John Steele Looking To Join Former Prenda Lawyer Paul Hansmeier In ADA Lawsuit Shakedown Business

from the once-a-parasite... dept

For more than a year now, Paul Hansmeier has attempted to offset the losses generated by the flagging Prenda Law brand with class action lawsuits predicated on supposed ADA (Americans with Disabilities Act) violations. Hansmeier isn't suddenly a do-gooding social warrior seeking equitable treatment for disabled Americans. He's just shifted the focus of his modus operandi. Hansmeier sues and sues and sues, offering out-of-court settlements to the defendants. This is money Hansmeier shouldn't theoretically be able to demand, but he's found a loophole that works for him.

In most cases, federal and state laws governing disability access don’t provide punitive relief. They can only be used to get property owners to correct shortcomings and to recover the plaintiff’s reasonable legal expenses. However, Hansmeier has been making claims under a Minnesota law that the property owners are committing a bias offense, which is a misdemeanor. In correspondence seeking a settlement with Peterson, he wrote that the law exposes defendants to a fine of $500 per incident, as well as punitive damages.

Using this, Hansmeier has demanded anywhere from $2,500 to $15,000 from the businesses he's sued. The end result has been some companies paying up rather than fighting back, while others have decided to cease doing business entirely. The 84-year-old owner of an antique shop targeted by a Hansmeier suit has closed her business as a result of his litigious actions. At the point it shut down, it was making around "$50 a day." Now, the business is completely inaccessible -- both to the disabled and non-disabled alike.

Like copyright trolling, the hit rate may be low but the margin is comfortably high. Only a small percentage of those sued need to pay up to ensure profitability. Hansmeier has managed to extract a few settlements at this point, which will only encourage him to continue exploiting a good law for negative ends. The biggest hurdle he faces now is his own terrible reputation.

[T]he chief judge of Hennepin County District Court has ordered that a half dozen of Hansmeier’s disability cases be reassigned to a single judge to ensure that they’re handled uniformly.

“ … the serial nature of these cases … raises the specter of litigation abuse, and Mr. Hansmeier’s history reinforces this concern,” Chief Judge Peter Cahill wrote.

The Minnesota attorney general’s office recently referred complaints about Hansmeier to the board that disciplines attorneys for ethical violations, even as he continues to press for cash settlements with small business owners.

The lure of easy money has now attracted another one of Prenda's principals: John Steele.

DarthSkeptic tweeted out two bits of information that point to Steele moving from one shakedown business to another.

On December 30, 2014, John Steele incorporated the "Accessibility Law Group, LLC" in the state of Illinois (screenshot below as the Illinois Secretary of State's business search provides no permalink to search results). The address of the "business" traces back to virtual offices offered by DaVinci Virtual Office Solutions, which would suggest Steele plans to pursue businesses for ADA violations without actually having to set up (physical) shop in Illinois.


He's also renewed his Illinois law license.


Given Steele's past, one should probably expect a flurry of filings in the near future, pursuing low-risk targets with low-to-medium settlement offers, much like Hansmeier's "work" in Minnesota. The paperwork can be filed from anywhere with work farmed out to local lawyers willing to do the groundwork in exchange for a percentage of collected settlements.

Steele's new hunting grounds favor his chosen business model. Time Magazine pointed out in a 2008 article about ADA lawsuit abuse that Illinois (along with California, Hawaii and Florida) is one of the easiest states to file (and collect on) frivolous lawsuits. The American Tort Reform Foundation has also called out Illinois' flawed legal system in the past, naming it one of the nation's foremost "judicial hellholes." One of the issues specifically listed is the willingness of the state to entertain lawsuits filed by non-residents -- something that works in Steele's favor if he doesn't actually reside in Illinois. Prenda Law was nominally a Chicago operation, but also included work done from Florida and (see Hansmeier) Minnesota.

Once a troll, always a troll, it seems. Prenda Law may no longer be an entity, but the lawyers behind it are back in the settlement business. Sure, ADA violations may be more publicly palatable than chasing porn downloaders, but underneath it all, it's still the same shady business that has the potential to wreak the same sort of financial havoc on its victims.

Filed Under: ada, copyright trolling, illinois, john steele, lawsuits, minnesota, paul hansmeier, shakedowns, trolling
Companies: accessibility law group, prenda, prenda law

Unsealed Motions Shows How Team Prenda Sought To Hide Money

from the can't-have-anyone-find-this-cash,-could-we? dept

Back in April, we wrote about a really enraged John Steele (famous for his likely leading role in the Prenda scam) angrily hitting back against a sealed motion for contempt against him, arguing that he was lying and hiding assets in his attempt to plead poverty, after a court ordered Team Prenda to file detailed financial statements. They did not do so. Instead, as the court noted:

In the case where there has been no attempt to comply with the Court's order, plaintiff's counsel must show a "complete inability to pay." ... Plaintiff's counsel, "stated differently, . . . [has] the burden of establishing clearly, plainly, and unmistakably that compliance is impossible." ....

The Court finds that plaintiff's counsel has not met its burden. They submitted incomplete, and to say the least suspicious, statements of financial condition. Attached to each statement was a letter from their certified public accountant ("CPA"). In these letters, the CPA indicates a departure from generally accepted accounting principles. He further notes that plaintiff's counsel elected to omit substantially all of the disclosures required by generally accepted accounting principles. The Court finds these statements insufficient to establish plaintiff's counsel's inability to pay.

Following that, lawyers Dan Booth and Jason Sweet filed the motion that got Steele so angry -- highlighting significant evidence that Steele and others had hid money offshore. Steele hit back at that, with little effect, and, as Fight Copyright Trolls now alerts us, the original filing that reveals some of Steele's financial shenanigans has been unsealed. Not surprisingly, it paints a picture of a lot of "shell games" for how the money was moved around. Here's just some of the details:

1. On December 13, 2011, Steele opened a CitiCard account. In the application for the account he identified his income amount as $900,000.00 and his total income for 2011 as $930,000. See Exhibit A hereto.

2. A statement from Fifth Third Bank shows that Steele had $2,177.005.27 in personal savings accounts there on September 5, 2012. See Exhibit B hereto. By September 25, 2012, two deposits totaling that amount had been transferred from Steele’s personal account into Prenda’s IOLTA account. The remainder of that money was then wired to an unknown destination the next day. See Exhibit C hereto.

3. On December 18, 2012, Prenda Law, Inc. (“Prenda”) paid out $5,000.00 to McCullough Sparks, an asset protection law firm located in Provo, Utah. See Exhibit D hereto. McCullough Sparks promotes its key service as the “541 Trust,” which “removes assets from your personal ownership and from any disclosure of your personal assets. It is a private document and it cannot be discovered through any public records.” See Exhibit E hereto. A CPA would not know about such a trust unless Plaintiffs’ Counsel disclosed it to them.

