Comcast And AT&T Want Their Cut From Prenda Too

from the welcome-to-the-big-leagues dept

Last week, we noted that yet another court had ruled against Prenda. In this case, rather than their own shell companies, Prenda was representing Lightspeed, a porn company which already had a questionable reputation. Also, this was a case where Prenda tried to use a "hacking" claim rather than a straight copyright claim, in an attempt to get the case in state court, rather than the more savvy federal courts. Finally, when the ISPs protested having to turn over names, the brilliant Prenda strategy was to sue the ISPs as well. So, now that the court found "the litigation smacked of bullying pretense," it's not just the random guy, Anthony Smith, seeking legal fees... but Comcast and AT&T as well. Late last week, Comcast and then AT&T each asked for John Steele, Paul Hansmeier and Paul Duffy (by name) to each pay their attorneys' fees as well. And, as you might imagine, they have some pricey attorneys. Comcast's filing goes into quite a bit of detail about the questionable actions taken by Team Prenda in this case (and in other cases). AT&T's filing is much shorter and more or less says "you already know what these guys have been up to, so no need to repeat it here."

Not surprisingly, Hansmeier quickly filed an angry response, arguing that there is no possible reason why he should have to pay attorneys' fees, and even arguing that there's still no evidence of wrongdoing... by himself (leaving the others out to dry). Basically, he argues that while he was involved with the case briefly, none of his actions were the problematic ones. He also claims that the requests for attorneys' fees isn't timely, since Team Prenda had dismissed the case six months ago -- leaving out the ruling from just last week which found Team Prenda's actions problematic and subject to attorneys' fees. Amusingly, he also argues that Comcast laying out in great detail all of the bogus actions of Team Prenda in this case, as well as how multiple other judges have called out their behavior and alerted law enforcement about their activities for criminal investigation, is nothing more than an ad hominem attack.

Sorry, Paul, if someone calls you a morally bankrupt scamming loser -- that would be an ad hominem attack. Comcast laying out in great detail how judges have ruled that you committed fraud on the court in very similar cases, and ordered you to pay attorneys' fees (while also alerting law enforcement, the IRS, local legal bars and others to investigate), is presenting relevant information to the court. It might help to learn the difference.

Filed Under: anthony smith, attorneys fees, john steele, paul duffy, paul hansmeier, steve lightspeed
Companies: at&t, comcast, lightspeed, prenda, prenda law

Turns Out Paul Hansmeier's ADA Lawsuits Were Filed Without Knowledge Of The Plaintiffs

from the is-he-just-looking-to-pile-on-more-problems? dept

Last week, we wrote a couple times about Paul Hansmeier's new lawsuit strategy, which had some similar characteristics to ones he's had in the past: they appear to be nuisance lawsuits designed to quickly extract settlements, rather than for any legitimate legal reason. He had done this in the past, obviously, with copyright trolling, but then again with class action lawsuits. The latest round involved claimed Americans with Disabilities Act (ADA) violations, mainly arguing that various small business websites violated the ADA.

Remember, with the copyright cases, Hansmeier is now in trouble for being involved in bogus shell companies and forged signatures. With the class action objections, his clients were mostly close family members. Some of our commenters quickly speculated about whether or not the "clients" in these ADA cases were real... or, if they were, if they knew the lawsuits existed. Well, wonder no more. A local newspaper, The Mankato Free Press, has quite a story, detailing how at least one of the clients had absolutely no idea that Hansmeier was filing lawsuits on her behalf:

The plaintiff named in the Family Dentistry lawsuit is Lily Poss, a visually impaired woman from North Mankato. Poss said she supports the organization's mission statement. However, she's not sure she can support Hansmeier after learning about the tactics he's using.

Poss had no idea that lawsuit, nor another one involving a business called Bancwest Investment Services, had been filed in her name. It was her understanding she would be providing information about websites that would be used to educate businesses, she said. She said it was possible that lawsuits would be filed if businesses didn't comply, but she didn't realize Hansmeier and Class Justice would be going after small businesses such as Family Dentistry.

The article notes that Poss signed up for this after getting a call from a cousin she hadn't spoken to in years -- named Allan Mooney. You may recall that name from previous Prenda lawsuits, where it was spelled many different ways (Allan Mooney, Alan Mony, Alan Moony, etc), and who later told a reporter that he didn't know he was involved in these lawsuits. Of course, now you have to wonder about that if he's signing up his long lost cousins for the latest wacky scheme from Hansmeier to shakedown companies.

Hansmeier, quite incredibly, is claiming that he's working for the good of disabled people, tossing out this astounding line:

"We consider ourselves to be an advocacy association more than we consider ourselves a law firm," he said. "With the porn reputation, I wanted to shift my focus and focus on something more positive. We're really focused on doing it right so anyone who hears about us says, 'Yeah. This is the right way to go about it.'"

