Prenda Law's Attorneys Take The Fifth Rather Than Answer Judge Wright's Questions

All of my coverage of Prenda Law is collected here.

Today the Prenda Law enterprise encountered an extinction-level event. Faced with a federal judge's demand that they explain their litigation conduct, Prenda Law's attorney principals — and one paralegal — invoked their right to remain silent under the Fifth Amendment to the United States Constitution. As a matter of individual prudence, that may have been the right decision. But for the nationwide Prenda Law enterprise, under whatever name or guise or glamour, it spelled doom.

Hail, Hail, The Gang's All Here

The crowd gathered early outside of the courtroom of United States District Judge Otis D. Wright II. As before, the spectators included journalists, former Prenda defendants and their lawyers, law clerks and externs, interested citizens, and Electronic Frontier Foundation activists. The little crowd went awkward-party-foul silent when a team of lawyers and nervous-looking men in suits filed into the courtroom. Some of us glanced at the chart that attorney Morgan Pietz created to see if we could match faces. We soon saw that we could. Bets regarding who would show up in response to Judge Wright's Order to Show Cause were won and lost with some good-natured cursing.

A swarm of attorneys quickly checked in with the court clerk and took their places. On one side, attorneys Morgan Pietz and Nicholas Ranallo looked calm. They had boxes of materials they wouldn't need, and notes they wouldn't have to consult. On the other side of the room, eight attorneys prepared to answer Judge Wright's questions, mostly for naught. In the gallery, Brett Gibbs — unhappy witness at the last hearing before Judge Wright — sat looking sallow and grim. Paul and Peter, the Hansmeier brothers, sat together, looking ridiculously young and out-of-place. Paul Hansmeier's face was beefy-red. John Steele looked conspicuously slick and immaculate in an impeccable suit, like a corporate executive in a bad Robocop sequel. Paul Duffy, Mark Lutz, and Angela Van Den Hemel stared straight ahead.

Not With A Whimper, But A Bang

At a few minutes past the hour the door to chambers slammed open and Judge Wright marched out and took the bench. Before he sat he strode back and forth once behind his chair, surveying the gallery and running his tongue over his teeth. Then he sat, and called the case. Attorneys announced their appearances — Brett Gibbs, Paul Hansmeier, John Steele, Paul Duffy, Angela Van Den Hemel, and Prenda Law all had counsel, but Peter Hansmeier and Mark Lutz did not. When Paul Hansmeier's attorney announced Mr. Hansmeier was present, Judge Wright asked where he was. Paul Hansmeier stood. "Front row," ordered Judge Wright, stabbing a finger at the first row of benches behind Hansmeier's attorney. John Steele received the same treatment, and sat next to Hansmeier. One of the attorneys pointed out that Peter Hansmeier and Mark Lutz were present but not represented. "Welcome, sir," Judge Wright said to Peter Hansmeier, not entirely convincingly. "Is there an Alan Cooper — any Alan Cooper present?" asked Judge Wright, referring to allegations that Prenda Law had stolen the identity of a Minnesota caretaker to serve as an officer of dummy clients. No such person was present.

Judge Wright wasted no time. He announced that he was "pleasantly surprised" that the people he had summoned had arrived. "It should be clear this court's focus has shifted dramatically from litigation of intellectual property rights to attorney misconduct — such misconduct as brings discredit to the profession," he began sternly. "I have questions for those present — including Mr. Steele. Mr. Steele can choose to answer those questions, or not."

Steele's attorney rose and said, in light of the "concerns" that Judge Wright had raised at the March 11 hearing, and "serious allegations" made by Judge Wright, Mr. Steele would be invoking his Fifth Amendment right to decline to answer questions. I expected a murmur in the courtroom, but there was a silence like after a thunderclap. "The word fraud was used," said Steele's lawyer. "It should have been," shot back Judge Wright. Steele's lawyer gamely continued, saying that Steele was also precluded from answering by the attorney-client privilege. "You think there is a difference between these clients and Mr. Steele?" demanded Judge Wright, referring to allegations that the Prenda Law plaintiffs were mere dummy entities concealing attorney interests in the cases. Steele's lawyer said there was a real difference, but Judge Wright was clearly unconvinced. He made it clear, though, that Steele didn't have to answer questions. "He doesn't have to answer if he thinks it may incriminate him," said Judge Wright. "I'm not saying that the answers would incriminate him," protested Steele's lawyer, thus muddying the question of whether his client was entitled to take the Fifth, "but you leave my client with no choice."

Judge Wright grew steadily and visibly more outraged. "I want to know if some of my conjecture is accurate — and the only way to know is to have the principals here and ask them questions. This is an opportunity for them to protect themselves," he said. But Steele's lawyer confirmed his client would exercise his right to remain silent. Attorneys for Paul Hansmeier, Paul Duffy, and Angela Van Den Hemel confirmed their clients, too, would invoke their rights to remain silent. Judge Wright did not — unless I missed it — confirm whether Peter Hansmeier or Mark Lutz would answer questions.

An Opportunity To Be Heard

Heather Rosing, appearing for Paul Duffy, Angela Van Den Hemel, and Prenda Law, rose and asked Judge Wright for an opportunity to present "about a half hour" of argument on the points in his Order to Show Cause. Look: when you are a lawyer, representing a client, you have to stand up. You have to hold your ground even in the face of a furious federal judge. When a judge is yelling at you, however unsettling it is, you have to hold fast and remember you are there to represent the interests of your client against the terrible power of the court. Heather Rosing stood up, and has my admiration, whatever I think of her clients.