4. Plaintiff’s Counsel brought this case, like hundreds of others, as part of their coercive litigation settlement practice. See Dkt. No. 61 pp. 14-19. Between 2010 and 2013, when that practice was at its height, BluePay, one of several online credit card processors they used to process settlements from Doe defendants, processed more than $4.4 million in settlement monies, paid out to Prenda, Steele Hansmeier PLLC, Media Copyright Group, LLC, and LiveWire Holdings, LLC. See Exhibit F hereto; see also Dkt. No. 124 p. 4 n.3 (detailing relationships between Plaintiff’s Counsel and these and other non-parties).

5. Smith’s subpoenas sought information about eighteen closely related non-parties. See Dkt. No. 116-1; Dkt. No. 124 p. 4 n. 3. The non-parties opened at least forty-seven bank accounts in just two of the banks subpoenaed since 2010, and have closed all but a few of those accounts. Several of these accounts were opened and shut so quickly as to suggest that Plaintiff’s Counsel have transferred monies between accounts and related entities in a deliberate attempt to obscure its sources and their current holdings. For example, on August 13, 2012, Steele withdrew $29,924.56 from Media Copyright Group, LLC. See Exhibit G. He then opened two Fifth Third Bank accounts in his personal name the same day, depositing $27,924.56 into the account identified in Exhibit H and $2,000 into the account identified in Exhibit I. He then closed the account in Exhibit H on September 25, 2012, transferring all its funds into the other account in Exhibit I, which he closed on January 7, 2013 (after transferring $1,000 to Prenda Law, Inc. on October 2, 2012.).

6. Likewise, on December 15, 2011, John Steele transferred $159,000 from his personal account to that of Steele Law. See Exhibit J. That same day, Steele Law transferred $160,000 into the account of Miami Beach Consulting (“MBC”). Id. MBC is a business owned by John Steele’s wife, Kerry Steele (neé Eckenrode). See Exhibit K. Four days later, $150,000 of that money was wired to an unknown destination via Sabadell Untd. Bank, a subsidiary of Banco de Sabadell, S.A. and provider of international banking services.6 Miami Beach Consulting’s account was closed two months later. See Exhibit L.

7. Duffy and Steele are the two signatories Prenda’s IOLTA and operating accounts with Fifth Third Bank. See Exhibit M hereto. This tends to refute Steele’s repeated denials that he has an ownership interest in Prenda.7 Similarly, and despite his denials otherwise, Paul Hansmeier was a partner in Media Copyright Group (a/k/a/ 6881 Forensics), the IT firm which Plaintiff’s Counsel used to identify alleged infringements. A check made out to Media Copyright Group from Alpha Law and signed by Hansmeier clearly states “capital contribution” “for 50% interest” See Exhibit N hereto.

In the footnotes, it also highlights that the use of "Steele Law" for transferring money is especially suspect, given that Steele claimed that Steele Law was gone as an entity ten months earlier. The filing also discusses money transfers to Latvia, combined with evidence that Steele had been reading about hiding money in Latvia with a program designed to get you a Latvian passport and citizenship.

It's still somewhat circumstantial evidence, but as FCT notes, it's somewhat surprising that Steele apparently missed the deadline to try to keep this particular document sealed...

On top of that, in a second filing, even more questionable moves are revealed. Again, just a snippet:

A. Sabadell Bank.
Smith has identified transactions between accounts owned by Steele and Sierra Investment Partners (“Sierra”) totaling $212,125.00. See, Ex. Q. Sierra is a business Steele co-owns with Robert Balzebre that maintains an account at Sabadell Bank. See, Ex. R. Mr. Balzebre has been involved with Steele in several business ventures going back to 1997—including Steele Hansmeier. See Ex. S. Continued discovery would clarify the true extent of Steele’s financial holdings.

B. ING.
Hansmeier transferred at least $62,979.00 into an account at ING (now owned by Capital One). See Ex. T. Similarly, Hansmeier has transferred $515,000 to Monyet LLC with the notation that such checks were for “estate planning.” See Ex. U. Smith can only surmise that Monyet’s account(s) may also be found at ING. Said company has no discernible address, officers, employees, products or services—but a transfer from Livewire indicates who the owner is: “Monyet/Paul Robert Hansmeier.” Id.

C. Pershing, LLC.
Steele’s frenzied attempt to prevent GMS Group, from complying with discovery though Smith has not yet subpoenaed them, is now understood. Dkt. No. 158. Documents produced by Pershing include statements from GMS Group. Pershing is a clearing firm for GMS Group, and while it has in its possession some documents from GMS Group, it by no means has them all. What Smith was able to obtain indicates Steele transferred via GMS Group in excess of $200,000.00 to various accounts, and under at least two other of his business aliases/shell companies to banks with branches in the US, UK and Canada. See Ex. V.

Remember how, among other things, Judge Wright had referred Team Prenda to the IRS? I wonder if they'll be interested in some of these transactions....

Filed Under: anthony smith, john steele, laundering, money, paul hansmeier
Companies: prenda, prenda law

Prenda Loses Again: Minnesota Appeals Court Upholds Sanctions

from the we're-waiting-for-the-truth-to-come-out dept

Almost exactly a year ago, we wrote about Team Prenda being ordered to pay another $64k in attorneys' fees in one of its many cases. This one involved Prenda, along with Paul Hansmeier's "Alpha Law Firm" and local Minnesota lawyer Michael Dugas supposedly representing a company named Guava, suing a bunch of folks in Minnesota state court. The case had taken quite a twist when defendant Spencer Merkel revealed how he'd made a deal to take a dive in the case. That is, he'd been hit with a standard Prenda threat letter concerning "Hard Drive Productions" content, and when he told them he couldn't pay, someone from Prenda made a "deal" with him in which he'd get sued, and would agree to give up hit Bittorrent logs during discovery and then have the case dismissed. Team Prenda needed the logs to find more people to shake down, and most likely wanted to use the case as an "example" that it was okay for them to get logs through these very, very questionable lawsuits.

Except, somewhere along the way the court noticed that it was a bogus lawsuit, and that resulted in the order to pay $64k. Team Prenda appealed, and... have lost again as the Minnesota state court of appeals has, like nearly every other court, seen right through the Prenda scam.

We have carefully reviewed the record, and we conclude that the district court did not abuse its discretion in imposing attorney-fee sanctions against appellants. The district court found that appellants initiated and pursued this litigation in bad faith, that the only purpose of the litigation was “to harass and burden Non-Parties through obtaining IP addresses to pursue possible settlement rather than proceed with potentially embarrassing litigation regarding downloading pornographic movies.” This is an improper use of the judicial system.