I know. Stop laughing. Of course, no one thinks this is the right way to go about it. The same reporter asked Ken Rodgers, the past president of the American Council of the Blind chapter in Minnesota, who agreed that websites that were hard for the blind to read can be a problem, but also made clear that he did not support what Hansmeier was doing at all, and, in fact, felt that it was just another way to squeeze money out of companies:

"Is he trying to make websites accessible, or is he just banking on the lawsuit revenue?" Rodgers said. "All this is doing is making the attorney wealthy, not fixing the problem. I would much rather have somebody make a business case to a business that has a website."

Furthermore, for all of Hansmseier's claims of doing "advocacy" work, when the reporter asked him to detail what advocacy organizations he's working with, he couldn't name any.

Filing a lawsuit on behalf of a client who hasn't actually agreed to be a part of that lawsuit could be a huge problem (though Hansmeier likely has bigger problems ahead on the priority list). Also, there's at least some potential that these plaintiffs may end up on the hook for attorneys' fees for the filing of bogus lawsuits.

Either way, you have to imagine that the almost certainly ongoing criminal investigation of Hansmeier's activities detailing the list of things he's done, the fact that he's continued to work on questionable schemes like this one, even after being slammed in courts all over the country for previous activities, won't reflect well on him.

Early on, I mentioned that Steele and Hansmeier really reminded me of some people I knew who were absolutely positive they were smarter than everyone else, when they really weren't. It's like they're playing chess by thinking they're the best chess players in the world because they can think one move ahead, while the people they're playing against can clearly see many moves ahead. It's astounding that they don't realize that each move they make only makes things worse and worse and worse.

Filed Under: ada, disabilities, flint million, lily poss, paul hansmeier, shake downs
Companies: class justice, prenda, prenda law

Prenda's Paul Hansmeier Has Been Busy Suing More Companies Over Questionable Website ADA Claims

from the count-'em dept

Earlier this week, we noted that Team Prenda's Paul Hansmeier appeared to be filing questionable lawsuits, claiming Americans with Disabilities Act (ADA) violations, including over websites. We pointed out that this had the hallmarks of Hansmeier's historical trolling cases, including copyright trolling and settlement opposition: file nuisance cases that appear designed to encourage those sued to just pay up to settle. We pointed out that while there were just two of these ADA cases, since we only found out about the most recent one because it had been removed to federal court, we wondered if there were more lurking in Minnesota state court.

The answer is: yes, absolutely. And it didn't take long. Three more such cases have been removed to federal court, and they're all quite similar. In each case, Hansmeier claims that the websites violate the ADA by not being "accessible" to people with disabilities. In each case, the claims are highly questionable, as can be seen in the two responses that have been filed already (all embedded below). The earlier story involved a dentist office's website. The latest ones are a doctor's office, a bank, and a chiropractor. Basically small business websites. I expect that we'll be seeing many more of these as well. You'd think Hansmeier would be busy trying to defend all of the cases he's been losing where he owes attorneys' fees for his copyright trolling efforts, but apparently he just can't stop filing questionable lawsuits.

Filed Under: ada, john steele, paul hansmeier, websites
Companies: class action justice, prenda, prenda law

Prenda Loses Big Again; Court Orders It To Pay Back Settlement Money, Refers To Law Enforcement

from the and-another-one dept

And here we go again. In yet another Prenda court case, Team Prenda has lost big. These are the cases in Minnesota that were reopened earlier this year, after the court became aware of Judge Wright's ruling in California, showing how Paul Hansmeier, John Steele, Paul Duffy and Mark Lutz appeared to be engaged in fraud on the court. In August, the magistrate judge assigned to review the cases, Franklin Noel, started demanding real answers to questions -- answers which never came.

Instead, we got a hearing in Minnesota that revealed some explosive new info, while Mark Lutz disappeared never to be heard from again. While Hansmseier and Duffy were never able to produce Lutz or answers to Judge Noel's questions, they did try to get Judge Noel kicked off the case.

None of the above strategies worked. At all. Judge Noel today not only rejected the request to pull him off the case, but also slammed Team Prenda, yet again, ordered them to pay back all the settlement money they got from the specific cases involved and then referred the case to law enforcement to look into the activities of Hansmeier, Steele, Duffy and Lutz. While he notes there are other issues being dealt with elsewhere, the main focus of Noel's inquiry was the legitimacy of Alan Cooper's signature -- and Judge Noel concludes, as have multiple other courts, that Cooper did not sign the document. And he's pretty thorough about it. He notes that AF Holdings, the shell company in question here, "failed to meet its burden of proving the authenticity of the copyright-assignment agreements."

