Appeals Court Affirms NSA Surveillance Can Be Used To Investigate Domestic Criminal Suspects

from the spooks-in-the-federal-cop-shop dept

The Seventh Circuit Court of Appeals confirms what's already known about the NSA's domestic surveillance: it's not just for terrorism.

The NSA collections -- done in the FBI's name -- are supposed to only gather info related to international terrorism. But that requirement has been phased out. The NSA "tips" a certain amount of data to the FBI for its own use and it has been shown in the past to do the same for the DEA, which it then instructs to obscure the origin of its info.

An opinion [PDF] just released by the Appeals Court, says basically the same thing: although the NSA's surveillance is supposed to be used to sniff out terrorists, there's nothing in the law that prevents it from using its collections to go after criminals.

Gregory Turner was convicted of conspiring with Prince Asiel Ben Israel (both US persons) to provide aid to Zimbabwean "Specially Designated Nationals" -- in this case a group working to block the institution of more democratic processes and procedures in that country.

Turner moved to suppress the evidence, claiming that the government's use of a FISA order to obtain information on his activities violated the NSAs foreign intelligence directives. But the court finds the directive does not limit FISA warrants to terrorism only. The government only needs to "reasonably believe" a target is an "agent of a foreign power."

The government informed Turner it had gathered evidence using FISA-authorized surveillance. Then it refused to turn over information to him with regards to its activities. From the redacted, terribly-reproduced decision:

On February 27, 2014, Turner filed a motion for disclosure of FISA materials and motion to suppress evidence obtained or derived from FISA. The government responded to these motions with a classified brief and a sealed appendix submitted ex parte to the district court and redacted, unclassified version served to Turner. Additionally, the government filed a "Declaration and Claim of Privilege" by the Attorney General that declared, "it would harm the national security of the United States to disclose or hold an adversarial hearing with regards to the FISA materials…"

Both motions by Turner were denied. These denials have been upheld by the Appeals Court. Turner claimed the government failed to meet its probable cause requirements for the FISA warrant and also violated his First Amendment rights with its surveillance.

Much of the court's reasoning is redacted but it does have this to say about Turner's assertions.

Turner contends that "FISA appears to require the communications subject to surveillance of a United States person must related directly to activities involving international terrorism as defined in FISA." Turner misstates the law. FISA is not limited to activities involving international terrorism. FISA authorizes surveillance and searches based on probable cause that the target is an "agent of foreign power," which relates to "any person" engaged in certain activities… on behalf of a foreign power, including "clandestine intelligence gathering activities" and "enter[ing] the United States under a false or fraudulent identity… or while in the United States… assum[ing] a false or fraudulent identity." These activities are listed in addition to "international terrorism."

Not only that, but the laws governing FISA-ordered activities were loosened in 2008 to encompass all sorts of criminal activity not related to foreign powers or international terrorism.

FISA, as amended in 2008, "eliminated any justification for the FISA court to balance the relative weight the government places on criminal prosecution as compared to other counterintelligence responses." [...] [T]he amended FISA statute "does not oblige the government to demonstrate to the FISA court that its primary purpose in conducting electronic surveillance is not criminal prosecution."

As for Turner's First Amendment claims, the court finds the activities he engaged in were not covered under the First Amendment, no matter how "right" Turner may have believed undermining the installation of a democratic government was. As the court sees it, the government established Turner was an "agent of a foreign power," something that strips away protections normally afforded to political activity. Or maybe just political activity the US government doesn't approve of.

Either way, it's very clear FISA court orders can be used to engage in domestic surveillance purely to investigate criminal activity, something the NSA hasn't exactly been forthcoming about. As long as a foreign power is somehow involved, the NSA and the FBI are interchangeable surveillance pieces, even though one of them is assumed to be mostly uninvolved in domestic surveillance of US persons.

Filed Under: 7th circuit, crime, domestic, fisa, gregory turner, nsa, surveillance, terrorism

Court To Prenda's John Steele: Okay, Now We'll Sum Up How Much You Cost Taxpayers And Need To Pay

from the the-saga-continues dept

When last we left John Steele, one of the dynamic duo behind the massive copyright trolling scam once known as Prenda Law, he was being scolded by the 7th circuit appeals court (not the first appeals court to do so), for failing to abide by the court's own advice to "stop digging." But digging a deeper and deeper hole has always been in John Steele's nature, it seems. As we've mentioned in the past, Steele reminded me of a guy I once knew, who incorrectly believed that he was clearly smarter than everyone else, and thus believed (incorrectly) that he could talk and lie his way out of any situation if he just kept smiling and talking. That generally doesn't work too well in court -- especially when you're not actually that smart.

In that July ruling, the court upheld most of the money Steele and Paul Hansmeier were told to pay, and scolded them for directly lying about their ability to pay. It referred to Steele's "entire pattern of vexatious and obstructive conduct." However, as we noted, Steele kinda sorta "won" on one point, though even that win was a loss. One of the arguments that Steele's lawyer had made was that on the fine that the lower court gave him for contempt, the basis for that fine appeared to be under the standards for criminal contempt rather than civil contempt. Way back during oral arguments, the judges on the panel had asked Steele's lawyer, somewhat incredulously, if he was actually asking the court to push this over to be a criminal case rather than a civil one, and Steele's lawyer answered affirmatively.

And so, the court notes that the contempt fine "falls on the criminal side of the line," because "it was an unconditional fine that did not reflect actual costs caused by the attorneys’ conduct." So it tossed out the $65,263 fine, but noted that criminal contempt charges might still be filed (out of the frying pan, into the fire). Oh, and of course, it left open the idea that the lower court might go back and actually justify civil contempt fines. And it appears that's exactly what Judge David Herndon in the Southern District of Illinois has done. He's ordered Steele to show cause for why he should not be fined, and then details the basis for such a fine.

As a direct result of Steele’s misrepresentations, between January 29, 2014 and June 5, 2015, this Court expended a significant amount of time and effort addressing matters relating to Steele’s ability to pay the Fee Order. This includes the following: (1) reviewing, researching, and issuing orders resolving and/or reconsidering numerous motions stemming from the misrepresentations; (2) preparing for and holding hearings on February 13, 2014 (Doc. 123) and November 12, 2014 (Doc. 187); and (3) reviewing asset statements submitted by John Steele in support of his inability to pay claim.

