Malibu Media Sues Its Former Lawyer Over Missing Funds, Breach Of Bar Rules

from the filing-shows-MM-is-as-stupid-as-its-lawyer-is-crooked dept

All aboard the schadenfreude express! It appears that when you base your business model on dubious litigation, you also to attract dubious litigators. (See also: Righthaven, Prenda Law.) So, this latest development in the Malibu Media saga -- brought to our attention by Sophisticated Jane Doe of Fight Copyright Trolls -- is perhaps less surprising than inevitable.

Today Malibu Media (a litigation shell of a hardcore “barely legal” pornography producer X-Art), represented by its new counsel, Pillar Law Group, filed a lawsuit in Central District of California against its former counsel, Michael Keith Lipscomb and his firm, Lipscomb, Eisenberg and Baker (CACD 16-cv-04715).

The problem -- or at least one of them -- appears to be that Lipscomb, like his former client, isn't a fan of sharing.

I’m still reading the complaint, but it seems that Lipscomb at some point (last fall) stopped paying Malibu/XArt percentage of ransom settlement proceeds and kept weaseling when he was asked a direct question “where is the money?”

Malibu Media employs a bit of kettle name-calling in the opening paragraphs of the complaint [PDF]:

Plaintiffs are informed and believe and thereon allege that Lipscomb used LEB as a mere shell, instrumentality, and/or conduit of each other, and commingled assets by and between himself and LEB to such an extent that any individuality or separateness of LEB ceased.

Yes, perhaps a little hypocritical of Malibu, considering it does the same thing on behalf of its porn production arm X-Art.

Much of what's alleged appears to be the result of Malibu setting itself up to be burned. This complaint is its attempt to ice down the affected areas. What responsible company engages in this sort of behavior when suing people by the hundreds?

Upon information and belief, at the inception of their representation, LEB never provided MM with a written and signed retainer agreement setting forth the standards upon which LEB would provide legal services to MM and bill for those services, including whether LEB’s fee would be on a contingency, flat fee, or hourly basis, and which contained provisions for charges and apportionment of settlement amounts and costs.

Notwithstanding the lack of a written and signed retainer agreement, upon information and belief, MM would receive a fixed percentage of the total settlement amounts flowing from settlements. Upon information and belief, at some point the fixed percentage number changed and LEB also began to charge MM for the filing costs for new cases.

"Information and belief" isn't nearly the same thing as a signed contract that contains both parties' signature and a clearly-denoted agreement as to how all of these aspects of litigation are to be handled. Malibu Media's pre-trolling preparations appear to be every bit as slapdash as the litigation that ensued under Lipscomb's control.

What's also interesting is that Lipscomb -- and perhaps Malibu Media itself -- appears to believe the trolling business model was no longer viable. After a few months of supposedly stashing away funds for future litigation, Lipscomb reversed course, declaring this particular form of litigation to be a dead end. As Malibu demanded detailed documentation of the supposed war chest (engaging the services of Pillar Law, which is also representing it in this suit), Lipscomb informed the legal reps that Malibu's trolling days were over.

In one email dated April 5, 2016, Lipscomb indicated that “Malibu is winding its copyright campaign down because it is no longer profitable.” On April 12, 2016, Lipscomb indicated in order for LEB to “wind down” the campaign, an “engagement agreement” would need to be signed.

[...]

In another email dated April 12, 2016, Lipscomb indicated that the type of litigation involved in the campaign was “incredibly sophisticated and nuanced” and also warned that “if the cases (or the steps in a wind down process) are mismanaged… Malibu will lose cases or be sanctioned by courts or both.” He warned in another email dated April 12, 2016 that “[t]here is enormous potential liability to [MM] if this is not managed correctly.”

Lipscomb is only half right. Trolling is neither "sophisticated" nor "nuanced." It's half-junk mail, half-Ponzi scheme. However, much sophistication and nuance is needed to extricate trolls from lawsuits that go sideways. Without these, judges are angered and a quick, dirty moneymaker becomes nothing more than a surefire way to rack up sanctions and orders to pay defendants' legal fees.