Even more specifically, Judge Noel says that he thinks Steele lied on the stand:

Based upon Cooper’s side of these two conversations, Steele testified that it was his “understanding that he [Cooper] had given authority to Mark and his people if he wasn’t available, that he could sign the various documents as long as he understood what the document related to . . . .” Finding Steele’s testimony regarding his “understanding” of an agreement between Cooper and Lutz to be vague, the Court asked directly, “Did you hear Mr. Cooper give Mr. Lutz authority or permission to sign his name to documents?” Steele replied “yes.” The Court expressly disbelieves Steele’s testimony in this regard.

Noel goes on to point out that AF Holdings failed to produce an officer of the company who was "capable of testifying to the authenticity of each copyright-assignment agreement." He doesn't make much of Lutz's not appearance (and subsequent disappearance) other than mentioning that Lutz did not appear.

In the end, the court finds that fraud was committed on the court and orders the return of all the settlement money and the payment of attorneys' fees, which should add some more to the top of what Duffy, Hansmeier and Steele have on their ever-growing tab. The court also notes that it would be a waste of its time to "untangle the relationship between Hansmeier, Steele, Duffy, Dugas, Lutz and Prenda Law, on the one hand--and the Plaintiff AF Holdings, LLC., on the other." Instead, "such investigation can more effectively be conducted by federal law enforcement...." While it's likely federal law enforcement was already looking into all of this after Judge Wright alerted them to the case, having another judge make a similar recommendation can't hurt (well, unless you're Team Prenda. Then it hurts).

Filed Under: alan cooper, franklin noel, john steele, mark lutz, michael dugas, paul duffy, paul hansmeier
Companies: af holdings, prenda, prenda law

Another Big Loss For Team Prenda, As Their Bills Keep Adding Up

from the getting-expensive dept

Last week, Team Prenda took another big loss and got smacked around by another judge ordering them to pay even more in attorneys' fees. The list is really starting to add up. This case, which involved Prenda representing porn producers Lightspeed (rather than one of their own shell operations), had been sitting out there for a while, but it was one of the cases that involved Prenda trying to route around the trouble they'd been having with copyright claims by arguing a computer hacking violation instead. And, on top of that, it involved Prenda going after AT&T and Comcast for refusing to just blindly hand over the names of people attached to the IP addresses listed. Back in April, Prenda had filed a ridiculous response to lawyers Booth Sweet asking for attorneys' fees. Given everything that's come out (and, honestly, much of which had already been public) the hubris of Prenda's Paul Duffy is impressive. In the lawsuit he attacks Booth Sweet arguing that they "routinely file baseless motions for attorneys' fees in hopes they will eventually get lucky." Of course, Booth Sweet's track record is pretty strong here, and while it took a few months, the judge in the case, Patrick Murphy, realized that it was Team Prenda who was really playing games:

The litigation smacked of bullying pretense.

Elsewhere, the judge notes that awarding attorneys' fees is appropriate "when counsel acted recklessly, raised baseless claims despite notice of the frivolous nature of these claims, or otherwise showed indifference to statutes, rules, or court orders," suggesting that he sees Team Prenda's actions as fitting into those categories.

At this point, all of these attorneys' fees wins are more or less meaningless. It's doubtful that any of them will get paid (though, there does appear to be money somewhere...). The main event, a more thorough investigation and possible criminal charges against Team Prenda still await -- but those things take time. Still, that isn't stopping Team Prenda from pulling their standard response to these kinds of rulings against them, pulling the same failed tricks out of their increasingly frayed trick bag.

In this case, it involves Paul Hansmeier claiming "what? who, me?" in response. He notes that, while he was involved in the case at some point, briefly, this was really a Paul Duffy case all along, and he, Hansmeier, along with his partner in crime John Steele, simply had no idea this case was even still going on, let alone that they might be on the hook for potential attorneys' fees. As unbelievable as that might be (and potentially a process violation -- since Hansmeier is no longer a lawyer in this matter, he shouldn't make filings in the case without first getting permission from the court), the bigger issue is that this is the first time I can recall where Hansmeier and Steele appear to pretty clearly be throwing Paul Duffy under the bus.

If you haven't been paying attention, Team Prenda has been gradually dwindling as the main players have gradually thrown the redshirts under the bus one by one. Brett Gibbs went down first, but Mark Lutz was a recent addition to the under-the-bus crew. But, from the beginning, many have argued that Duffy was the patsy for Steele and Hansmeier, and here's a case where Hansmeier appears to be leaving Duffy out to dry on yet another failed case. You'd think that Hansmeier would be more careful, because if there's anyone who likely knows all the details of how Prenda is setup, it would be Paul Duffy. As they say, never throw anyone under the bus who might take you with them. Hansmeier and Steele seemed to miss that with Brett Gibbs, and now they're repeating it with Duffy. As for Lutz, he still seems to be completely MIA, which seems increasingly suspicious... especially since Hansmeier insisted that Lutz would appear shortly to answer questions the court had asked.