Judge Wright was uninterested in hearing legal argument, as opposed to testimony or evidence. "My clients have a right to a reasonable opportunity to be heard," Ms. Rosing protested. "Excuse me?" thundered Judge Wright, probably thinking — not unreasonably — that Ms. Rosing's clients could have filed briefs in advance to address any legal arguments they had, and that Ms. Rosing's clients have been evading questions for months. Judge Wright began to count off the questions he wanted answered. "I'm looking for facts," he said. He wanted to know who directs Prenda Law's litigation efforts, who makes its decisions, whether there is another Alan Cooper, and what happens with the money Prenda Law makes from settlements. Ms. Rosing answered (wisely, and properly) that she could not personally testify to those things. Why, Judge Wright demanded, did Prenda Law conceal its attorneys' financial interest in the cases? "There's no evidence that they have an interest," Ms. Rosing protested. "Excuse me?" Judge Wright boomed even louder. Were there windows, they would have rattled. "Have you read Paul Hansmeier's deposition?" he demanded, referring to the bizarre deposition in which Paul Hansmeier failed to explain Prenda Law's shadowy owners or flow of funds. "I have," Ms. Rosing said, but stood her ground.

Ms. Rosing suggested that she might file a brief addressing her arguments. "Do so," said Judge Wright acidly. "We're done," he said abruptly, and stormed off the bench. The whole hearing took about fifteen minutes.

Death Comes For Prenda Law

The significance of today's hearing cannot be overstated.

Yesterday I wrote about the tools Judge Wright had at his disposal to sanction or otherwise punish Prenda Law's principals. It appears to me he likely won't invoke his contempt power, but the other remedies — his inherent sanctions power, and referrals to state bars and to the U.S. Attorney's Office for criminal investigation — remain available. I expect a detailed written order.

By invoking their Fifth Amendment rights, Prenda Law principals John Steele, Paul Hansmeier, Paul Duffy, and paralegal Angela Van Den Hemel have avoided incriminating themselves. In light of the evidence adduced — evidence that Prenda Law may have created sham entities to conceal its lawyers' interest in litigation, and may have misled courts across the country — that was very likely the smart thing to do. I might have advised it myself if I were representing them. With respect to their individual exposure to potential criminal consequences, it stops things from getting worse, which is often an attorney's first task.

I'm a criminal defense attorney. I cherish and support the Fifth Amendment. Its invocation here was completely lawful. But its invocation will have catastrophic consequences for the Prenda Law enterprise, which cannot possibly continue. When they appeared today, John Steele, Paul Hansmeier, and Paul Duffy were not merely individuals facing the overwhelming power of the state. They were also officers of the court and, according to the testimony of Brett Gibbs, the very attorneys who directed nationwide litigation for the Prenda Law enterprise. Judge Wright ordered them to answer for the conduct of that enterprise in his court, as he had the right and power to do. Their invocation of their Fifth Amendment rights in the face of that order is utterly unprecedented in my experience as a lawyer. In effect, the responsible lawyers for a law firm conducting litigation before a court have refused to explain that litigation to the court on the grounds that doing so could expose them to criminal prosecution.

However well grounded in the individual rights of Steele, Hansmeier, and Duffy, the invocation eviscerates their credibility as lawyers and the credibility of Prenda Law as an enterprise in every court across the country. I expect that defense attorneys will file notice of if in every state and federal case Prenda Law has brought, through whatever guise or cutout. The message will be stark: the attorneys directing this litigation just took the Fifth rather than answer another judge's questions about their conduct in this litigation campaign. I expect federal and state judges across the country will take notice and begin their own inquiries. Moreover, Prenda's lawyers may face adverse consequences from the invocation in Alan Cooper's counterclaim against them. A defendant's exercise of the right to remain silent can't be used against him or her in a criminal case, but it often can in a civil case.

Some inquiries will come quite quickly. In the Northern District of California, where Prenda Law's Paul Duffy is fighting Morgan Pietz's demand for attorney fees in a case Prenda Law tried to dismiss, Paul Duffy has asked to appear by telephone, but Judge Edward Chen has rejected the request and ordered Duffy to appear in person on April 18, 2013. Duffy will once again have to decide whether to assert his Fifth Amendment rights. Moreover, he likely now has an irreconcilable conflict with his putative client. He may seek to withdraw before April 18.

The consequences for the individuals behind Prenda Law may arrive slowly — particularly by the standards of Twitter and anxious blogs. But they will come — and they may come from many directions at once.

Prenda Law may still be standing. But it's dead.

As Prenda's Next Big Day Approaches, What Could Judge Wright Do?

All of our coverage of Prenda Law is collected here.

Prenda-watchers know that United States District Court Judge Otis D. Wright II has ordered multiple Prenda Law lawyers and clients to appear before him on April 2, 2013. As a reminder, Judge Wright's order required these people and entities to appear for the following purposes:

Thus, the Court amends its February 7, 2013 Order to Show Cause (ECF No. 48) to include sanctions against the persons and entities in subparagraphs a–m below:

a) John Steele, of Steele Hansmeier PLLC, Prenda Law, Inc., and/or Livewire Holdings LLC;

b) Paul Hansmeier, of Steele Hansmeier PLLC and/or Livewire Holdings LLC;

c) Paul Duffy, of Prenda Law, Inc.;

d) Angela Van Den Hemel, of Prenda Law, Inc.;

e) Mark Lutz, of Prenda Law, Inc., AF Holdings LLC and/or Ingenuity 13 LLC;

f) Alan Cooper, of AF Holdings LLC;

g) Peter Hansemeier, of 6881 Forensics, LLC;

h) Prenda Law, Inc.;

i) Livewire Holdings LLC;

j) Steele Hansmeier PLLC;

k) AF Holdings LLC;

l) Ingenuity 13 LLC; and

m) 6881 Forensics, LLC.

These persons and entities are ORDERED to appear on March 29, 2013, at 10:30 a.m., 1 TO SHOW CAUSE for the following:

1) Why they should not be sanctioned for their participation, direction, and execution of the acts described in the Court’s February 7, 2013 Order to Show Cause;

2) Why they should not be sanctioned for failing to notify the Court of all parties that have a financial interest in the outcome of litigation;

3) Why they should not be sanctioned for defrauding the Court by misrepresenting the nature and relationship of the individuals and entities in subparagraphs a–m above;

4) Why John Steele and Paul Hansmeier should not be sanctioned for failing to make a pro hac vice appearance before the Court, given their involvement as “senior attorneys” in the cases; and

5) Why the individuals in subparagraphs a–g above should not be sanctioned for contravening the Court’s March 5, 2013 Order (ECF No. 66) and failing to appear on March 11, 2013.