Steele’s choice to make misrepresentations to this Court and to continue to press the issue of inability to pay necessitated all of the above. Steele’s misconduct resulted in an actual loss to this Court and, more importantly, to the tax payers. It is the tax payers who ultimately bear the cost of adjudicating Steele’s misrepresentations. See U.S. v. Dowell, 257 F.3d 694, 699-700 (7th Cir. 2001). Considering the real cost to this Court and to the tax payers, the Court may impose a sanction that compensates the taxpayers for the Court’s time....

The Court intends to impose a remedial sanction for the Steele’s misconduct, outlined in this Court’s June 5, 2015 Order (Doc. 199). The remedial sanction shall be a fine in an amount necessary to reimburse the Court for the costs incurred as a result of Steele’s misrepresentations to this Court....

So, yes, the tiny "victory" for Steele in having the contempt fine tossed out was short lived, as a new civil contempt fine appears likely to be on the way. And, who knows, perhaps criminal charges as well. Can't wait to see Steele try to talk himself out of this one too.

Filed Under: 7th circuit, anthony smith, contempt, david herndon, john steele
Companies: lightspeed, prenda, prenda law

Prenda (Mostly) Loses Again; Court Says 'We Warned You To Stop Digging, But You Still Did'

from the first-rule-of-holes dept

Here's a quick lesson in reading judicial opinions. If this is how the ruling on your appeal starts out, things did not go well:

When last we considered John Steele and Paul Hansmeier’s challenges to contempt sanctions imposed on them, we gave them some friendly advice: stop digging.... Apparently they did not realize that we meant what we said. Hoping to avoid paying additional sanctions, they dissembled to the district court and engaged in discovery shenanigans.

And, yes, this is the latest in the still ongoing Prenda saga. Specifically, this is the appeal in the Lightspeed case, one of a few "main" cases where Team Prenda (John Steele, Paul Hansmeier and the late Paul Duffy) got completely slammed by courts for lying and other dishonest and sketchy behavior. Prenda lost big back in 2013, but kept lying. The judge then slapped them with huge fees. On appeal, the 7th Circuit smacked Prenda down again, and (as you probably surmised from above) explained the "rule of holes" to Prenda:

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.

The case went back to the lower court, where the judge hit Team Prenda with sanctions for its behavior, including contempt, and then added on attorneys' fees for good measure.

Because Steele and Hansmeier can't help themselves, they appealed again, leading to this latest ruling. Believe it or not, Steele actually may be temporarily happy with this latest ruling as he actually won on one point (but may lose even bigger in the long run). Still, the court is clearly not happy with either Steele or Hansmeier. It does note that since Hansmeier has filed for a (highly questionable) bankruptcy, he cannot pursue the appeal and thus his appeal is dismissed out of hand.

Steele's appeal, however moves forward. And he still mostly loses and the court doesn't miss opportunities to slam Steele:

Steele offers only the weak argument that Smith should have obtained and submitted this evidence earlier, and that Smith’s lack of diligence should cut off this line of inquiry.... This approach has little but chutzpah—a quality that Steele and his compatriots have long demonstrated—going for it. To begin with, it was Steele and Hansmeier’s actions that prevented Smith from obtaining the necessary evidence in time for the November 12, 2014 hearing. (Indeed, Steele and Hansmeier maintained at the hearing that Smith should receive no further discovery because he already had all the relevant documents in his possession.) Steele’s misrepresentations and Hansmeier’s motion to quash delayed Sabadell’s production regarding Steele’s finances until November 17, 2014. The district court denied Smith’s motion the next day. Meanwhile, Smith first sought discovery regarding Monyet from TCF Bank on March 24, 2014. Because of Hansmeier’s second motion to quash and initially incomplete production, Smith was unable to obtain it until February 2015.

Steele nonetheless says that Smith should have found the relevant documents earlier because Monyet’s existence was “public record” in 2010, and the relevant documents were attached as exhibits to a debtor’s exam in a Minnesota bankruptcy case in June and July 2014. The fact that Monyet’s existence was public record is of little import: Smith had no reason to know of its existence, let alone any way to know of Hansmeier’s control of the company or the transfers Hansmeier made from its Scottrade account. Moreover, Smith was not a party to the Minnesota bankruptcy case. The district court did not abuse its discretion in granting Smith’s motion to reconsider.

The court notes that the sanctions on Steele are "easy to justify" given "Steele's entire pattern of vexatious and obstructive conduct."

And that included deliberately seeking to hide his and Hansmeier's money just as the sanctions were being ordered:

This was the very time when Steele and Hansmeier were emptying accounts they controlled of sums vastly in excess of the sanctions they owed. This was obviously egregious behavior, and a flat violation of the district court’s order. Their actions necessitated Smith’s litigation over their ability to pay the sanctions. Smith’s compensable expenses reasonably reached back to his first round of third‐party subpoenas, issued on January 16, 2014, as the district court found.

The one point that Steele won on, however, was on the contempt fine. Steele had argued that it was issued as a form of criminal contempt, rather than civil contempt, and there are different standards there. After looking it over, the appeals court appears to reluctantly agree.

Examining the nature of Steele’s fine and its justification, we are convinced that it falls on the criminal side of the line. It was an unconditional fine that did not reflect actual costs caused by the attorneys’ conduct. The district court justified the fine of $65,263.00 solely by reference to the attorneys’ “contemptuous statements in court.” This number, the court commented, was “twenty‐five percent of Judge Murphy’s original sanction.” It added that a “pattern is purposefully developing whereby the contemnors could find their way back to the full sanction … for their original wrongdoing if they continue their misdeeds before this Court.” This justification most naturally supports a fine meant to vindicate the authority of the court and deter future misconduct, not an award designed to be compensatory or coercive.

It is also telling that the amount of the fine was not connected to any cost imposed on either Smith or the district court. The court meant instead to punish past behavior and to deter future contemptuous conduct. Nor was the fine tied to any specific future action. While Lightspeed I found a fine quantified without reference to billing statements to be a civil contempt, the fine there “corresponded to attorneys’ fees and costs incurred by defendants during the course of litigating the contempt motion.” ... That is not the case here: the district court said nothing about Smith’s costs. It had taken care of the costs attributable to the separate discovery sanctions in a separate part of its order.

Of course, this small victory may be short-lived:

We make no comment on what type of contempt Smith may wish to seek, whether the court might re‐consider the possibility of civil contempt, or whether criminal contempt could be justified once the proper procedures are followed. We are confident that the district court will take a fresh look at these questions in light of this opinion.