Filed Under: dan booth, jason sweet, paul duffy, paul hansmeier, steve lightspeed
Companies: at&t, comcast, lightspeed, prenda, prenda law

Team Prenda's Paul Hansmeier Now Suing Companies Over Supposed ADA Violations

from the everything's-a-shakedown dept

Team Prenda's Paul Hansmeier appears to believe in a simple formula for what he does. Find some highly questionable scenarios where he can file expensive lawsuits that are more of a nuisance than anything else, while offering up ample opportunities for parties to "settle." Obviously, his involvement in the Steele/Hansmeier/Prenda operations have received the most attention, but as we've been discussed, he's also been involved in the very questionable businesses of class action objections, in which he finds class action lawsuits that are almost settled, and then objects -- but makes it clear he'll "settle" for a big chunk of cash upfront. A few different people alerted me last week that Hansmeier's latest version of this appears to be going after companies for supposed Americans with Disabilities Act (ADA) violations -- including claiming that their websites violate the ADA.

Like so much of what Team Prenda gets involved in, this plan appears to be copied from others. Last year, we wrote about a dangerous ruling that suggested that Netflix could be subject to the ADA for not making its movie streaming accessible to the deaf. At the time, we noted that this could be a dream for shady lawyers, and it looks like Hansmeier felt this was a perfect role for him. Hansmeier appears to be targeting small businesses -- those who are least likely to be able to afford a full legal defense, making them a lot more willing to settle. In one case, he's sued a dentist, arguing that the website does not comply with the ADA. Another case involves a small sporting goods store, though at least the accusations there are about the physical store, rather than the website. Even then, though, the accusations seem questionable. Hansmeier claims that the store is not accessible because there's a step in the front -- but the store owner's response points out that there's a second, fully accessible entrance for wheelchairs in the back, which is open during all store hours. Hansmeier also argues that the bathroom in the store does not have grab bars and thus is not ADA compliant, but the store owner points out that the bathroom is for staff use only, and it sounds like he let the guy in the wheelchair that Hansmeier is representing, Jaime Veliz, use the staff-only bathroom as a favor. As a thanks for that, they get sued.

Once again, all of these lawsuits that Hansmeier gets involved in seem to show a fairly similar pattern, looking for scenarios where it will almost always be less of a hassle to just pay off Hansmeier to go away than to challenge the (often questionable) legal claims in court. It's unclear how many of these ADA lawsuits Hansmeier has filed. There are only two in federal court, where they're easy to find, but the latest one was actually filed in Minnesota state court, and was then removed to federal court. For all we know there could be more in Minnesota state court, which are harder to find out about. Either way, Hansmeier really seems like the kind of person who gives lawyers such a bad reputation.

Filed Under: ada, paul hansmeier
Companies: class action justice, prenda, prenda law

Prenda Wants Another Judge Who Ruled Against Them Disqualified Because He Gave A Speech

from the same-old-bag-of-tricks dept

One of the many (weak) tricks in the big ol' Prenda "bag of tricks" is to accuse judges who rule against them of bias, and try to get them thrown off the case. It hasn't worked so far, but the Prenda spirit seems to be to never, ever, ever give up trying the same old bogus crap. So here we are with Paul Hansmeier trying to get magistrate judge Franklin Noel disqualified from the case in Minnesota where he's been a giant pain in the ass for Team Prenda, because he's been digging into their actions to determine if a bunch of Minnesota lawsuits were actually fraud on the court. Noel's been pretty careful and methodical, even as Team Prenda has done their usual tapdance. Remember, Judge Noel was the one who ordered them to show up in court with someone who could answer questions -- and Prenda failed to produce Mark Lutz (who, as far as I can tell, is still missing).

So what was Noel's big crime that should get him thrown off the case? Apparently it was giving a talk about copyright trolls and some of the details of Prenda to the Student Federal Bar Association at the University of Minnesota Law School (added bonus: Paul Hansmeier and John Steele are alumni of that school). They claim that the talk is a form of ex parte communication and shows that Judge Noel has "prejudged" them in part because the emailed description of the event mentioned Prenda's "bad behavior." Even as they admit that Noel probably didn't write the email, they say it's guilt by association.

They also claim that the emailed announcement contains details that Hansmeier insists were only filed under seal in the cases -- suggesting that Judge Noel may have revealed that information:

The e-mail further discloses information about the settlement demands in this case. Yet, Plaintiff’s settlement demands were filed under seal by order of the district court. The e-mail’s author appears to be in possession of non-public sealed information, which a reasonable person might conclude was furnished by the Magistrate Judge, even if it was not.

Of course, the information on settlement demands by Team Prenda can be found widely online. Hansmeier leaves that bit out, of course.

