A New York state appeals court on Tuesday threw out Facebook's unusual malicious prosecution lawsuit against DLA Piper and other law firms that have represented a fugitive who claimed a 50 percent stake in the social media company.
Reversing a lower court ruling that favored Facebook and Chief Executive Mark Zuckerberg, the Appellate Division in Manhattan found a lack of evidence that the law firms knew or should have known that the case of their client, Paul Ceglia, was fraudulent and based on fabricated evidence.
Ceglia, 42, a wood pellet salesman from Wellsville, New York, sued Facebook and Zuckerberg in June 2010, alleging that a 2003 contract for Zuckerberg to do programming for his company Street Fax entitled him to half of Facebook.
Federal prosecutors later deemed the contract a forgery and brought criminal charges against Ceglia.
He had been free on bail ahead of a trial set for May 4, 2015, but early last March Ceglia removed his electronic ankle bracelet and disappeared, along with his wife, two children and a dog.
Facebook's market value is now roughly $300 billion.
In May, state Supreme Court Justice Eileen Rakower said Facebook and Zuckerberg could pursue claims that DLA Piper, Milberg LLP and Lippes Mathias Wexler Friedman knew there was no basis for Ceglia's civil lawsuit.
But the appeals court noted that the law firms had found experts to counter Facebook's claim that the 2003 contract was forged, and that Ceglia had passed a lie detector test.
The court called Facebook's allegations that the law firms lacked probable cause to pursue Ceglia's civil case "entirely conclusory."
"Facebook said it is evaluating whether to appeal."We are disappointed," a spokeswoman said. "DLA Piper and the other named law firms possessed evidence proving the case was based on forged documents and that Paul Ceglia's claim was a fraud, but chose to pursue it anyway. We believe they should be held accountable."
Matthew Dontzin, a lawyer representing DLA Piper, said Facebook and Zuckerberg sued solely "to deter lawyers from taking them on. These types of bullying tactics have no place in the courthouse and today justice was done."
Sigmund Wissner-Gross, a lawyer representing Lippes Mathias, said he was pleased with the decision. Milberg's lawyer Gregory Joseph declined to comment.
The Facebook spokeswoman said the Menlo Park, California-based company will continue litigation against Paul Argentieri, another of Ceglia's lawyers. He could not be immediately reached for comment.