Divya Narendra’s Facebook Settlement: Value, Fees, and Payout

Divya Narendra’s Facebook settlement, reached with the Winklevoss twins in February 2008, resolved ConnectU’s claims against Mark Zuckerberg for roughly $65 million: about $20 million in cash and Facebook stock valued at the time at around $45 million.¹ The exact split between Narendra and the two Winklevoss brothers has never been publicly disclosed. What is public is that the stock portion appreciated dramatically as Facebook grew, pushing the settlement’s total value past $200 million by the time the litigation finally ended in 2011.²

What the 2008 Deal Actually Contained

The agreement came out of a single mediation session on February 22, 2008, run by mediator Antonio Piazza. In the early hours of February 23, the parties signed a handwritten seven-paragraph “Term Sheet & Settlement Agreement.” ConnectU’s founders handed over all of the company’s stock. In return, they received the $20 million in cash and the block of Facebook shares valued at roughly $45 million, for the approximately $65 million total.³¹

The term sheet said it was “binding” and left Facebook to determine the form and documentation of the acquisition. That short handwritten document became the entire fight for the next three years.

The Fight to Undo the Deal

Almost as soon as the term sheet was signed, the ConnectU founders tried to escape it. They argued it was too vague to enforce and, more pointedly, accused Facebook of committing fraud during the mediation. Their claim was specific: Facebook had led them to believe its shares were worth $35.90 apiece, a figure tied to a recent Microsoft investment, when internally the company had valued its own common stock at just $8.88 per share for tax purposes. At the lower price, the same $45 million slice would have translated into roughly four times as many shares.⁴⁵

Facebook moved to enforce the agreement. On June 25, 2008, Judge James Ware granted the motion. He held that the term sheet contained enough definite and essential terms to be binding under California law, and he rejected the fraud claims, noting that the founders were sophisticated business parties represented by counsel who had chosen not to demand valuation warranties or additional due diligence before signing. He ordered the ConnectU founders to transfer their shares.⁶

The founders appealed. On April 11, 2011, a Ninth Circuit panel led by Chief Judge Alex Kozinski unanimously affirmed. The panel found the settlement enforceable and held that a confidentiality agreement signed before mediation barred the founders from introducing anything said during that session to prove fraud. Kozinski wrote that the founders were “sophisticated parties” accompanied by a half-dozen lawyers, and closed the opinion with: “At some point, litigation must come to an end. That point has now been reached.”⁷⁴

On June 22, 2011, the Winklevoss twins notified the Ninth Circuit that they would not seek Supreme Court review. The settlement was final.²⁸

What the Stock Made the Settlement Worth

The $45 million share figure locked in at the 2008 mediation reflected private-market valuations that Facebook would quickly leave behind. Estimates of the settlement’s total value climbed with each milestone in the company’s growth.

By the time the Ninth Circuit ruled in April 2011, CBS News estimated the deal at more than $160 million.⁴ Two months later, when the twins dropped their Supreme Court challenge, the New York Times valued the settlement at more than $200 million.² When Facebook filed for its IPO in early 2012, NPR reported that the Winklevoss twins alone stood to receive up to $300 million worth of shares from the deal.⁹

Because the founders’ internal split has never been made public, no one figure captures Narendra’s individual take. What is clear is that his share tracked the same multiple: the recovery ballooned from tens of millions at signing to a headline figure many times larger by the IPO.

The Legal Fee That Came Off the Top

A significant slice of the ConnectU recovery went to the founders’ own lawyers. Quinn Emanuel Urquhart Oliver & Hedges had represented them on a contingency arrangement entitling the firm to 20 percent of the recovery, roughly $13 million on the original $65 million settlement value.

The founders fired the firm and sued for malpractice, arguing that Quinn Emanuel should have obtained recent valuations of Facebook stock before letting them sign. In August 2010, an arbitration panel rejected the malpractice claim and ruled that the firm had earned its full fee. A New York state court judge upheld the $13 million award later that year.¹⁰ That ruling matched, in litigation, the same reasoning the courts had used against the founders’ fraud theory: they were sophisticated parties with counsel, and the deal they signed was the deal they got.

Where Narendra’s Money Went

Narendra put his post-settlement career into finance rather than another social platform. He worked as an analyst at Credit Suisse and then Sowood Capital, and during the 2008 credit crisis he began building SumZero, a research-sharing platform for buy-side investment professionals.¹¹¹²

In a striking postscript, the Winklevoss twins invested $1.05 million in SumZero through Winklevoss Capital in 2012, the same year Narendra finished a joint JD-MBA at Northwestern and began running the company full-time.¹³ Asked years later how he looked back on the Facebook fight, Narendra put it plainly: “I don’t lose any sleep at night over what happened.”¹⁴

1
CBS News. Winklevoss Twins Try Again in Facebook Dispute
2
The New York Times. Winklevosses Drop Facebook Fight, Keep Settlement
3
Orrick. ConnectU v. Facebook Legal Brief
4
CBS News. Facebook’s Settlement With Winklevosses Upheld
5
Merge Mediation. Lessons From the Mediation That Resolved the Dispute Over the Founding of Facebook
6
The New York Times. Order Granting Motion to Enforce Settlement Agreement
7
United States Court of Appeals for the Ninth Circuit. Facebook, Inc. v. Pacific Northwest Software, Inc.
8
ABA Journal. Winklevoss Twins Won’t Ask Supreme Court to Scuttle Facebook Settlement
9
NPR. Winklevoss Twins May Reap $300 Million From Facebook IPO
10
TechCrunch. ConnectU Facebook Quinn Emanuel
11
Forbes. Ten Years After Facebook, Divya Narendra Continues to Innovate
12
SumZero. Divya Narendra on Building SumZero
13
Kellogg School of Management. SumZero Builds
14
The Harvard Crimson. Divya Narendra