Tuesday, April 19, 2011

Why We Should Take Paul Ceglia Seriously

I am taking pause from my current blog series on Social Media Idiocy, which will resume later this month.

I recently reported on Facebook's legal troubles with Paul Ceglia, the man who claims to be entitled to a 50% interest in Facebook.

When he filed a lawsuit against Facebook and founder Mark Zuckerberg in 2010, naysayers immediately dismissed Ceglia because his evidence seemed weak, because his lawyer was fairly small-time, and because he has been convicted for fraud in the past.

Recently, however, Ceglia has amended his complaint, which references a plethora of new evidence and (alleged) extensive email correspondence between him and Mark Zuckerberg. He has also switched attorneys; he is now represented by law megafirm DLA Piper.

Still, many journalists, bloggers, and Internet commenters doubt that this could have any significant impact on Facebook's bottom line. They think that Ceglia is trying to pull a fast one, and that he has absolutely no case whatsoever.

This negative assessment of Ceglia's case, however, is both premature and misguided.

Speaking as an attorney – particularly one who has worked on contingency in the past and who knows many other attorneys (from firms of all sizes) who take cases on contingency – the very fact of convincing an attorney to take your case – especially on contingency (which seems likely in Ceglia's case, given his apparent financial situation) – tends to lend a certain amount of credibility to your case (even if it's not an ultimate winner).

There are several considerations here:

· The attorney has to make sure he'll get paid.

Most attorneys don't mind taking long-shot cases as long as the client can afford to pay a hefty retainer and the attorney's hourly rate. It is a different matter, however, with contingency cases. When an attorney accepts a case on contingency, he agrees that he will not get paid a cent unless the client wins some proceeds from the case (whether through judgment, settlement, arbitration, mediation, or what-have-you); if the client wins proceeds, the attorney gets some percentage of those proceeds (typically 33.3%). In many cases, particularly if the firm is large and has more resources and/or if the client is especially poor, the firm may front some or all of the client's litigation costs until the case is resolved.

Attorneys REALLY hate to invest a lot of time (and, in some cases, money) into a client's matter and not get paid. We hate this a lot. (For my own part, I hate this more than I hate Osama bin Laden and people who find a way to work into every conversation the phrase, "I was listening to NPR this morning..." combined.)

Therefore, excepting all but the greenest and most desperate of barristers, attorneys will always make sure a client's case is at least reasonably strong (if not very strong) before taking such a case on contingency.

· The attorney's livelihood depends upon not taking fraudulent or frivolous cases.

Most people know that attorneys have rules of ethics with which to comply that (1) require them to be diligent and honest and (2) prevent them from helping clients perpetrate fraud on the court.

Attorneys also have duties under rules of civil procedure that assure that they will have thoroughly ascertained the veracity of any statement on any document – including complaints/pleadings – that they sign and file with the court.

In Federal Court, this is known as Rule 11 (the full text of which can be read here).

If an attorney fails to comply with his Rule 11 obligations, he can face severe sanctions.

· The golden rule of law practice that every attorney with half a brain learns at some point in their career: Never represent bad clients.

When you agree to take on a bad client, it never ends well. If you take on a bad client and you're lucky, all that will happen is that you'll get super stressed out and you won't get paid. If you're unlucky, you can wind up getting sued, getting in trouble with the Bar, losing lots of money, losing your career, and pretty much having a good chunk of your life ruined – even if you never did anything wrong.

· Big, white-shoe firms get to be extremely picky.

Anyone who has any interest in litigation should read The Curmudgeon's Guide to Practicing Law by Mark Herrman.

In this book, Herrman observes an important truth about law practice, which I paraphrase here: Solo practitioners and attorneys with small firms with tight finances have genuine ethics problems; attorneys in big firms never have ethics problems.

(Technically, this is not entirely accurate; a better way to say it would be: "Attorneys in big firms have fewer and usually much more technical ethics problems than solo practitioners and attorneys with small firms do.")

Whenever the slightest ethical problem presents itself, major law firms have a unique luxury. They can, without hesitation, simply choose to not represent the client (or, if representation has already begun, take steps to withdraw from representation).

This is not to say they always choose this route, but it's important to note that they can (and often do; after all, when you're already making tons of money, the risk-return ratio is bad when it comes to taking on more questionable clients and cases). While they obviously would prefer not to, the white-shoe firms of the world can afford to lose any given client without batting an eyelash.

Whereas lawyers who are more "small time" genuinely have to make judgment calls all the time about how to navigate murky ethical issues and unsavory clients, "big time" lawyers are above such quandaries.

· DLA Piper is a big white-shoe firm.

DLA Piper is one of the premier, largest law firms in the entire world. They bill more in a single day than most people make in a lifetime.

So here's what this comes down to:

Ceglia's history of fraud is common knowledge by now. He would raise flags for ANY lawyer – let alone the big guns at DLA Piper.

DLA Piper – legal powerhouse that it is – does not need to scramble desperately to take cases. They also have tremendous resources backing them up. Not only can they afford to carefully evaluate every potential client; they can't afford not to.

And with Ceglia being in the news over the past year, there is no way DLA Piper did not know about his criminal background. You can bet that they went over his case with the most finely toothed of combs.

Additionally, after their due diligence, the lawyers who signed their names to the amended complaint could be in serious trouble if the emails they alluded to don't actually exist.

Because of all of these considerations, the very fact that DLA Piper has taken this case shows that the case most likely has some serious meat to it.

(Add in the very unflattering portrayal of Ceglia in his complaint, and he starts to look downright credible.)

Is Ceglia's version of the facts completely accurate? Will Ceglia win his case (or a substantial settlement)? That's not for me to say.

But I do think we have to at least start taking Paul Ceglia seriously.

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