany County, New York (population: about 50,000 - http://quickfacts.census.gov/qfd/states/36/36003.html).

2. The lawsuit is filed on June 30, 2010 and consists of a grand total of 2 pages of allegations, coupled with a request for relief (see http://www.scribd.com/doc/34239119/Ceglia-v-Zuckerberg-compl...).

3. Among the substantive allegations are absurdly wrong ones (from a lawyer standpoint), such as the allegation in paragraph 3 that Facebook is a "domestic corporation" in New York. Facebook is in fact a foreign corporation that is qualified to do business in New York, as is shown by the very attachment the lawyer appends to the complaint itself (Exhibit B). I make this point only to highlight a certain level of sloppiness that attends this whole matter. This is hardly a mark of top-flight lawyering.

4. The contract states that it is entered into as a "Purchase agreement and 'work made for hire' that reflects two separate business ventures," the first for something called StreetFax Database and the second for the "continued development of the software, programs, and for the purchase and design of a suitable website for the project Seller has already initiated that is designed to offer the students of Harvard university [sic] access to a website similar to a live functioning yearbook with the working title 'The Face Book'." Mr. Ceglia was to pay to Mr. Zuckerberg $1,000 for the work he did on StreetFax and an additional $1,000 for the work he did on "The Face Book." In turn, Mr. Ceglia was to receive (with respect to the "Face Book" work, the following: "It is agreed that the Purchaser will own a half interest (50%) in the software, programming language and business interests derived from the expansion of that service to a larger audience." The contract then provides that "the agreed upon completion for the expanded project with working title 'The Face Book' shall be January 1, 2004 and an additional 1% interest in the business will be due the buyer for each day the website is delayed from that date."

5. The agreement appears to be a canned document and is poorly drafted. Since its terms appear to be heavily slanted in favor of Mr. Ceglia, it is probably fair to assume that this was his form of contract which he presented to Mr. Zuckerberg (then a student) to sign.

6. The complaint then alleges that the website was completed on February 4, 2004 (paragraph 7) and asserts that Mr. Ceglia is therefore entitled to an extra 34% of "the business," (paragraph 8) or 84% in total.

7. A few comments on the above:

(a) can anyone say "vagueness" and "uncertainty" as serious problems with this contract? with no company formed at the time, this is a guy who essentially hired Mr. Zuckerberg to develop a website that was to be like a "live yearbook" and who claims that he is to have an 84% stake in any future expansion of that idea to be made by Mr. Zuckerberg, no matter what form it took and no matter who else contributed value to build that business; this in essence is a claim by Mr. Ceglia that, at any time and under under any circumstances, he can pull a piece of paper out of his pocket and claim a perpetual non-dilutable stake in somebody's company based on a work-for-hire contract for a small development fee done before that company was even to be formed; thus, every founder who might work in that company, even for years, every investor who might invest in it, and every other stakeholder (including innocent purchasers for value who bought shares in the company in secondary trading), all such persons were to work, sweat, and toil, taking huge risks all the while, and all were to be subject to dilution - except for Mr. Ceglia, who could take his sweet time and come forward at any time with his claim of an 84% non-dilutable interest;

(b) if not vagueness, how about an unenforceable penalty? How would you react to someone who told you he would pay $1,000 for some development work and then take 1% of your company for every day delay in completing the project? Such terms are outrageous to say the least and probably serve to render the entire contract unenforceable, particular when the contract as a whole amounts to an alleged non-dilutable stake in a business no matter what future form it might take;

(c) how about statutes of limitations? New York apparently has a 6-year statute for breach of a written agreement. If the work was done by February 4, 2004, then Mr. Zuckerberg's obligation to perform would have started on that date. The complaint was filed on June 30, 2010, well past the 6-year deadline. Thus, on its face, the claim appears to be time-barred. One can of course allege facts for why the statute did not begin to run until a later date. This complaint fails to do so.

(d) Other equitable defenses would almost certainly apply so as to preclude assertion of any claim for equitable relief after such a long delay (laches being the most obvious - I discussed this in an earlier comment, http://news.ycombinator.com/item?id=1509601).

Thus, all in all, a lawsuit full of holes is built up by sensationalist reporting into a supposed major threat to Facebook and to Mr. Zuckerberg.

This is where the reporting becomes interesting. I think this relates to a strong impulse to see Mr. Zuckerberg get some sort of comeuppance for whatever reason.

The case got major headlines nationwide because a judge in a small state court entered a TRO, with the reports touting the idea that this gave the claim more gravitas because judges do not enter a TRO lightly. Yet this judge did just that. He entered the order even though the defendants had been given no notice of the application and even though the plaintiff made no showing whatever of likelihood of success on the merits and of alleged irreparable harm that he would suffer if the defendants were not enjoined from transferring assets while the TRO was in effect (see the brief filed by Facebook making these points, http://www.scribd.com/doc/34240120/Ceglia-v-Facebook-Motion-...). Without getting into technicalities, this amounts to a court having concluded that the TRO had to be entered to cover a 15-day period in which Mr. Ceglia might otherwise suffer irreparable harm absent a court order barring any transfer of Facebook assets during that period. After a nearly 7-year delay, it is basically absurd that such an order should have been entered. No possible harm could have come to Mr. Ceglia over a 15-day period that would have been any different from whatever risk he had faced for the nearly 7 years pre-dating the order. Thus, the TRO was ill-conceived at best and the federal court to which this case was removed immediately stayed its effect upon getting the case (the parties have since agreed to allow it to expire and die a merciful death).

In this piece, then, we get a subtitle stating or implying that the claims made by Facebook's lawyers (that this lawsuit was frivolous) were in themselves frivolous. Why? Because we now have an admission by Mr. Zuckerberg's lawyers that he did indeed sign the contract. This is then touted as some sort of setback for Facebook's case.

From a lawyer's standpoint, this is all really weird. This case is full of holes and represents at best a wild swing at Facebook and Mr. Zuckerberg. The contract is worded in a flaky manner. The terms themselves are outrageous by any measure (think about you would react if someone claimed a perpetual stake in whatever you did just because he paid you a small fee for a minor development effort). The lawyering in support is slipshod at best. Yet, in spite of all this, the reporting on it is building continual momentum such that it is perceived as a serious problem for the company and all because a judge entered an ill-conceived TRO and because of the basically irrelevant fact that Mr. Zuckerberg's lawyers admit that he signed the contract (a fact never previously denied). Yes, this all makes for high drama, but it also makes for highly inaccurate reporting on the legal merits of what is happening.

At most, in my view, this case represents a nuisance claim against Facebook, as no court in the world is about to prejudice the interests of innocent investors, co-founders, employees and the like for the sake of some guy who comes out of the woodwork after long delays with a wildly worded contract that is of dubious enforceability. While a court might be more open to entertaining a claim against Mr. Zuckerberg personally, even that is so dubious here as to be barely worth considering.

There are obviously many people who want to see Mr. Zuckerberg get what is due to him but this will not be the channel by which that might happen, notwithstanding the reporting on the case. In the end, this will be tried to a federal court and not in the blogs. And, in the courts, this thing is going nowhere.

I am, by the way, no apologist for Mr. Zuckerberg and have been quite critical of his actions in relation to the whole ConnectU mess (which does pose a serious risk for him and for Facebook, as I discussed in an earlier comment, http://news.ycombinator.com/item?id=1362379).