These emails weren't just Lipscomb being pragmatic about the situation. They were apparently also useful in buying him time as he dodged requests for detailed info on where Malibu's money was. He also sent over an agreement that would allow him to exit the trolling enterprise mostly intact, with his only liability being "malpractice going forward" from the date of agreement.

In a final indignity (at least according to Malibu Media), he withdrew from an ongoing case, forcing it to scramble to find replacement representation "within 21 days." Three weeks might seem like plenty of time, but Malibu's increasingly-poisonous reputation likely preceded it. It failed to obtain a new lawyer in time and the judge awarded a default judgment to the plaintiff -- including nearly $160,000 in legal fees.

Malibu Media claims Lipscomb violated Florida bar rules by not providing it with a contingency agreement or itemization of costs claimed. That may be true, but Malibu is equally to blame (although not under rules governing the state bar) for moving forward with Lipscomb/LEB without demanding something resembling an actual contract first. Lipscomb may be hit with fees and sanctions for violating this code of conduct, but Malibu should really have to live with the consequences of its own actions. It can't even sue for breach of contract because there was apparently no contract in place during this whole debacle -- something that allowed Lipscomb to "rewrite" the terms at whim.

It remains to be seen if Malibu is actually winding down its trolling side business. No new lawsuits have been filed since April 20, which appears to indicate Lipscomb's assertions about the end of the trolling era are true. Of course, Malibu Media has been running without a legal rep in these cases since that point, so it still may be interested in pursuing more copyright infringement litigation once it has "retained" (and that's in quotes because Malibu Media doesn't appear to know how to correctly retain a lawyer) new representation.

However, it could be the $160,000 default judgment is a hurdle it can't overcome, especially since it's likely still months or years away from extricating any funds from its former representation -- and that's assuming there's anything left to take once this whole thing plays out.

Filed Under: copyright, copyright trolling, ethics, florida, keith lipscomb, speculative invoicing
Companies: malibu media, x-art

Ohio Judge Fed Up With Malibu Media: Appears To Give Copyright Troll One Last Chance

from the pay-attention-now dept

With all the talk about Prenda and its copyright trolling practices, it's long been clear that the real king of copyright trolling in the US is Malibu Media -- better known as xArt -- and its legal team led by Keith Lipscomb (and we'll leave aside the fact that behind the scenes, it appears to be using the same German "international men of mystery" that other copyright trolls, like Voltage Pictures have been using). Either way, Lipscomb's shakedown campaign accounts for an astounding percentage of copyright lawsuits filed in the US these days. And, given some of the stories that have come out in these lawsuits, it's kind of astounding that the company has not received the "Prenda treatment" from any federal judges.

That may be about to change. Federal district court judge Timothy Black appears to have had enough of Malibu Media and its copyright trolling practices. In two separate cases this week, Judge Black issued "orders to show cause" (more or less judicial language for "I think you've done something really bad and here's your last chance to show me otherwise) that go beyond the usual level of "Hey, it appears you've been acting naughty" to a full blown recitation of all of Malibu Media's questionable practices.

Both orders (first one and here's the second) ostensibly focus on a common problem with Malibu Media's lawsuits: the failure to actually serve the defendants (when your main focus is just on getting identifying info to shake down people with threats that get them to settle, actually following official procedure required for an actual lawsuit falls by the wayside). And Malibu Media/Lipscomb/flunkies are notorious at screwing this up. In this case, Judge Black had already issued multiple orders to show cause over the issue. You can read about all the missed deadlines in the full filing, but Judge Black sees the problems here.

The much delayed filing of the summons return simultaneously forced the Court to unnecessarily expend judicial resources in the issuance of an Order to Show Cause and hindered the ability of the Court to manage its docket. With respect to the filing of an answer or other matters dependent on the date of service of process, the Court’s ability to actively manage its docket is entirely dependent on counsel filing a summons return within a reasonable amount of time.

But that's just the preamble. From there, Judge Black makes it clear he's well read up on all of Malibu Media's infamous shenanigans in gaming the judicial system for profit.

