Facebook v. ConnectU: The Saga Continues
The 1st Circuit resolves a jurisdictional dispute [access the order here (.pdf)] in favor for ConnectU, in a ruling that I'm sure some will find quite interesting:
The seeds of the global controversy were sown in a Harvard College dormitory room. Tyler Winklevoss, Cameron Winklevoss, and Divya Narendra (the Founders), then Harvard undergraduates, hatched the idea of creating a social networking website for college students. Lacking the programming expertise necessary to bring this idea to fruition, the Founders asked defendant Mark Zuckerberg to help them complete the proposed website's source code and aid in the development of their embryonic website. The request, which was made and accepted in November of 2003, yielded an horrific harvest.
According to the Founders, Zuckerberg not only failed to carry out the assignment but also stole their idea, business plan, and rudimentary (unfinished) source code in order to launch a competing social networking website. Zuckerberg acted in secret. By the time that the Founders learned of his perfidy, completed the source code through other means, and inaugurated their own social networking website (originally called harvardconnection.com and later renamed connectU.com), Zuckerberg's venture (originally called thefacebook.com and later abbreviated facebook.com) had gotten an unbeatable head start in user traffic.
Harvard's traditional school color is crimson but the Founders saw red. On September 2, 2004, ConnectU LLC, a Delaware limited liability company (the LLC) commenced an action in the federal district court premised on diversity of citizenship and the existence of a controversy in the requisite amount, 28 U.S.C. § 1332(a)(1), against Zuckerberg and five other defendants associated with him, namely, Dustin Moskovitz, Eduardo Saverin, Andrew McCollum, Christopher Hughes, and Facebook itself. The complaint linked the three Founders with the LLC and asserted a gallimaufry of state-law claims arising from the alleged misappropriation and unauthorized use of the LLC's confidential source code and business plan.
On October 28, 2004 — approximately two weeks after registering a copyright for its website's source code with the United States Copyright Office and before any responsive pleading was filed by the defendants — the LLC served an amended complaint. See Fed. R. Civ. P. 15(a). The amended complaint added a corporate affiliate of Facebook as a defendant and introduced two new statements of claim, including a federal-law claim for copyright infringement. At the same time, the amended complaint forsook diversity as the basis for federal subject matter jurisdiction and premised jurisdiction instead on the existence of a federal question. See 28 U.S.C. § 1331. That federal question consisted of the newly asserted copyright infringement claim, see 17 U.S.C. § 501(b), and carried with it supplemental jurisdiction over the armada of state-law claims, see 28 U.S.C. § 1367(a).
Almost one year later, the defendants moved to dismiss for want of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). They argued that the parties to the original complaint were not wholly diverse and that, therefore, the LLC's jurisdictional allegation did not hold water.
...
This argument focused on the jurisdictional basis set forth in the original complaint because, in the defendants' view, the amended complaint was beside the point. For this proposition, they cited the time-of-filing rule reiterated in Grupo Dataflux v. Atlas Global Group L.P., 541 U.S. 567, 570-71 (2004).
The LLC countered that the existence vel non of diversity had become a non-issue because the amended complaint, which premised jurisdiction on the existence of a federal question, had become the operative pleading. In the alternative, the LLC maintained that the parties to the original complaint were wholly diverse at the time of the commencement of the action. In support of this last proposition, the LLC suggested that Narendra's citizenship should not figure into the diversity calculus because he had not been admitted as a member of the LLC and that, at any rate, Zuckerberg was a citizen of California, not New York.
The defendants demur. They argue that an action originally filed under diversity jurisdiction — like this one — must, in line with longstanding Supreme Court precedent, live or die from a jurisdictional standpoint as of the time of filing regardless of subsequent changes in either the facts or the underlying jurisdictional allegations.
According to the Founders, Zuckerberg not only failed to carry out the assignment but also stole their idea, business plan, and rudimentary (unfinished) source code in order to launch a competing social networking website. Zuckerberg acted in secret. By the time that the Founders learned of his perfidy, completed the source code through other means, and inaugurated their own social networking website (originally called harvardconnection.com and later renamed connectU.com), Zuckerberg's venture (originally called thefacebook.com and later abbreviated facebook.com) had gotten an unbeatable head start in user traffic.
Harvard's traditional school color is crimson but the Founders saw red. On September 2, 2004, ConnectU LLC, a Delaware limited liability company (the LLC) commenced an action in the federal district court premised on diversity of citizenship and the existence of a controversy in the requisite amount, 28 U.S.C. § 1332(a)(1), against Zuckerberg and five other defendants associated with him, namely, Dustin Moskovitz, Eduardo Saverin, Andrew McCollum, Christopher Hughes, and Facebook itself. The complaint linked the three Founders with the LLC and asserted a gallimaufry of state-law claims arising from the alleged misappropriation and unauthorized use of the LLC's confidential source code and business plan.
On October 28, 2004 — approximately two weeks after registering a copyright for its website's source code with the United States Copyright Office and before any responsive pleading was filed by the defendants — the LLC served an amended complaint. See Fed. R. Civ. P. 15(a). The amended complaint added a corporate affiliate of Facebook as a defendant and introduced two new statements of claim, including a federal-law claim for copyright infringement. At the same time, the amended complaint forsook diversity as the basis for federal subject matter jurisdiction and premised jurisdiction instead on the existence of a federal question. See 28 U.S.C. § 1331. That federal question consisted of the newly asserted copyright infringement claim, see 17 U.S.C. § 501(b), and carried with it supplemental jurisdiction over the armada of state-law claims, see 28 U.S.C. § 1367(a).
Almost one year later, the defendants moved to dismiss for want of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). They argued that the parties to the original complaint were not wholly diverse and that, therefore, the LLC's jurisdictional allegation did not hold water.
...
This argument focused on the jurisdictional basis set forth in the original complaint because, in the defendants' view, the amended complaint was beside the point. For this proposition, they cited the time-of-filing rule reiterated in Grupo Dataflux v. Atlas Global Group L.P., 541 U.S. 567, 570-71 (2004).
The LLC countered that the existence vel non of diversity had become a non-issue because the amended complaint, which premised jurisdiction on the existence of a federal question, had become the operative pleading. In the alternative, the LLC maintained that the parties to the original complaint were wholly diverse at the time of the commencement of the action. In support of this last proposition, the LLC suggested that Narendra's citizenship should not figure into the diversity calculus because he had not been admitted as a member of the LLC and that, at any rate, Zuckerberg was a citizen of California, not New York.
The defendants demur. They argue that an action originally filed under diversity jurisdiction — like this one — must, in line with longstanding Supreme Court precedent, live or die from a jurisdictional standpoint as of the time of filing regardless of subsequent changes in either the facts or the underlying jurisdictional allegations.
Unfortunately for defendants, the 1st Circuit rejected their many arguments. The opinion is entertaining, but I would grab a dictionary before digging in.
Comments