As per usual, Team Prenda throws a lot of crap at the wall, hoping something will stick. None of it does. First, they claimed -- as they always do -- a failure of due process. The court brushes that aside and shows that there was plenty of due process, even if some of it could have been slightly clearer. Next, Team Prenda claims there's not enough evidence for "bad faith." The court has no problem rejecting that one quickly:

Although the record in this case was not fully developed because appellants voluntarily dismissed the underlying action before it could be considered on the merits, it includes sufficient evidence to support the district court’s finding. The evidence includes Merkel’s affidavit testimony that he received a letter from Prenda Law threatening suit on behalf of its client, Hard Drives; he made arrangements with someone named “Michael” or “Mike” at Prenda Law for an alternative settlement arrangement, including his consent to be sued in Minnesota; Prenda Law referred him to pro bono counsel; Hard Drives would dismiss the suit after Merkel provided his BitTorrent log; and he was surprised to be sued by Guava, rather than Hard Drives. The evidence also includes Morrison’s testimony that Merkel was referred to her by Hansmeier and Dugas; that she expected a lawsuit to be filed by Hard Drives, rather than Guava; and “[t]here’s been some bait and switch you might call it in this case.” And the evidence includes the facts that (a) despite repeated questioning by the district court regarding Guava’s corporate status, appellants failed to file a certificate of authority or provide any evidence regarding Guava’s incorporation, its officers, or its business operations, and (b) despite Merkel’s alleged involvement in a hacking conspiracy, appellants sought no discovery from Merkel during the pendency of the litigation. This evidence, taken together, amply supports the finding that appellants had no good-faith basis for this litigation....

Appellants assert that the district court erred by relying on the communications between Merkel and Prenda Law relating to claims by Hard Drives, arguing that there is no evidence of a connection to this action. But the district court found a connection, and there is evidence in the record to support that finding. “Michael” at Prenda Law offered to refer Merkel to Minnesota attorney, Morrison. Morrison testified that she received the referral from Hansmeier and Dugas; Hansmeier filed a notice of appearance identifying himself as “of counsel” to Prenda Law, and Dugas submitted a declaration in this matter identifying himself as the only “‘Mike or Michael’” at either Alpha Law Firm LLC or Prenda Law, Inc.” Dugas denied representing Hard Drives or being involved in the settlement agreement between Merkel and Hard Drives. But the district court rejected this assertion as incredible, and we will not disturb that credibility determination.

There's a funny bit where Team Prenda tries to claim that originally the court thought the case was brought in good faith, so the later bad faith determination shouldn't count. The appeals court is, again, not impressed:

We reject this argument as circular and unpersuasive. The district court’s initial determination that Guava demonstrated that the information it sought was relevant and material did not preclude it from later—on being made more fully informed of the facts—finding that appellants were acting in bad faith.

Team Prenda also protested the $64k amount. But, again, their arguments fall (mostly) flat. The court basically says the amount is enough, as is the requirement that the lawyers file a $10k bond before filing any more lawsuits, but there was one procedural issue, concerning filing a Minnesota "certificate of authority" that was improperly presented in the lower court ruling, so the appeals court fixes that. It's a meaningless issue, though.

Finally, Team Prenda argues that sanctions can't be applied because they had voluntarily dismissed the lawsuit already. No go:

Lastly, appellants assert that the district court was precluded from awarding sanctions after the action had been voluntarily dismissed, citing such a limitation in the district court’s authority [citing laws and caselaw that say] “motions for sanctions brought after the conclusion of the trial must be rejected precisely because the offending party is unable to withdraw the improper papers or otherwise rectify the situation”). But the district court’s inherent authority to impose sanctions is not so circumscribed. See, e.g., Brickwood Contractors, Inc. v. Datanet Eng'g, Inc., 369 F.3d 385, 389 n.2 (4th Cir. 2004) explaining that “failure to comply with the safe-harbor provisions would have no effect on the court’s authority to . . . impose sanctions within its inherent power”).

So, once again, an appeal by Team Prenda falls totally and completely flat. And they need to pay up.

Filed Under: michael dugas, minnesota, paul hansmeier, spencer merkel
Companies: af holdings, alpha law firm, guava, hard drive productions, prenda, prenda law

Appeals Court Smacks Down Team Prenda... Again

from the still-waiting-for-the-truth-to-come-out,-huh? dept

Back in April it seemed fairly clear that the 7th Circuit Appeals Court panel set up to hear the Prenda appeal of the Lightspeed v. Anthony Smith case was not impressed by Team Prenda. I mean, when a judge directly states "there's a lot of shell games going on here" and also points out that it's "shocking" that the lawyer representing Prenda has no idea about the relationship between Prenda, Alpha Law and Steele Hansmeier (a central issue in the case), you expect that the eventual ruling is going to not go well for Team Prenda, but you never really know until the ruling comes out. It has come out. And it is not good news for Team Prenda. Any time a ruling starts off with the following, you know you're going to be in for a good ride:

The first rule of holes, according to an old saying, is to stop digging. The two appeals before us bring that to mind, for reasons that will become apparent.

Yes, a failure to "stop digging" has long been a major fault many of us have associated with Prenda "mastermind" John Steele, and the judges clearly see that as well. They go through the history of the case, highlighting a bunch of questionable moves by Steele and Paul Hansmeier in demanding names from ISPs and using a bunch of questionable legal claims in the original lawsuit, and pretty quickly get at the "shell games":

At the same time, Hansmeier submitted a motion for pro hac vice admission; he did not identify a law firm on the form. Steele entered an appearance in which he listed his firm as Prenda Law. The firm affiliations, however, turned out to be provisional, to put it kindly. At the emergency motion hearing, Steele identified his firm as Steele Hansmeier PLLC, Duffy said that he was with Prenda Law, and Hansmeier was with something called Alpha Law Firm. Steele Hansmeier and Prenda are listed at the same street address, 161 North Clark Street, in Chicago, in different suites.

Later, the court notes dryly that when Hansmeier submitted a motion to withdraw, he did so "without indicating which firm he was with." The court then notes how Team Prenda was engaged in similar shenanigans elsewhere, citing the famous smackdown from Judge Otis Wright in California.

Then we get to the meat of the appeal. First, the silly claims (tried repeatedly) from Steele and Hansmeier that they were never properly informed about Smith's motion for sanctions. The court doesn't buy it. At all:

The record, however, does not support them. First, as the district court concluded, even if we assume that they did not have notice originally, that defect was cured when the district court granted rehearing on the sanctions issue. Indeed, in their briefs before this court, Steele and Hansmeier seem to concede as much. Their complaint has shifted to one focusing on the adequacy of their opportunity to respond. It is too late to change theories, however, and in any event, the district court correctly ruled that whatever procedural flaw there may have been was fully corrected by affording a new opportunity for a hearing. Finally, they received adequate notice in the first place.