Judge Wright's order refers back to his February 7, 2013 Order to Show Cause. That order described the conduct that concerned him and included this ominous warning:

Based on the evidence presented at the March 11, 2013 hearing, the Court will consider whether sanctions are appropriate, and if so, determine the proper punishment. This may include a monetary fine, incarceration, or other sanctions sufficient to deter future misconduct. Failure by Mr. Gibbs to appear will result in the automatic imposition of sanctions along with the immediate issuance of a bench warrant for contempt.

As April 2 fast approaches, you might be asking yourself: what sorts of tools does Judge Wright have at his disposal if he finds that Prenda Law attorneys or clients have committed misconduct?

Judge Wright has many tools, and broad power, but that power is not unlimited. This post reviews some of the tools at his disposal.

Part I: Things Judge Wright Could Ask Others To Do

First up, as a federal judge, Judge Wright has vast influence over others who might take action against Prenda Law lawyers, principals, and entities.

State Bars: If Judge Wright believes that any attorney affiliated with Prenda Law has committed misconduct, he could refer the matter to the state bar of each state in which that attorney is admitted. State Bars tend to be underfunded, understaffed, and underpowered, at least compared to the ubiquity and mendacity of modern lawyers. There are too many reports of misconduct and too few people to investigate them. But referrals from judges tend to move to the front of the line. If Judge Wright makes a referral couched in the sort of blunt language he has uttered to date, he'll probably inspire immediate and vigorous State Bar investigations of the named lawyers. Such investigations can lead to state bar proceedings that might eventually result in probation, suspension, or disbarment.

United States District Court and Circuit Court Bars: Membership in a state bar doesn't automatically confer the right to appear in federal court in that state. Instead, most of the 94 federal judicial districts (including the United States District Court for the Central District of California, where Judge Wright sits) have their own process for admitting lawyers. So do the 12 circuits that hear appeals. Most of their courts have their own system for addressing attorney misconduct. You can be suspended or disbarred from the bar of a federal district or circuit even if you aren't disciplined by your state bar. For anyone whose practice focuses on federal court, that would be catastrophic. Local Rule 83-3 of the Central District of California, for instance, provides for a disciplinary process. If Judge Wright refers his conclusions to each district and circuit where the Prenda Law attorneys are admitted, they will probably face investigations of their conduct, and could face suspension or disbarment from practice before those courts.

United States Attorney's Office: Both Judge Wright's written orders and his comments during the March 11 hearing suggest he suspects that Prenda Law attorneys and principals are involved in fraud on the court — including, but not limited to, fraudulent misuse of Alan Cooper's identity and fraudulent misrepresentation of the true ownership and control of the Prenda plaintiff entities. Based on that conclusion, he could refer the case to the U.S. Attorney's Office — just 11 floors above him — for a criminal investigation. That would be as easy as picking up the phone and calling the Chief of the Criminal Division.

To be frank, the sort of fraud that Judge Wright apparently suspects — the sort of fraud that Prenda Law foes have alleged — is not the sort of fraud that would normally attract the attention of federal prosecutors. The resources of the U.S. Attorneys' Offices across the country are limited, and after 9/11 they've been diverted away from white collar crime in favor of terrorism, drugs, guns, gangs, and immigration — with occasional objectionable diversions into "computer fraud." The allegations against Prenda Law amount to penny-ante stuff compared to the high-dollar fraud that usually concerns federal prosecutors. But a direct referral from a federal judge carries very substantial weight. If Judge Wright refers the case, the U.S. Attorney's Office will allocate resources to start a grand jury investigation.

What would they investigate? Well, Judge Wright's orders and comments suggest that he is entertaining theories that Prenda Law attorneys (1) misappropriated Alan Cooper's identity, (2) created entities like AF Holdings and Ingenuity 13 to conceal their own financial interests in the cases they brought, and (3) lied to and concealed facts from both defendants and federal courts. Any investigation might focus on whether Prenda Law's attorneys engaged in conspiracy to violate federal law, false statements to the federal government, mail fraud, wire fraud, obstruction of justice, subornation of perjury, and — if the feds are in a particularly bring-out-the-gimp mood — money laundering. Moreover, unlike state bar and federal bar remedies — which by necessity only threaten consequences to lawyers — a criminal investigation could focus on non-lawyers like Mark Lutz and even on non-human entities like Prenda Law, AF Holdings, and Ingenuity 13. The feds are quite adept at flipping lower-level figures in an investigation against higher-ups. Some of the figures in this case seem ripe for that treatment.

So: merely by sending a letter or even picking up the phone, Judge Wright could easily generate state and federal bar investigations against Prenda Law's lawyers and a federal criminal investigation of everyone involved.

But Judge Wright has his own powers, too.

Part II: Things Judge Wright Could Do Himself

As a district court judge, Judge Wright has numerous tools with which he can address misconduct before him, including Rule 11 of the Federal Rules of Civil Procedure, federal statute, his inherent authority, local rules, and the contempt power. Each tool has its own limits.

Rule 11: Rule 11 of the Federal Rules of Civil Procedure requires that every pleading filed in federal court be signed by a lawyer. By signing, the lawyer is representing to the court that the document isn't filed for an improper purpose (like harassment or delay) and that its factual and legal allegations have an adequate basis. Whether claims in a document have an adequate basis is tested not based on the attorney's subjective intent, but on the objective reasonableness of the claims. A party may file a motion alleging a Rule 11 violation against another party (a regrettably involved process) or the judge may make an inquiry on his or her own initiative. A judge finding a Rule 11 violation may impose sanctions against attorneys or, in some cases, parties; those sanctions can be monetary or non-monetary, and can be designed to deter similar conduct.