This issue actually came up during the original appeal, when the judges on the 7th Circuit, somewhat incredulously, asked the lawyer representing Steele and Hansmeier if he was really asking for the courts to consider if Steele and Hansmeier had committed criminal acts when it had already focused solely on civil ones. And, now, Steele, at least may find himself in a deeper hole because of this. That's what happens when you keep digging.

Filed Under: 7th circuit, anthony smith, copyright troll, john steele, paul hansmeier, rule of holes
Companies: lightspeed, prenda, prenda law

Appeals Court Rejects Prior Restraint In Defamation Case; Could Have Gone Further

from the make-it-so dept

As highlighted by the folks at EFF, Judge Richard Posner has ruled in an appeal on a defamation case, tossing out an injunction against two individuals who defamed two other people. The details of the actual case fall into the "somewhat nutty" category, involving some religious stuff that we'll skip over as not relevant. What you need to know is that two people (Patricia Ann Fuller and Paul Hartman) were sued and found to have defamed Kevin McCarthy and Albert Langsenkamp. Some of those people go by other names and titles (including Mr. Langsenkamp referring to himself as a Papal Knight of the Holy Sepulchre), but we'll leave that aside. The court found in favor of the plaintiffs and said that the defamation occurred. The only real issue on appeal was whether or not the judge's decision to issue a very broad injunction against Hartman and Fuller was appropriate.

And here we come to an issue that comes up semi-frequently in discussions of defamation cases: if you are found guilty of defamation, can you be (1) forced to take down the defamatory content and (2) barred from saying it again (or saying something like it)? For the most part, courts have said that you cannot have an injunction against defamation, because that's classic prior restraint in violation of the First Amendment. That is, the government cannot tell someone "you cannot say that." So, in most cases, the remedy for defamation is a monetary one (along with the satisfaction of a court ruling saying that what was said about you was false). There are some fairly narrow exceptions in some courts that have argued that it's okay to tell someone that they cannot repeat the very same statements found to be defamatory.

However, while there are a bunch of rulings on this topic, it's never quite gone to the Supreme Court, so there's at least some ambiguity. In this case, the District Court judge basically ignored all of that and issued a massively broad injunction. Without having the jury specifically determine which statements were defamatory, the judge issued an injunction saying that they couldn't publish any of the statements that the plaintiffs claimed were defamatory -- or "any similar statements" -- and further ordered Hartman to take down his entire blog.

That's pretty clear prior restraint, and indeed the three judges on the appeals court all agreed, throwing the case back to the district court. As Posner noted, the lawyers for Fuller and Hartman were... shall we say... not the most professional, which may have contributed to the result:

The conduct of the litigation in the district court by the lawyer representing Fuller and Hartman showed, as the district judge explained in granting the request for attorney’s fees, a serious and studied disregard for the orderly processes of justice. That disregard has persisted on appeal. Many of the grounds on which Fuller and Hartman seek reversal were waived, are frivolous, or are incomplete, with the important exception of the permanent injunction entered by the district judge, to which we devote the balance of this opinion.

Part of this included not filing a timely objection to the injunction, which in most cases would mean that this issue wouldn't be reviewed. However, Posner notes that given the seriousness of prior restraint and the First Amendment, it's still appropriate to explore this issue, especially since the public could be harmed:

Fuller and Hartman missed the deadline for responding to McCarthy’s motion for a permanent injunction, however, and ordinarily such a miss would have justified the judge’s rejecting any objection to the injunction as untimely. But the injunction in this case had the potential to harm nonparties to the litigation because enjoining speech harms listeners as well as speakers.

Posner's main issue with the injunction is just how incredibly broad it is, and the fact that the jury never determined if each specific statement was defamatory. He stays away from the larger question of whether or not defamation can ever be enjoined, by noting that the broad nature of this injunction is reason enough to toss it:

But this is not a case in which we have to decide whether defamation can ever be enjoined because, even if it can be, the injunction issued by the district judge cannot be sustained. An injunction against defamatory statements, if permissible at all, must not through careless drafting forbid statements not yet determined to be defamatory, for by doing so it could restrict lawful expression. The injunction that the district judge issued in this case was of that character, owing to its inclusion of vague, open-ended provisions for which there is no support in the jury verdict or, so far as appears, in the district judge’s own evaluation of the evidence. We have no jury findings as to which statements were defamatory, and the plaintiffs didn't even ask the judge to address that absence, so he didn’t. As illustrative of the injunction’s resulting excessive breadth, notice that it orders Hartman to take down his website, which would prevent him from posting any nondefamatory messages on his blog; it would thus enjoin lawful speech.

As Posner further notes:

An injunction against speech harms not just the speakers but also the listeners (in this case the viewers and readers). “[T]he First Amendment goes beyond protection of the press and the self-expression of individuals to prohibit government from limiting the stock of information from which members of the public may draw.” ... The injunction in this case is so broad and vague that it threatens to silence Fuller and Hartman completely.

Unfortunately, Posner does not just toss out the injunction completely, but rather sends it back to the lower court to try again, meaning that the judge may get another chance to try an injunction.

There's a good concurring opinion from Judge Diane Sykes, who agrees with tossing out the injunction, but disagrees with sending it back to the lower court, making an even stronger argument in saying that injunctions are an inappropriate remedy for defamation, citing numerous cases that make this argument:

More fundamentally, the question whether an injunction is permissible at all in this context is a sensitive and difficult matter of First Amendment law. A court order permanently enjoining future speech is a prior restraint and as such is presumptively unconstitutional. Any prior restraint comes to us “bearing a heavy presumption against its constitutional validity,” Bantam Books, Inc. v. Sullivan, 372 U.S. 58, 70 (1963), and “permanent injunctions—i.e., court orders that actually forbid speech activities—are classic examples of prior restraints” because they impose a “true restraint on future speech,” Alexander v. United States, 509 U.S. 544, 550 (1993). As the Supreme Court explained in its seminal case condemning prior restraints, an injunction against future speech—making any publication of the suppressed speech punishable as contempt—is “the essence of censorship.” Near v. Minnesota ex rel. Olson, 283 U.S. 697, 713 (1931).