The court further notes that the attempts by Steele and Hansmeier to claim that even if Duffy was properly notified it doesn't mean they were ring pretty hollow, given how the three of them keep collaborating and using the ever-shifting names of each other's law firms:

Duffy received notice, he was in charge of Prenda Law, and there was evidence that both Steele and Hansmeier were working for Prenda as well. While appellants huff that the district court “wholly gloss[ed] over the fact that Hansmeier noticed his appearance in the case for Alpha Law Firm, not Prenda Law,” the district court had ample reason to find the Prenda/Alpha distinction illusory at best, fraudulent at worst. Two days after Steele moved to withdraw from this case, he declared in another action that he was “of counsel with the law firm, Prenda Law, Inc.” and that Hansmeier was “also of counsel to the firm.” ... And this is to say nothing of the fact that at least once Hansmeier indicated in this case that he was of counsel to Prenda.

And, that's not all. The court unpacks a bunch of the connections:

A quick look at publicly available documents supports the district court’s finding that service on Duffy also accomplished service on Steele and Hansmeier. In its application for authorization to transact business in Florida, Steele Hansmeier, a Minnesota corporation, listed its mailing ad‐ dress as 161 N. Clark St. No. 3200, Chicago, IL 60601. Paul Hansmeier is listed as Manager and his address is listed as 1111 Lincoln Rd., Suite 400, in Miami Beach, Florida....

Interestingly, 161 N. Clark St. Suite 3200 is also listed as the principal place of business for Prenda Law, Inc., in its 2011 application for authorization to transact business in Florida. Its registered agent, Mark Lutz, uses the same Miami Beach address as Hansmeier did in the Steele Hansmeier application.... Alpha’s connection to Steele Hansmeier and Prenda shows up in a search for Steele Hansmeier on Minnesota’s business filing site. There, Steele Hansmeier lists its registered address as 80 S. 8th St. #900 Alpha Law Firm, Minneapolis, MN 55402.

In conclusion, the court basically calls "bullshit" on Steele and Hansmeier:

Little more need be said. We are disappointed that the appellants’ own attorney, Daniel J. Voelker, was either unable or unwilling to tell us at oral argument about the precise relationship between Prenda and Alpha Law, despite its relevance for the issues on appeal. No matter: we have enough to conclude with confidence that notice to Duffy was reasonably calculated to apprise Steele and Hansmeier of the pendency of the motion. For the icing on the cake, we add that the district court also found that Steele received actual notice via email. Smith sent notice to the email address that Steele shared with Duffy. While Duffy argues that after he withdrew from the case he did not receive those emails, the district court did not find him to be credible. We have no reason to upset that assessment.

The ruling seems to be dripping with that kind of sarcastic understatement. The court then takes on the claim by Steele and Hansmeier that they were never given an opportunity "to be heard" in response to Smith's motion for sanctions. Again, the court says "yeah, right."

Once again, the record belies their assertion. As we have noted, they had adequate notice of the hearing. Duffy submitted a memorandum in opposition to Smith’s motion, but Steele and Hansmeier did not. Nonetheless, the court gave all three appellants another opportunity to be heard on the matter after they submitted motions to vacate or reconsider the order granting Smith’s request for attorneys’ fees. Before the rehearing, Steele and Hansmeier both submitted briefs in opposition to Comcast’s fees. They chose not to submit additional briefs (apart from what was presented in the motion to vacate or reconsider itself) on any other aspect of the order

At the hearing Hansmeier explained in detail why he thought that sanctions should not be imposed against him; Steele spoke as well. This more than sufficed as an opportunity to be heard.

The court then turns its attention to Duffy. Duffy whined that he wasn't given an opportunity to respond to the lower court's decision granting fees to ISPs. Remember, in this case Team Prenda made the incredibly stupid decision to drag Comcast and AT&T into this lawsuit, after those two companies refused to just cough up names of people. Both companies decided to go after fees from Team Prenda, which they got. Duffy claimed that he never had a chance to respond to the motion for fees. The court, once again, points out that this is hogwash (or, more specifically, "frivolous.")

While Steele and Hansmeier submitted timely memoranda in opposition to the ISPs’ motions, Duffy did not. He asserts that he was not given an opportunity to respond because the district court ruled on the motions before the time to respond expired under the court’s local rules. This argument is frivolous. Duffy does not cite any local rule for this point, and had he taken the time to look at the rules, he quickly would have realized that there was time to respond. The ISPs electronically filed their motions on November 8, 2013. The local rules allow 17 days for any response to electronically filed motions... The rules provide that “[f]ailure to file a timely response to a motion may, in the Court’s discretion, be considered an admission of the merits of the motion.”.... Duffy had until November 25, 2013, to submit his response, but he did not file anything. The district court granted the ISPs’ motion on November 27, 2013. Duffy had an opportunity to respond; he simply chose not to exercise it.

The court also rejects the claim from all three that they didn't have a chance to respond to the details of the fee itemization, noting that all three "had a full opportunity to respond to Smith’s itemization but chose to focus on other issues." The court does admit that they didn't really have a chance to respond to the ISPs' itemization, but says "we conclude that this error was harmless." It notes that no one has come close to suggesting that the ISPs' itemization was unreasonable. In fact, the court points out that one of Team Prenda's arguments is that Smith's itemization is much higher than Comcasts -- suggesting that they find Comcast's to be more reasonable.

From there, they move on to the main act: Team Prenda wants to overturn the main ruling against them. The court is, again, not impressed:

Appellants next throw a variety of arguments regarding the substantive ruling against the wall, with the hope that one might stick. None does.

The court notes that Team Prenda's use of the CFAA to try to route around copyright laws was clearly bogus. Even noting that the CFAA is ridiculously broad, the court notes that "this is a frivolous charge." The court also rejects Team Prenda's Hail Mary attempt to blame ISPs because people may have infringed on their service, an argument that is clearly blocked by the law (citing the DMCA's safe harbors, though probably could have used CDA 230 as well for the non-copyright claims).

To this day, the appellants have provided no support for the idea that every time an internet user does something unlawful online, the user’s ISP is unjustly enriched because it continues receiving subscriber fees from the malefactor. The law in fact is to the contrary. See 17 U.S.C. § 512(a) (a “service provider shall not be liable … for infringement of copyright by reason of the provider’s transmitting, routing, or providing connections for” material distributed by others on its network).

As for the claim that there was a conspiracy between all the defendants, including the ISPs because they refused to cough up info? Um, no.

These assertions are utterly without legal merit. The complaint lacks even the most rudimentary allegation of agreement that would satisfy federal pleading standards. In addition, a service provider does not risk becoming a co‐conspirator every time it challenges a subpoena. To argue that challenging a subpoena makes the ISPs co‐conspirators in a fictional copyright infringement ring is frivolous. Appellants’ theory is all the more outrageous given the fact that the Illinois Supreme Court quashed a functionally identical abusive subpoena.

