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March 17, 2010 2:38 PM

Quinn Emanuel-ConnectU Fee Fight Won't Yield Facebook Stock Info

Posted by Zach Lowe

It's something everyone will want to know until the day when Facebook files for an IPO: How much is a share in Facebook worth? Some FB watchers had hoped they'd get a definitive answer through an arbitration fight between Quinn Emanuel Urquhart & Sullivan and the firm's former client, ConnectU, which sued Facebook and its founder in 2004 for essentially stealing ConnectU's idea and turning it into Facebook.

But alas: A New York state judge denied ConnectU's request to force Facebook to supply information, including data about its stock price, to the arbitration panel hearing the ConnectU-Quinn dispute, according to the New York Law Journal, an Am Law Daily sibling publication. The panel also had sought information from Microsoft, which invested $240 million in Facebook in 2007.

The share price is an issue because Quinn's contingency fee for settling the ConnectU-Facebook litigation is based on a valuation of Facebook's share price that ConnectU now says was far too high. The settlement ConnectU won in the underlying case, a combination of cash and Facebook shares, was initially valued at about $65 million based on a Facebook share price of close to $36, the NYLJ says. Quinn has asked for a contingency fee of $13 million based on that amount, the NYLJ reports. ConnectU is now balking, saying the settlement turned out to be worth much less, since Facebook's shares may have been more accurately priced at $8.88 or even $7.75 at the time of the settlement in early 2008. ConnectU has challenged the settlement, but those challenges have failed so far. 

ConnectU wanted to use Facebook's private share price data in its arbitration against Quinn, but a judge ruled that Facebook, as a nonparty to the arbitration, did not have to comply with the request. (Microsoft doesn't have to, either, the NYLJ says.) Cooley Godward Kronish represented Facebook in the matter;  Orrick, Herrington & Sutcliffe represented Microsoft.

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