All of my coverage of the Prenda Law saga is collected here.
Two Prenda posts in a day may seem gratuitous. But I go where PACER leads me.
Late today Heather Rosing — currently counsel for the entity Prenda Law, Prenda principal Paul Duffy, and paralegal Angela Van Den Hemel — filed a brief in response to Judge Wright's latest Order to Show Cause. You may recall that Judge Wright told her she could do so at the April 2, 2013 hearing.
In this post I will review the arguments in the brief and discuss their significance for the fortunes of Prenda Law and its principals. Let me begin with this: Rosing has filed the best brief I have seen from Penda's side during this whole wretched story. Briefs by Prenda's own lawyers responding to accusations of misconduct have been smug, angry, evasive, and self-righteous. Rosing's brief is professional. It makes colorable arguments, and supports them with authority where there is authority to be had. There's no perfect way to tell an angry federal judge he lacks jurisdiction; she strikes a tone that's firm but respectful. It's well written, well organized, and as comprehensive as prudence permits. This is good work.
But what does it say?
The brief is here. It attaches declarations from Raymond Rogers (who assigned the copyrights to AF Holdings), Joshua Chin (who offers expert testimony about Prenda's identification of downloaders), and Brent Berry (who makes alarming claims about Alan Cooper, discussed below). The brief also attaches a Request for Judicial Notice (a legal device asking a court to consider indisputable evidence, like the existence of documents previously filed in court) and Exhibit 1, Exhibit 2, Exhibit 3, Exhibit 4, and Exhibit 5.
I'll review the arguments by subject matter. Rosing divides them — as she should — according to the subjects specified in Judge Wright's Order to Show Cause.
The Fifth Amendment: Rosing acknowledges, as she must, that Duffy and Van Den Hemel invoked the Fifth Amendment and declined to answer questions at the April 2, 2013 hearing. She also notes that while Prenda Law does not enjoy Fifth Amendment rights, Duffy could not be compelled to answer on behalf of Prenda if he invoked. Then Rosing makes a creative argument: in the face of a clear doctrine that courts may consider a litigant's invocation of the Fifth in civil cases, she argues that because Judge Wright threatened imprisonment as a possible consequence, the proceeding was effectively criminal, and therefore her clients' invocation can't be held against them. As a defense attorney I admire the moxie of the argument. But Judge Wright can render it moot by avoiding any use of his contempt power and confining his sanctions to civil ones.
Limits On the Court's Sanctions Authority: Next Rosing reviews the limits of Judge Wright's power under Rule 11, his inherent power, and federal statute, as I discussed here. Rosing points out that Judge Wright has limited power over people and entities that did not appear before him or direct or supervise attorneys before him. This argument is strong as to Van Den Hemel, somewhat weaker as to Duffy (particularly if Judge Wright takes notice of Duffy's nationwide participation in Prenda Law matters), and weakest as to Prenda Law itself.
Critique of the March 11 Hearing: Next Rosing attacks what she sees as defects in the March 11 hearing before Judge Wright. She complains that Morgan Pietz, counsel for the John Doe in one of the cases, was an "improper prosecutor" — but this is only pertinent if Judge Wright was required to treat the hearing as a criminal contempt proceeding triggering the right to an independent prosecutor; otherwise there's no requirement that Pietz be neutral. She complains that Judge Wright considered improper unsworn testimony from Jason Sweet, who spoke up from the gallery in what I called a Perry Mason moment. But that's irrelevant unless Judge Wright relies on what Mr. Sweet said during that brief exchange. She asserts that Judge Wright considered inadmissible evidence, and that she was not permitted to object to it. Leaving aside the analysis of the merits of her objections, the argument is only relevant to the extent Judge Wright considers the evidence in question, and it's not clear he will. She complains that Judge Wright considered evidence outside of the five cases before him and the scope of his pending Order to Show Cause. This argument is weak; the other evidence was pertinent as proof of Prenda Law's overall conduct and as evidence of knowledge and intent of its principals.
Attack on Alan Cooper: With respect to Judge Wright's suggestion that Prenda Law might have forged Alan Cooper's signature on assignments of copyright, Rosing offers multiple arguments. She repeats the standard Prenda Law argument that any misrepresentation is not meaningful because it's undisputed that the companies that assigned copyrights to Prenda Law's clients signed the assignments even if Alan Cooper didn't. In a hint of the Resevoir-Dogs-level bloodletting to come, she implies that the evidence only supports John Steele knowing about any forgery, not Prenda Law or Duffy or Van Den Hemel. She argues that upon learning of Cooper's testimony Duffy immediately filed the "Notice of Allegations" I described before and dismissed pending cases. That, she asserts, shows his good faith.
But those are mundane arguments. Rosing also launches a surprising attack on Alan Cooper himself. She offers the declaration of Brent Berry, an acquaintance of Cooper and Steele, who claims that Cooper knew of his putative position with AF Holdings and asked Cooper "how's my porn company doing?" Berry also claims that Cooper is mentally ill and threatened him, and attaches many disturbing text messages purportedly from Cooper. This, Rosing argues, shows that Cooper's testimony that his identity has been stolen cannot be trusted.
