Those who saw the award-winning film, The Social Network, are familiar with the dispute between Mark Zuckerberg and the Winklevoss twins (and their business partner, Divya Narendra) over the founding of Facebook. What many fans of the movie might not be aware of is that the Zuckerberg-Winklevoss dispute was resolved through mediation.
This historical tidbit came to my attention while reading a recent Massachusetts state appellate court decision affirming dismissal of contract and tort-based claims asserted by software developer Wayne Chang against the Winklevosses in connection with the settlement of the Zuckerberg-Winklevoss dispute. Chang v. Winkelvoss, 95 Mass. App. Ct. 202 (April 24, 2019) The Chang-Winklevoss litigation is a footnote to the more substantive fight over Facebook, but adds some interesting color.
After Zuckerberg launched Facebook in February 2004, the Winklevosses reached out to Chang to help increase the user base of the Winklevoss’s competing social networking website, ConnectU (originally launched as the HarvardConnection). Chang had previously founded i2hub (a peer-to-peer, file-sharing platform).
In late 2004, Chang and the Winklevosses agreed to incorporate i2hub’s software into ConnectU’s website, and form a jointly owned holding company called the Winklevoss Chang Group (WCG). But the relationship later soured over various financial and ownership disputes, and the parties eventually agreed to terminate their collaboration. As a result, neither WCG nor any other joint entity was apparently ever formed, and i2hub was never integrated with ConnectU. By the end of 2005, the parties’ communications make it clear that they were going their own separate ways as if no partnership had ever existed.
Meanwhile, in September 2004 — about a month before the Winklevosses contacted Chang — ConnectU had sued Facebook in Massachusetts federal court alleging theft of trade secrets and other claims. Chang never became a party in the Massachusetts action, although he was named a defendant in a later California action commenced by Facebook in August 2005 against ConnectU alleging that one of the websites developed by Chang had misappropriated Facebook’s proprietary code and user data.
In a February 2008 mediation, Facebook and ConnectU settled all of their outstanding disputes. Facebook received 100% of ConnectU’s stock in exchange for paying the Winkelvosses and Narendra $20 million in cash and one million shares of Facebook (purportedly worth $35.90/share at the time).
In December 2009, Chang sued the Winkelvosses alleging that his 50% interest in WCG entitled him to 50% of the proceeds of the settlement with Facebook. As noted above, the trial court dismissed certain of Chang’s...