Hansmeier continues to flail wildly around, arguing that Judge Noel has clearly been reading blogs including those "created by individuals who have been caught infringing" because "many of his comments echoed criticisms" on those blogs. Of course, what Hansmeier leaves out is that those same criticisms have now been validated by multiple federal courts. It is not, in any way, out of turn for Judge Noel to make note of that. Later, Hansmeier argues that the cases have generated "notoriety" and uses the example that a letter he sent the judge "was the subject of an immediate feature story on several pirate websites." As far as I know, we here at Techdirt were actually the first to write about that letter. I know Ars Technica picked up on our story and wrote one as well. Neither of our sites are "pirate blogs." We're both media organizations that cover a variety of issues. Earlier in his filing, Hansmeier argued that these pirate blogs were all set up by people who had been accused of infringement. That's a blatantly false statement regarding us, and one hopes that Hansmeier will correct the record, though that seems unlikely.

Back to the issue at hand, it does seem a bit strange, and perhaps unwise, for a judge to give a talk about a case that is still ongoing. But whether or not it actually qualifies for being disqualified from the case seems like a stretch. But, it is the Prenda way: flail and flail and flail some more.

Filed Under: copyright trolls, disqualify, franklin noel, john steele, paul hansmeier
Companies: af holdings, prenda, prenda law

Paul Hansmeier Tries To Explain Away Brett Gibbs Revealing Prenda Spreadsheets

from the might-not-be-real-and-if-they-are,-so-what? dept

So, last week, Brett Gibbs dropped quite the bombshell in one of the key Prenda cases, in which he revealed some spreadsheets that had been shared with him via a Dropbox account, showing that John Steele and Paul Hansmeier had received about 70% of Prenda's proceeds, despite insisting they had no direct relationship with the firm. As expected, lawyers in other Prenda cases have rushed to file those documents in their cases as well. In Minnesota, Paul Hansmeier has responded, seeking to block the filing of the documents to Magistrate Judge Franklin Noel, who has been overseeing an investigation into the possibility of fraud on the part of Team Prenda. The argument, summed up, is "who knows if those documents are legit, they don't show anything bad, they're not relevant and they were obtained illegally." Almost all of that is, in typical Hansmeier fashion, ridiculous:

Second, the documents Mr. Godfread proposes to file are inadmissible because they are not authenticated. Mr. Godfread claims that the exhibits "appear" to be financial records of Prenda Law, Inc. Perhaps he is right, but I have not reviewed Prenda Law's financials and neither, presumably, has he. Until he can authenticate the documents, they are inadmissible;

Seems like there's a pretty quick way to take care of that. Judge Noel can put one of the Prendaristas on the stand and ask them if the documents are accurate. Either way, claiming that they're not "authenticated" seems like pretty weak sauce at this stage of the game.

Third, the documents undermine Mr. Godfread's narrative. I have consistently stated—often to deaf ears—that I sold my law practice to Prenda Law in late-2011 and subsequently pursued other interests. That is what these documents show. I am labeled an "old owner" throughout the documents. With one de minimus exception, the only transfers I received from Prenda Law were in consideration of the sale of my practice;

As Gibbs detailed in his filing, the use of "old owners" was clearly done to leave open exactly this excuse, but it does not seem even remotely credible given the massive amount that continued to go to both Steele and Hansmeier long after the sale. While it's certainly not unheard of for service businesses like law firms and accounting firms to include a percentage of ongoing revenue for a few years after sale, having this much go to Steele and Hansmeier suggests something else. At the very least, it's quite relevant for a deeper discussion into Hansmeier's and Steele's claims of having no relationship with Prenda.

Fourth, the documents have no relevance to the subject-matter of this case, which was filed as an action for copyright infringement. Although it has since morphed into a different matter, the day-to-day ledgers of a law firm are not relevant to either inquiry;

Really? I mean, this one doesn't even require a response, since the "subject-matter" of the case is about whether or not Prenda and related companies and individuals were engaged in fraud. It seems highly relevant.

Fifth, if these documents are authentic, then they were stolen. No business would release sensitive financial documents to its adversaries. I understand that this matter is being investigated and will be reported to law enforcement, as appropriate.

Again, as Gibbs explained, it appears these documents were placed in a shared Dropbox account, meaning they were given to him. Yes, at the time he was still part of Team Prenda, but that doesn't mean the documents were "stolen." Anyway, there's something kind of funny about Hansmeier saying that this 'theft' "will be reported to law enforcement." It seems quite likely that law enforcement already knows... and that's because there's an ongoing investigation of Hansmeier.

