Facebook, Inc. v. Pacific Northwest Software, Inc.
United States Court of Appeals for the Ninth Circuit
640 F.3d 1034 (2011)
- Written by Sharon Feldman, JD
Facts
Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra (the Winklevosses) (plaintiffs) sued Facebook, Inc., and Mark Zuckerberg (defendants) for stealing the idea for Facebook. A settlement agreement was signed after mediation. The agreement provided that Facebook would acquire all of the Winklevosses’ competing company’s shares in exchange for cash and a percentage of Facebook’s common stock, and the parties would grant each other broad mutual releases. The Winklevosses represented and warranted that they had no further claims against Facebook. After the agreement was signed, Facebook notified the Winklevosses that an internal valuation valued Facebook’s common stock at $8.88 per share. The parties disagreed on the form of the final deal documents, and Facebook moved for an order enforcing the settlement. The Winklevosses argued that Facebook misled them into believing its shares were worth four times more than the internal valuation and that had they known about the true valuation, they would not have signed the settlement agreement. The Winklevosses charged Facebook with securities fraud and sought rescission of the settlement agreement. The district court ruled that the settlement agreement was enforceable. The Winklevosses appealed.
Rule of Law
Issue
Holding and Reasoning (Kozinski, C.J.)
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