The court basically agrees with everything the district court said about Team Prenda's scheming in deciding that they deserved to be sanctioned for their actions:

The district court similarly did not abuse its discretion in awarding attorneys’ fees to Smith from the inception of the suit. Lightspeed raised baseless claims and pressed for a meritless “emergency” discovery hearing. The district court found that the litigation “smacked of bully pretense.” At the November 13, 2013, hearing on fees, the court could not have been more clear: it stated that appellants were engaged in “abusive litigation … simply filing a lawsuit to do discovery to find out if you can sue somebody. That’s just utter nonsense.” We see no need to belabor the point. The record amply supports the district court’s conclusions, as our discussion of the case thus far demonstrates. There was no abuse of discretion in the court’s decision to grant either the ISPs or Smith fees for the entire case

So far, Team Prenda seems to be scoring a perfect zero, and their luck doesn't get any better as they move into challenging the fact that the court lumped all of them together in making them jointly and severally liable. Team Prenda didn't like it. The court says, deal with it:

Appellants begin by asserting that the district court misapplied section 1927 by holding them vicariously liable for each others’ actions. They are mistaken. While it is true that section 1927 liability is direct..., an order holding parties jointly and severally liable for costs after determining that each one is individually liable is a finding of direct liability.

Next, they contend that FM Industries, Inc. v. Citicorp Credit Services, Inc...., stands for the proposition that a lawyer cannot be held responsible for documents that bear another’s name but not his own. FMI, however, does not stand for such a broad proposition. There, we upheld sanctions against an attorney, but we found that they could not be levied against the copyright specialist retained by plaintiff’s principal counsel....

[....]

The relevant question thus relates to the scope of responsibility undertaken by each individual attorney. In our case, the district court found that while Steele and Hansmeier were not listed on every court document, the evidence showed that they were “in cahoots” with Duffy and worked with him to use the judicial system for a legally meritless claim. Their efforts seem to have continued in this court. While both Steele and Hansmeier now contend that they showed up in this case only after the federal proceedings were underway, the record shows that both were also involved in the shadows of the state court proceedings. Steele called AT&T’s counsel about the subpoenas, and he appeared and argued against the ISPs’ motion to quash and motion to stay. Hansmeier appeared at a conference before a magistrate judge and was the sole signatory of the 10‐page opposition to the ISPs’ motion for the stay of discovery. While Steele and Hansmeier insist that they had only minimal activity with this case, the district court did not abuse its discretion when it found otherwise.

And finally, the court takes on Team Prenda's appeal for their being found in contempt by the district court. As you may recall, after the original district court ruling that told them to pay $261,025.11, Team Prenda simply ignored it. They didn't pay. When hit with the contempt claim, Team Prenda tried to pretend that the sanctions were ineligible for contempt (by twisting the law and pretending it was a "money judgment" and not "sanctions") and then claiming they couldn't pay. This was when the court ordered financial statements from all of them, receiving documents where the CPA who prepared them flat out admitted that they "elected to omit substantially all of the disclosures required by generally accepted accounting principles." And thus, they were found in contempt, and Team Prenda appealed that too. Guess what the appeals court thinks of that? You're right.

Appellants try to evade it by arguing that they thought the order was for a money judgment. But this was neither private nor public litigation against the attorneys. What was at stake was the court’s power to govern its bar. As section 1927 (and for that matter 28 U.S.C. § 1651) reflect, courts have the authority, through contempt proceedings, to sanction attorneys and to enforce their orders.... The money‐judgment defense gets appellants nowhere.

Oh yeah, almost forgot. Team Prenda claimed there was no evidence that they didn't comply with the sanctions. The court laughs:

Appellants next argue that there is no evidence that they did not substantially comply with the order, or at least take reasonable and diligent steps to do so. This position ignores the record. At the show‐cause hearing appellants made clear that they had not paid anything and, when questioned about payment, they never pointed to any step in that direction. They elected instead to defend on the ground that they were unable to pay. Inability to pay is indeed a valid defense in contempt proceedings..., but the question whether the sanctions were paid is different from the question why payment was not made. The district court was entitled to answer the first one in the negative, given appellants’ admission on the record that they had neither paid the required amount to defendants nor posted a supersedeas bond.

What about the whole "inability to pay" thing? Yeah, guess what the court thinks of that. It simply notes that the burden of an inability to pay is a high one and it's totally on Team Prenda to prove -- and they totally failed to do that.

End result: appeals court basically calls bullshit on every single Prenda claim and upholds the original ruling and the contempt finding. It also notes that while it may have skipped over some of the many arguments Team Prenda threw against the wall "any arguments we have not discussed do not merit separate attention." Oh yeah, and the costs of the appeal are now to be added to the amount that Team Prenda has to pay up.

Filed Under: 7th circuit, anthony smith, john steele, paul duffy, paul hansmeier, team prenda
Companies: alpha law group, lightspeed, prenda, prenda law, steele hansmeier

Prenda Hit With $12,000 In Sanctions Over Its Bogus Defamation Suit

from the Assclown-Law-racks-up-another-debit dept

The spectacular Prenda flameout continues. As was reported here back in January, US District Judge John Darrah approved Paul Godfread and Alan Cooper's request for sanctions at the tail end of Prenda's disastrous defamation suit (one John Steele himself did plenty to undermine). Now, we have a dollar amount. (via Ars Technica)

Today, Judge Darrah in the Northern District of Illinois granted yet another sanctions award against copyright troll Prenda Law. Paul Godfread and Alan Cooper have been awarded $11,758.20 as reimbursement for a portion of the fees they have spent on attorneys in defending themselves against Prenda’s defamation lawsuit.

The Court awarded the sanctions under both Federal Rule of Civil Procedure 11 as well as its inherent power to sanction provided in 28 U.S.C. § 1927. In the Court’s own words, the sanctions award was “[b]ased on Prenda’s misrepresentations in this Court” and the Defendants’ incurred fees were “occasioned by the misconduct of Prenda Law and Paul A. Duffy in this Court.”

This will be added to the half-million in (mostly uncollected) sanctions levied against Prenda since the beginning of last year. Prenda tried to argue that the hourly fee requested was ridiculously high.

According to the American Intellectual Property Law Association’s 2013 Report of the Economic Survey, intellectual property attorneys based in Chicago and Boston within the first quartile bill $400 per hour, in line with the amount billed by Defendants’ counsel, who are based in Chicago and Boston. (Dkt. No. 61, Ex. B.) Yet, Prenda argues that this rate is “exorbitant” because Defendants’ attorney Erin Russell is not registered before the United States Patent and Trademark Office and, therefore, not an intellectual property attorney.

"Apropos of what," Judge Darrah doesn't even bother asking.

Prenda cites no law supporting this contention, and its claim of exorbitant rates fails.

