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

Judge Decides The Prenda Buck Should Stop With John Steele And Paul Hansmeier

from the another-shoe-drops dept

The latest ruling in the AF Holdings v. Navasca case has come out with Magistrate Judge Nador Vadas completely slamming Team Prenda, focusing mainly on John Steele and Paul Hansmeier, whom he thinks should clearly be directly liable for the attorneys' fees already ordered on AF Holdings in the case, but which haven't yet been paid (of course). This is in response to the hearing from a few weeks ago, in which Judge Vadas had made it clear that he wanted AF Holdings/Prenda to answer some very specific questions. Paul Duffy, representing AF Holdings, did not answer most of the questions, and the Judge noticed. He also noticed that AF Holdings did basically nothing to actually respond to most of the issues, other than trying to attack Brett Gibbs or Navasca's lawyer Nick Ranallo.

Even after the excoriating decision Judge Wright issued in Ingenuity 13, and the troublesome findings Judge Chen made in his order awarding attorneys' fees to Navasca, AF chose not to oppose the majority of the arguments in Navasca's motion for sanctions. Instead, AF introduced immaterial issues in its opposition, attacked its former counsel Gibbs, and attacked Navasca's counsel.... AF addressed the “Salt Marsh” issue and the working relationship between AF's former counsel Gibbs and its CEO/manager/sole employee Lutz.... However, AF failed to oppose Navasca's arguments that Steele and/or Hansmeier (1) manufactured Cooper's involvement in AF and forged his signature; (2) were in cahoots with the computer forensic experts who identified the alleged illegal downloaders that AF then sued; and (3) themselves uploaded the Video to Pirate Bay to induce others to download the Video. AF failed to offer any evidence to rebut Navasca's evidence establishing these points. AF's counsel attacked the affidavit of Delvan Neville, who explains how he determined that John Steele or someone with access to Steele's GoDaddy account uploaded the copyrighted works that form the basis of AF's lawsuits to BitTorrent swarms in order to induce infringement.... But AF did not actually rebut the evidence Neville presents. Instead of grappling with these admittedly difficult accusations, AF “respectfully request[ed] that to the extent the Court deems one or more to be relevant in any respect, that it identify those matters and allow Plaintiff opportunity to respond and present evidence to contradict them.” .... AF's counsel is apparently not familiar with the rules of federal procedure, or with basic principles of motion practice

That last sentence? Ouch. Later, the Judge restates the three straightforward questions he'd ordered Duffy and AF Holdings be prepared to answer, and then notes "AF chose not to present any witness at the evidentiary hearing, continuing its campaign of obfuscation."

From there, the Judge notes that Judge Wright's initial findings against Team Prenda were compelling and adopted in this case. He finds that Gibbs' testimony concerning John Steele and Paul Hansmeier was convincing, and notes that Paul Duffy presented little evidence to counter any of it. The Judge also faults Steele and Hansmeier for claiming that they haven't had "a full and fair opportunity to litigate these issues," noting that's not at all true, going back to the opportunity before Judge Wright.

The key point of all of this is to see if John Steele and Paul Hansmeier could be made personally liable to pay the attorneys' fees ordered by Judge Chen in this case, and Judge Vadas is clearly convinced. Still, he notes that he's unable to do so under some of the proposed theories. He can't use the court's inherent powers, since neither Steele nor Hansmeier technically appeared as attorneys in the case (even if Hansmeier was deposed as a corporate representative). Still, the court notes that there's tons of evidence that Steele and Hansmeier deserve sanctions, but since they're not officially part of the case, there's just no jurisdiction.

However, that doesn't let them off the hook. The court finds that it can add Steele and Hansmeier personally as debtors to the original judgment, noting that they are basically an "alter ego to the original debtor." It then goes into a fair amount of detail about why this makes sense, highlighting the evidence that Steele and Hansmeier really controlled the lawsuit, that they had a financial interest in the ruling, and, most importantly, their near total failure to refute any of the evidence against them, despite multiple opportunities.

The evidence adduced at the August 28, 2013 evidentiary hearing confirms Judge Wright's findings. AF's failure to refute that evidence with any of its own also speaks volumes. Although the undersigned ordered AF to be prepared to explain at the hearing the money trail and provide an accounting of the funds it received from copyright infringement actions or settlements, AF failed to present a witness who could do so or documents that might shed light on these issues. During the evidentiary hearing, Duffy represented to the undersigned (but did not testify) that it was his belief that the settlement or litigation proceeds were held in IOLTA trust accounts by AF's attorneys (including Prenda Law, formerly known as Steele Hansmeier). Duffy also represented as a "fact" to this court that a settlement check in another matter was written to Prenda Law.... However, no witness testified regarding whether any of the funds ever left Prenda's trust account(s). Thus, there is no evidence before the undersigned that any settlement or litigation proceeds ever reached AF.