Filed Under: brett gibbs, franklin noel, john steele, paul hansmeier, spreadsheet
Companies: af holdings, ingenuity 13, prenda, prenda law

Oops: Brett Gibbs Releases Spreadsheet Showing 70% Of Prenda Proceeds Went To Steele & Hansmeier

from the seems-dark-down-there-under-the-bus dept

If John Steele and Paul Hansmeier didn't realize they were in serious trouble already, things just got a lot more difficult for them. As you may recall, Steele and Hansmeier have been bending over backwards to insist that they had nothing whatsoever to do with Prenda Law, and that they got no money from any of the settlements. Courts haven't been buying this argument, and earlier this week we wrote about Judge Chen in Northern California noting that he was convinced that Steele and Hansmeier really were Prenda. But the evidence just got a lot stronger. It appears that Steele and Hansmeier's attempt to throw lawyer Brett Gibbs under the bus has just come back to haunt them. Gibbs has just made a filing in the Judge Otis Wright case in the Central District of California (the first case to directly state that Hansmeier and Steele were clearly behind Prenda) that might be Steele and Hansmeier's worst nightmare: because it reveals a spreadsheet showing how most of the Prenda settlement money went to them.

Ostensibly, the filing from Gibbs is an attempt to get out from Judge Wright's order which lumped in Gibbs with Steele, Hansmeier, Duffy and Lutz as "principles" of Prenda, making them all responsible for the attorneys' fees. Gibbs has been trying to distance himself from the Prenda crew for a while, but with this filing he reveals the real meat: it seems that there was a Dropbox account that was shared between Gibbs, Hansmeier and Steele, and in it was a spreadsheet revealing the payouts from Prenda settlements. And while Steele and Hansmeier have told courts that they are not associated with Prenda and not making any money from the cases, the documents... show otherwise.

Steele and Hansmeier have repeatedly claimed that they have no ownership interest in Prenda Law, AF Holdings or Ingenuity 13 and that all settlement proceeds are held in trust accounts for use in future litigation. For example, in the bar complaint filed in this Court, Steele stated “I have never had an ownership interest in Prenda Law Inc”; “I have never had an ownership interest in AF Holdings LLC or Ingenuity 13.” (Id. at pg. 83). In his deposition, Hansmeier testified that he had “no ownership interest [in AF Holdings] whatsoever” and that proceeds from settlements went into an attorney’s trust account and were withdrawn only to pay expenses of litigation. (ECF No. 69-1 at pgs. 9-13).

The truthfulness of these and similar statements is severely challenged by two documents which Prenda Law sent to the Dropbox account on Gibbs’ computer in early 2013: “Prenda Law Profit and Loss Detail, January through December 2012” and “Prenda Law Balance Sheet Detail.” (See Exhibits E and F). The receipt and disbursements shown in these spreadsheets directly contradict the oft-repeated statements of Steele and Hansmeier that they have no financial interest in Prenda Law or its litigation.

According to the Prenda Law Profit and Loss Detail, in 2012 alone, Prenda made “Payments to Old Owners”—Hansmeier, Steele and Under the Bridge Consulting (their jointly-owned company)—equal to almost 70% of Prenda’s total revenue. Hansmeier received $645,821.29 ($185,321.28 directly and $460,500.00 through Under the Bridge). Steele received $660,915.94 ($200,415.94 directly and $460,500.00 through Under the Bridge). This does not include tens of thousands of dollars in additional payments to or on behalf of Steele and Hansmeier for travel and entertainment, meals, credit card charges, and miscellaneous reimbursements, or payments to Steel’s wife, Kerry Eckenrode Steele. It also does not include payments totaling $37,069.56 to Duffy or Duffy Law Group, also classified as “Payments to Old Owners.” Judging from the documents it appears that neither the Profit and Loss Detail nor the Balance Sheet Detail show any payments to AF Holdings, Ingenuity 13 or other Plaintiffs represented by Prenda.

Exhibit E shows that Prenda received income from “Pirates” of $1,931,977.09 in 2012, and made “Payments to Old Owners” of $1,343,806.78 or 69.6% of its total receipts. Considering other payments to or for Steele, Hansmeier and Duffy, the total distributed to them likely exceeded 80% of receipts, even though these distributions left Prenda with a 2012 loss of $487,791.20. These figures do not include payments to Steele and Hansmeier from other Prenda accounts, or settlements that may have bypassed Prenda completely.

In an affidavit, Gibbs points out that Hansmeier had told him earlier that Steele and Hansmeier had setup "Under the Bridge Consulting" (nice troll reference guys, very subtle) and each had a 50% stake. As Gibbs points out, this very strongly supports Gibbs' earlier claims and reinforces that idea that Steele and Hansmeier are both the powers that be behind Prenda and that they directly lied in the past concerning their involvement. While the spreadsheets do say "old owners," Gibbs' filing correctly notes that (1) this suggest they at one time did own Prenda and (2) getting more than 70% of the revenue going to "old owners" certainly doesn't suggest that those two were no longer involved in the business.

