Righthaven: Blame Our Clueless Lawyer, But Don't Sanction Us, For Failing To Name Stephens Media As An Interested Party

from the that's-not-going-to-fly dept

Thu, Jun 30th 2011 11:33am — Mike Masnick

The flailing disaster that is Righthaven just got that much more desperate and ridiculous. As you may recall, when Judge Roger Hunt ruled that the Stephens Media/Righthaven copyright transfer was a sham, the part that he got really incensed about (and it seems he was already pretty upset about the bogus transfer), was the fact that Righthaven totally failed to name Stephens Media as having an interest in the outcome of the lawsuit, as required by the law. This is pretty basic stuff that any trial lawyer knows. Judge Hunt called this "factually brazen" and demanded that Righthaven provide an explanation why it shouldn't be sanctioned:

As shown in the preceding pages, the Court believes that Righthaven has made multiple inaccurate and likely dishonest statements to the Court. Here, however, the Court will only focus on the most factually brazen: Righthaven�s failure to disclose Stephens Media as an interested party in Righthaven�s Certificate of Interested Parties. (Dkt. #5.) Rule 7.1-1 of the Local Rules of Practice for the District of Nevada requires parties to disclose �all persons, associations of persons, firms, partnerships or corporations (including parent corporations) which have a direct, pecuniary interest in the outcome of the case.� This Local Rule requires greater disclosure than Federal Rule 7.1, which only requires non-governmental corporate parties to disclose parent corporations or corporations owning more than 10% of the party�s stock. Frankly, if receiving 50% of litigation proceeds minus costs (Dkt. #79, SAA Section 5) does not create a pecuniary interest under Local Rule 7.1-1, the Court isn�t sure what would.

Making this failure more egregious, not only did Righthaven fail to identify Stephens Media as an interested party in this suit, the Court believes that Righthaven failed to disclose Stephens Media as an interested party in any of its approximately 200 cases filed in this District. Accordingly, the Court orders Righthaven to show cause, in writing, no later than two (2) weeks from the date of this order, why it should not be sanctioned for this flagrant misrepresentation to the Court.

So, now, Righthaven has filed its response, and I get the feeling it's not going to satisfy Judge Hunt at all. The response, written by Righthaven lawyer Shawn Mangano, basically throws an unnamed "former in house counsel for Righthaven" under the bus, claiming that he "failed to consider the full scope" of the rules that meant he had to disclose Stephens Media's monetary interest. This is, frankly speaking, ridiculous. The law is pretty clear:

Unless otherwise ordered, in all cases except habeas corpus cases counsel for private (non-governmental) parties shall identify in the disclosure statement required by Fed. R. Civ. P. 7.1 all persons, associations of persons, firms, partnerships or corporations (including parent corporations) which have a direct, pecuniary interest in the outcome of the case.

The filing insists that Righthaven was not willfully trying to avoid complying with the law and suggests that reasonable minds could differ over the interpretation of the above, because the monetary interest Stephens Media had in the case was "indirect" because money gets paid to Righthaven first, and then Righthaven paid Stephens Media. That may be the most tortured reading of "direct" I've ever seen:

Rather, former in house counsel for Righthaven apparently failed to consider the full scope of the "direct, pecuniary interest" language under Local Rule 7.1-1 in failing to list Stephens Media on its Certificate of Interested Parties.... Unlike its federal rule counterpart, Local Rule 7.1-1 does not define what constitutes a direct, pecuniary interest and there is an absence of case law addressing the scope of the required disclosures. While the Court has concluded otherwise, it is certainly understandable how Local Rule 7.1-1 could have arguably been reasonably construed to not require the disclosure of Stephens Media�s interest in any recovery in excess of costs under the Strategic Alliance Agreement (the "SAA").

The obligation to disclose Stephens Media as an interested party pursuant to Local Rule 7.1-1 was certainly not appreciated by Righthaven's undersigned outside counsel, who has been licensed to practice before this Court since 1998.... Counsel reasonably viewed any contingent payment to Stephens Media under the SAA as constituting an indirect interest that required a two-step payment process assuming any case resulted in a recovery.... Simply put, receipt of settlement funds through settlement or recovery by the enforcement of a judgment would be made to Righthaven.... Righthaven would then be contractually obligated under the SAA to subsequently pay Stephens Media any recovered sums over and above costs incurred.... Thus, while counsel certainly appreciates the Court's guidance and will adhere to its decision, there is certainly an arguable and reasonable basis to construe Stephens Media's pecuniary interest as indirect, and not direct, under the SAA.