The end result is that Vadas has sent the case back to Judge Chen with a recommendation for yet another Order to Show Cause why Steele and Hansmeier shouldn't be added as debtors to the original award for attorney's fees. In short, Hansmeier and Steele now get to argue why they shouldn't personally be liable for this debt. I'm sure their filings will be highly entertaining.

As a post script to this story, elsewhere we had noted that Mark Lutz had failed to show up at the hearing, despite Paul Duffy insisting that he knew Lutz was in town and would be present soon. A week later, Duffy finally filed with the court stating that Lutz had a good excuse, but wanted it to remain secret from the public. The court rejected two separate attempts to explain secretly why Lutz did so, and then just before Vadas' ruling filed a statement from Lutz that claims he was detained at the airport for the entire day by federal officials and unable to contact anyone, including his lawyer. He does not explain why he was detained, other than that it "was not for any actions I took at the airport and had no way of knowing that I was going to be detained on that day until it happened."

There are a number of oddities in this explanation, including the earlier claims from Duffy that he knew Lutz was apparently in town, when he wasn't, as well as the claim that he was unable to contact his lawyer during the entire 16.5 hours that Lutz claims he was detained. That's an awfully long time to be detained without access to one's lawyers. It also doesn't explain why it took Duffy a week to file anything with the court about this absence.

Filed Under: alan cooper, brett gibbs, edward chen, joe navasca, john steele, liability, mark lutz, nador vadas, nick ranallo, otis wright, paul duffy, paul hansmeier, sanctions
Companies: af holdings, ingenuity 13, prenda, prenda law

Ex-Prenda Lawyer Wonders If Team Prenda Believes Their Own Lies After Laughable Hearing

from the keep-trying dept

Earlier this week, there was yet another hearing dealing with one of the many courts investigating the actions of Team Prenda. This was in the Navasca case up in San Francisco, where some sanctions have already been issued, and more may await. Judge Edward Chen handed off this stage of the case to Magistrate Judge Nador Vadas, who recently demanded some actual answers, telling "AF Holdings" (one of the many Prenda shell corporations) to show up ready to answer some very specific questions. That's not quite what happened.

The day started off with a laughable declaration from John Steele, in which he stuck with his plan of deny absolutely everything. This focused on denying every bit of Delvan Neville's expert analysis showing a high likelihood that John Steele and Paul Hansmeier were themselves seeding the files they later sued over, via The Pirate Bay. Neville's analysis is detailed, thorough and hard to argue against. Steele and Hansmeier, along with Paul Duffy (the official "named" partner of Prenda) have been insisting that there is nothing to Neville's filing, and keep insisting that he's a nobody, rather than an expert.

I note initially that Mr. Neville is a graduate student; that he has not disclosed why he prepared his declaration.... whether he will successfully complete whatever course of study he is now engaged upon as a "graduate student;" whether he meets any of the rigorous standards applicable to an expert witness in a Federal court proceeding in a Federal court proceeding. (sic)

Upon my review of Mr. Neville's declaration, I find the claims contained therein pertaining to me to be completely untrue and without any basis in fact.

Mr. Neville asserts I may have acted to "seed" a BitTorrent "swarm" involved in the digital piracy of copyrighted works. Those assertions (perhaps better described as suspicions) are categorically false. I have never acted to "seed" a BitTorrent "swarm," and would not know how to do so if for some reason I would desire to try.

It goes on like that. Of course, this is all pretty laughable, given the mountains of evidence that connect Steele to the seeding, including Comcast revealing that the IP address associated with the seeding belonged to Steele Hansmeier, and the information provided by GoDaddy involving John Steele impersonating Alan Cooper and Mark Lutz. Those both came out in a different Prenda case, but showed up in this particular hearing.

Only Paul Duffy from Team Prenda showed up to the hearing (though he showed up late) and while it was promised that Mark Lutz was "in town" and would be there, he never showed up at all. The star of the show was former Prenda team player Brett Gibbs, who, after realizing that Hansmeier and Steele had thrown him under the bus, started finally revealing the truth. Hansmeier and Steele have continued to insist they had little oversight over Gibbs, but at the hearing he produced phone records showing somewhere around 4,500 minutes of phone calls with Hansmeier. He was later asked to identify the recordings on those calls, and said they were John Steele's voice -- which Duffy weakly objected to.

