Yahoo May Settle With Facebook On Patents, But CEO Levinsohn Has Another Legal Wrangle On His Hands

Ross Levinsohn, the interim CEO of Yahoo, and members of his board have “stepped up” talks with Facebook to settle their patent dispute, according to AllThingsD, but that is not the end of legal wrangles for Levinsohn, it seems.

This week could see a decision on whether another case that names Levinsohn as a defendant will go to trial: an ongoing, messy suit filed by Kate Paley (daughter of CBS’s William Paley) accusing Radar Networks, makers of a social web app called Twine, Levinsohn and several other investors, and Evri, the company that bought Radar Networks, of fraud, breach of contract and 10 other things.

Paley had invested $5 million in Radar in 2007 and contends she didn’t get her just returns on that. Although the case has nothing to do with Yahoo, it’s an awkward situation to have Levinsohn named in an investor fraud case at a time when the Internet giant is looking for a fresh start and tackling much bigger issues it is facing as it loses online ad market share to Facebook and Google.

As background: Levinsohn was on the board and was an investor in Fuse Capital (formerly Velocity Interactive Group) which had invested in Radar Networks. Other investors included Steve Hall, MD of Vulcan Capital, and Nova Spivack. Paley believes these people have colluded to cheat her out of a return on her investment.

The defendants had a bit of a setback in February this year when they were denied a motion for summary adjudication. The defendants are now seeking a stay on the original suit by trying to claim bankruptcy for Radar Networks: that’s the case that is getting heard on June 8.

If that motion gets granted Paley’s case goes; if it is dimissed, Paley’s case goes to trial.

Paley’s lawyers say they have been trying to settle for a while now: “The parties have engaged in numerous settlement sessions, but no resolutions have been reached,” says Doug Colt, who represents Paley and her company, Word Diamonds, in the case (both are named as plaintiffs).

Since we first wrote about this case last year, Spivak himself published a response saying the case was without merit and spurious — this may have been at least part of the reason for being reluctant to settle.

There is a question of whether the fact that Levinsohn is now (interim) CEO of Yahoo will bring the defendants closer to settling the case before it gets any further.

However, a source a source familiar with the situation says the litigation strategy is “unlikely to change in this latest round.” In other words, the defendants don’t seem to see this case as any more than a nuisance at this point. (A kind of awkward one, all the same.)

We have reached out to both Spivack and Levinsohn for comment and will update as we learn more. For now, for your own perusal, here is the amended complaint and summary judgment order embedded below.