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Facebook sues lawyers of man who claimed to own the social network

The world's largest social network claims DLA Piper and other law firms knew Paul Ceglia was lying about his ownership stake in Facebook -- but went forward with the case anyway.

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Facebook CEO Mark Zuckerberg, has been the subject of several lawsuits over the social network's founding. James Martin/CNET

Facebook says when Paul Ceglia claimed to own at least half of the world's largest social network, at least one of his lawyers figured out he was lying.

That's the crux of a lawsuit filed by the Menlo Park, Calif.-based company against DLA Piper, one of the world's largest law firms, and several other lawyers connected to Ceglia and his claim that he owned 84 percent of Facebook.

At the time, Ceglia produced documents proving his ownership stake, all of which have since been dismissed as fraudulent by the courts. But during the case, DLA Piper's lawyers repeatedly assured the public that Ceglia's case had merit and that the documents he produced were real. "Anyone who claims this case is fraudulent and brought by a scam artist will come to regret those claims," Robert Brownlie, a lawyer from DLA Piper, said in a statement to The New York Times. Ceglia was arrested two years later for alleged fraud.

The original three-page lawsuit, filed in 2010, set off waves of speculation about the potential impact on the social network, which itself was expected to file documents for an initial public offering. Facebook went public two years later.

Now, Facebook wants Ceglia's lawyers to be held responsible too. In its filing to the Supreme Court of New York, Facebook said some of Ceglia's lawyers realized that the documents claiming an ownership stake in the social network were different from original versions that were on his computer. "This discovery confirmed beyond any doubt that the lawsuit was based on a forgery," Facebook said in its filing.

The lawyers, who worked for the firm Kasowitz, Benson, Torres & Friedman immediately stopped representing Ceglia and warned other lawyers on the case, including those from DLA Piper, about the fraud, Facebook said in its suit. "Yet, even after receiving a warning letter from Kasowitz, DLA Piper and Ceglia's other lawyers continued to pursue the fraudulent lawsuit."

DLA Piper said the lawsuit amounted to intimidation. "DLA Piper, which was not part of this case at its outset or its conclusion, was involved for 78 days," said Peter Pantaleo, DLA Piper's general counsel, in a statement. He added that though Facebook claimed to be "damaged" in those 78 days, its initial public offering left it worth billions of dollars.

Facebook said in a statement this lawsuit followed a promise to hold those responsible for Ceglia's claims accountable. "DLA Piper and the other named law firms knew the case was based on forged documents yet they pursued it anyway, and they should be held to account," said Colin Stretch, Facebook's general counsel.

The suit marks another twist in the bizarre tale of Facebook's founding, and in particular of the continued attempts to claim ownership in the company. Mark Zuckerberg, Facebook's 30-year-old co-founder and CEO, has not only defended his stake in the company from Ceglia, but also Cameron and Tyler Winklevoss, twins who attended Harvard with Zuckerberg. Their claim that they had originally conceived of the idea behind Facebook became one of the primary plot points of the 2010 movie, "The Social Network."

In the case of the Winklevoss twins, Facebook and Zuckerberg settled the suit for $65 million in June 2011. Facebook said Ceglia and his lawyers were after something similar. By early 2011, Facebook said Ceglia's lawyers sent "pitch documents" to various firms asking for assistance with the case. In the pitches, the Ceglia's lawyers also mapped out a strategy for a settlement, based on the one struck with the Winklevoss twins.

Ceglia is currently preparing for his trial, which has been delayed to May next year. The delay, which was set in September, came in part because of the large amounts of evidence, and Ceglia's hiring a new lawyer.

Throughout its complaint, Facebook focused on both the lawyer's knowledge of the fraud and their responsibility to inform the courts. Facebook notes that even when DLA Piper withdrew from the case, and stopped representing Ceglia, it didn't reveal the fraudulent nature of his claims. That cost Facebook time, money and cast a dark cloud over its IPO. "The refusal of DLA Piper and Ceglia's other lawyers to come clean even when withdrawing forced Facebook and Zuckerberg to continue defending a case the lawyers knew was a fraud," Facebook said.

Facebook is requesting the court pay for attorney's fees from both this and the previous lawsuits, as well as punitive damages.

Update, 12:31 p.m. PT: Adds DLA Piper's statement.