After Neville testified about the inner workings of BitTorrent, it was Duffy's turn, and many people expected a full cross-examination of Neville. Given that Duffy, Hansmeier and Steele have been insisting that Neville's claims are a complete joke and wouldn't stand up to any scrutiny, you'd think they'd relish a chance to have him on the stand. But they more or less ignored him. Instead, Duffy spent a ridiculous amount of time tying himself into knots with an astoundingly weak attempt to pin the blame on Gibbs himself, focusing mainly on procedural issues. The two points he seemed to focus on: that Gibbs never actually saw the infamous "Salt Marsh" signature and that Gibbs never officially checked to see if the Steele Hansmeier law firm was dissolved or purchased after Steele and Hansmeier told Gibbs they'd be doing business as Prenda going forward.

Neither point makes much sense, nor does it really matter. On the signature front, Gibbs has already stated, repeatedly, that he'd asked about Salt Marsh and Hansmeier insisted it was legit. If there was a procedural error, it was trusting his boss (and friend and former roommate). Either way, this could only come back to bite Duffy, since it was Duffy's law firm that Gibbs supposedly worked for, and sooner or later this comes around to lawyers technically working for Duffy's law firm violating procedures. As for the status of Steele Hansmeier, that seems like a pointless tangent.

Thankfully, it appeared that Judge Vadas was pretty aware of what was going on. While not as outspoken as Judge Wright, he made it clear that he wasn't buying what Duffy was selling:

At this point, Magistrate Judge Vadas broke in to ask Duffy a question. "Counsel, where are we going with this?"

"Counsel has the obligation under federal and local rules to maintain the original signature and he [Gibbs] didn't do it!" said Duffy. "He's trying to blame other people who weren't on the case. Any liability should fall upon him, as the filer."

Duffy went on. A minute later, Vadas broke in again, with the same question, asking where the line of questioning was going. Duffy was trying to show that Gibbs had changed his story as a result of a "deal" with another defense attorney in Florida, to drop sanctions against him.

"It strikes me from what I have heard so far that there's a chain of command here, and that Mr. Steele and Mr. Hansmeier were managing partners of the firm that became Prenda Law," said Vadas. "This counsel and other counsels were contract lawyers doing the heavy lifting in whatever states these lawsuits were being filed... Isn't that a fair analysis?"

Some have argued that from Duffy's performance, he appears like he's in way over his head. Of course, given all of the evidence piling up against him and his colleagues, I'm not sure how he could do any better.

Still, the best line of the day may have come after the hearing was over, when reporter Joe Mullin from Ars Technica chased down Gibbs in the hall and asked for an interview:

"I'm just trying to get on with my life," he said. "I'm pretty overwhelmed by this. There just needs to be some truth in this, in the whole matter, and that's why I came today. I don't know if they believe their own lies, at this point."

To be fair, Gibbs was a big part of that lying machine at some point, even if he was just taking orders from Steele and Hansmeier, but kudos to him for finally coming clean.

Filed Under: alan cooper, brett gibbs, delvan neville, edward chen, john steele, mark lutz, nador vadas, paul duffy, paul hansmeier
Companies: af holdings, ingenuity 13, prenda, prenda law

Courts Start Demanding Actual Answers From Team Prenda

from the and-on-and-on dept

The saga of Team Prenda continues, as courts in two of the Prenda cases we've been following have shown that they're getting pretty tired with Team Prenda's attempts to dance around the issues. First up, we've got the various AF Holdings cases up in Minnesota. If you don't recall, these cases had been dismissed, but after the court learned about some of Team Prenda's antics, it reopened the case with an eye towards determining if Team Prenda was guilty of fraud on the court in coaxing settlements out of people on a faulty or illegal basis. Amusingly, late last week, Paul Hansmeier, sticking to Team Prenda's ridiculous strategy of "whenever we're completely backed into a corner, charge!" filed a notice claiming that AF Holdings intended to reopen the original cases. That is, he's now claiming that because magistrate judge Franklin Noel is investigating them for fraud in the original cases, they now want to continue to "sue" people for infringement to show how "legitimate" their cases really were. The notice is worth reading, mainly for the comedic value. Hansmeier claims that Alan Cooper is mentally unstable and was trying to extort money from John Steele. Also, that there was no forgery of Cooper's signature, but rather Cooper "repudiating" his association with AF Holdings.