The Court does not view Malibu Media’s conduct in this action in isolation. Rather, the Court views it as part of an unmistakable pattern that has emerged in other actions before this Court and in context of observations made by multiple other federal judges in cases involving Malibu Media.

This Court has observed the conduct of Malibu Media and its counsel of record in over 60 cases filed in this District in the past twelve months. This is not the first case in which Malibu Media has filed a summons return well after the date of service. Counsel appears to have made a misrepresentation in seeking an extension of time to complete service in two cases. The Court also issued an order to show cause after counsel publicly filed a defendant’s name in direct violation of two orders unambiguously ordering counsel to file that information under seal.

We wrote about that public filing a few months ago. But that's not all that the judge has been watching. He's also well aware of the notorious "Exhibit C," where Malibu Media would file an "exhibit" of other movies that it believed the defendant may also have downloaded illegally -- even though it was not the copyright holder on those films. The titles were often very embarrassing, suggesting that the entire purpose of Exhibit C was to embarrass someone into settling so the list would not be associated with their name in court documents.

Judge Black also calls out the "swarm joinder" issue that was popular in early lawsuits -- whereby copyright trolls like Malibu (and others) tried to lump hundreds or thousands of individuals together in a single lawsuit, arguing it was proper to "join" them all since they participated in the same infringement. As Black notes, that misuse of the court system really only set the stage for a bunch of other questionable practices. It seems clear that Judge Black is well aware of the game being played, and even refers to it as copyright trolling:

Malibu Media asserts that it is necessary to invoke the Court’s subpoena power to “propound discovery in advance of a Rule 26(f) conference.” .... However, not a single one of these 60 cases has ever progressed to a Rule 26(f) conference. In fact, most cases are voluntarily dismissed by Malibu Media pursuant to Rule 41(a)(1)(A)(i) without obtaining a summons, but presumably after Malibu Media has used the third-party subpoena to obtain a settlement. The name of the IP subscriber is never provided to the Court in these voluntarily dismissed cases. This makes it impossible for this Court or any other court to determine, for example, if a later action should be dismissed with prejudice under Rule 41(a)(1)(B). In the few cases in which a defendant has appeared with counsel, counsel have raised numerous allegations of impropriety and abusive litigation tactics. The Court is not blind to the reality that these allegations likely substantially underrepresent the amount of misconduct that goes unreported by defendants who simply pay Malibu Media’s settlement demand rather than face the prospect of expensive and extensive litigation regarding their purported interest in pornography.

The Court is aware that Malibu Media, through separate local counsel, has filed thousands of similar cases in federal courts across the country. A copyright troll has been defined as “an owner of a valid copyright who brings an infringement action not to be made whole, but rather as a primary or supplemental revenue stream.” .... Under this definition, Malibu Media certainly qualifies. However, Malibu Media generally responds to this allegation by pointing to comments of the trial judge in the so-called bellwether trial as unassailable proof that its intentions and tactics differ from other entities that bring copyright infringement actions related to pornographic movies.

Oh right. The Bellwether trial. That case had all sorts of problems, including a lying defendant who tried to destroy evidence. Unfortunately, it did not do what it was initially intended to do: actually test some of Malibu Media's really questionable legal arguments. Judge Black quickly notes that the "bellwether" trial doesn't matter. Malibu Media is up to some really questionable judicial gaming. He walks through all of the abuses, from misjoinder to Exhibit C -- and even notes that despite being benchslapped over Exhibit C, Malibu Media just "evolved this practice":

Notwithstanding Malibu Media’s contention that it “instructed counsel nationwide to never file Exhibit C with a complaint again,” ... this Court has borne witness to the fact that Malibu Media has simply evolved this practice rather than eradicate it. In an Order issued in a separate case on October 6, 2014, this Court sua sponte noted a continued vestige of Exhibit C in several paragraphs of Malibu Media’s complaint.... Instead of attaching Exhibit C, Malibu Media adapted its practice and now made an explicit reference to a document with “additional evidence” that the defendant had distributed a large number of third-party files through BitTorrent.... Malibu Media disingenuously offered to produce this document to the Court with the seemingly off-handed remark that “many of the titles to the third party works may also be relevant to proving Defendant is the infringer because they correlate to the Defendant’s hobbies, profession, or other interests.” ... Citing the two Wisconsin district court cases that imposed sanctions for attaching Exhibit C, the Court struck the offending paragraphs from the complaint and ordered Malibu Media to file a conforming amended complaint forthwith.... Two months later, Malibu Media voluntarily dismissed the action without filing an amended complaint.