At this point I see no reason to place any trust in claims made by Prenda witnesses. But even if Berry's claims about Cooper are true, they don't exonerate Prenda or its principals. If the claims about Cooper are true, it means that Prenda principals, rather than stealing an identity to serve as the principal of a front company, used a mentally ill caretaker as the putative executive of a front company. "How's my porn company doing?" is not the question of an involved and genuine executive; it's the question of someone used as a front. Berry's declaration is entirely consistent with the theory that Prenda Law was using entities to conceal the financial stake of its lawyers.
The Violation of Judge Wright's Discovery Order: Judge Wright ordered Prenda Law to explain whether it violated his discovery orders when, as evidence demonstrated, it continued to gather the identities of downloaders after Judge Wright ordered a halt to discovery. Here Rosing points the finger at Steele and Hansmeier, pointing out that Brett Gibbs said he reported Judge Wright's order to them, not to Duffy or Van Den Hemel. That argument is somewhat persuasive, at least as to Van Den Hemel. Rosing also argues that because Gibbs, Steele, and Hansmeier are only "of counsel" to Prenda Law, Prenda Law is not responsible for their conduct. That argument is considerably less persuasive given the evidence that Prenda supervised cases across the country.
Investigation Into the Identity of Downloaders: From early in the case, Judge Wright has ruled that Prenda Law's methods of associating downloads to particular individuals through IP matches is unsound. He ordered the litigants to show cause why they shouldn't be sanctioned for initiating cases based on IP matches. Here Rosing devotes a substantial portion of the brief to what amounts to a defense of the entire litigation model, not just to Prenda Law, Duffy, and Van Den Hemel. I will let others critique the defense. Suffice it to say that even if Judge Wright is correct that the IP match is not an adequate basis for a John Doe suit or for discovery into the identity of IP subscribers, the law here is unsettled enough that I think the case for sanctions on this basis is not very strong. Rosing makes a good case that, at least, pursuing discovery or bringing John Doe actions is not objectively unreasonable enough to warrant sanctions. This is dry stuff; the only particularly entertaining part is when she cites the Kinsey report for the proposition that it's reasonable to assume that, given a family using an IP address, the porn downloader is the adolescent male.
Financial Interests: Judge Wright suggested that litigants may be sanctioned for concealing the financial interest of the lawyers in the putative Prenda Law clients. Rosing first argues that there is no evidence that Duffy or Van Den Hemel had any interest themselves or were aware of any interest held by Steele or Hansmeier. Note, here, more cracks in the unity of Prenda Law figures — there's no omerta with this crew. I think that's a difficult argument to make about Duffy in light of the evidence of his involvement in Prenda's nationwide cases, but it's a perfectly persuasive argument as to Van Den Hemel. Next, Rosing tries a rather bold materiality argument certain to agitate Judge Wright. She argues that the only purpose of the disclosure of financial interests is to let judges know when they must recuse themselves, and since Judge Wright didn't recuse himself when he formed the suspicion that the Prenda Law principals have financial interests in their clients, there must be no basis for recusal, and therefore the concealment (if any) is irrelevant. Now there's an in-your-face argument. It's too cute, I think: the definition of materiality is broader than Rosing seems to imagine. There's a perfectly good reason courts and litigants would want to know if attorneys are the owners and concealed principals of their clients — it makes them potential witnesses in the case, which carries its own complications for the lawyers, parties, and court. This is the one argument in Rosing's brief I would not have made under any circumstances.
The Related Case Issue: Judge Wright asserts that Prenda Law should have filed notices of related cases in the Central District of California because the cases involved the same plaintiffs, same attorneys, and same issues. That's certainly arguable. But is failure to do so sanctionable? Rosing attaches an exhibit showing that the Northern District of California declined to treat cases as related under the same circumstances. That suggests that Prenda Law had a colorable basis for not filing a related case notice in Los Angeles. Rosing is right on this narrow issue, I think. (Brett Gibbs, in testifying about this on March 11, was unclear — he suggested that the issue in the Northern District was consolidation, which is something different.)
Failure to Appear: Finally, Rosing argues that Judge Wright should not sanction Van Den Hemel and Duffy for failing to appear at the March 11 hearing. She repeats arguments from her unsuccessful ex parte application: she asserts that Judge Wright lacks jurisdiction over them, and that they received inadequate notice. She also argues that because they made themselves available by phone they should not be penalized for failing to appear in person. Given the evidence before Judge Wright in the form of Prenda's nationwide litigation, the Hansmeier deposition, and Brett Gibbs' testimony, I think the jurisdiction argument is terrible as to Prenda Law, weak as to Duffy, and only so-so as to Van Den Hemel, who was connected to Prenda Law activities reaching into California. The notice issue is not particularly persuasive either — it strains credulity past the breaking point to assert that the entire Prenda team wasn't intimately familiar with what was going on before Judge Wright. As for the argument that it was enough to be available by telephone — well, it's a mitigating factor, but I don't expect it to be persuasive to Judge Wright.
What can we take away from the brief Rosing filed on behalf of Prenda Law, Duffy, and Van Den Hemel?
First, it's clear Rosing is competent and will continue to deliver good representation to them, and is carefully making a record. Their invocation of the Fifth suggests they are, at least, smart enough to take her advice. Second, it's clear that the Prenda Law team no longer presents a unified front. Duffy and Van Den Hemel are now clearly adverse to Steele and Hansmeier. That's no surprise. Third, it's clear that Judge Wright does not have an easy task before him. His powers, as I've discussed before, are limited, and if he wants to make any sanctions stick (as opposed to handing the matter off to state bars or criminal authorities), he's going to have to be careful about making a record.