Of course, the main reason for making this filing isn't to reopen the cases, or to make laughable claims about Alan Cooper, but rather this:

However, Plaintiff has reached the outer-limits of what it can learn without the coercive power of formal discovery. As such, Plaintiff respectfully requests the Court to issue an order scheduling a Rule 26(f) conference so it resolve this matter as quickly as possible.

Basically, it's Paul Hansmeier asking the court for a fishing expedition against Cooper and his lawyer Paul Godfread. It's hard to see this as anything more than an attempt to be a nuisance.

However, it seems highly unlikely that magistrate judge Noel is buying anything that Hansmeier is selling. Instead, his latest order shows that he's getting pretty damn tired of Team Prenda's runaround. It makes no mention of Hansmeier's filing, denies the local counsel Michael Dugas' request to be dropped from the case (noting that he signed the forged papers), repeats the findings of Judge Wright in California, and then orders AF Holdings/Team Prenda to explain why Judge Wright's findings shouldn't apply equally to these cases:

The plaintiff shall file a memorandum of law on or before August 26, 2013 showing cause as to why Judge Wright's factual findings are not binding against it in these cases under the common law doctrine of issue preclusion. See, e.g., Bechtold v. City of Rosemount, 104 F.3d 1062, 1066-67 (8th Cir. 1997) (issue preclusion appropriate under Minnesota law if (1) the issues are identical; (2) the prior adjudication ended with a final judgment on the merits; (3) the plaintiff was a party to the prior adjudication; and (4) the plaintiff was given a full and fair opportunity to be heard on the adjudicated issue).

The Clerk of Court shall correct the docket to reflect that Mr. Michael K. Dugas remains counsel of record for the plaintiff. Although he filed a notice of withdrawal and substitution, his withdrawal was not effective upon filing under Local Rule 83.7(b) because it would delay the progress of this case. He signed the complaint to which the forged documents were attached. If Mr. Dugas wishes to withdraw as counsel of record for the plaintiff, he must proceed in accordance with Local Rule 83.7(c) and establish good cause to do so.

In other words, Team Prenda's can't just ignore Judge Wright's ruling here, and it certainly sounds like Judge Noel has no time for Hansmeier's plans to play discovery games.

Meanwhile, back in the Navasca case in Northern California, it appears that the recent sanctions against Team Prenda that Judge Edward Chen awarded have been ignored by Team Prenda, and a magistrate judge in that court, Nador Vadas, would like to know why. Oh, that's not all Judge Vadas would like to know. It appears that Judge Vadas is now taking a special interest in the now-infamous Paul Hansmeier deposition from this case, which was one of the key documents that convinced Judge Wright that Prenda was up to no good. Judge Vadas has some questions he'd like AF Holdings to answer, and they are the kinds of questions that Paul Hansmeier, Paul Duffy, John Steele and Mark Lutz probably don't want to answer about who actually is behind AF Holdings and the various "trusts" such as Salt Marsh:

Hansmeier testified that AF Holdings was owned by a trust, but he could not testify about the name of the trust.... In a May 2, 2013 filing, Mark Lutz, who identifies himself as someone who “manage[s] various adult content related companies, including AF Holdings LLC,” declared that “Salt Marsh is the name of the trust that owns AF Holdings”.... At the hearing, AF Holdings should be prepared to identify the name of its owner and any entity or person having a financial interest in the outcome of this case, beyond Salt Marsh.

AF Holdings should be prepared to explain why it represented that there were “no known persons, associations of persons, firms, partnerships, corporations (including parent corporations), or other entities (other than the parties themselves) that may have personal or affiliated financial interest in the subject matter in controversy, or any other kind of interest that could be substantially affected by the outcome of the proceeding other than the parties.” Doc. No. 2 (Certificate of Interested Entities).

AF Holdings should be prepared to explain why Paul Hansmeier was designated as its 30(b)(6) deponent instead of Mark Lutz.

Paul Hansmeier was unable to testify about “the exact mechanisms by which the money goes from” to AF Holdings from the law firms that represent it.... AF Holdings should be prepared to explain these “exact mechanisms” at the hearing, and also should be prepared to provide an accounting of the funds it has received from persons it has sued or threatened to sue for copyright violation based on allegedly illegal downloading of its adult titles.

Those all seem like important questions. Questions that would be easy to answer if there were nothing nefarious going on, but which Team Prenda has avoided answering in any meaningful way for months. The hearing at which they need to have such answers ready will be on August 28th. I imagine it will be quite interesting.

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