Separately, in the filing, Gibbs notes that Hansmeier called him after Wright's original ruling, trying to get him to sign a document that would require him to lie, and also to indemnify both Hansmeier and Steele, in order to be included under the bond that Duffy, Hansmeier and Steele were organizing as required by Judge Wright's order. Basically, Hansmeier offered Gibbs a terrible deal: to get in on the bond that we're getting, you have to lie to the court and then basically accept any and all liability that may come down because of all this. Gibbs, quite reasonably, rejected the deal, leading to this filing now:

After receiving the May 6 Order, Hansmeier telephoned Gibbs in an attempt to persuade him to work with, not against, the Principals as they appealed the Order. Over several conversations, Hansmeier conveyed to Gibbs exactly what he would have to do to be covered by the superseadous bond which the Principals were arranging to purchase. Knowing that Gibbs would not be able to post sufficient collateral to buy a separate bond, Steele and Hansmeier made six demands which Gibbs would have to accede to before they would add him to their bond: (1) Gibbs pay $3,000 to Hansmeier and Steele to reimburse them for the entire cost of the bond; (2) Gibbs sign a unilateral Release and Settlement Agreement releasing any and all claims he might have against Duffy, Steele, Hansmeier, Prenda Law, Steele Hansmeier PLLC, and Alpha Law Firm” (See Exhibit A); (3) Gibbs agree to sign a declaration stating (falsely) that Steele had no involvement in a Florida copyright case; (4) Gibbs represent AF Holdings and Ingenuity 13 in their appeal of the May 6 Order; (5) Gibbs sign an agreement that would create a fiduciary relationship between Gibbs and both Steele and Hansmeier;2 and (6) Gibbs sign an agreement indemnifying Steele and Hansmeier

against any and all claims, demands, actions, suits, losses, costs, charges, expenses, damages and liabilities whatsoever which [they] may pay, sustain, suffer or incur by reason of or in connection with the appeal of the May 6, 2013 order issued by Judge Wright in Case No. 2:12-cv-8333-ODW (JCx) including, without limiting the generality of the foregoing, all costs and expenses (including legal expenses) incurred in connection with any such loss or damage. (See Exhibit B).

The unilateral release and the indemnity agreement proposed by Steele and Hansmeier would have made Gibbs solely liable for the full amount of the monetary sanctions imposed on all of the parties in the May 6 order, as well as the costs and attorneys’ fees incurred in appealing the order. Steele and Hansmeier were also trying to force Gibbs to testify dishonestly or remain silent with regard to the Principals’ fraudulent activities. Gibbs rejected their offer and was not included on the bond.

It's quite incredible that Hansmeier apparently thought Gibbs was so stupid as to accept such a terrible deal. There's a bunch more in the filing worth reading, but these are the highlights -- and ones that I'd imagine are about to be refiled in a number of other Prenda-related cases around the country. My only question, however, is why Gibbs waited until now to file this...

Still, assuming that this information turns out to be legit, and there's no reason to think it isn't, Steele and Hansmeier may be in for a world of trouble. Everyone knew something like this was coming eventually, but I can't see how the two of them will tap dance around this one.

Filed Under: brett gibbs, john steele, otis wright, paul hansmeier
Companies: af holdings, ingenuity 13, prenda, prenda law

Judge Isn't Buying Team Prenda's Excuses

from the of-course-not dept

Team Prenda keeps trying... and failing. In the AF Holdings v. Joe Navasca case in northern California, Judge Edward Chen has accepted the findings of Magistrate Judge Nador Vadas, who had found that John Steele and Paul Hansmeier were clearly the forces behind AF Holdings and Prenda. Judge Chen completely rejects Hansmeier and Steele's protests about all of this, arguing that there is plenty of compelling evidence that Prenda was really managed by the two of them, and they failed to present any evidence to the contrary. Rather, Judge Chen notes, it appears that the protests from Steele and Hansmeier were almost always attempts to kick up dust to distract from the basic facts, rather than attempts to dispute them.

Judge Vadas took into account AF’s attempt to impugn Mr. Gibbs’s credibility but found the evidence unpersuasive: The declarations (of Mr. Gibbs and other attorneys who represented AF in other states) “do not rebut Gibbs’ testimony that Steele and Hansmeier alone communicated with the purported client, and that they directed Gibbs’ litigation strategy. The declarations actually corroborate Gibbs’ testimony: he communicated with local counsel for AF, essentially acting as a go-between for Steel and Hansmeier.”

