Facebook and ConnectU signed a settlement agreement on February 22, 2008, after mediation. The deal was widely reported as worth about $65 million, but it was not a $65 million cash payment: court filings describe approximately 1,253,326 Facebook shares plus $20,000 in cash. The agreement later became the subject of enforcement proceedings and appellate review.
What the Facebook–ConnectU settlement covered
The dispute involved Facebook, Mark Zuckerberg, ConnectU, Cameron Winklevoss, Tyler Winklevoss and Divya Narendra. ConnectU was the social-networking project originally associated with the name HarvardConnection.
The founders alleged that Zuckerberg had agreed to help develop their project, then failed to complete the work and used confidential information in creating Facebook. Those were allegations in settled litigation, not findings that a court reached after a full trial. The Ninth Circuit’s account of the case is available in its opinion at https://cdn.ca9.uscourts.gov/datastore/opinions/2011/04/11/08-16745.pdf.
Facebook disputed the claims. The parties resolved the underlying litigation through a mediated agreement rather than a merits verdict deciding who created Facebook or whether code or ideas had been misappropriated.
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When was the agreement reached?
The parties reached the deal on February 22, 2008, following mediation. The Ninth Circuit described the document as a handwritten, approximately one-and-one-third-page “Term Sheet & Settlement Agreement.” The short document later became important because the parties disagreed about whether it contained enough material terms to be enforceable. The appellate record is reproduced at https://docs.justia.com/cases/federal/appellate-courts/ca9/08-16873/179.
What did “$65 million” mean?
The headline figure was an estimated total value for the consideration, not a wire transfer of $65 million. A later Northern District of California filing described the settlement consideration as approximately 1,253,326 shares of Facebook common stock and $20,000 in cash, with the stock valued at about $65 million under the valuation used at the time. See the court filing describing the consideration.
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| Component | What the court record describes | Why it matters |
|---|---|---|
| Facebook equity | Approximately 1,253,326 shares of Facebook common stock | Most of the reported value was private-company stock, not cash. |
| Cash | $20,000 | A relatively small cash component compared with the reported total. |
| Reported total | Approximately $65 million | An estimate based on the contemporaneous valuation of Facebook shares. |
Facebook was privately held in 2008, so its shares did not have a continuously quoted public-market price. The approximately $65 million figure therefore reflected a negotiated or otherwise assigned private-company valuation. It was not a guarantee that the recipients could immediately sell the shares for that amount, and later Facebook share values should not be substituted for the 2008 estimate without a separate, clearly labeled comparison.
Did Facebook acquire ConnectU?
The settlement required ConnectU shares to be transferred to Facebook, while the ConnectU-related parties were to receive the cash and Facebook shares specified by the agreement. That makes it reasonable to say Facebook obtained ConnectU’s stock through the settlement. It was not announced as a conventional public-company acquisition with a separate cash purchase price.
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The federal judgment ordered the relevant transfers and broad mutual releases. The judgment is available at https://www.govinfo.gov/content/pkg/USCOURTS-cand-5_07-cv-01389/pdf/USCOURTS-cand-5_07-cv-01389-25.pdf.
Why did the case continue after the February agreement?
Signing the term sheet did not immediately eliminate every procedural dispute. ConnectU-related parties challenged enforceability, arguing in part that the document lacked material terms and had been procured or interpreted improperly. Facebook asked the district court to enforce it.
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The district court granted Facebook’s enforcement motion on June 25, 2008, according to later filings, and entered an enforcing judgment on July 2. The docket materials describing those steps are at https://docs.justia.com/cases/federal/district-courts/california/candce/5%3A2007cv01389/189975/469/3.html and https://law.justia.com/cases/federal/district-courts/california/candce/5%3A2007cv01389/189975/574/. The Ninth Circuit ultimately upheld enforcement rather than allowing the agreement to be undone.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What did the court ultimately order?
The implementation phase included directions to the special master handling property under the settlement. On November 3, 2008, the court directed delivery of settlement property; the docket record is at https://www.govinfo.gov/app/details/USCOURTS-cand-5_07-cv-01389/USCOURTS-cand-5_07-cv-01389-23.
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On November 21, 2008, the court entered a judgment requiring specific performance. Facebook was to receive ConnectU shares held by the special master, while the ConnectU side was to receive the specified cash and Facebook shares. The judgment also declared broad mutual releases, ending the released claims between the parties. A reproduced copy is available at https://www.govinfo.gov/content/pkg/USCOURTS-cand-5_07-cv-01389/pdf/USCOURTS-cand-5_07-cv-01389-25.pdf.
Key dates in the settlement and enforcement
| Date | Event |
|---|---|
| February 22, 2008 | Mediated settlement term sheet signed. |
| June 23, 2008 | Facebook’s motion to enforce came before the district court. |
| June 25, 2008 | The district court granted the enforcement motion, as described in subsequent filings. |
| July 2, 2008 | The court entered judgment enforcing the agreement, according to later docket materials. |
| November 3, 2008 | The court directed the special master to deliver settlement property. |
| November 21, 2008 | Specific-performance judgment and broad mutual releases entered. |
| 2011 | The Ninth Circuit issued opinions concerning enforcement and related appeals. |
What the settlement did—and did not—establish
- It did establish a binding resolution: the agreement was enforced by the district court and upheld on appeal.
- It did not establish that ConnectU’s historical allegations were true: there was no trial verdict finding that Zuckerberg stole Facebook’s idea or code.
- It did not mean $65 million in cash: the reported value primarily represented Facebook equity, plus $20,000 in cash.
- It did not make the February signing the end of the process: transfers, releases and enforcement orders followed.
The Ninth Circuit’s 2011 treatment of the enforcement dispute is available at https://cdn.ca9.uscourts.gov/datastore/opinions/2011/04/11/08-16745.pdf. The related appellate docket opinion is at https://docs.justia.com/cases/federal/appellate-courts/ca9/08-16873/179.
Bottom line
Facebook and ConnectU genuinely reached a settlement on February 22, 2008, and the courts later enforced it. “$65 million” was shorthand for an approximate valuation dominated by about 1.25 million Facebook shares, with only $20,000 in cash. The deal resolved the litigation through releases and court-ordered performance; it was not a judicial finding that ConnectU’s account of Facebook’s origins had been proven.
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