In discussing what to do about this, Black notes that, ordinarily, it's wrong to just dismiss a case to discipline "an errant attorney" since that would be unfair to the parties the lawyer represents. However, he notes that in this case, it's different. The sheer number of cases and the fact that Malibu/Lipscomb's games continue suggest that this is not just a bad lawyer not fairly representing the interests of a client. Oh, and it's clear Black knows that this is all being run through Lipscomb, rather than the random lawyers who actually turn up for local cases:

Here, and in the dozens of other actions before the Court, there is ample evidence that Malibu Media or its “outside general counsel,” rather than its local counsel of record selects the litigation strategy and tactics. 12 Accordingly, the general principle that “directly sanctioning the delinquent lawyer rather than an innocent client” may not apply here....

Still, Judge Black is incredibly patient. Despite the earlier orders to show cause, he once again gives Malibu a chance to explain itself. Though in the second of the two orders, Judge Black also lays out the possibility of "Rule 11 sanctions" against the lawyers for flat out lying to the court and failing to correct the record on it -- though again (perhaps surprisingly) suggests that the conduct to date is not enough to get there.

Here, the record indicates that on February 10, 2015, Malibu Media’s counsel represented that service had not yet occurred. (Doc. 10 at 2). However, it is clear that Defendant was served on January 26, 2015. (Doc. 12). Counsel made no attempt to correct this statement until after the Court issued an Order to Show Cause regarding the apparent failure to complete service of process.

It may be frustrating to those who are watching these cases that even this is not enough to bring down Rule 11 sanctions, but Judge Black has made it clear that he's watching -- and you can bet that other judges across the country may start to take notice as well. And assuming Malibu Media can't resist continuing to push things even further, the record of misconduct will be that much longer and more detailed.

Filed Under: copyright troll, copyright trolling, exhibit c, extortion, keith lipscomb, order to show cause, shakedown, timothy black
Companies: malibu media, xart

Copyright Troll Malibu Media Sanctioned For Bogus Copyright Abuse & Intimidation Tactic

from the there-goes-another-one dept

For the last few months, I'd been meaning to write some more about Malibu Media, a major copyright troll who we've mentioned a few times in the past. Some have been arguing that (believe it or not), the company is even worse than Prenda. Of course, with so much other stuff going on, I haven't had as much time to dig in, but the company just got hit with some sanctions. A few months back, people realized that one of Malibu Media's tactics was to send a now infamous "Exhibit C" court filing to the subscribers they were accusing of infringing on their copyrights. The problem? The movies in Exhibit C -- which tended to be hard core porn films -- had no connection to Malibu Media. They didn't hold the copyright on them at all, and certainly had no standing to sue over them. Basically, Malibu would file this list of other movies the person may or may not have been sharing, with really offensive names, knowing that if the names became public it would likely be quite embarrassing for the recipients of the threat letters. It seemed pretty clear that the idea was to intimidate people into paying up. EFF summed up the situation a few months ago:

Malibu Media, which runs the site "x-art," files civil complaints in courts around the country. Each complaint accuses an anonymous Internet user of illegally downloading and sharing one or more of Malibu's movies. But the complaint goes further: Malibu attaches a list of other movies and files that Malibu accuses the user of copying illegally. Some of them have titles that are far more lewd and embarrassing than the titles of Malibu's own movies. But Malibu doesn't own the copyright in those other movies, and can't actually sue over them. There's no legitimate reason to attach that list of other titles to a complaint, because complaints in federal court are not the place for laying out evidence. They're just to initiate a case and let the other side know what the case is about. But adding some really embarrassing titles to a complaint and filing it on a public court docket ups the embarrassment factor and discourages innocent people from standing up for themselves in court. (It's not clear what those extra titles would add to a court case, anyway - most judges would bar them from being read to a jury.)