However, Rule 11 has important limits. First, it applies only to documents filed by an attorney in federal court, not to out-of-court conduct. Second, under Rule 11(c)(5)(B), because Prenda dismissed this particular case before Judge Wright issued his February 7, 2013 Order to Show Cause, he can't impose monetary sanctions under Rule 11 — though he can impose monetary sanctions with other tools discussed below, and can impose them in any cases in which he issued his OSC before Prenda dismissed. Third, although Judge Wright can probably impose Rule 11 sanctions against Prenda Law attorneys and parties who did not sign documents filed in court but directed them to be filed (according to Brett Gibbs and Paul Hansmeier's testimony, that would include John Steele and Mark Lutz, for instance), the law on that point is a bit cloudy.

So: Rule 11 may not be the best tool for Judge Wright here.

Title 28, United States Code, Section 1927: 28 U.S.C. section 1927 gives federal judges another tool for imposing sanctions:

Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.

This statute is even more limited than Rule 11. First, it only applies to conduct that prolongs litigation and increases the other side's attorney fees, not to pre-litigation conduct or conduct that doesn't have the effect of prolonging litigation. Second, courts are split on whether it applies to attorneys other than counsel of record in the case. Third, sanctions are limited to the amount of fees caused by the other wrongful conduct.

Inherent Authority: Federal judges have inherent authority to sanction bad faith conduct before them or violation of their orders. That authority extends to conduct that can be punished under Rule 11 or Section 1927, and beyond to other conduct. A judge's inherent authority is more flexible in that it isn't restricted by all of Rule 11's procedural limits (for instance, it can be wielded even after a plaintiff has dismissed a case) and less flexible in that it only applies to bad faith conduct — that is, conduct that not merely objectively unreasonable, but subjectively done with bad intent. Moreover, many courts have held that their inherent power can be used to sanction "fraud on the court" — the phrase Judge Wright has invoked repeatedly. A judge's inherent authority reaches beyond the lawyer appearing in court to lawyers or parties who direct the litigation, and can include conduct outside of court — though it can't include conduct in another district.

Judge Wright's inherent authority is probably the most flexible and effective tool he has.

Local Rules: Local Rules — rules enacted by the judges of a particular district — can also confer sanction power. For instance, Local Rule 83-7 permits sanctions for violations of the rules that apply to proceedings in the Central District of California where Judge Wright sits. Those local rules require, for instance, adherence to the California Rules of Professional Conduct. However, this power is somewhat limited — the local rules can't confer sanctions power broader than statutes and the Federal Rules of Civil Procedure allow, and a court must make a finding of intentional or grossly negligent violation of rules to support sanctions. Because the local rules incorporate the California Rules of Professional Conduct — including prohibitions on fraud — Rule 83-3 may be a useful tool.

Contempt Power: Federal judges also have the power to hold people in contempt — based both on their inherent power and on federal statute. Contempt can include fines or imprisonment. Contempt is complicated, and this is a very abbreviated description. Contempt is divided into two types — civil contempt and criminal contempt. Often, it's not perfectly clear whether a judge is invoking civil contempt or criminal contempt.

Civil contempt is an exercise of the contempt power intended to coerce (as when a judge threatens to fine someone $100 a day until they comply with an order) or to compensate (as when a judge holds a misbehaving party in contempt and orders them to pay the attorney fees incurred by the opposing party as a result of the misconduct). Criminal contempt, on the other hand, is an exercise of the power to punish or deter.

The contempt power isn't as broad as the sanctions power. Contempt coerces obedience to a court order or punishes disobedience; it doesn't address misconduct in the abstract. It requires proof of an unambiguous order and knowing disobedience of it. Here, if Judge Wright thinks that Prenda Law deliberately violated his discovery order by continuing to seek the identity of downloaders after he ordered them not to — or if he thinks they improperly defied his order to appear on March 11 — he might invoke the contempt power. But he couldn't invoke it, for instance, to punish what he sees as improper failure to disclose financial interests or notify the court of related cases.

Moreover, invocation of the contempt power requires more due process than invocation of the sanction power. A judge may summarily invoke the contempt power summarily for direct conduct that appears immediately before him or her — as in the case of an attorney who swears at the judge in court. Otherwise, the judge invoking criminal contempt power over indirect conduct outside of court must give notice, an independent prosecutor, notice of the charges, counsel, and the right to confront witnesses. Invocation of the civil contempt power for indirect conduct outside of court requires only notice and an opportunity to be heard — though in some cases, where extremely complex factfinding is necessary, it may require procedures more like criminal contempt.

I have dramatically oversimplified Judge Wright's contempt power. Suffice it to say that he could probably hold attorneys and parties in civil contempt at the April 2 hearing if he finds a knowing violation of one of his orders. He can't find them in criminal contempt without further proceedings.

Predictions?

How will Judge Wright wield these powers?

If I were a betting man, I'd bet that he won't make a ruling on April 2. Rather, I suspect he'll offer a carefully-worded order with findings of fact. If the participants in the April 2 hearing fail to answer his questions to his satisfaction, I think he will make referrals to state and federal bars. I suspect he'll also, at a minimum, sanction the Prenda Law attorneys under his inherent authority. Beyond that? I wouldn't guess.

Stay tuned.

Prenda Law: Am I My Brother's Keeper?

Our coverage of the Prenda Law saga is collected here.

You know, if I got my brother involved in an enterprise that culminated in a furious federal judge demanding that he fly across the country to show cause why he shouldn't be sanctioned, I think I'd step up and represent my brother, or ask my attorney to represent my brother, or hire a separate attorney for my brother.

But then, I'm an only child; there may be nuances to this sibling relationship thing I don't grasp.

You may recall that when United States District Judge Otis D. Wright II ordered Prenda Law participants to appear in his Court for the March 11, 2013 hearing, one of the people he ordered to appear is Peter Hansmeier, brother of Paul Hansmeier. Judge Wright probably ordered Peter Hansmeier to appear because the Doe defendants allege that he, through a company called 6881 Forensics LLC, had been paid for "forensic" work related to Prenda Law's litigation activities.

You may also recall that John Steele, Paul Hansmeier, and Paul Duffy hired attorneys to appear for them and their paralegal and to file a request to excuse them from appearance on March 11. Those attorneys didn't appear for Peter Hansmeier. As far as we knew, nobody appeared for Peter Hansmeier.