Somehow, I don't think that's going to fly, at all. The filing goes on to note that the court obviously should have just known about Stephens Media's interest in the case because there was so much press coverage about it. I'm not sure the point of that. Are they implying that if something is in the news, they don't have to follow the disclosure law?

Also, as Eric Goldman notes, the filing is extremely disingenuous in that in throwing the "former in house counsel" under the bus, it ignores the fact that Righthaven CEO Steve Gibson signed the complaint in this case (against Democratic Underground), meaning he was taking responsibility for the statements. Furthermore, it doesn't address the other 270 or so cases Righthaven has filed, all of which have the same problem, and not all of which were signed by the same "former in house counsel." Indeed, many of those were signed by Mangano himself. And Judge Hunt knows this -- which is why he mentioned the other 200+ cases in the question about sanctions.

This is characteristically weak from Righthaven, and it seems likely that the company is about to get slammed hard by Judge Hunt here.

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Filed Under: nevada, sanctions, shawn mangano
Companies: righthaven, stephens media

32 Comments

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Some cow herd, 30 Jun 2011 @ 11:41am

This "slamming" the judge is about to dish out is all swell, but unless there is actual jail time involved, there's really no point...
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Anonymous Coward, 30 Jun 2011 @ 11:42am

I think it's plausible that in-house counsel might not realize that a local rule of practice requires greater disclosure than the general federal rules.

But if Righthaven was using outside litigation attorneys, it's pretty fucking poor practice to blame in-house counsel for the mistake.

I guess if the CEO signed the complaint (odd), maybe they were doing this all in-house (also odd).

Anyway, that doesn't excuse the mistake, but brings it into the realm of plausibility that it was, in fact, a mistake.
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John Doe, 30 Jun 2011 @ 11:46am

Oh what a tangled web we weave when at first we practice to deceive
Sounds like these guys better through themselves at the mercy of the court and beg forgiveness before they dig themselves in deeper and deeper.

The funny thing about lies, you eventually paint yourself into a corner and leave yourself no way out.

A coworker of mine once said that if you always tell the truth, you don't have to worry about what you said or who you told it to.
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Anonymous Coward, 30 Jun 2011 @ 11:46am

Re:
jail time isn't the only sanction that motivates people
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Anonymous Coward, 30 Jun 2011 @ 11:50am

Also, they do name the former counsel: Mr. Coons and Mr. Chu.

As for being "pretty basic stuff than any trial lawyer knows," it's really not. It's a local rule that is more demanding than the federal rules (which only require IDing someone with 10% or more ownership in the plaintiff).

Also, apparently the people filing the initial documents were in-house counsel (i.e., not trial lawyers).

Just goes to show you: kids, if you want to litigate, you're better off using litigation attorneys.
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ComputerAddict (profile), 30 Jun 2011 @ 11:55am

Re: Oh what a tangled web we weave when at first we practice to deceive
Funny thing about painting yourself into a corner... it dries in a few hours and then you can just walk away... no harm done..
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John Doe, 30 Jun 2011 @ 12:16pm

Re: Re: Oh what a tangled web we weave when at first we practice to deceive
It often seems that way.
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Anonymous Poster, 30 Jun 2011 @ 12:34pm

I'd prefer that everyone in Righthaven gets another kind of slamming, if you know what I mean.
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Scote, 30 Jun 2011 @ 12:39pm

We thought we'd get away with it.
Shorter Righthaven:

Former inside council (and the rest of us) didn't think we'd ever get caught. The SAA that hid the 50/50 revenue split with Stephens Media was supposed to be secret. Please reject sanctions on that basis.
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DannyB (profile), 30 Jun 2011 @ 12:44pm

What Righthaven is unwittingly doing
By pointing fingers at others to deflect blame, Righthaven is unwittingly alerting the judge to any other guilty parties, in addition to Righthaven, who he might have otherwise missed sanctioning.
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trish, 30 Jun 2011 @ 12:46pm

um...
They say 1) in house counsel failed and so it's their fault, but 2) There's no actual mistake because bla bla bla bs. ???
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taoareyou (profile), 30 Jun 2011 @ 12:48pm

Re:
"The obligation to disclose Stephens Media as an interested party pursuant to Local Rule 7.1-1 was certainly not appreciated by Righthaven's undersigned outside counsel, who has been licensed to practice before this Court since 1998"

Doesn't this imply the counsel was licensed to practice law in that state? If so shouldn't he be aware of local rules of practice?
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Anonymous Coward, 30 Jun 2011 @ 12:55pm

Certificate of Interested parties
This is the language used by Righthaven for its certificate. I don't see any way this could have confused the lawyers. Mr. Mangano is a Charlatan.