Consistent with this bedrock free-speech principle, the traditional rule in defamation law is that “equity does not enjoin a libel or slander[;] … the only remedy for defamation is an action for damages.” e360 Insight v. The Spamhaus Project, 500 F.3d 594, 606 (7th Cir. 2007) (quotation marks omitted); see also Metro. Opera Ass’n, Inc. v. Local 100, Hotel Emps. & Rest. Emps. Int’l Union, 239 F.3d 172, 177 (2d Cir. 2001); Kramer v. Thomp-son, 947 F.2d 666, 677 (3d Cir. 1991); Comm. for Creative Non-Violence v. Pierce, 814 F.2d 663, 672 (D.C. Cir. 1987). This rule “has enjoyed nearly two centuries of widespread acceptance at common law.” Kramer, 947 F.2d at 677; see also Erwin Chemerinsky, Injunctions in Defamation Cases, 57 SYRACUSE L. REV. 157, 167–68 (2007); Michael I. Myerson, The Neglected His-tory of the Prior Restraint Doctrine: Rediscovering the Link Be-tween the First Amendment and the Separation of Powers, 34 IND. L. REV. 295, 308–22 (2001).

The Supreme Court has not yet directly addressed whether injunctive relief is a constitutionally permissible remedy for defamation, but the general equitable rule accords with the Court’s prior-restraint jurisprudence dating back to Near, which invalidated a Minnesota statute that permitted the issuance of temporary and permanent injunctions against persons and organizations engaged in the publication of defamatory newspapers, magazines, or other periodicals. 283 U.S. at 702, 723; see id. at 712 (“[S]uppression is accomplished by enjoining publication, and that restraint is the object and effect of the statute.”).

While Judge Sykes notes that some courts have allowed very narrowly tailored injunctions for the specific repetition of statements, she questions the wisdom of those rulings, stating "I'm not sure I agree with this modern trend" and then notes that the key cases where this has occurred have very distinct facts associated with them that "make it difficult to map their holdings onto defamation law." And, she notes, the key cases that are often cited aren't really defamation cases at all. And thus injunctions in defamation cases are tricky to accept:

Defamation by its nature is highly contextual. A statement that is defamatory in one circumstance, time, or place might not be defamatory in another circumstance, time, or place. A permanent injunction as a remedy for defamation does not account for constantly changing contextual factors that affect whether the speech is punishable or protected. If factual circumstances change in a way that affects the defamation calculus, the person enjoined must risk contempt or seek the court’s permission to speak. As the Court said emphatically in Near, “[t]his is the essence of censorship.”

And thus, she feels that sending the case back down only opens up another opportunity for unconstitutional prior restraint -- and, tragically, gives off the belief that this is okay:

By offering the district court an opportunity to craft a new injunction, my colleagues imply that such a remedy is constitutionally permissible—indeed appropriate in cases of judgment-proof defamers who might not be deterred by a damages award.... I cannot join this part of the court’s opinion. At the very least, it wrongly implies that a core liberty secured by the First Amendment—the right to be free from prior restraints on speech—does not protect people who lack the means to pay a judgment.

It's too bad this wasn't the actual opinion, but it's still better than nothing. Overall it's a good ruling, but it would be nice to have it confirmed once and for all that injunctions against future speech are, indeed, prior restraint.

Filed Under: 7th circuit, defamation, free speech, injunctions, prior restraint, richard posner

Appeals Court Issues Fantastic 1st Amendment Ruling Against Censorious Sheriff Thomas Dart In His Crusade Against The Internet

from the go-away dept

We've written about Cook County Sheriff Thomas Dart and his desire to censor the internet for a few years now. Back in 2009, he sued Craigslist because he claimed it was "the single largest source of prostitution in the nation." As we noted at the time, Craigslist was just a platform, and suing it made no sense at all -- especially given that the company was more than willing to cooperate closely with law enforcement and help them track down people who were breaking the law online. In other words, whereas a sheriff who was actually interested in stopping law breaking might embrace the site and work with it to track down law breakers, Dart chose to sue the toolmaker. That lawsuit failed miserably, but Sheriff Dart never gave up his quixotic quest to blame internet companies for prostitution.

Over the past few years, Backpage.com has taken over the boogeyman reputation previously held by Craigslist when it comes to online prostitution. Back in July of this year, Dart proudly announced that he had scared Visa and Mastercard out of working with Backpage after he sent them a misleading letter effectively threatening them if they did not stop working with Backpage. Backpage quickly sued Dart and within weeks received a temporary restraining order, with the court wasting no time claiming that Dart's actions in getting Visa and Mastercard to stop doing business with Backpage was unconstitutional prior restraint. However, the court later appeared to change its mind and refused to issue an injunction, saying that while Dart's letter could be construed as a threat, it wasn't censorship since he had no legal authority over the payment companies.

Backpage quickly appealed to the Seventh Circuit appeals court -- which has now absolutely trashed Dart in a decision written by Judge Richard Posner. The entire ruling is well worth reading, but here are a few excerpts. Posner does not find the lower court's reasoning convincing at all, quoting Okwedy v. Molinari to explain why:

“The fact that a public-official defendant lacks direct regulatory or decisionmaking authority over a plaintiff, or a third party that is publishing or otherwise disseminating the plaintiff’s message, is not necessarily dispositive … . What matters is the distinction between attempts to convince and attempts to coerce. A public-official defendant who threatens to employ coercive state power to stifle protected speech violates a plaintiff’s First Amendment rights, regardless of whether the threatened punishment comes in the form of the use (or, misuse) of the defendant’s direct regulatory or decisionmaking authority over the plaintiff, or in some less-direct form.”

Posner is well aware of Dart's previous failed attempt to sue Craigslist and notes the obvious intention of the letter to payment companies:

The suit against Craigslist having failed, the sheriff decided to proceed against Backpage not by litigation but instead by suffocation, depriving the company of ad revenues by scaring off its payments-service providers. The analogy is to killing a person by cutting off his oxygen supply rather than by shooting him. Still, if all the sheriff were doing to crush Backpage was done in his capacity as a private citizen rather than as a government official (and a powerful government official at that), he would be within his rights. But he is using the power of his office to threaten legal sanctions against the credit-card companies for facilitating future speech, and by doing so he is violating the First Amendment unless there is no constitutionally protected speech in the ads on Backpage’s website—and no one is claiming that. The First Amendment forbids a public official to attempt to suppress the protected speech of private persons by threatening that legal sanctions will at his urging be imposed unless there is compliance with his demands....