Prenda also argued that some of the fees incurred were "self-inflicted" and not the direct result of its bogus lawsuit/endless dicking around. Darrah dismantles this argument as well.

The basis of Prenda’s mitigation argument is that Defendants chose not to trust Prenda to withdraw its motion to remand. Defendants’ failure to trust Prenda was not unreasonable, given Prenda’s vigorous defense of its motion to remand on the same day it filed its motion to withdraw the motion. In any event, Defendants’ response to Prenda’s motion to remand was sufficiently quick and efficient. Not only did Defendants file their response within six days, they filed it on the same day that Prenda presented its motion to withdraw. Prenda’s opposition with respect to Defendants’ fees being self-inflicted or avoidable is denied.

Prenda did manage to come out of this in slightly better shape than it could have. Darrah only awarded the attorney's fees racked up in his court, not including anything that occurred in a separate court in 2013. That decision cut the awarded amount roughly in half.

This appears to be the final moments for Prenda Law, a sordid episode of legal abuse that is ending with lots of (gavel) banging and (Prenda partner) whimpering.

Filed Under: alan cooper, defamation, john steele, paul duffy, paul godfread, paul hansmeier, sanctions
Companies: af holdings, prenda, prenda law

Prenda Tries To Weasel Out Of Case It Just Lost At The Appeals Court

from the run-away,-run-away dept

Remember last week when the DC Circuit appeals court overturned one of Prenda's few "wins" on the question of "joinder" (lumping together a bunch of unrelated people in a single lawsuit)? That was the case where a former RIAA lobbyist-turned-judge, Beryl Howell, was one of a very few judges who found such joinder appropriate. The appeals court disagreed and sent it back. And... in response, Prenda (in the form of Paul Duffy) are now trying to scamper away, by filing to voluntarily dismiss the case. This is pretty typical in the Prenda playbook. Whenever things start to look problematic, they try to dismiss the case and get away unscathed. Most of the cases where various attorneys' fees are being lumped on them involve similar cases where Prenda tried to run away, and was not allowed to do so. Some of the plaintiffs in this case may pursue fees, though with the previous awards piling up, it's unlikely they'd get much at this point. Either way, it's clear that after the appeal went against Prenda, it doesn't even want to try again at the district level.

Filed Under: beryl howell, dc circuit, joinder, paul duffy, paul hansmeier
Companies: af holdings, prenda, prenda law

Appeals Court Overturns Prenda Win From Former RIAA Lobbyist Judge

from the good-to-see dept

As we've been covering the Prenda debacle for years, there was still the one big "victory" it had, in which a DC district court judge ruled that randomly lumping together over a thousand unrelated "Does" was perfectly legitimate, something most other courts had found to be inappropriate. Of course, people quickly figured out that the judge who found in favor of this bizarre joinder ruling, had only recently been appointed to the bench, having previously been an RIAA lobbyist, and who, years earlier, had helped write the DMCA as a Congressional staffer.

That case made its way slowly through the appeals process, and earlier today, the DC Circuit appeals court overturned the ruling, highlighting a bunch of Prenda's bad behavior, but (perhaps more importantly) pointing out that the subpoenas for information on these 1,000+ Does was clearly inappropriate, first because almost none of the Does appeared to live in Washington DC, and thus were outside the court's jurisdiction. Prenda/AF Holdings complete failure to do anything even remotely close to figuring out if people might be located in DC was pretty damning here:

Federal Rules of Civil Procedure 45 and 26 set forth the relevant considerations. Rule 45(d)(3)(A) requires a district court to “quash or modify a subpoena that . . . subjects a person to undue burden.” If a subpoena compels disclosure of information that is not properly discoverable, then the burden it imposes, however slight, is necessarily undue: why require a party to produce information the requesting party has no right to obtain?

And, here, the court certainly finds the discovery attempts to be "undue," because AF Holdings/Prenda could show no good faith belief that they were going after information relevant to a lawsuit in that court.

Here, we think it quite obvious that AF Holdings could not possibly have had a good faith belief that it could successfully sue the overwhelming majority of the 1,058 John Doe defendants in this district. AF Holdings concedes that under the District of Columbia’s long-arm statute, which along with the Due Process Clause governs this question... the only conceivable way that personal jurisdiction might properly be exercised over these Doe defendants is if they are residents of the District of Columbia or at least downloaded the copyrighted work in the District.... But AF Holdings has made absolutely no effort to limit its suit or its discovery efforts to those defendants who might live or have downloaded Popular Demand in the District of Columbia. Instead, it sought to subpoena Internet service providers that provide no service at all in the District. As Duffy reluctantly conceded at oral argument, AF Holdings could have no legitimate reason for objecting to the court’s quashing the subpoenas directed at these providers.... Even for those providers that do serve the District of Columbia, AF Holdings’s discovery demands were overbroad because it made no attempt to limit its inquiry to those subscribers who might actually be located in the District. It could have easily done so using what are known as geolocation services, which enable anyone to estimate the location of Internet users based on their IP addresses. Such services cost very little or are even free.

The court notes that Prenda's failure to do even the most basic things to limit discovery raises questions about its motives:

Given AF Holdings’s failure to take even these minimal steps, we cannot escape the conclusion that it sought the vast majority of this information for reasons unrelated to its pursuit of this particular lawsuit.... . Indeed, Duffy essentially admitted as much at oral argument, stating that if, as appears to be the case, 399 of Comcast’s 400 identified subscribers were found to live outside the District, “the 399 likely wouldn’t be named as defendants in this case.”

The court then checks in on the big question of "joinder" -- and whether or not it's appropriate to lump together over 1,000 totally unrelated individuals in one of these copyright trolling lawsuits. Like most courts to date, but unlike Judge Howell, the appeals court sees how problematic this is.

We are unconvinced. For purposes of this case, we may assume that two individuals who participate in the same swarm at the same time are part of the same series of transactions within the meaning of Rule 20(a)(2). In that circumstance, the individuals might well be actively sharing a file with one another, uploading and downloading pieces of the copyrighted work from the other members of the swarm.

But AF Holdings has provided no reason to think that the Doe defendants it named in this lawsuit were ever participating in the same swarm at the same time. Instead, it has simply set forth snapshots of a precise moment in which each of these 1,058 Does allegedly shared the copyrighted work—snapshots that span a period of nearly five months. Two individuals who downloaded the same file five months apart are exceedingly unlikely to have had any interaction with one another whatsoever. Their only relationship is that they used the same protocol to access the same work. To paraphrase an analogy offered by amicus counsel at oral argument, two BitTorrent users who download the same file months apart are like two individuals who play at the same blackjack table at different times. They may have won the same amount of money, employed the same strategy, and perhaps even played with the same dealer, but they have still engaged in entirely separate transactions.... We therefore agree with those district courts that have concluded that the mere fact that two defendants accessed the same file through BitTorrent provides an insufficient basis for joinder.

