13 July,2010 05:49 PM IST | | Agencies
A judge here has issued a temporary restraining order on the transfer of Facebook Inc.'s assets, after a suit by a New York man who claims to own an 84 percent stake in the social-networking company, a media report said Tuesday.
Paul D. Ceglia filed a suit in the Supreme Court of New York's Allegany County June 30, claiming that a 2003 contract he signed with Facebook founder and Chief Executive Mark Zuckerberg entitles him to ownership of the company and monetary damages, Wall Street Journal reported on its website.
Judge Thomas Brown, who issued the temporary restraining order earlier this month, is hearing the suit. Facebook has requested that the case be moved to federal court.
In his suit, Ceglia claims he signed a contract with Zuckerberg April 28, 2003, to develop and design a website, paying a $1,000 fee but getting a 50 percent stake in the product.
The contract stipulated that Ceglia would get an additional one percent interest in the business for every day after Jan 1, 2004, until it was completed.
In a statement, a spokesman for closely held Facebook said: "We believe this suit is completely frivolous and we will fight it vigorously."
Ceglia didn't return calls seeking comment. His lawyer, Paul A. Argentieri, also didn't return a call for comment.
It's unclear how Ceglia might have become involved with Zuckerberg.
A copy of the contract seen by The Wall Street Journal says it is "for the purchase and design of a suitable website for the project. Seller (Zuckerberg) has already initiated that is designed to offer the students of Harvard university access to a website similar to a live functioning yearbook with the working title of 'The Face Book.'"
The date of the contract appears to conflict with previous accounts of the creation of Facebook. Zuckerberg built a predecessor to Facebook called Facemash in October and November 2003, but Zuckerberg didn't register the domain thefacebook.com until January 2004.
In 2009, New York's Attorney General Andrew M. Cuomo accused Ceglia of defrauding customers of his wood-pellet fuel company, according to a news release from the Attorney General's office.
The state claimed that he took more than $200,000 from consumers and then failed to deliver any products or refunds. The wood-pellet case is ongoing.
Victor P. Goldberg, who teaches contracts at Columbia University's Law School, said the Facebook contract lawsuit may get tripped up by the statute of limitations, which is six years in New York.
He said the contract itself was unusual, because it doesn't stipulate what else Zuckerberg would have gotten from Ceglia aside from $1,000.
Facebook has grown explosively in recent years, and has about 500 million users globally. Along the way, the company has wrestled with other challenges over its early ownership and origins, and with user privacy issues.
