Porn Copyright Trolling Law Firm Loses $230K Sanction Appeal

Jun 13, 2016 11:38 AM PST

PASADENA, Calif. — The 9th U.S. Circuit Court of Appeals on Friday upheld more than $230,000 in sanctions against the attorneys who for years operated the porn copyright trolling law firm Prenda Law.

Attorneys John Steele and Paul Hansmeier, as well as the deceased lawyer Paul Duffy, created a “scheme,” the 9th Circuit said in its 12-page decision, that started to unravel when they faced U.S. District Judge Otis Wright, who levied sanctions against them in 2013.

Friday’s decision defends Wright's sanction and didn’t move forward the argument that the Prenda Law attorneys' due process rights were violated. Prenda Law’s appellate attorney last year sought for the sanctions to be tossed or, alternatively, a separate hearing on the sanctions to be held.

The 9th Circuit, in its description of Prenda Law’s method of operation, said the attorneys filed mass lawsuits against thousands of defendants, accusing them of illegally downloading porn movies.

“The Prenda principals, through their law firm, Prenda Law Inc., set up a number of shell companies, including Ingenuity 13 LLC and AF Holdings LLC, which purchased copyrights to pornographic movies,” the 9th Circuit wrote. “When one of those movies was illegally downloaded, the shell company (via Prenda Law or a local attorney hired by Prenda Law) filed a complaint against John Doe in federal or state court for copyright infringement and used early discovery mechanisms to determine the identities of the persons it alleged illegally downloaded the film.”

The court said that the shell company would then mail the typical John Does a letter threatening to sue unless the individual paid roughly $4,000 to “settle” the case.

“Out of embarrassment and for economic reasons, many John Does settled, regardless of whether they, or another family member, friend, or guest, infringed the copyright. When the John Does settled, Prenda Law would voluntarily dismiss the case; Prenda Law never litigated a single copyright infringement case through to a merits judgment.

By misusing the subpoena power of the court, the court said, Prenda Law made millions of dollars from suing hundreds to thousands of John Does across the country.

Things started to unravel for the law firm after courts nationwide started catching on to the its real business of copyright trolling, the court said.

"Prenda principals were found contradicting themselves, evading questioning and possibly committing identity theft and fraud on the courts," the 9th Circuit said.

Before Steele, Hansmeier and Duffy’s hearing was allowed to proceed with the appeal of sanctions, Wright ordered that the firm pay two bonds totaling more than $230,000.

The first bond consisted of the full $81,000 sanction, multiplied by 125 percent to account for interest. The second bond was $135,000, the estimated legal costs of John Doe’s defense attorney, Morgan Pietz.

The 9th Circuit on Friday held that the three Prenda lawyers, despite their arguments to the contrary, received due process for civil sanctions requiring notice, an opportunity to be heard and a finding of bad faith.

“[I]t was not an abuse of discretion for Judge Wright to find that the Prenda principals were indeed the leaders and decision-makers behind Prenda Law’s national trolling scheme,” the 9th Circuit said.

Further, "They have lied to other courts about their ability to pay sanctions. They also failed to pay their own attorney’s fees in this case."

A 2015 video of oral arguments in the appeal before the 9th Circuit can be accessed here.

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