A court became suspicious of this, and ordered Malibu Media to explain. The company's main lawyer in these cases, Keith Lipscomb, was then quoted in a ridiculous filing in which he swore up and down that he had no intention to intimidate people with that bogus list at all. He was just... um... making his "case stronger." Yeah, that's the ticket...

It goes on to claim that Exhibit C, which (again) does not involve anything that Malibu Media holds a copyright on, and which they have no right to sue over, is part of the "breadcrumbs" that help solve the "whodunit." How, you might ask? Well, Malibu Media claims that all of the other non-Malibu Media content that they attach to the lawsuit helps establish who really did the file sharing, because that other content might just include other things associated with that person.

Of course, even if that's true (and it's incredibly weak as arguments go), it doesn't matter, because you don't file that kind of thing with the initial case. It's (at best) evidence that is presented during the actual case itself, not with the initial complaint. EFF thankfully jumped in and filed an amicus brief highlighting just how ridiculous Malibu Media's explanation was:

This is nonsensical. Complaints are pleadings, not affidavits, so they have no “evidentiary purpose.” Complaints are to provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” .... Here, in each case, plaintiff is explicitly disavowing any claim based on Exhibit C. If it were to matter, under what rule of evidence would Exhibit C be relevant at any stage of this lawsuit? Propensity evidence is forbidden by F.R. Ev. 404(b)(1). Plaintiff makes no claim that Exhibit C is relevant under Rule 404(b)(2), and if it did, then the weighing process of Rule 403 would militate forcefully toward excluding this evidence. So what’s really going on here?

Even a cursory review of each lawsuit’s Exhibit C shows first, that it is always much, much longer than the short list of titles that is the actual subject of plaintiff’s lawsuit, and second, that among the innocuous titles listed in each Exhibit C (e.g., “Top Gear,” “Star Trek VI”) are numerous “adult” programs, usually many more than the handful for which plaintiff is claiming a copyright violation, and many with titles exponentially more lewd than any title claimed by plaintiff. Compare “Red Satin” with “[Bestiality] Young Blonde . . . Dog (www.sickporn.in).” One needn’t be a cynic to suppose that an intended purpose–perhaps the primary purpose–of Exhibit C to the complaint in each of these lawsuits is to increase the pressure on a subsequently identified Doe defendant to settle before s/he is publicly linked to hardcore/deviant titles that are completely irrelevant to plaintiff’s actual claims in the lawsuit.

Thankfully, the judge has now agreed and issued sanctions. The opinion more or less adopts exactly the points made in the EFF's filing. Judge William Conley also shreds Malibu's explanation for the filing, pointing out how each argument Malibu made makes no sense and could have been accomplished in other ways that don't lead to "extorting unreasonable settlements." As the Judge says:

Nothing is gained by filing this document publicly in unredacted form, except to harass and embarrass defendants into early settlements

Later in the filing, after eviscerating all of the reasons Malibu presented, the judge notes that the silly statements of both Malibu and its lawyer that there was no "ill intent" here don't even pass the laugh test.

Malibu Media's denials do not pass the smell test, and any denial of improper motive by its counsel does not pass the laugh test. For the reasons described above, there exists no good basis upon which a reasonable attorney -- subject to the ethical rules and restrictions of Rule 11 -- could conclude that attachment of Exhibit C to a complaint "for evidentiary purposes only" served any legitimate purpose at that stage of litigation.

