The 9th Circuit Court of Appeals held that the Winklevosses could not renege their settlement deal with Facebook/Mark Zuckerberg. Basically what happened is that the Winklevosses refused to sign the rest of the settlement documents for their original settlement with Facebook/Mark Zuckerberg. Apparently the Winklevosses claim they were misled about the value of Facebook’s stock. The parties had originally signed a handwritten, one-and-a-third page “Term Sheet & Settlement Agreement,” which provided a cash payment and stock to the Winklevosses, but apparently the share price was not listed. After signing the Settlement Agreement, Facebook notified the Winklevosses that an internal valuation put the value of its common stock at $8.88 per share. The Winklevosses argued that Facebook misled them into believing its shares were worth four times as much. Had they known about this valuation during the mediation, they claim, they would never have signed the Settlement Agreement.
The court rejected the Winklevosses’ argument: a deal is sometimes a deal.
It is hard to believe that the Winklevosses boys did not specify a value of the stock, or at least a minimum value of the stock in the handwritten, one-and-a-third page “Term Sheet & Settlement Agreement.” Perhaps the boys can sue someone for malpractice for not documenting the deal. (“They brought half-a-dozen lawyers to the mediation. Howard Winklevoss—father of Cameron and Tyler, former accounting professor at Wharton School of Business and an expert in valuation—also participated.”)
The Facebook, Inc. v. Pacific Northwest Software, Inc. – filed April 11, 2011
Update: The above opinion was amended and superceded by Facebook, Inc. v. Pacific Northwest Software, Inc. (9th Cir. 2011) 640 F.3d 1034.