The Social Network Sequel: The 9th Circuit Court of Appeals Cuts the Winklevoss Twins No Slack

The 2010, immensely popular, movie “The Social Network,” which won 3 Oscars and 4 Golden Globes, charted the meteoric rise of Facebook and its majority shareholder Mark Zuckerberg. Zuckerberg rose from computer science nerd at Harvard to the CEO of a multibillion dollar internet corporation, but his climb to fame and fortune was not without controversy. One such controversy, documented in the movie, involved identical twin brothers (Tyler & Cameron Winklevoss) handsome jocks (portrayed as greedy, annoying, and opportunistic in the film) who rowed for Harvard crew. Cameron & Tyler claimed that Mark Zuckerberg stole their idea for the social network (Facebook).

In the movie, the Winklevoss brothers sue Zuckerberg and Facebook and settle for $65 million. That is where the film ends, but now we learn there is a sequel. The twins, after making the deal with Zuckerberg, apparently suffered from “settler’s remorse” when they learned that Microsoft had offered $15 billion for Facebook before they made the settlement. The twins sued to back out of the settlement claiming the deal was procured by fraud.

The 9th Circuit (on April 11, 2011) held that the Winklevosses were unable to overcome the “steep uphill battle” faced by a party seeking to rescind a settlement agreement based on fraud. The Court remarked the twins were not the first parties bested by a competitor who then seek to gain through litigation what they were unable to achieve in the marketplace. The Winklevosses were “sophisticated parties” helped by “a team of lawyers and financial advisors.” The Court rejected their attempt to rescind the agreement, which was “a deal that appears quite favorable” to the twins. The Court was quick to point out that the Winklevosses were not the only ones to come out on top. The litigation surrounding the twin’s claim “quote gave bread to many lawyers.”

While it is hard to feel sorry for the Winklevosses, as they must now learn to live with receiving $65 million for an idea that may not even have been theirs, this case does stress that courts are generally reluctant to throw out a settlement, even when it looks like a raw deal in retrospect.

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