It's been more than two years since the "copyright trolling" firm called Prenda Law began to unravel, after a disastrous hearing in the courtroom of US District Court Judge Otis Wright led to bruising sanctions and a referral to criminal investigators.

The attorneys said to be operating Prenda, Paul Hansmeier and John Steele, have long denied their involvement, and they denounced Wright's order as lacking due process. They've seen through an appeal of the case after posting a $238,000 bond that will go to defense attorney Morgan Pietz and his anonymous client if Steele and Hansmeier lose.

A roughly hour-long oral argument held this morning at the 9th Circuit's Pasadena courthouse suggests that things aren't looking good for Team Prenda.

“Who ran this operation?”

All the sanctioned Prenda parties—Steele, Hansmeier, Paul Duffy, and several Prenda-linked shell companies—were represented on appeal by Daniel Voelker, the same attorney who argued for them, to no avail, in their 7th Circuit appeal last year.

Voelker argued that the trio of attorneys were denied due process by Wright, who punished them for invoking their 5th Amendment right. Wright made accusations of fraud and forgery, at one point threatening incarceration as a possible sanction, noted Voelker. By doing so, the judge had initiated an "indirect criminal contempt" proceeding that warranted additional protections, he explained.

"The entire proceeding was tainted," Voelker said. "Mark Lutz, the CEO of Ingenuity 13, was not allowed to testify. As soon as they asserted their 5th amendment rights, the judge stopped the proceeding. He can't use that against them."

"Sure he can," responded US Circuit Judge Richard Tallman. "He can draw adverse inferences. The district court was trying to gather facts. Your clients didn't appear for the first hearing."

"Explain to me in simple English how this operation worked—from the beginning," said US Circuit Judge Harry Pregerson. "How did they make their money? Who ran this operation?"

"I don't know," Voelker said.

"You don't know anything, do you?" Pregerson said.

"I know Mr. Lutz was the CEO, and he wasn't allowed to testify."

"They should have taken the 5th, because they were engaged in extortion," Pregerson said. "They sent out thousands of extortionate letters."

"The principals of Prenda set up these companies, who would then pursue ... early discovery, to try to get a settlement," said US Circuit Judge Jacqueline Nguyen. She told Voelker he was "swimming uphill" if he was going to try to argue there were no "bad faith" tactics. "Those are well supported in the record," said Nguyen. "This wasn't exactly a clean operation."

Nguyen and Tallman both seemed concerned about the "multiplier" that the district court had imposed, doubling the fee award as a sheerly punitive measure. At one point Nguyen even suggested that Voelker focus his arguments around that multiplier.

But Voelker persisted in arguing that the proceeding was tainted and that the sanctions should be thrown out entirely.

"Let's say you're right," said Pregerson. "Do you want us to send this back and have this turn into a criminal contempt proceeding?"

"Absolutely, your honor," said Voelker. "My clients want their day in court, with procedural protections."

The judges were taken aback at that remark.

"With a potential penalty of life in prison for criminal contempt?" asked Tallman. "They're prepared to run that gauntlet?"

"I'm amazed that you are asking us to vacate the sanctions and send it back for an independent prosecutor to pursue," said Nguyen. There are other cases across the country that such a prosecution could bring up, as well, she noted.

"I'm giving you their message," said Voelker. "They're citizens of the United States, and that's what they would like."

At one point, Pregerson began reading out loud one of the Prenda threat letters that had been entered into evidence, asking for a $3,400 payment in order to avoid being named in a federal lawsuit over pornographic content.

"This was a very clever scheme they were involved in," said Pregerson. He continued:

"They used our court system for illegal purposes to extort money—they used our discovery system. They bought these pornographic films, and seeded the Internet with them. This is going to be written about, for years and years. You’re probably going to be part of the story. I don't know where this is going to end up. If they really want to have a trial on this, with all protections of a criminal case—burden of proof, and a prosecutor, and all the rest of it—you sure they want that?"

They want their day in court, Voelker repeated.

From paralegal to mastermind?

"What happened here is the reason why many people hate lawyers," said defense lawyer Morgan Pietz, who represents a John Doe client in this case. "The word was used at one point, 'a disgrace to the profession.' That's why I’m here, why I was involved in the case below, and why I’m still here."

Pietz represented dozens of Prenda defendants over the years the firm was active. In the case argued today, Pietz represented a John Doe client accused of downloading a pornographic movie owned by Ingenuity 13, a Prenda shell company.

The idea that Lutz would have offered game-changing testimony at the April 2013 hearing was a far-fetched one, Pietz argued. Lutz had multiple opportunities to testify in copyright-trolling cases after the Ingenuity 13 case, and he didn't show up to those hearings.

"Lutz was a paralegal for Steele Hansmeier," said Pietz. "This notion that he went from a humble paralegal at Prenda, to the mastermind overseeing shell companies, and overseeing 20 lawyers across the country—it doesn’t hold water."

Pietz argued that legal precedent did allow for an imposition of strong sanctions, including the "multiplier" that the judges indicated they had some reservations about. "The fundamental concern of civil sanctions is supposed to be deterrence," he said.

As to the other side's suggestion that Prenda principals deserve criminal protections, Pietz was fine with them having it—in a separate criminal proceeding.

"The court can do both," said Pietz. "Award the maximum civil sanction in this appeal and grant them their wish of an additional criminal proceeding."

At one point, one of the judges asked Pietz if he knew anything about any criminal investigation into the Prenda principals. He said he wasn't aware of any. It's possible the authorities are waiting on a decision by the appellate panel before taking action, he noted.