In accordance with Fed.R.Civ.P. 7.1 and Local Rule 7.1-1, the undersigned, counsel of record for Righthaven LLC, certifies that the following have a direct, pecuniary interest in the outcome of this case:

1. Righthaven LLC, a Nevada limited-liability company;
2. SI Content Monitor LLC, an Arkansas limited-liability company;
3. Net Sortie Systems, LLC, a Nevada limited-liability company.

RIGHTHAVEN LLC
By: /s/ J. Charles Coons
STEVEN A. GIBSON, ESQ.
Nevada Bar No. 6656
J. CHARLES COONS, ESQ.
Nevada Bar No. 10553
JOSEPH CHU, ESQ.
Nevada Bar. No. 11082
9960 West Cheyenne Avenue, Suite 210
Las Vegas, Nevada 89129-7701
Attorneys for Plaintiff
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Anonymous Coward, 30 Jun 2011 @ 1:40pm

Story on ARS Technica
http://arstechnica.com/tech-policy/news/2011/06/newspaper-chain-fights-for-copyright-trolls-survival .ars
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The eejit (profile), 30 Jun 2011 @ 1:41pm

Re:
These people were fucking trained and passed the Bar specialising in litigation. IF they didn't know the local rules, then that's such a training issue that I'd doubt they were actually trained in law.

God, my four-=ear-old daughter could givew a better defense than these type-writing chimps.
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FUDbuster (profile), 30 Jun 2011 @ 2:15pm

So in a regular contingency contract between a lawyer and his client, the lawyer, though a third party to the lawsuit, is considered to have a direct, pecuniary interest in his client's lawsuit by virtue of the contract. Extending that same logic here, Stephens Media has a direct, pecuniary interest in this lawsuit, even though they are a third party. Make sense?

I think that Mangano could have made this mistake in good faith--and I see no reason to think otherwise. And he has already made a good faith effort to correct this mistake in every other Righthaven case. Still, I imagine the-not-happy-with-all-of-this Judge Hunt will inflict pain for this transgression.
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FUDbuster (profile), 30 Jun 2011 @ 2:25pm

Notice too how Mangano never mentioned Steve Gibson, even though up until a couple of days ago, he was an attorney of record on the suit. It's a glaring omission that I trust will not be overlooked by Judge Hunt.
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Anonymous Coward, 30 Jun 2011 @ 2:32pm

Re:
Mangano does nothing in good faith.
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Anonymous Coward, 30 Jun 2011 @ 2:40pm

Re: Re:
Well, I think there's at least two questions there. That particular attorney, who appears to be a litigation attorney who practices before that particular federal district court, should absolutely know of the rule and that it is not the same as the general federal rule. Whether he did or should have known that the rule would be interpreted to require disclosure of Stephens Media...I think the text of the rule makes it clear he should have, or at least should have known it might be interpreted that way.

BUT, I have no idea what actual common local practice there is, and it sounds like there haven't been many cases actually interpreting the scope of that local rules requirement.

As for any attorney licensed in Nevada, I'm sure the vast majority of them have no need whatsoever to know the local federal district court rules.
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Anonymous Coward, 30 Jun 2011 @ 2:44pm

Re: Re:
Dude, I'm going to try to say this with a friendly tone, but it's hard to do.

You should make a minimal attempt to verify something is true (or even plausible) before you say it.

There is no such thing as passing the bar with a specialization in litigation. In fact, most state ethical rules prohibit attorneys from advertising that they have any particular endorsement or specialization certificate (except for patent attorneys that have passed the patent bar).

Most in-house attorneys do NOT specialize in litigation. Maybe Righthaven is different. I don't know.

Moreover, local federal court rules are not tested on any state's bar exam.
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RD, 30 Jun 2011 @ 6:37pm

Re:
"Anyway, that doesn't excuse the mistake, but brings it into the realm of plausibility that it was, in fact, a mistake."

