Business Law – Facebook settlement with Winklevoss twins still stands

As more cases settle before trial with the assistance of a mediator, two things are important to remember.  One is that once the parties sign a written agreement settling the case, it is probably enforceable, even if the agreement is just an interim agreement with the “fine print” to be worked out later.  Another is that communications during a mediation really are confidential.

These principles led to the recent 9th Circuit Court of Appeals ruling that the settlement agreement between Facebook and the Winklevoss twins (famous from the Social Network movie: by the way, did you know one actor played the twins in the movie?) was enforceable.  As detailed here, the Winklevoss twins claimed to have been had by Facebook because they were paid off in stock in a manner that was not satisfactory to the twins.

Unfortunately for them, they signed off on an interim settlement agreement that gave Facebook broad discretion on the valuation of the shares to be transferred to the twins.  Furthermore, the twins had very competent representation and had conducted a thorough investigation on Facebook before the settlement.  Finally, evidence that supposedly proved Facebook duped the twins into the settlement was largely based on what Facebook said or didn’t say during the mediation, and this evidence was excluded because as is typical the parties agreed that communications during the mediation are inadmissible in a subsequent proceeding.

Also, what clinched this was the fact that Facebook’s value has skyrocketed since the settlement agreement, so even if the twins were misled, they haven’t been harmed by it as their share is now worth about $150 million instead of the $45 million the twins originally thought they were getting.

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