AF has objected to the finding that Mr. Steele and Mr. Hansmeier were directing Mr. Gibbs’s actions, but the objection is without any merit. The gist of AF’s objection is that, if Mr. Gibbs did in fact simply follow the directions of Mr. Steele and Mr. Hansmeier without doing any investigation of his own, then he violated his duties as an attorney under, e.g., Federal Rule of Civil Procedure 11. But just because Mr. Gibbs’s conduct may have been improper does not mean that any improper conduct on the part of Mr. Steele and Mr. Hansmeier should therefore be immunized. All three of the individuals can be deemed to have engaged in improper conduct

Furthermore, Judge Chen also notes the non-appearance of Mark Lutz and the subsequent bizarre excuse sent in a week later. We had noted how odd it was that it would take a week for Lutz to file such information, and Judge Chen makes it clear that the entire thing raises serious questions about Lutz's credibility:

The Court acknowledges AF’s objection that no negative inference should be read from the fact that Mr. Lutz did not appear at the evidentiary hearing because he intended to appear but was not able to because of unforeseen circumstances.... But the claimed inability to appear is highly questionable. First, AF waited for about a week after the evidentiary hearing before bringing up the argument that Mr. Lutz could not appear because of “very sensitive” reasons that would “expose [him] to undue scrutiny.” Second, in spite of the professed sensitive reasons, Mr. Lutz ultimately ended up publicly filing an affidavit (without permission from Judge Vadas) explaining why he could not appear. Third, the affidavit itself strains credulity. According to Mr. Lutz, he had bought a ticket to fly to San Francisco from Miami but, when he arrived at the Miami airport at 5:30 a.m., he was detained by federal authorities and was ultimately detained up until 10:00 p.m. – i.e., for more than 16 hours. And while Mr. Lutz suggests that he had no way to contact his attorney while detained, that is a dubious claim. Moreover, even if he could not contact his attorney while detained, there is no explanation as to why he did not ask for relief the next day.

It's good to see judges seeing through such bizarre filings. Judge Chen also has little patience for Hansmeier and Steele's attempts to attack Alan Cooper, which again he finds have little credibility.

The Court is somewhat sympathetic to AF’s point that it, Mr. Steele, and Mr. Hansmeier did not have a chance to cross-examine Mr. Cooper either at the March 11 hearing or at the April 2 hearing. But that is hardly a reason for the Court to entirely discount Mr. Cooper’s testimony. This is because, even if AF, Mr. Steele, and Mr. Hansmeier did not have a chance to cross-examine Mr. Cooper, they still had the opportunity to introduce their side of the story as to what happened with Mr. Cooper at the April 2 hearing but they effectively chose to do nothing. Mr. Steele and Mr. Hansmeier stated that they would not answer any questions. Tellingly, Mr. Steele did offer an explanation in or about May 28, 2013, in conjunction with another case involving AF in Arizona. (claiming that Mr. Cooper voluntarily expressed interest in getting into the business of fighting digital piracy, Mr. Steele put Mr. Cooper in touch with Mr. Lutz, and that Mr. Cooper thereafter participated in a limited number of transactions in 2011 with Mr. Lutz’s companies). There is no reason why Mr. Steele could not have offered this explanation during the April 2 hearing before Judge Wright.

Moreover, if Mr. Steele and Mr. Hansmeier really felt that cross-examination of Mr. Cooper was critical, there is no reason why they could not have issued a subpoena requiring Mr. Cooper’s presence at the evidentiary hearing before Judge Vadas.

Finally, it is worth noting that Mr. Navasca submitted evidence to Judge Vadas that Mr. Cooper’s identity had been stolen independent of the assignment agreement that bore Mr. Cooper’s name and signature. As Judge Vadas recited in the report and recommendation, Mr. Navasca provided an audio recording from GoDaddy.com, in which the caller identified himself as “Alan Cooper” but who was in fact, as testified to by Mr. Gibbs (who recognized the voice of the caller), Mr. Steele. There is also documentary evidence from GoDaddy.com reflecting that the customer’s name was “Alan Cooper” but the e-mail address was “johnsteele@gmail.com.” Docket No. 93 (Pl.’s Ex. G). Furthermore, the physical address for the customer was 4532 E Villa Theresa Dr. – an address that is linked to Mr. Steele’s sister and “Anthony Saltmarsh.” Mr. Steele and Mr. Hansmeier did not provide any evidence explaining these circumstances.

Basically: the judge isn't buying any of Steele and Hansmeier's attempts to kick up dust without actually answering any of the key questions. The judge, in fact, points out that Steele and Hansmeier did not actually answer the key question that Judge Vadas directly warned them needed to be answered at the hearing: what happened to the funds.

All this concludes with a new hearing, to be held November 21st, in which Steele and Hansmeier are going to have to show cause for why the attorneys' fees that were awarded to Navasca from "AF Holdings" should also apply to the two of them directly. The judge warns them to think twice about filing motions on this, noting that they will carry little weight, since the judge appears to want to get to the bottom of these issues at the actual hearing.

Filed Under: edward chen, joe navasca, john steele, nador vadas, paul hansmeier
Companies: af holdings, prenda, prenda law