Later, the judge acknowledges that copyright trolling cases "already give off an air of extortion" and uses that to claim that making that situation even worse with things like Exhibit C makes the whole effort sanctionable. Unfortunately, the judge then limits the sanctions to just $200 per case (there are 11 related cases) for a total of $2,200, and then actually lets the cases move forward (they had been stayed while this issue was resolved). It's at least something, and shows yet another dirty trick from a copyright troll, and how Rule 11 sanctions can be used against such activities -- but it's hardly a game changer. Since it seems likely that they've used Exhibit C elsewhere, however, it seems likely this will come up again.

However, given some of the other things that Malibu Media has been accused of doing recently, you have to wonder if Malibu and Lipscomb are on their way down the Righthaven/Prenda trail of more and more courts realizing what they're up to.

Filed Under: copyright troll, exhibit c, intimidation, keith lipscomb, rule 11 sanctions, sanctions
Companies: eff, malibu media

Copyright Troll Lawsuit Ends Badly Because Very Dumb Defendant Lied To Court, Destroyed Evidence

from the you-don't-do-that dept

We've pointed out before how stupid it was for people like Jammie Thomas and Joel Tenenbaum to fight the copyright infringement lawsuits launched against them. In Tenenbaum's case it was monumentally stupid, because he flat out lied to the court and then had to admit it in court. You don't do that. Lying to a court is not only stupid in general, but it completely taints any underlying issues that may actually be important, and predisposes the judge against you. There are often good reasons to fight back against copyright lawsuits, but if you actually infringed and then lied about it that's a really bad reason to fight back.

Unfortunately, it looks like there was a similar situation in one of the big copyright trolling cases last week. Last fall, we wrote about how Judge Michael Baylson decided to force a group of Malibu Media copyright trolling cases to trial, after it became apparent that Malibu Media didn't seem particularly interested in going through with a trial (similar to most copyright trolls). Unfortunately, it then came out that one of the "selected" defendants lied, committing perjury, and (on top of that) destroyed the evidence. This is just ridiculously stupid.

In the end, all of the defendants "settled," but the case still had a sort of sham trial. Yes, there was no reason for the trial, since everyone basically settled, but the lawyer for Malibu, Keith Lipscomb, asked the court to enter a "final judgment." That basically allowed the judge to rail against the stupid defendant who lied and destroyed evidence (who deserves to be yelled at by the court for his actions), but it also now allows Lipscomb to use the "judgment" of $112,500 to threaten many others who are not in the same situation as the guy who lost. There's a good summary from lawyer John Whitaker, who found the whole thing baffling.

In sum, all of the defendants stipulated to liability before the trial. Plaintiff had already agreed not to seek damages against two of the three defendants. The third defendant stipulated to liability. Malibu Media and the third defendant asked the judge to enter a finding on damages, even though they had already agreed on what he would pay.

So there was absolutely nothing at issue during the trial. Not liability. Not damages. Nothing.

Then there was the 'trial' itself. The only party to actually put on a witness was Malibu Media. None of the defendants even cross-examined a witness. Really?

What kind of trial is it where the defendant doesn't challenge any of the plaintiff's witnesses or even put on any witnesses of its own? A sham, that's what.

So why was there even a trial? I have no idea.

Well, actually, he points out, everyone knows why:

It was all about Malibu Media trying to get Judge Baylson to write a document that Malibu Media could use in all its demand letters from now on. I'll point out that, to his credit, Judge Baylson had to tell Lipscomb numerous times that he would not be Lipscomb's advertising spokesman. I think what he said was he wasn't interested in writing anything that was "commercially valuable" to Malibu Media.

If the goal wasn't to be "commercially valuable" to Malibu, it looks like it failed. In the aftermath of the ruling, Malibu Media filed dozens of new trolling lawsuits. Yes, the defendant deserved to lose. Infringing by downloading the work, then lying about it to the court and destroying evidence should be punished. But it's a shame that all it's doing in this case is enabling more copyright trolling shakedown behavior.

Bad cases make bad law, and this was clearly a bad case, which was made even worse by the actions of that particular defendant. I'm not saying he should have gotten off free, but the end result here is going to lead many others to feel obligated to pay up when they probably shouldn't.

Filed Under: copyright, copyright troll. bellwether, keith lipscomb, lying in court
Companies: malibu media