Prenda Law Takes the Fifth

LOS ANGELES—According to a criminal defense attorney who’s been writing extensively about the case, what took place Tuesday in a downtown Los Angeles courtroom was “utterly unprecedented” in his experience as a lawyer. Other observers were equally amazed at the spectacle of a handful of attorneys associated with Chicago-based Prenda Law forced under threat of severe sanction by the court to [finally] appear before United States District Judge Otis D. Wright II to answer a battery of questions he had prepared for them pertaining to Prenda’s legal strategies in copyright cases filed in courts around the nation … only to have each of them invoke their Fifth Amendment right against self-incrimination.  Indeed, the hearing, which some observers anticipated would last hours if not all day (assuming the parties showed up, as they had failed to do at another hearing on the matter in early March), took less than 15 minutes to complete. Not that Judge Wright was happy about that outcome. According to Popehat.com's Ken White, who has been covering the case in person, Wright became increasingly agitated upon realizing that no one was going to answer his questions, abruptly announcing after a particularly irksome exchange with one lawyer, “We’re done,” and storming off the bench. The controversy surrounds lawsuits filed by Prenda Law regarding illegal downloads of adult material from BitTorrent websites, the tactics used by the law firm to push defendants to settle cases and related matters. AVN emailed John Steele Tuesday seeking comment on why he decided to plead the Fifth. Steele replied, “I would like to respond to your questions, and I think you would agree I have always been as helpful as possible in the past. But due to the serious accusations being made against me and others, I have been instructed not to discuss ongoing litigation.  All I can say is that for over two years people have made just about every accusation I can think of against me and other anti-piracy attorneys.” The hearing was in response to a March 14 order filed by Judge Wright compelling “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,” the judge continued. “Further, it appears that these persons, and their related entities, may have defrauded the Court through their acts and representations in these cases.” The order then continued: 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., [note that date was later changed to April 2] 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. This was the work Judge Wright intended to accomplish this Tuesday. Addressing the courtroom after the initial introduction of the parties present, according to Ars Technica’s coverage of the proceedings, he said, “I am pleasantly surprised that we have everyone here. "It should be clear by now,” he continued, “that this court's focus has shifted from protecting intellectual property rights to attorney misconduct. Such misconduct brings discredit to the profession." According to Ars Technica’s Joe Mullin, the judge then stated that “At this stage in the game, that kind of misconduct is ‘of much more concern to the court’ than protecting the copyrights of the porn producers that Steele and Hansmeier represent.” But it was immediately clear that whatever suspected misconduct took place, none of the alleged participants were going to answer any questions. The Ars Technia coverage continued: "I have questions for Mr. Steele," said Wright, in the understatement of the century. "Mr. Steele can choose to answer those questions or not. Same applies to Mr. Hansmeier." Phil Baker, Steele's attorney, stepped forward to the lectern. "At this point in time, if Mr. Steele is called, he's going to invoke his Fifth Amendment right [to not incriminate himself]," Baker said. "The word 'fraud' was used [at the March 11 hearing] and appears on the transcript many times." "It should have been!" said Wright. Baker mentioned some of the other Prenda shell companies that have filed copyright lawsuits, like Ingenuity 13 LLC and AF Holdings LLC, essentially saying there wouldn't be much forthcoming about those either. "Do you think there's a difference between those clients and Mr. Steele?" There is a difference, Baker said, without elaborating. "Well if you say answering those kinds of questions would incriminate him, I'll take you at your word," said Wright. "You leave my client with no alternative," said Baker. Wright sputtered, amazed and again angered that he was faced with lawyers who wouldn't answer the most basic questions about who was profiting from their scheme to sue over porn copyrights. He wanted to know who was in control of the litigation, who was making the money, why the relationships among Prenda entities weren't disclosed, and why the proper procedures weren't followed. "Let's cut to the chase," said Wright. "I want to know if some of my conjecture is accurate." If Steele and Hansmeier weren't going to talk, he was prepared to draw his own conclusions about what that meant. "This is an opportunity for him to protect and defend himself," said Wright. "I'm not going to go through the charade of asking him questions he's not going to answer." "He's not going to answer your questions," said Baker. Neither was Hansmeier, said another lawyer. In the end, no questions were answered and to the extent that lawyers representing Prenda clients asked for permission to present arguments responding to the judge’s original Order to Show Cause, Wright cut them off mercilessly. “Heather Rosing,” reported Popehat, “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.” But according to Ken for Popehat, “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. With those not forthcoming, Wright abruptly left the courtroom. The upshot of all of this is unknown at this point, but it is expected that Judge Wright will in short order issue sanctions against the Prenda crew. Popehat has outlined a number of possible avenues available to the judge, but even White doubts that Wright will utilize the most severe sanctions that are available to him. “It appears to me he likely won't invoke his contempt power,” wrote White, “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.” Ars Technica agreed, “Some of [the available sanctions] would actually be tricky to use. But Steele and Hansmeier may well be referred to their state bar associations for investigation, or the US or Circuit Court Bar Associations. And Wright could sanction them under his own ‘inherent authority’ as a federal judge.” According to both, however, Prenda Law’s days as a going concern in copyright litigation are probably over.   “It will be difficult, if not impossible, for Steele and Hansmeier to pursue any of their copyright cases,” wrote Mullin for Ars Technica. “Their porn-trolling operation is likely coming to an end, and several questions remain: What will the repercussions be? And what will it mean for the next group of folks who decide that turning sleazy movies into copyright threats could mean an easy buck?” The firm has in fact been dismissing cases throughout the country. Popehat Ken was no less apocalyptic. “Prenda Law may still be standing,” he wrote. “But it's dead.” But he also wrote at length about why he believes Tuesday’s events will turn out to be “catastrophic” for Prenda and its officers. “I'm a criminal defense attorney,” he wrote. “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.”