Today we learn that back on March 8, 2013 — the Friday before the March 11 hearing, and the same day that Paul Hansmeier, Paul Duffy, and John Steele filed their unsuccessful ex parte application — Peter Hansmeier attempted to file a pro se ex parte application to relieve him from showing up on March 11, 2013. The application is here, and his supporting declaration is here. The clerk of the court only filed it to PACER today. Judge Wright rejected it back on March 12, 2013 because it didn't include proof that Peter Hansmeier gave notice to the other parties that he was making the application — a necessary element of an ex parte application (that is, a motion to the court filed outside the normal motion schedule required by local rules).

There are a few notable things about Peter Hansmeier's ex parte application.

First, Peter Hansmeier says he doesn't want to show up because he is not a party, could only be a witness, and has "no dog in this fight." Yet Hansmeier shrewdly captions his application as being from Peter Hansmeier of Livewire Holdings LLC — one of the Prenda Law plaintiff entities, which has also been ordered to appear, and which Judge Wright clearly suspects is connected to fraud on the court.

ThatWouldBeGreat

Second, Peter Hansmeier says in his one-page declaration that he lives and works in Minnesota and intends to continue to do so. Yet his declaration, like his ex parte application, is captioned Peter Hansmeier, pro se, of Livewire Holdings LLC at its Washington, D.C. address.

Peter Hansmeier's ex parte application has some law-talk in it; it's been worked upon by someone who is either a lawyer or an informed amateur. But making the "I have nothing to do with this mess and I live in Minnesota" assertion on a pleading captioned with Livewire Holdings LLC in Washington D.C. is a blunder of epic proportions. Moreover that blunder probably could have resulted in the document not being filed at all — someone appearing pro se can't appear for an entity in court, and the caption makes it somewhat ambiguous whether Peter Hansmeier is intending to appear pro se just for himself or also in some capacity for the entity Livewire Holdings LLC.

Maybe if someone had referred Peter to a competent lawyer, or even hired one for him, he might have avoided such a blunder. Instead, it appears that the lawyers who got him into this mess — including his own brother — let him appear pro se and effectively incriminate himself.

That's some cold shit, yo.

Edited to add: Commenter Robert points out something I missed — the "Peter Hansmeier" ex parte is just a cut-and-paste of arguments from the ex parte application filed by John Steele, Paul Hansmeier, and Paul Duffy. Yet someone still managed to stick the "Livewire Holdings LLC" into the caption. Ooops.

Edited again to add: "How about no."

Prenda Law: A Brief Interlude About Being A Judge

All of our coverage of Prenda Law is collected here.

There was a time when I thought that someday I might like to be a judge — that at some point, after the kids are educated or incarcerated or off following a band or whatever, it would be rewarding to wrap up my career with some time on the bench.

I think it's safe to say that ship has sailed. Best thing for me, really. If I were a judge I couldn't say what's on my mind. I couldn't have any fun.

At least most of the time.

Last week Fight Copyright Trolls broke a story about Prenda Law attorneys Paul Hansmeier and Brett Gibbs being involved in some questionable class-action-objector shenanigans. Techdirt and Ars Technica followed up on the story. I really don't have anything of substance to add — read the Fight Copyright Trolls post, it's instructive — but the story reveals that being a judge does, in fact, allow for very occasional moments of fun.

The case was Shames et al v. Hertz Corporation et al, a class action pending in federal court in San Diego in 2007. The parties reached a proposed settlement. On the last day for objections to the settlement, Paul Hansmeier — purportedly representing his father — wrote to the attorney for the class and said, in effect, that unless the class paid him $30,000, he'd object to the settlement:

I will extend to you an offer to settle this matter with my client for $30,000.00 if the settlement terms are reached by 5:00 PM CST on Monday, Oct. 1, 2012. If you reject this settlement and the objection is filed, the offer to o settle is revoked and will not be extended at the pre-filing settlement amount.

Govern yourself accordingly.

Note Hansmeier's parting line there. What is it about pompous scumbags and that line? Does it speak to some inadequacy deep inside them?

Class counsel appropriately told Hansmeier to go piss up a rope and threatened him with sanctions. All wounded innocence, Hansmeier filed an ex parte application seeking to intervene in the case and to have class counsel removed. United States District Judge Michael M. Anello's order denying that request is as satisfying a judicial smackdown as you are ever likely to see. It made me guffaw and bounce in my seat. It included a sharp reference to Hansmeier's puffery: "On Monday, October 1, 2012, governing himself according to the undertone and implications of Objector’s counsel’s letter, class counsel responded . . . ." And then came the hammer:

In reviewing the letters between Objector’s counsel and class counsel, the only “bold and improper” conduct the Court can identify is [Hansmeier's] attempt to extract $30,000, from class counsel in exchange for Objector not filing objections that [Hansmeier] suggested could derail approval of the class settlement and award of attorneys’ fees.

That's going to leave a mark.

So, as you can see, judges can occasionally have some fun. But I think I'll stay a lawyer, and a blogger.

And Paul Hansmeier? Well, in a recent interview with a hometown paper, he expressed hope that representing family members in class action matters would eventually lead to a broader client base:

“Now, I would hope … that as time goes on that I expand the circle, that I gain some credibility and some experience and a reputation for successfully prosecuting these style of cases.”

Do let us know how that goes for you, Paul.

Alan Cooper Strikes Back, Files Counterclaim Against Prenda Law and Paul Duffy

Prior coverage of Prenda Law is collected here.

Can things get worse for Prenda Law even before the next hearing before Judge Wright?

Yes. Yes they can.

Prenda Law's three censorious defamation suits inspired me to start writing about their shenanigans. Though John Steele dismissed the one he filed in his own name in Florida, two cases remain in federal court in Illinois: one filed by Prenda Law in the Southern District of Illinois, and one filed by Paul Duffy in the Northern District of Illinois. Jordan Rushie posted them here.

