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In Internet Porn Spat, Prenda Claims Judge Overstepped
2013-06-17 05:46:50 PM
SAN FRANCISCO — A law firm accused of shaking down Internet porn consumers by threatening to expose their identities is kicking up a storm at the U.S. Court of Appeals for the Ninth Circuit. And the first merits brief isn't even filed yet
Prenda Law Inc. and the Southern California lawyer fighting its alleged copyright trolling spent the weekend arguing whether U.S. District Judge Otis Wright overstepped by forcing Prenda to post a $237,000 appellate bond that would cover attorney fees on appeal.
Prenda returns to a familiar theme, arguing that Los Angeles attorney Morgan Pietz hasn't identified an actual client with standing to recover attorney fees under the Copyright Act. "John Doe, whoever he or she might be, and the truly interested appellee, Morgan Pietz, have [already] received sufficient security to insure the underlying, but unlawful sanctions issued by the District Court," Prenda's attorney, Heather Rosing, a shareholder and CFO at Klinedinst, wrote in a Monday filing.
The firm also complains, essentially, that Pietz has been leading Wright around by the nose, using dubious precedents — including a Supreme Court dissent — to get him to double the bond and make it nondischargeable in bankruptcy.
For his part, Pietz, of the Pietz Law Firm in Manhattan Beach, says Prenda never would have faced such onerous conditions on appeal if it had been willing to meet and confer, rather than respond to his emails with "bellicose nonsense."
Pietz attached to his Monday morning filing a May 22 email in which he asks the Prenda lawyers to "please respond to my substantive points ... ASAP." Attorney Paul Duffy responded with an email stating, "You had no substantive points. If you think of some and can articulate them coherently I would be glad to consider them. Thanks for thinking of me." When Pietz renewed his request, Duffy sent what purported to be an automated message stating, "I must place you in my 'spam' filter. Unfortunately, I delete such messages daily without reading them."
Last month, Wright lowered the boom on Duffy, John Steele, Paul Hansmeier and Brett Gibbs — attorneys associated with Chicago-based Prenda. His opinion, laced with Star Trek references, accused the four of operating a RICO-like scam to squeeze nuisance-value settlements out of individuals by threatening to sue them for illegally downloading pornography. The lawyers did this without fully investigating whether the targets of their cease-and-desist orders had violated copyright laws, according to Wright's order. Although they originally represented actual porn producers, Prenda attorneys later created offshore companies that did nothing but hold copyrights to pornography, then lied to the court about them, Wright concluded.
He referred the attorneys to their respective state and federal bars, the U.S. attorney's office and the IRS. He also sanctioned them $81,000, which he noted was "calculated to be just below the cost of an effective appeal," and ordered each to pay $1,000 a day toward the sanction or post a supersedeas bond of about $101,000 pending appeal.
But on June 7, after the Prenda defendants had posted bond and filed a notice of appeal, Wright added a second bond of $136,000 "to cover costs on appeal, which includes attorneys fees since the underlying case is a copyright case." He also specified that the bond be payable to "John Doe or the Pietz Law Firm," that defendants would be jointly and severally liable for the bond, and that they would be estopped from seeking a stay in bankruptcy court.
In an emergency motion last Friday, Rosing argued for the defendants that the second bond and additional conditions were Pietz's idea, and that Wright adopted them nearly word for word without giving Prenda an opportunity for briefing or argument.
At Pietz's urging, Wright adopted the dissent in Celotex v. Edwards as his rationale for bankruptcy court estoppel. "It is curious John Doe and Pietz would rely on a two-justice dissent when requesting an order essentially depriving a United States Bankruptcy Court of its jurisdiction over a bankrupt estate, something Celotex specifically held could not happen," Rosing wrote.
Plus, there's no prevailing party to be awarded fees, Rosing wrote, because Prenda dismissed the complaint and no defendant ever was identified. "Pietz's alleged client, an unnamed John Doe defendant, never appeared in any of the contested lawsuits," she wrote, "and therefore cannot be a 'prevailing party' for application of 17 U.S.C. §505."
In response, Pietz argues that having to post a few extra dollars is not an "emergency" requiring the Ninth Circuit's immediate attention. He accuses Prenda attorneys of continuing bad faith, noting that attorney Duffy told the Ninth Circuit in an affidavit that cash-strapped Prenda is winding down operations at the same time a Prenda affiliate, Livewire Holdings, is filing similar cases in state court based on computer hacking laws.
"Thus, when Mr. Duffy averred here that 'Because Prenda law has not filed any new copyright infringement cases in several months" ... (emphasis added), Prenda cannot pay an additional bond,' he is pulling a fast one," Pietz writes.
Prenda has asked the Ninth Circuit to rule by Tuesday, though on Monday afternoon Wright stayed his order an additional month and mostly excused Gibbs from the bond requirement.
So far, early returns at the Ninth Circuit have not been encouraging. Last month a Ninth Circuit motions panel denied a request to stay Wright's original sanctions order without prejudice, and Ninth Circuit Appellate Commissioner Peter Shaw refused to let Hansmeier appear as counsel in a separate case based on Wright's order.
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