Central to Backpage’s case is a letter of June 29 of this year that Sheriff Dart sent both to MasterCard’s CEO and Board of Directors and to the corresponding personnel of Visa. The letter is on stationery captioned “Office of the Sheriff,” and begins: “As the Sheriff of Cook County, a father and a caring citizen, I write to request that your institution immediately cease and desist from allowing your credit cards to be used to place ads on websites like Backpage. com.” Notice that he is sheriff first, father and citizen second; notice his use of the legal term “cease and desist”; notice that he calls MasterCard “your institution,” implying that the same letter is going to other “institutions”—namely other credit card companies—in other words that he is organizing a boycott. And notice that he doesn’t demand that “your institution” refuse to allow “your credit cards” to be used to pay just for ads on Backpage’s website that promote illegal products or services—he demands that “your institution” cease and desist from placing any ads “on websites like Backpage.com” (and a fortiori on Backpage’s own website) even though “adult” ads are only one of eleven types of classified ad published on the website. Visa and MasterCard got the message and cut all their ties to Backpage.

The letter goes on to state that “it has become increasingly indefensible for any corporation to continue to willfully play a central role in an industry that reaps its cash from the victimization of women and girls across the world.” The implication, given whom the letter is addressed to, is that credit card companies, such as MasterCard and Visa, “willfully play a central role” in a criminal activity (emphases added)—so they had better stop! Indeed, the letter goes on to say, those companies are “key” to the “growth” of sex trafficking in the United States. (Actually, as explained in an amicus curiae brief filed by the Cato Institute, Reason Foundation, and DKT Liberty Project, citing voluminous governmental and academic studies, there are no reliable statistics on which Sheriff Dart could base a judgment that sex trafficking has been increasing in the United States.) He is intimating that two of the world’s largest credit card companies may be criminal accomplices.

“Financial institutions,” the letter continues, “have the legal duty to file ‘Suspicious Activity Reports’ to authorities in cases of human trafficking and sexual exploitation of minors.” The letter cites the federal money-laundering statute, 18 U.S.C. § 1956, thereby intimating that the credit card companies could be prosecuted for processing payments made by purchasers of the ads on Backpage that promote unlawful sexual activity, such as prostitution. And “make no mistake,” the letter thunders: “Your [credit] cards have and will continue to be used to buy ads that sell children for sex on sites like Backpage.com. … The use of credit cards in this violent industry implies an undeserved credibility and sense of normalcy to such illicit transactions and only serves to increase demand.” And then, Posner notes, Dart makes his threat pretty damn clear:

And here’s the kicker: “Within the next week, please provide me with contact information for an individual within your organization that I can work with [harass, pester] on this issue.” The “I” is Sheriff Dart, not private citizen Dart— the letter was signed by “Thomas Dart, Cook County Sheriff.” And the letter was not merely an expression of Sheriff Dart’s opinion. It was designed to compel the credit card companies to act by inserting Dart into the discussion; he’ll be chatting them up. Further insight into the purpose and likely effect of such a letter is provided by a strategy memo written by a member of the sheriff’s staff in advance of the letter. The memo suggested approaching the credit card companies (whether by phone, mail, email, or a visit in person) with threats in the form of “reminders” of “their own potential liability for allowing suspected illegal transactions to continue to take place” and their potential susceptibility to “money laundering prosecutions … and/or hefty fines.” Allusion to that “susceptibility” was the culminating and most ominous threat in the letter.

Posner further notes that if an ordinary citizen had sent a letter with similar requests, and without the "demands," the payment companies likely would have been "discarded or filed away." Posner gets down to the truth of the matter:

Visa and MasterCard were victims of government coercion aimed at shutting up or shutting down Backpage’s adult section (more likely aimed at bankrupting Backpage--lest the ads that the sheriff doesn’t like simply migrate to other sections of the website), when it is unclear that Backpage is engaged in illegal activity, and if it is not then the credit card companies cannot be accomplices and should not be threatened as accomplices by the sheriff and his staff.

Posner points out that Section 230 protects Backpage from liability and the hints that Mastercard and Visa might be liable for federal crimes (which are exempt from Section 230) are ludicrous. He also knocks Dart for suggesting that all ads in the adult section of Backpage are illegal themselves, noting that plenty of it is perfectly legal, including fetishism and phone sex.

And thus:

As a citizen or father, or in any other private capacity, Sheriff Dart can denounce Backpage to his heart’s content. He is in good company; many people are disturbed or revolted by the kind of sex ads found on Backpage’s website. And even in his official capacity the sheriff can express his distaste for Backpage and its look-alikes; that is, he can exercise what is called “[freedom of] government speech.”... A government entity, including therefore the Cook County Sheriff’s Office, is entitled to say what it wants to say—but only within limits. It is not permitted to employ threats to squelch the free speech of private citizens. “[A] government’s ability to express itself is [not] without restriction. … [T]he Free Speech Clause itself may constrain the government’s speech.”

Posner clearly notes the potential slippery slope:

For where would such official bullying end, were it permitted to begin? Some public officials doubtless disapprove of bars, or pets and therefore pet supplies, or yard sales, or lawyers, or “plug the band” (a listing of music performances that includes such dubious offerings as “SUPERCELL Rocks Halloween at The Matchbox Bar & Grill”), or men dating men or women dating women—but ads for all these things can be found in non-adult sections of Backpage and it would be a clear abuse of power for public officials to try to eliminate them not by expressing an opinion but by threatening credit card companies or other suppliers of payment services utilized by customers of Backpage, or other third parties, with legal or other coercive governmental action.

Finally, Judge Posner rejects the lower court's claims that issuing an injunction would hurt Dart's own First Amendment rights:

The judge was further mistaken when he said that “the Sheriff’s own First Amendment rights are at stake in this case and the Court must therefore also consider the risk that erroneously entering an injunction would chill Dart’s own right to speak out on issues of public concern. Sheriff Dart has a First Amendment right to publicly criticize the credit card companies for any connection to illegal activity, as long as he stops short of threats” (emphasis added). But the judge himself, in the passages we quoted earlier, had been emphatic that Dart had not stopped short of threats. Those threats were not protected by the First Amendment; they were violations of the First Amendment.

This ruling has lots of great quotes that may be quite useful elsewhere. Over the years we've seen many politicians make similar threats -- often to similar results. Remember when former Senator Joe Lieberman pressured Amazon to stop hosting Wikileaks? And similar pressure led Mastercard and Visa to stop accepting donations for Wikileaks as well -- apparently in a deal with US diplomats. Lieberman (that guy again?!?) also famously put pressure on Google to censor websites that he deemed as promoting "terrorism" and similarly pressured Twitter to silence the feeds of people he didn't like. He also threatened the NY Times for publishing Wikileaks' documents.