As you may recall, among others Prenda's defamation lawsuits target Alan Cooper — nominally an executive of Prenda's clients, but according to him, a victim of identity theft — and Cooper's lawyer, Paul Godfread. Though the suits are very vague, they seem to attack Cooper and Godfread for asserting (both in public and in court) that Prenda has stolen Cooper's identity.

Yesterday, March 21, Cooper and Godfread struck back. They filed answers and counterclaims in both Illinois federal suits.

[Read more…]

Prenda Law: Brett Gibbs Confronts a Philosophical Conundrum

My prior coverage of the Prenda Law saga is here. It's reaching the point where I'm going to have to do some kind of index.

You may recall that on March 14, 2013, Judge Wright issued a new Order to Show Cause directed to Prenda Law's principals and putative clients, and ordered Brett Gibbs to serve it. Prenda-watchers recognized some of the dilemmas this presented: how does one serve "Alan Cooper of AF Holdings?" How would Gibbs serve the alleged client entities? How would he make contact with his former supervisors Paul Duffy, Paul Hansmeier, and John Steele?

Because Mr. Gibbs is now represented by competent and sensible counsel, the answer is: thoroughly and professionally. Mr. Gibbs' attorney Andrew Waxler filed a declaration today documenting his efforts to serve the Prenda Law cast of characters as Judge Wright ordered.

A few notes:

1. You may recall that an attorney appeared on March 11, 2013 representing Duffy, Steele, Hansmeier, and their paralegal. Waxler asked that attorney to accept service on their behalf. She said she was "unable to accept service." Normally, if you were trying to avoid a federal judge's wrath, you'd be a little more cooperative than that. The refusal suggests to me that (1) they are trying to preserve their frankly specious lack-of-personal-jurisdiction argument, and/or (2) Steele, Hansmeier, Duffy, and the paralegal aren't cooperating with their counsel. You can stand on ceremony and insist on formal service, but all I can say is if Judge Wright were that mad at me, I'd want the proof of service to reflect that I happily accepted service to make things easier.

2. How do you serve "Alan Cooper" without making any concessions about "Alan Cooper"? Delicately:

Service on "Alan Cooper, of A F Holdings L L C . " The only "Alan Cooper" that we are aware of appeared in Court on March 11t h . I understand that he claims that he is not affiliated with A F Holdings. We further understand that Mr. Steele may contend otherwise. In any event, since we know of no other Alan Cooper than the person that appeared in Court, I reached an agreement with his attorney, Paul Godfread, that I can serve "Alan Cooper" via email only care of Mr. Godfread's email address, paul@godfreadlaw.com. Pursuant to that agreement, we served Mr. Cooper c/o Mr. Godfread on March 15t h . Mr. Godfread did acknowledge receipt of the email when he wrote back with the following remarks: "Please note that I do not represent Alan Cooper of A F Holdings. I only represent Alan Cooper of Isle, M N . I do not accept service on behalf of Alan Cooper of A F Holdings. I not agree to accept service on behalf of Alan Cooper of A F Holdings. Please also note that the most recent order specifically does not order my client, Alan Cooper of Isle, M N to appear."

Note that (a) Gibbs, at least, understands that John Steele is insisting that Alan Cooper was voluntarily involved in this, (b) Cooper maintains that he isn't, and (3) Cooper's attorney reads the order (not unreasonably) as not requiring him to return, but only requiring the presence of whatever Alan Cooper admits to heading AF Holdings, if such a person exists.

3. Of Paul Duffy, Paul Hansmeier, Peter Hansmeier, Mark Lutz, John Steele, Angela Van Der Hemel, and all of the entities, only Paul Hansmeier and Van Der Hemel made any response to the service, and then only to confirm which addresses worked. Multiple formerly used email addresses failed.

We'll see what the Prenda Law principals do in response to this. April 2, 2013 looms.

Prenda Law Continues To Dismiss Lawsuits

My prior coverage of the Prenda Law saga is here.

Friday I reported that Prenda Law had dismissed multiple cases in the Northern District of Illinois — including one in which they had already secured a default against the defendant.

Today I can report dismissals in three other districts. On Thursday, AF Holdings, LLC dismissed a case in Northern District of Georgia. Today — Sunday — AF Holdings LLC dismissed cases in the Eastern District of Michigan and the Western District of Michigan. (The beauty of the CM/ECF system used by federal courts is that you can file documents around the clock.)

The "Notice of Allegations" that Paul Duffy filed in Illinois wasn't filed in any of these cases. Different counsel represented AF Holdings in Georgia and Michigan.

Some Prenda Law cases brought on behalf of AF Holdings and Ingenuity 13 remain open. I'm watching them and will report any changes.

Prenda Law Tries To Close The Barn Door After The Horse Has Lawyered Up

My prior coverage of the Prenda Law saga is here.

Yesterday, March 14, as Judge Wright was busy issuing a new Order to Show Cause directing Prenda Law clients and affiliated attorneys to appear before him, Prenda Law was busy too.

More specifically, Prenda Law — through Paul Duffy, one of the lawyers Judge Wright has ordered to appear — was busy dismissing cases and filing a "Notice of Allegations" informing other courts of what is going on. Sort of.

A tipster told me that Mr. Duffy had a busy day yesterday. PACER showed it's true. More specifically, Mr. Duffy filed voluntary dismissals of multiple AF Holdings LLC cases in the Northern District of Illinois — here and here and here (in which he stipulated to dismiss the case with prejudice, meaning it can't be re-filed) and here. In one of those cases he filed the notice of dismissal even though AF Holdings had already secured a default against the defendant, leaving nothing but proving damages. I haven't yet counted all the cases in which Duffy filed dismissals yesterday.

In each of those cases — and in a case in the Northern District of California — Duffy also filed a substantially identical document styled a "Notice of Allegations." Here's what they all say:

Plaintiff hereby notifies the Court of allegations of forgery that were made during a hearing in a matter pending before the U.S. District Court for the Central District of California. Ingenuity13 LLC v. John Doe, No. 2:12-cv-08333-OWD-JC (C.D. Cal. Mar. 11, 2013). On March 11, 2013, an individual by the name of Alan Cooper alleged that his signature was forged on two separate agreements assigning the rights of various copyrighted works to Plaintiff, including the assignment at issue in this matter. (See, ECF No. 1-2 at 2.) Plaintiff categorically denies Mr. Cooper’s allegations, which arise nearly two years after certain of the alleged conduct occurred. Mr. Cooper has a pecuniary interest in his allegations by virtue of a lawsuit he filed against Plaintiff. Cooper v. Steele, et al., No. 27-CV-13-3463 (Minn. Dist. Ct., Hennepin Cty., 2013).