It's nice to see that the court picked up on many of the amicus arguments made by EFF, ACLU, Public Knowledge and Public Citizen.

Oh, and, in case you're wondering about all the other stuff, such as the Alan Cooper forgery, the court notes those allegations, while saying they are unrelated to the issues here, but, at the very end, in sending the case back to the district court, tosses this in:

Accordingly, we vacate the district court’s order and remand for further proceedings consistent with this opinion. We leave it to the district court to determine what sanctions, if any, are warranted for AF Holdings’s use of a possible forgery in support of its claim.

Filed Under: alan cooper, beryl howell, copyright, copyright troll, john steele, joinder, jurisdiction, mark lutz, misjoinder, paul duffy, paul hansmeier
Companies: af holdings, prenda, prenda law

Chutzpah: John Steele To Court: What, You Think I Would Lie, Cheat And Break The Law? Come On!

from the get-crackin' dept

Having followed the saga of Prenda Law over the past few years, one thing has become clear: John Steele really loves the "I know you are, but what am I" form of legal argument, in which whatever he's accused of, he aggressively accuses his accuser of being guilty of the same. It's a sort of faux macho move, in which every attack on him is met with an equally or more aggressive attack. To date, the strategy has failed badly, but it seems that Steele just can't let go of this kind of approach. In the latest round of the Anthony Smith case, Steele appears to be trying on a variant of that aggressive posture, taking on the very serious and direct accusations made against him (including those by multiple federal judges) and mocking them, by asking another court rhetorically, "what, do you really think I'm guilty of all these crazy things?" when the answer to that question may very well be yes.

At issue is the continuing fight over getting Steele and his collaborators, Paul Hansmeier and Paul Duffy, to actually pay up for their abuse of the legal process. Last we checked in on this particular case, the district court was finding them in contempt and piling more onto the money they would need to pay, while the appeals court does not appear to be impressed by Team Prenda's arguments, clearly calling out the "shell games" that Prenda and associated entities were playing.

While aspects of the case have been stayed during the appeal, other aspects are moving forward, including Smith's lawyer continuing to push for discovery on the actual assets of Steele, Hansmeier and Duffy. As you may recall, despite being required to provide such information, they did so in a questionable manner. As Judge David Herndon pointed out:

The Court finds that plaintiff's counsel has not met its burden. They submitted incomplete, and to say the least suspicious, statements of financial condition. Attached to each statement was a letter from their certified public accountant ("CPA"). In these letters, the CPA indicates a departure from generally accepted accounting principles. He further notes that plaintiff's counsel elected to omit substantially all of the disclosures required by generally accepted accounting principles. The Court finds these statements insufficient to establish plaintiff's counsel's inability to pay.

Since then, Smith's lawyer, Jason Sweet of Booth & Sweet, has continued to push for determining the financial position of the three individuals here. There's a sealed document which apparently hints at some shady financial dealings, but it appears to be making Steele very angry. While Paul Duffy filed a pretty empty opposition saying that he has no offshore accounts, Steele went into full on, ultra-aggressive "who me?" defensiveness in response, leading to some incredible statements, considering what multiple courts have already said about them. The classic part has to be this:

For this Court to find any act of Prenda should be attributed to Steele, the Court would have to believe that Steele lied to multiple federal judges without getting caught, committed massive tax fraud without the IRS finding out, and proactively broke into the Illinois Secretary of State’s corporate records database to hide his ownership of Prenda Law, all because of the remote chance that years later a federal judge might sanction Prenda Law for $261,000.

Except... of course, multiple judges have already claimed that Steele and the others have lied, including in this very case. In the original ruling in this case, Judge Patrick Murphy directly called out Steele for lying, saying: "These men have shown a relentless willingness to lie to the Court on paper and in person." He furthermore highlighted how it was quite clear that Steele was directly involved in Prenda, which Steele is now denying yet again. And no one is claiming he hacked into the corporate records database (though, now that he's denied it, it almost makes you wonder...), but that he was clearly in control of Prenda and received much of the money that went into Prenda.

As for the issue of the IRS, well, last we checked, at least one judge, Otis Wright, has referred their conduct to the IRS, and there are at least some indications that an investigation is ongoing. And while no one thinks they set up this shell game specifically to avoid this particular ruling, it's not difficult to see that they did so to try to avoid a series of similar court rulings, after Prenda's initial approach started getting regularly shot down in court.

Steele's response also ratchets up the ridiculous rhetoric in describing the copyright trolling shakedown business, which they copied from a bunch of other firms:

Steele and his partner, Paul Hansmeier (”Hansmeier”) were early pioneers in catching thieves and hackers who engaged in stealing copyrighted works and other computer related misdeeds, including computer hacking and copyright infringement.

Except, of course, they were neither pioneers, nor were they catching "thieves" or "hackers." Rather, by all accounts, they set up a honeypot site, uploaded their own content to it, shared it on file sharing sites, and then used the IP addresses of those who followed the release that they themselves put online, to shake them down with lawsuits and demands for settlement. The evidence on this is fairly overwhelming.

Steele tries to argue away the "oddities" the court noted in the filings made by the CPA they hired this way:

At the hearing, no reference was made to the GAAP, the Generally Accepted Accounting Rules, a set of standards designed for the financial reporting of corporations, not individuals. Steele submitted his financial statement as directed. Steele’s submissions were accurate, and no filing since has disproved any aspect of Steele’s statement

If he thinks that this will get him out of the fact that the CPA "elected to omit substantially all of the disclosures required" I would imagine he's got another thing coming.

Steele, also tries to angrily argue away the infamous Brett Gibbs spreadsheet that revealed the revenue of Prenda Law, and how 70% of it went to both Steele and Hansmeier, who have long denied being associated with that firm. Steele argues that this spreadsheet was made by Gibbs, as opposed to (as Gibbs has noted) made by Prenda and shared with Gibbs via a shared Dropbox account.

It appears that Mr. Gibbs created some accounting sheet of Prenda Law finances for some period of time prior to this case, and thus is irrelevant. Steele has no personal knowledge of Mr. Gibbs’ accounting records, methodology, or how Mr. Gibbs created his documents. According to Mr. Gibbs himself, he doesn’t either, and claims he doesn’t even know how his document came into existence. Such a document hardly comports with the Federal Rules of Civil Procedure governing admissible evidence.

He focuses on the fact that the spreadsheet is not admissible. Of course, his partner, Hansmeier, having argued basically the same thing in the past, has also suggested that the facts of the document are accurate, noting (incorrectly) that the document supports Steele/Hansmeier's position and that it was "stolen."