And, of course, in just the last few weeks, we've seen increasing pressure from government entities potentially demanding censorship online of "bad" content in the wake of the Paris attacks. Hopefully, this ruling by Posner will provide a useful tool to combat such censorship. While it technically only applies in the 7th Circuit, Posner's rulings are influential in other circuits as well. Of course, there's a chance that Sheriff Dart will decide to waste more taxpayer money and seek for an en banc rehearing in the 7th Circuit or even ask the Supreme Court to hear the case as well. If so, this could become a key free speech case concerning government coercion to silence online speech.

Filed Under: 7th circuit, adult ads, censorship, first amendment, free speech, richard posner, thomas dart, threats
Companies: backpage, backpage.com, craigslist, mastercard, visa

Police Officers Can Sue Newspaper For Publishing Descriptive Info, Raising Serious First Amendment Issues

from the publishing-factual-information-is-a-crime? dept

We just recently wrote about a troubling case in the 9th Circuit in which a court tried to "balance" free speech rights against state publicity rights. Now, over in the 7th Circuit, there's a troubling ruling that seems to suggest a particular privacy law might similarly override the First Amendment. The writeup at the Columbia Journalism Review (link in the previous sentence) is a really great overview of the case, or you can read the ruling itself.

In short, the Chicago Sun-Times published a series of reports investigating whether or not Chicago Police "manipulated" an investigation into a manslaughter case, involving a nephew of then Chicago mayor Richard M. Daley. That nephew, R.J. Vanecko, had apparently punched another man, David Koschman, leading Koschman to fall over and hit his head -- leading to a brain injury from which he died a few days later. The Sun-Times report argued that the police investigation was designed more to protect Vanecko, rather than bring him to justice.

In exposing the questionable nature of the investigation, the Chicago Sun-Times highlighted the key "police lineup" that the CPD had put together, showing Vanecko and five police officers. No eyewitness picked out Vanecko, but the Sun-Times report argued that the police had chosen officers who strongly resembled Vanecko to make it difficult to pick out who really was involved. In order to make this point, reporters at the paper used a public records request to get the lineup photos, but then also got the physical information about the other officers in the photo via the state's motor vehicle records database, controlled by the Illinois Secretary of State.

The point, obviously, was to show the physical resemblance to Vanecko. However, the officers in question sued the Sun-Times, arguing that publishing the information from the motor vehicle database, violated the Driver's Privacy Protection Act (DPPA) of 1994. That law bars the disclosure of "personal information" from the various Department of Motor Vehicles' records. It was originally passed after people had been using information in those databases to find and harass people they disagreed with politically.

The Sun-Times argued, reasonably, that the First Amendment should protect its right to publish this information. However, both the lower court and the 7th Circuit appeals court have now both disagreed.

The appeals court starts out by first noting that the information that was published -- the police officers' "approximate date of birth, height, weight, hair color, and eye color" are "personal information" as defined by the DPPA. That seems ridiculous enough already, given that those aren't exactly things that are private information for the most part. From there we get to the First Amendment analysis. First, the court says that there's nothing unconstitutional about the DPPA's prohibition on obtaining the information, since that doesn't involve any expression. The Sun-Times argued that even so, the purpose here was to stifle reporting by denying the press access to such information. It pointed to the recent ACLU case we covered, where the court said a law banning the recording of police violated the First Amendment, but the court doesn't buy it:

However, ACLU is distinguishable on several grounds. While the Illinois eavesdropping statute’s effect on First Amendment interests was “far from incidental” because it banned “all audio recording of any oral communication,”..., the same is not true of the DPPA’s prohibition on the acquisition of personal information from a single, isolated source. It can hardly be said that this targeted restriction renders Sun-Times’s right to publish the truthful information at issue here—much of which can be gathered from physical observation of the Officers or from other lawful sources (including, of course, a state FOIA request)—“largely ineffective.” Further, in forbidding only the act of peering into an individual’s personal government records, the DPPA protects privacy concerns not present in ACLU. If a member of the press observed one of the Officers in public—for example, during a traffic stop—he could publish any information gleaned from that interaction without offending the DPPA. By contrast, the Illinois eavesdropping statute operated as a total ban on recording police officers’ activities, even when they were “performing their duties in public places and speaking at a volume audible to bystanders.”

Now, how about the restriction on disclosing the information -- which seems to fall even more squarely into the First Amendment arena? Again, the court doesn't buy it. It points out that while it would be protected in publishing the information if someone else got it and gave it to the Sun-Times, that doesn't apply if the Sun-Times itself broke the law in getting the information:

The Supreme Court has established that “if a newspaper lawfully obtains truthful information about a matter of public significance then state officials may not constitutionally punish publication of the information, absent a need to further a state interest of the highest order.” .... Sun-Times, however, cites no authority for the proposition that an entity that acquires information by breaking the law enjoys a First Amendment right to disseminate that information. Instead, all of the many cases on which Sun-Times relies involve scenarios where the press’s initial acquisition of sensitive information was lawful.

The court then has to do some rather fancy tap dancing to get around some of its previous rulings that said similar activity was protected free speech, by arguing that the "intent" matters.

Sun-Times fares no better in its invocation of precedent from this circuit. Sun-Times points to our opinion in Thomas v. Pearl, 998 F.2d 447, 449 (7th Cir. 1993), in which a college basketball coach secretly taped conversations with a player about illegal perks offered by a rival university, as an example of what Sun-Times terms “theoretically unlawful news-gathering techniques inherent to successful journalism.” Yet in Thomas, we determined that the coach lacked the requisite intent to be found in violation of federal wiretapping laws, id. at 452–53, and thus had not unlawfully obtained the in-formation at issue. Sun-Times also cites Desnick v. American Broadcasting Cos., 44 F.3d 1345, 1355 (7th Cir. 1995), for the proposition that the First Amendment protects a broadcaster’s “surreptitious, confrontational, unscrupulous and ungentlemanly” investigatory tactics. But Desnick’s ruling applies only insofar as “no established rights are invaded in the process.” Id. Here, of course, Sun-Times’s acquisition of the Officers’ personal information invaded their established rights under the DPPA. This is a crucial distinction. Although Sun-Times claims that, in acquiring and disclosing truthful information, it engaged only in “perfectly routine, traditional journalism,” it cannot escape the fact that it acquired that truthful information unlawfully.