Tough shit for them. Lots of people make "mistakes" and pay for it with their freedom and get thrown in jail. Shouldnt be any different for these assholes than it is for the guy who gets into a bar fight.

Remember the ultimate credo:

Ignorance of the law is no defense.
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taoareyou (profile), 30 Jun 2011 @ 8:52pm

Re: Re: Re:
Maybe I am just expecting too much from lawyers, but if I am acting as counsel for a specific court, I would expect that I certainly DO need to be aware of all laws and rules affecting my filings. Is it seriously that difficult? Are these local rules hidden and not publicly available?

You may not have to know ALL laws and rules, but it's not beyond expectation for you to know the laws and rules pertaining to whatever you are working on.

Honestly, when did "I didn't know" become an acceptable defense for a lawyer?
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Dave (profile), 30 Jun 2011 @ 10:20pm

What I don't understand is why this farce continues to eat up judicial time and taxpayers money. Somebody should just toss everyone at Wronghaven into the pokey and throw away the key.
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Anonymous Coward, 30 Jun 2011 @ 10:36pm

Re: Re: Re: Re:
I certainly agree that if you're filing a lawsuit in a certain court, you *should* know the rules governing your filing.

The question here is whether they *did* know and chose to ignore it.

I think it's plausible that they were more incompetent than malicious (which isn't to say that I'm absolutely convinced that this is the case).
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Anonymous Coward, 30 Jun 2011 @ 10:40pm

Re: Re:
The nature of someone's intent/knowledge is relevant to whether sanctions are warranted under the law.

You should know that right? I mean, ignorance of the law...and all that.
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Karl (profile), 1 Jul 2011 @ 12:14am

Re: Re: Re:
There is no such thing as passing the bar with a specialization in litigation.

There is, however, such a thing as passing the bar in your home state while knowing the litigation rules in your home state.

It's almost like their ins-house legal team isn't actually certified to pass the Nevada bar... or something.
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Karl (profile), 1 Jul 2011 @ 12:16am

Re:
I'd prefer that everyone in Righthaven gets another kind of slamming, if you know what I mean.

WORST PORNO EVER
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Karl (profile), 1 Jul 2011 @ 12:26am

Re:
So in a regular contingency contract between a lawyer and his client

In general I think you're right, but like most people, you're ignoring one crucial thing:

Righthaven is not a law firm.

They claim to be a "holding company," under USC 26 P. 543(4). Of course, under that law, they would need to earn at least 50% of their income from other sources... so even buying their own BS, they're still full of BS.
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Karl (profile), 1 Jul 2011 @ 12:30am

Re:
Mr. Coons and Mr. Chu

Is it only me that is thinking this is some sort of racist 80's cop show?

"...and they fight crime!"
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The eejit (profile), 1 Jul 2011 @ 4:29am

Re: Re: Re:
Moreover, local federal court rules are not tested on any state's bar exam.

How can you have local federal rules? That's a pretty big oxymoron.

And as for the "passing the Bar specialising in litigation" statement, I think it would be necessary to be at least remotely competent, unless you were going for cartoon villainy. A lawyer should be versed in litigation, especially within their specialisation (such as family law, Criminal law, IP law).
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taoareyou (profile), 1 Jul 2011 @ 1:31pm

Re: Re: Re: Re: Re:
Then from what I understand, the guy who filed the response claiming incompetence must include himself on this list, since he signed off on many of these. Sounds like massive incompetence and certainly grounds to get everything tossed.
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dwg, 18 Jul 2011 @ 8:35am

Re: Re: Re:
"...federal court rules are not tested on any state's bar exam."

No, they're taught and tested IN LAW SCHOOL.

FEDERAL RULE OF CIVIL PROCEDURE 7.1 states that any non-government entity must disclose any parent corporation or publicly held corp. holding more than 10% of its stock to the court with its first appearance. http://www.law.cornell.edu/rules/frcp/Rule7_1.htm.

Any litigator seeking to practice in federal court MUST know the rules. Any particular variations by circuit, especially those specifically relevant to a case at bar, must be known by counsel seeking to practice in that circuit. In litigation, in all areas of law, procedure is king. Like it or not, if you've chosen to be a lawyer that's your lot.

This is all a sham, and Judge Hunt is a smart, capable judge--shame on Righthaven for trying to pretend otherwise on both counts.
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