Even if Mr. Cooper’s allegations were true—and they are not—Plaintiff’s assignments, including the assignment at issue in the instant action, remain valid. The formal requirements of a copyright assignment are “quite simple”: a writing signed by the assignor. 17 U.S.C. § 204; Effects Associates, Inc. v. Cohen, 908 F.2d 555, 557 (9th Cir. 1990) (“The rule is really quite Case: 1:12-cv-03567 Document simple: If the copyright holder agrees to transfer ownership to another party, that party must get the copyright holder to sign a piece of paper saying so. It doesn't have to be the Magna Charta; a one-line pro forma statement will do.”); see also Order, AF Holdings LLC v. Does 1-96, No. 11-cv-3335-JSC (N.D. Cal. Nov. 22, 2011), ECF No. 29 at 5 n.1 (“The written copyright assignment recites that it is between the original copyright owner, Heartbreaker Films, and Plaintiff here, AF Holdings, LLC. . . . As the law requires only that the assignment be signed by the assignor and not the assignee, this inconsistency does not prevent a prima facie showing of copyright ownership.”) (internal citations omitted).

Mr. Cooper’s allegations relate to the assignee, not the assignor. The assignment at issue in this action satisfies the Copyright Act’s formal requirements. It is a writing signed by the assignor. Plaintiff’s rights in the copyrighted work in this action were transferred when the assignor executed the assignment.
Plaintiff is treating Mr. Cooper’s allegations with utmost seriousness and is investigating their substance. Because Mr. Cooper’s allegations relate to the assignment agreement at issue in the instant litigation, Plaintiff respectfully brings the matter to the Court’s attention.

Broken down, here's what Duffy is saying: (1) Cooper's claim is untrue, (2) but we're treating the claim seriously and investigating it, (3) but even if it were true, it doesn't matter, because an assignment only needs a valid signature from the person giving the property, not the person receiving the property.

Many things could be said about that argument. Among them: the first two points are oddly at war with each other, particularly when uttered in such proximity. If AF Holdings knows the allegation is not true, then what precisely is AF Holdings carefully investigating? Doesn't AF Holdings already know whether or not Mr. Cooper consented to be an officer for it and executed documents for it? What is there to investigate, exactly?

Duffy's third point is about a doctrine that lawyers — including, for instance, prosecutors and defense lawyers — call materiality. Most civil or criminal laws prohibiting false statements only extend to material false statements — that is, statements that are the sort that could make a difference in the issue at hand. Duffy seems to be previewing Prenda Law's defense by suggesting that even if Cooper's identify was misappropriated and his signature forged on assignments, that false statement was not material because a copyright assignment only needs a valid signature from the guy giving the copyright, not the guy receiving it.

There are a number of problems with that argument. Among them: Judge Wright is not only interested in whether Prenda Law made fraudulent representations about who received the assignments. Judge Wright is investigating — and has ordered Prenda Law to explain — whether Prenda Law made fraudulent representations about the true owners of plaintiff entities like AF Holdings. Whether Alan Cooper is a real officer or not is unquestionably material to that. Judge Wright has specifically ordered them to explain:

2) Why they should not be sanctioned for failing to notify the Court of all parties that have a financial interest in the outcome of litigation;

3) Why they should not be sanctioned for defrauding the Court by misrepresenting the nature and relationship of the individuals and entities in subparagraphs a–m above [of the March 14, 2013 Order];

Prenda Law's apparent theory of materiality may be apt in analyzing whether the copyright assignments are valid. But it may not be apt in determining whether any misstatements were material for purposes of civil or criminal fraud allegations directed at the ownership and management of Prenda Law's clients. For instance, as I've discussed before, for purposes of charging defendants with false statements to the government, materiality is defined very broadly to include the sorts of statements that have the capacity to influence the government, whether or not the government is actually misled.

All that said, aside from questions about the exact language of the "Notice of Allegations," Paul Duffy is very likely doing the right thing legally and ethically by dismissing the cases and informing courts of the allegations against Prenda Law. In doing so he is reducing the risk that he will be accused of continuing any alleged fraud on the court after the March 11, 2013 hearing.

With respect to what has already happened, though — my friends, that die is cast, the Rubicon crossed, the ram has touched the wall.

Another Day of Reckoning Scheduled For Prenda Law

My prior coverage of the Prenda Law saga is here.

Shortly before noon on Thursday, March 14 — three days after a dramatic hearing at which he expressed grave concerns about the operations of Prenda Law — United States District Judge Otis D. Wright II has issued a new Order to Show Cause directing principals of Prenda Law to appear before him, this time on March 29, 2013 at 10:30 a.m. [Edit: As is noted below, this has been moved to April 2, 2013 at 10:00 a.m.]

The order is here.

Here's what the order does, and the significance of its terms.

First, the judge retroactively denies the Prenda principals' ex parte request that he lift his order requiring them to appear. Judge Wright concludes — absolutely correctly based on the evidence, I submit — that he has jurisdiction over them. He also blasts them for their last-minute filing evading the March 11 appearance:

The Court has received the Ex Parte Application filed on behalf of John Steele,
Paul Hansmeier, Paul Duffy, and Angela Van Den Hemel, requesting the Court to withdraw its March 5, 2013 Order requiring their attendance on March 11, 2013.

Based on the papers filed and the evidence presented during the March 11, 2013 hearing, the Court concludes there is at least specific jurisdiction over these persons because of their pecuniary interest and active, albeit clandestine participation in these cases. Not only does the Ex Parte Application lack merit, its eleventh-hour filing exemplifies gamesmanship. Accordingly, the Ex Parte Application is
DENIED.