The thing that I don't get is why it's the Sun-Times that is being seen as the one who broke the DPPA here. It seems more like it was the Secretary of State, who gave the Sun-Times the information which it controlled in the first place. But the Court seems blind to that concept:

We would face an analogous scenario if a third party had obtained personal information in violation of the DPPA and transmitted that information to Sun-Times, who subsequently published it. But that is not our case. Here, there is no intervening illegal actor: Sun-Times itself unlawfully sought and acquired the Officers’ personal information from the Secretary of State, and proceeded to publish it. Where the acquirer and publisher are one and the same, a prohibition on the publication of sensitive information operates as an effective deterrent against the initial unlawful acquisition of that same information. Such acquisition carries little benefit independent of the right to disseminate that information to a broader audience. We therefore conclude that the government’s deterrence interest is both important and likely to be advanced by the DPPA’s ban on Sun-Times’s disclosure of the Officers’ per-sonal information.

But that doesn't make much sense. Asking the Secretary of State for the information seems like a perfectly reasonable journalistic tactic in investigating a story.

The court then goes into even more troubling waters, as the judges basically decide that the information here isn't that important anyway, and that also undermines the First Amendment claims. It notes that in other cases, courts have found that "privacy concerns give way when balanced against the interest in publishing matters of public importance." Again, we're back to this idea that there's some sort of mythical "balancing act" between the First Amendment and privacy rights. And, when the court puts these two things on the scales in this case, it thinks the balance goes to privacy, rather than the First Amendment. Why? Because it finds that the "personal information" about the officers really isn't that important to the story.

While Sun-Times provided details of the Officers’ physical traits to highlight the resemblance between the “fillers” and Vanecko, most of the article’s editorial force was achieved through publication of the lineup photographs that Sun-Times obtained through its FOIA request—the value added by the inclusion of the Officers’ personal information was negligible. Each Officer’s height is evident from the lineup photographs, while their weights and ages are relevant only to the extent that they increase the Officers’ resemblance to Vanecko—a resemblance that the photographs independently convey. And, although identifying the Officers’ hair and eye colors may add some detail to the published black-and-white photographs, their personal information is largely redundant of what the public could easily observe from the photographs themselves. Therefore, Sun-Times’s publication of the Officers’ personal details both intruded on their privacy and threatened their safety, while doing little to advance Sun-Times’s reporting on a story of public concern.

This seems immensely troubling for a variety of reasons, not the least of which is that it puts the court system into the editing business, deciding which facts are actually relevant to the story, and which are somehow unnecessary. The court notes that it's possible a case "involving less privacy concerns or information of greater public significance" would come up with a different result, but that's also ridiculous. First of all, how is someone's height and eye color such a great "privacy concern"? Second, this again seems like a pretty clear restriction on the freedom of the press. It's not something that you "balance." The First Amendment is pretty clear that Congress cannot pass a law abridging the freedom of the press. And yet here, the court seems to think that it's okay, as long as it's "balanced."

Because of this, the police can now sue the paper for daring to reveal their eye color and whatnot. This seems like a terrible ruling for the First Amendment, and even while the court tries to limit it to the specific facts of this case, it seems likely that this particular ruling is now likely to be cited against reporters quite a lot.

Filed Under: 7th circuit, chicago, chicago police, david koschman, dppa, first amendment, free press, free speech, privacy, richard daley, rj vanecko

Seventh Circuit Court Upholds Fair Use Win, But Does So With Some Convoluted Reasoning And Bad Assumptions

from the desire-to-mock-politicians-largely-unaffected dept

Another small win for fair use, courtesy of the Seventh Circuit Court of Appeals. There's some history behind the disputed derivative artwork, but that history -- while illuminating -- has nothing to do with the plaintiff or defendants. It does, however, explain why this item came to be, and is integral enough that the Court's decision recounts it during its very brief confirmation of the lower court's decision. [pdf link]

While a student at the University of Wisconsin in 1969, Paul Soglin attended the first Mifflin Street Block Party, whose theme (according to Soglin) was “taking a sharp stick and poking it in the eye of authority.” Now in his seventh term as Mayor of Madison, Wisconsin, Soglin does not appreciate being on the pointy end. He wants to shut down the annual event. For the 2012 Block Party, Sconnie Nation made some t-shirts and tank tops displaying an image of Soglin’s face and the phrase “Sorry for Partying.” The 54 sales, on which Sconnie Nation cleared a small profit, led to this suit, in which photographer Michael Kienitz accuses Sconnie Nation and its vendor of copyright infringement.

The original photo, which was taken by Kienitz and downloaded from Soglin's website, is shown below, along with Sconnie Nation's t-shirt design.


Sconnie Nation admitted that the photo from the site was the starting point, so there's no question the rights belong to the photographer. But the photographer also admitted that he "gave" the photo to Soglin to use on his website (rather than licensed) and make freely available for download. These facts don't necessarily excuse the alleged infringement when applying the four-factor Fair Use test, as the court does here.

There’s no good reason why defendants should be allowed to appropriate someone else’s copyrighted efforts as the starting point in their lampoon, when so many non-­copyrighted alternatives (including snapshots they could have taken themselves) were available. The fair-­use privilege under §107 is not designed to protect lazy appropriators.

As the court points out, the fair use protection for parody exists to prevent copyright owners from shutting down any uses that might make them (or their subjects) look less than dignified (something the photographer promised to his subjects despite having no legal way to prevent situations like this from occurring).

But the fact that the appropriators could have started anywhere doesn't make this infringement (even if the court labors under the misimpression that the world is loaded with copyright-free images). Stacking the t-shirt up against the other prongs of the Fair Use defense, the Seventh Circuit Court finds the plaintiff's claims wanting.

A t-­shirt or tank top is no substitute for the original photograph. Nor does Kienitz say that defendants disrupted a plan to license this work for apparel. Kienitz does not argue that defendants’ products have reduced the demand for the original work or any use of it that he is contemplating.

The court notes that Kienitz could have claimed that this lampooning would diminish photographic work for other dignitaries, seeing as he promised to keep their dignity intact when licensing, but those claims were never raised during this case's trip through the court system.

The court also points out that significant transformation took place during its trip from the website to Nation's t-shirt. The original photo was stripped of its background, was "posterized," re-colored and altered enough that the defendants could have achieved the same effect by "using a snapshot taken on the street." The court notes that the defendants made a small profit (which doesn't instantly negate a Fair Use defense -- although the court's wording here seems to indicate it does) but that is mitigated by the "political purposes" of the design. And even if Kienitz had decided to claim that the parodic work would harm his photography business in the future, the court says that "by the time the defendants were done, almost none of the copyrighted work remained."

