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Two in-house counsel are caught in the crosshairs as a federal judge in Las Vegas takes aim at what appears to be a copyright trolling company. On June 14, U.S. District Court Judge Roger Hunt ordered Righthaven LLC to show cause why it shouldn’t be sanctioned for its “egregious” and “flagrant misrepresentation” to the court about its financial relationship with Stephens Media LLC, which owns the Las Vegas Review-Journal newspaper. The case began in May of 2010 when a user posted a comment on a political website called Democratic Underground. The comment included part of an article from the Review-Journal, as well as a link to the paper’s site. Court documents indicate that Stephens Media hired attorney Steven Gibson to set up Righthaven, then assigned to Righthaven the right to sue websites that used articles from the newspaper. Righthaven then sued the Democratic Underground and its owner, David Allen. Under an agreement with Righthaven, Stephens Media would receive 50 percent of any recovery, and would retain its ownership of the copyrights. Judge Hunt noted that Righthaven had filed over 200 such copyright cases in the district of Nevada and already collected on some. But Righthaven, which claimed to hold the copyright on articles, failed to disclose the financial interest of Stephens Media in its required “Certificate of Interested Parties,” filed with the court. That certificate was signed by J. Charles Coons, then the assistant general counsel at Righthaven, and Joseph Chu, then a Righthaven in-house attorney. After the true relationship between Righthaven and Stephens Media came out in discovery, Judge Hunt dismissed Righthaven’s copyright complaint for lack of standing on June 14. He also ordered Righthaven to show cause why it should not be sanctioned for making “multiple inaccurate and likely dishonest statements to the court.” Last week Righthaven’s outside trial counsel, Shawn Mangano, filed a response. In it, Mangano, a private practitioner in Las Vegas, effectively threw the two in-house counsel under the bus. Coons filed the certificate, Mangano said, while Chu also signed it. He said neither lawyer is still with Righthaven. Coons, Chu, and Mangano didn’t return messages seeking comment. Mangano stated that Coons was admitted to practice in Nevada in 2007 and Chu in 2008. He added that he had served as co-counsel with the two in-house lawyers several times and “at times, their litigation skills understandably reflected their limited practice experience.” Mangano went on to say, “I do not believe that they fully comprehended the scope” of the court rule that requires disclosure of any party having a direct, pecuniary interest in the case. Mangano also confessed that he didn’t comprehend it either. He viewed the contingent payment to Stephens Media upon recovery as “constituting an indirect interest,” and not a direct one requiring disclosure. He said that since the judge’s order, he has filed updated disclosures in 80 pending cases in Nevada and 34 in Colorado. MediaNews Group, Inc., owner of The Denver Post, was disclosed as a financially interested party in the Colorado cases. While everyone awaits Judge Hunt’s decision on sanctions, the case goes on, now pitting Allen and his website in a counterclaim against Stephens Media. Righthaven has filed a motion to intervene. The media company, represented by J. Colby Williams, has filed a motion for reconsideration of an earlier motion to dismiss. Williams, with the Las Vegas law firm Campbell & Williams, didn’t immediately return messages for comment. Democratic Underground, now on a roll, says in court papers that it may seek leave to file an amended complaint. It is represented by Laurence Pulgram, a partner at Fenwick & West in San Francisco. Pulgram said in an interview this week that Righthaven is trying to revive its case by amending the agreement with Stephens Media. But, Pulgram added, “putting lipstick on this pig won’t make it kosher.” Two lawyers for the Electronic Frontier Foundation have joined Pulgram’s team, and the advocacy group Citizens Against Litigation Abuse, Inc., has filed an amicus brief on the website’s behalf. The amicus calls the assignment of copyrights to Righthaven “purely illusory.” It also calls Righthaven a “notorious copyright troll” and claims that it is actually an “unauthorized law firm engaging in the unauthorized practice of law” when it represents media companies. The amicus urges the judge to rule that the so-called assignment of copyright is actually a contingency-fee agreement for legal services. Will the former in-house counsel or the outside counsel be sanctioned? Will the website or the media company prevail? What will happen to Righthaven? Stay tuned, as CorpCounsel.com continues to keep an eye on this in-motion story.

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