Related to all of this, Steele appears to still be playing games. In a separate filing, Sweet details how Steele took it upon himself to (incorrectly) inform various parties that Sweet had subpoenaed, that the stay on one part of the case meant those subpoenas were withdrawn as well. Except that they're part of a separate process, which is still ongoing. Sweet asked Steele to confirm that Steele had gone back to those third parties, and admitted that he was wrong in interfering with the discovery process. Steele did not do so, but rather sent one of his snarky emails about how he promises that he "will address your most recent round of subpoenas as appropriate."

It's been a while since Steele has done this kind of thing, but it's the same old John Steele, cocky until the very end, even as all of the evidence is against him. It reminds you of a little kid who has been caught doing something wrong but figures if he just keeps denying it over and over again, buying himself time, there will be some way to get out of it all.

Filed Under: anthony smith, brett gibbs, david herndon, jason sweet, john steele, paul duffy, paul hansmeier, sanctions, subpoenas
Companies: af holdings, ingenuity 13, lightspeed, lightspeed media, prenda, prenda law

Appeals Court Not At All Impressed By Prenda's Appeal

from the wanna-try-that-again dept

Team Prenda finally got to an appeals court on Monday and it didn't go particularly well. The appeal in the Lightspeed case, in which Judge Patrick Murphy called them out for "flat-out lying" to the court and hit them with $261,000 in attorneys' fees (a number that has been bumped up as Team Prenda was found in contempt for not actually paying) was heard on Monday, and the three judge panel in the 7th Circuit did not appear at all impressed by the arguments made by Daniel Voelker who was representing John Steele, Paul Hansmeier and Paul Duffy. You can listen to the 32 minute hearing yourself for all the fun.

It starts off almost immediately, as Voelker argues there's no basis for the district court ruling -- and is interrupted by one of the judges, noting that the court found that the case was pursued in bad faith "which stands on its own as a basis for sanctions." Voelker insists that the court "didn't rely on any record nor cite any facts" and, again, he's cut off: "well, it talks about an extensive pattern of lying and misrepresentations, and vindictive pursuit of claims that were, in the court's view, frivolous or marginal at best. And, trying to extract settlement payments before an inevitable voluntary dismissal."

In other words, within 3 minutes of the appeal hearing, the judges had made it clear that they were well-informed about the scheme Team Prenda had cooked up and why the district court had ruled the way it had. Voelker tries to slam the judge for taking "extrajudicial notice" of basically every other case where Prenda had been thumped. Of course, I don't see how that helps Team Prenda at all: to argue "please ignore my clients' record of being slammed by judges all across the country" doesn't seem very convincing. And, immediately another judge jumped in to point out that there were, in fact, statements made on the record in those other cases that contradicted what was being said in this case. The same judge immediately highlights the questionable nature of the different organizations, such as the affiliation between Prenda Law and AF Holdings, and says that of course it's reasonable for the judge to take notice of those contradictory claims.

Eventually, the judges ask about the relationship between the various organizations, including Prenda Law, Alpha Law and Steele Hansmeier ("in 25 words or less") and Voelker doesn't inspire any confidence by saying he has no ideas: "I can't your honor. I don't know, I don't know what it is today; I don't know what it was a year ago. So I wouldn't want to even begin to tell you because I just don't know." One of the judge hits back immediately:

That's shocking!

After a bit more of a back and forth she understates the situation:

There's a lot of shell game going on here.

Voelker claims this has no relevance to the issue at hand. The judges don't appear to buy it, at all, noting "this is all pretty serious conduct."

It's often a mistake to read too much into what appeals court panels (and Supreme Court Justices) say during oral hearings. Sometimes they're just testing out theories or pushing various attorneys to see how thoroughly their arguments make sense. But in this case, it seems abundantly clear that the judges are incredibly skeptical about Team Prenda's appeal.

Filed Under: 7th circuit, anthony smith, daniel voelker, john steele, patrick murphy, paul duffy, paul hansmeier
Companies: af holdings, alpha law, at&t, comcast, prenda, prenda law, steele hansmeier

Prenda Actually Wins A Round; Order To Pay Back Settlements Tossed In Minnesota

from the well-that's-unfortunate dept

For months now, we've been covering how Prenda had been losing pretty much every one of its legal fights concerning its fraudulent copyright trolling practices. I guess it was bound to happen sooner or later, but Team Prenda has bounced back with an actual victory. You may recall that one of the (many) key Prenda cases was taking place in Minnesota, where magistrate judge Franklin Noel, becoming aware of what was happening with Prenda in other courts had reopened a bunch of Prenda (via AF Holdings) cases in Minnesota to explore if Team Prenda had committed fraud upon the court. Noel dug in, demanding actual answers to various questions that Team Prenda had avoided in other cases, eventually ruling against Team Prenda and (importantly) ordering the law firm to pay back all the settlement money it had taken in via those cases.

Well, it appears that's all for nothing now. Judge Joan Ericksen has apparently stepped in to put magistrate judge Noel in his place, pointing out that he went way beyond what a magistrate judge is allowed to do and then actually siding with Prenda lawyer Paul Hansmeier in saying that the fact that team Prenda forged Alan Cooper's signatures on the copyright assignment isn't fraud on the court... and, in fact, saying that it basically doesn't matter at all. First, as to a mere magistrate judge sniffing out these problems, judge Ericksen isn't having any of it:

AF Holdings consistently objected to the magistrate judge’s authority to determine whether it had committed a fraud on the Court. The magistrate judge had no such authority. See Reddick v. White, 456 F. App’x 191, 193 (4th Cir. 2011) (per curiam) (“A motion for sanctions under the district court’s ‘inherent’ power is not a pretrial matter under § 636(B)(1)(a). Magistrate judges have no inherent Article III powers—they have only those powers vested in them by Congress. Congress has not created statutory authorization for magistrate judges to exercise inherent Article III powers.”

Furthermore, Ericksen points out that, as a magistrate judge, Noel can't really make an order like he did (which is likely accurate), but instead can just make a recommendation for a "real" judge like Ericksen to review. And Ericksen just doesn't seem concerned about the forgery, lying and other shenanigans from Team Prenda.

Cooper’s signatures were immaterial to the decision that granted AF Holdings expedited discovery.... AF Holdings’ submission of the agreements with Cooper’s signatures—legitimate or not, authorized or not—to evince the transfer of the copyrights to AF Holdings did not amount to a fraud on the Court.

It's somewhat disappointing to see a court not all that concerned that an effort that involved forgery is really no big deal, especially when it was about copyright trolling, a practice of abusing the court system to hound people into paying up to avoid having to fight a lawsuit.

That's unfortunate, but given how many other courts have ruled on Prenda's efforts and the multiple referrals to state bars, DOJ and others, I would imagine that this is merely a slight and brief reprieve for Team Prenda.

Filed Under: alan cooper, copyright, copyright trolling, franklin noel, joan ericksen, john steele, paul duffy, paul hansmeier
Companies: af holdings, prenda, prenda law