While "lazy appropriators" were smacked around a little, and the false assumption that making money negates Fair Use defenses was given a little credence, it's another win for transformative creations, even if it's one that is skewed to statutory factors rather than the concept of fair use itself.

The decision is also a bit strange in the fact that it points out the significant transformation of the original Soglin photo, while at the same time dismissing the transformative use arguments raised by the Supreme Court (Campbell v. Acuff-Rose Music) and the much broader Second Circuit Court decision in Cariou v. Prince. The judge raises both cases by name but then points out that "transformative use" isn't one of the four factors under consideration and posits that entertaining the Cariou defense could undermine rights holders' control over derivative works.

The Second Circuit has run with the suggestion and concluded that “transformative use” is enough to bring a modified copy within the scope of §107. See, e.g., Cariou v. Prince, 714 F.3d 694, 706 (2d Cir. 2013). Cariou applied this to an example of “appropriation art,” in which some of the supposed value comes from the very fact that the work was created by someone else.

We’re skeptical of Cariou’s approach, because asking exclusively whether something is “transformative” not only replaces the list in §107 but also could override 17 U.S.C. §106(2), which protects derivative works. To say that a new use transforms the work is precisely to say that it is derivative and thus, one might suppose, protected under §106(2). Cariou and its predecessors in the Second Circuit do not explain how every “transformative use” can be “fair use” without extinguishing the author’s rights under §106(2).

By making this argument, the court conflates two distinct terms -- transformative use and derivative works (Section 106(2)) -- making transformative use slightly weaker, at least in this venue. Instead, the court focuses on the four statutory defenses, mainly those that could negatively affect the creator's future earnings. In doing so, it arrives at the correct conclusion, but leaves a muddied blueprint in its wake for future rulings to follow.

Filed Under: 7th circuit, copyright, fair use, madison, paul soglin, sorry for partying, transformative use, wisconsin

Conan Doyle Estate Asks Supreme Court To Put Sherlock Holmes Back Under Copyright

from the the-case-of-the-missing-public-domain dept

For a while now, we've been following the lawsuit concerning whether or not Sherlock Holmes is in the public domain. Back in June the 7th Circuit appeals court ruled that Holmes was in the public domain, followed up by a more thorough slamming of the Sir Arthur Conan Doyle Estate in a follow-up ruling concerning rewarding attorneys' fees. We saw some reporters claim that the case was now "over," but that was clearly not true. The Estate had made it clear it intended to appeal, having already asked the Supreme Court to block the appeals court ruling from taking effect (a request that was quickly denied). But that was clearly the preamble to a request to the Supreme Court to hear the case.

That request has now come, with the Estate arguing that there are serious questions still in play. Specifically, the Doyle Estate raises three questions for a potential Supreme Court hearing. As a bit of background, the case was not directly started by the Estate, but rather author Leslie Klinger, who filed for declaratory judgment saying he wasn't infringing since the character was in the public domain. In the past, Klinger's publisher had felt pressured into taking out a license, and Klinger felt that this demand was unfair and unjust. The Estate tried to argue that even though all but one book of Holmes stories were published before 1923 (which puts them in the public domain), the fact that another book was published after 1923 with new facets to the character meant that the entirety of the character of Holmes (and Watson) were still covered by copyright. The argument was, more or less, that as long as the character is still "developing," and not complete, the copyright clock can be kept ticking. The courts completely rejected this argument and pointed out that the public domain is the public domain.

However, the Estate is making one last go of it, with a two-pronged attempt to get the Supreme Court to reconsider:

1. Whether it was reasonable to rule on the case prior to Klinger finishing his book. This is a bit of misdirection. The Estate argues that the case shouldn't have been decided until Klinger finished his book since you can't determine if something isn't infringing if it hasn't been produced yet. This question was easily dismissed by the courts because (1) the Estate had been agitating for a license already, and that had created publishing issues for Klinger and (2) the courts made it clear that they were just saying that the early works were in the public domain -- and if Klinger's eventual book infringed on anything from that final (still copyrighted) Holmes book, the Estate could bring a specific case on that issue.
2. The big question: whether or not a "dynamically developing character" can continue to extend the clock on copyright. Here, the Doyle Estate claims that there's a circuit split, in particular with a ruling from the 8th Circuit (which we covered here) concerning the Wizard of Oz (and people making t-shirts out of images from a movie poster that clearly was in the public domain). Admittedly, that was a terrible decision -- effectively allowing some reclamation of the public domain by copyright law. If the Supreme Court takes this case, hopefully it will be to just smack down that 8th Circuit decision and bring it into compliance with the 7th Circuit's point that things that were in the public domain stay in the public domain.

The Supreme Court is not always clear in indicating which cases it will take and which it will pass over, and I wouldn't recommend betting in favor of the Court taking this case. Chances are it will pass. However, if it does take on the case, hopefully it will only be to protect and preserve the public domain.

Filed Under: 7th circuit, 8th circuit, copyright, leslie klinger, public domain, sherlock holmes, supreme court, wizard of oz
Companies: conan doyle estate

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

Court Calls A Do Over In Terror Hearings After Failure To Record

from the are-they-allowed-to-change-arguments? dept

We covered how court staffers, totally spooked by FBI agents sweeping the court room for recording devices, failed to record the public portion of oral arguments in an important terrorism case (against Adel Daoud), meaning that there was no official recording or transcript of the hearing (part of which was also held in secret). But now, the court has called for a rare "do over" on the public portion of the hearing.

A federal appeals court in Chicago has rescheduled oral arguments in a terrorism case after courtroom staff failed to record a significant hearing.

The U.S. 7th Circuit Court of Appeals issued a notice on Friday saying it would rehear arguments June 11 in the case against Adel Daoud, who's accused of trying to set off a bomb near a Chicago bar in 2012.

So, um, what? The original was a dress rehearsal? Do they get to make different arguments, or are they expected to basically repeat the script they did a week earlier? Will it play out like an awkward re-enactment? And, most importantly, will Judge Posner, once again yell "Look! You answer my questions, not your questions!" at the lawyers?

Filed Under: 7th circuit, adel daoud, appeals court, do over, doj, fbi, recording, richard posner