We predict that Facebook, Inc. v DLA Piper LLP (US)  2015 NY Slip Op 09602  Decided on December 29, 2015  Appellate Division, First Department   will turn out to be a highly cited and influential case in 2016.  The general sentiment, even in the face of conduct strongly suggesting deceit is basically to look the other way.  Judiciary Law 487, the most ancient of common law proscriptions is celebrated but almost never applied.

The facts are set forth, and generally support the reasonable assumption that Ceglia should not have been believed, even for a minute.  Nevertheless, a number of really big-time serious NYC law firms took up the case.  Was it solely for fees?  We don’t know.

“On June 30, 2010, Ceglia, through defendant attorney Paul Argentieri, filed a complaint in Allegheny County Supreme Court against Facebook and Zuckerberg (the Ceglia action), alleging that on April 28, 2003, Zuckerberg and Ceglia purportedly entered into a “Work For Hire Contract.” This purported contract allegedly reflected Ceglia’s agreement to pay Zuckerberg for developing the Street Fax website and a separate website with the working title of “The Face Book,” and Ceglia’s purported acquisition of a 50% interest in the software, programming language and business interests derived from any expansion of The Face Book, along with an additional 1% interest for each day the website was delayed beyond January 1, 2004. At the time they filed the complaint, Ceglia’s representatives obtained an ex parte TRO from the court restraining Facebook from transferring, selling, or assigning any assets owned by [*2]it. The TRO was served on Facebook on July 6, 2010, and expired on or before July 23, 2010.

On July 9, 2010, the case was removed to federal court based on diversity jurisdiction. From the outset of the litigation, Zuckerberg took the position that the Work For Hire Contract was a forgery and the Ceglia action was fraudulent.

In early 2011, Ceglia and Argentieri offered a contingency fee arrangement to various law firms via a “Lawsuit Overview” document, which mapped out the strategy and bases of the lawsuit. Several law firms, including the DLA Piper and the Lippes defendants, as well as Kasowitz, Benson, Torres and Friedman, LLP (Kasowitz), agreed to represent Ceglia.

On March 30, 2011, a forensic e-discovery consultant working with Kasowitz discovered the original Street Fax Contract on Ceglia’s computer hard drive and concluded it had been altered to create the “Work For Hire Contract” by adding references to Facebook. Kasowitz notified Argentieri of these findings several times and immediately withdrew as Ceglia’s counsel.

On April 11, 2011, the DLA Piper and the Lippes defendants (DLA-Lippes) filed an amended complaint in the Ceglia action repeating Ceglia’s claims against Facebook based on the Work For Hire Contract, and quoting, but not attaching, purported emails between Zuckerberg and Ceglia discussing the development of Facebook.

On April 13, 2011, Kasowitz sent a letter to the DLA-Lippes defendants, informing them that on March 30, it had seen documents on Ceglia’s computer that established that the Work For Hire Contract was a forgery and that it had communicated these findings to Argentieri on March 30, April 4, and April 12. The letter further stated that Kasowitz would agree, pending an investigation that defendant Vacco of Lippes Mathias had promised to undertake, to refrain from reporting its findings to the Federal Court ^[FN1]. This investigation was indeed undertaken as discussed infra.

On June 2, the parties moved and cross-moved for expedited discovery concerning the Work For Hire Contract, complete with affidavits and expert evidence both for and against the authenticity of the contract. On June 29, on the eve of the hearing for expedited discovery, the DLA-Lippes defendants

withdrew from the case without explanation ^[FN2]. The Federal Magistrate ordered expedited discovery into the authenticity of the Work For Hire Contract and the purported emails.

During the expedited discovery period, Ceglia hired the Milberg defendants, which first entered an appearance on March 5, 2012. They moved to withdraw from representing Ceglia on May 20, 2012.

On November 26, 2012, Ceglia was indicted for mail and wire fraud as a result of his scheme to defraud plaintiffs. He subsequently fled the jurisdiction and is currently a fugitive.

On March 26, 2013, following discovery, the Federal Magistrate recommended that the District Court dismiss the Ceglia action with prejudice, finding that the Work for Hire Contract and purported emails were all forgeries and that the lawsuit was a massive fraud on the court. This recommendation was adopted by the District Court on March 25, 2014, and the complaint was dismissed.”

“We turn now to the Judiciary Law claims. Relief under a cause of action based upon Judiciary Law § 487 “is not lightly given” (Chowaiki & Co. Fine Art Ltd. v Lacher, 115 AD3d 600, 601 [1st Dept 2014]) and requires a showing of “egregious conduct or a chronic and extreme pattern of behavior” on the part of the defendant attorneys that caused damages (Savitt v Greenberg Traurig, LLP, 126 AD3d 506, 507 [1st Dept 2015]). Allegations regarding an act of deceit or intent to deceive must be stated with particularity (see Armstrong v Blank Rome LLP, 126 AD3d 427, 427 [1st Dept 2015]); the claim will be dismissed if the allegations as to scienter are conclusory and factually insufficient (see Briarpatch Ltd., L.P. v Frankfurt Garbus Klein & Selz, P.C., 13 AD3d 296, 297-298 [1st Dept 2004],lv denied 4 NY3d 707 [2005]; Agostini v Sobol, 304 AD2d 395, 396 [1st Dept 2003]).

Here, the allegations that defendants knew of Ceglia’s fraud are conclusory and not supported by the record. Although plaintiffs allege that the DLA-Lippes defendants had been advised by Kasowitz that the Work For Hire Contract was a forgery prior to the filing of the amended complaint in the Ceglia action on April 11, the record unequivocally shows that the Kasowitz letter to that effect was dated April 13, two days after the amended complaint was filed. There is nothing to indicate that this information had been communicated to the defendants prior to the issuance of that letter. Moreover, plaintiffs offer no support for their claim that defendants had actual knowledge of the fraudulent nature of the claim based on statements made to them by Ceglia. In fact, the opposite is true. As noted, Ceglia consistently maintained that the Work For Hire Contract was genuine and even passed a polygraph test covering the contract and his other claims. Statements made in pleadings upon information and belief are not sufficient to establish the necessary quantum of proof to sustain allegations of fraud (see Angel v Bank of Tokyo-Mitsubishi, Ltd., 39 AD3d 368, 370 [1st Dept 2007]). Even assuming that the DLA-Lippes defendants knew of Kasowitz’s finding before they filed the amended complaint, and regardless of the fact that the Milberg defendants knew about the Street Fax Contract when they represented Ceglia, at any of those times, there was no conclusive proof of Ceglia’s fraud that rendered their representation deceptive. In fact, the dispute over the authenticity of the contract remained central to the Ceglia litigation throughout that action, and was the subject of expert testing and opinion, both in favor of, and against, its authenticity. As a result, the Judiciary Law § 487 claim should have been dismissed.”