Specific jurisdiction means jurisdiction over a particular case (like this one), as contrasted with general jurisdiction, which means jurisdiction in any case anyone might care to bring. In other words, Judge Wright is suggesting that their actions in this case subject them to personal jurisdiction in connection with this case. Note the "albeit clandestine" line, a reference to Judge Wright's conclusion — supported by evidence in the record — that Prenda Law principals are concealing their financial interest in the putative clients acting as plaintiffs in their cases.

Next, Judge Wright gives a taste of what he has concluded:

The March 11, 2013 hearing raised questions concerning acts performed by other persons related to Prenda Law, Inc., Steele Hansmeier PLLC, Livewire Holdings LLC, AF Holdings LLC, Ingenuity 13 LLC, and 6881 Forensics, LLC. The evidence presented suggests these persons may be culpable for the sanctionable conduct explained in the Court’s February 7, 2013 Order to Show Cause, which the Court previously attributed to Brett Gibbs only. Further, it appears that these persons, and their related entities, may have defrauded the Court through their acts and representations in these cases.

Next, Judge Wright announces what he is ordering:

Thus, the Court amends its February 7, 2013 Order to Show Cause (ECF No. 48) to include sanctions against the persons and entities in subparagraphs a–m below:

a) John Steele, of Steele Hansmeier PLLC, Prenda Law, Inc., and/or Livewire Holdings LLC;

b) Paul Hansmeier, of Steele Hansmeier PLLC and/or Livewire Holdings LLC;

c) Paul Duffy, of Prenda Law, Inc.;

d) Angela Van Den Hemel, of Prenda Law, Inc.;

e) Mark Lutz, of Prenda Law, Inc., AF Holdings LLC and/or Ingenuity 13 LLC;

f) Alan Cooper, of AF Holdings LLC;

g) Peter Hansemeier, of 6881 Forensics, LLC;

h) Prenda Law, Inc.;

i) Livewire Holdings LLC;

j) Steele Hansmeier PLLC;

k) AF Holdings LLC;

l) Ingenuity 13 LLC; and

m) 6881 Forensics, LLC.
These persons and entities are ORDERED to appear on March 29, 2013, at 10:30 a.m., TO SHOW CAUSE for the following:

1) Why they should not be sanctioned for their participation, direction, and execution of the acts described in the Court’s February 7, 2013 Order to Show Cause;

2) Why they should not be sanctioned for failing to notify the Court of all parties that have a financial interest in the outcome of litigation;

3) Why they should not be sanctioned for defrauding the Court by misrepresenting the nature and relationship of the individuals and entities in subparagraphs a–m above;

4) Why John Steele and Paul Hansmeier should not be sanctioned for failing to make a pro hac vice appearance before the Court, given their involvement as “senior attorneys” in the cases; and

5) Why the individuals in subparagraphs a–g above should not be sanctioned for contravening the Court’s March 5, 2013 Order (ECF No. 66) and failing to appear on March 11, 2013.

Judge Wright is demanding, in other words, that all the individuals and entities associated with Prenda Law show up and explain why they shouldn't be sanctioned for the full range of conduct he has been investigating: allegations that they filed lawsuits without adequate investigation of the identity of the John Doe defendants, allegations that they participated in fraud by using Alan Cooper's name as a fraudulent head of a shell company, allegations that they hid the true owners of the putative plaintiffs, allegations that they failed to appear as the true lawyers in the cases instead of using local counsel, and their failure to appear as ordered on March 11, 2013.

And if they don't?

Should the persons and entities in subparagraphs a–m above not appear on March 29, 2013, the Court is prepared to draw reasonable inferences concerning their conduct in the cases before the Court, including any inferences derived from their failure to appear. Failure to comply with this order will result in the imposition of sanctions.

The individuals named in the order are in a bind. On the one hand, an angry and motivated federal judge is considering sanctioning them. On the other hand, the same judge is accusing them of a broad scheme to defraud the court. I respectfully suggest that they should only submit to questioning about their conduct after a very serious discussion with competent attorneys about their constitutional rights.

Edited To Add: Judge Wright has moved the new hearing to April 2, 2013 at 10:00 a.m. The order appears to be a mere scheduling issue, not anything of substance.

Prenda Vileness: Transcripts of John Steele's Voicemails To Alan Cooper

My past coverage of the Prenda Law saga is here.

In my description of the March 11 hearing regarding the Prenda Law saga before Judge Wright, I mentioned that one of the most dramatic moments was when attorney Morgan Pietz played voicemails that John Steele left for Alan Cooper immediately after Steele learned that Cooper was suing for misappropriation of his identity. I said that the voicemails made me feel sympathy for Mr. Cooper and revulsion for Mr. Steele, and that they suggested that Mr. Steele was attempting to threaten and menace Mr. Cooper to deter him from discussing the use of his name.

Today Mr. Pietz, as promised, has filed a transcript of the voicemails. Here it is. Review it, and draw your own conclusions.

A couple of highlights:

IT'S LIKE IF YOU REFUSE TO, YOU
KNOW, RETURN MY CALLS OR — OR ENGAGE IN MANDATORY
CONFERENCE, THEN I'M GOING TO HAVE TO BE FORCED TO
ASK THE JUDGE TO, YOU KNOW, FORCE YOU TO DO THINGS
AND IT JUST GETS UGLY FROM THERE.

I CAN ASSURE YOU THAT JUST IGNORING
LEGAL MATTERS, IT'S NOT GOING TO GO AWAY. I CAN
GUARANTEE YOU, I'M NOT GOING AWAY.
SO I HIGHLY RECOMMEND YOU, AT
LEAST, YOU KNOW, FOLLOW THE RULES OF MINNESOTA,
ILLINOIS, FLORIDA AND SOME OTHER STATES' SOON
CIVIL PROCEDURE BECAUSE, OTHERWISE, YOUR LIFE IS
GOING TO GET REALLY COMPLICATED.
AND I'M SAYING THIS AS A FRIEND, AS
WELL AS OPPOSING COUNSEL.