In my post about Prenda Law's defamation lawsuits, I mentioned that Prenda is facing an inquiry by United States District Judge Otis Wright in Los Angeles.

A remarkable new order yesterday by Judge Wright moves me to describe that situation in greater detail based on my experience as a litigator and federal practitioner. The bullet: holy crap!

To sum up, yesterday Judge Wright ordered the principals of Prenda Law — and a man who accused them of stealing his identity — to appear in his court next Monday as part of Judge Wright's inquiry into whether anyone associated with Prenda Law should be sanctioned or otherwise punished for alleged fraud on the court. This is, to put it very mildly, unusual, and signifies grave danger for Prenda Law and its attorneys.

It wasn't always like this. Here's how Prenda Law got there.

The Complaint: The trail begins with a September 2012 federal complaint by "Ingenuity 13 LLC" against a John Doe. In the complaint, Ingenuity 13 LLC — a limited liability company organized in the Federation of St. Kitts and Nevis (no doubt for their convenience) said that John Doe illegally downloaded an adult video called "A Peek Behind the Scenes At The Show," the rights to which Ingenuity owns. Ingenuity was represented by Brett L. Gibbs, who was admitted to the California State Bar in 2007, and who billed himself as "Of Counsel" to Prenda Law Inc. ("Of Counsel" is a title that usually signifies the attorney is not a partner, but not a mere associate. No offense to you mere associates.)

John Doe Resists: Ingenuity 13 LLC begins to issue subpoenas seeking to reveal the identity of John Doe. Doe resisted, seeking a stay of the subpoenas. Moreover, John Doe — through his attorney Morgan Pietz — filed a notice of related case. A notice of related case is a mundane document that lets the court know that a particular case is related to another one (because they involve the same parties, or intertwined factual or legal disputes) so that the court might move them all before the same judge or otherwise consolidate them. Sometimes there are strategic reasons for filing a related case notice — if you like the judge that the oldest case is before, for instance — but such notices are not ordinarily the locus of great controversy.

The notice Pietz filed was anything but ordinary. In it he laid out his theory in detail that Prenda Law and attorneys affiliated with it were engaged in fraud on the court in multiple cases. Pietz asserted — and bear in mind these are only assertions, not yet fully adjudicated by any court — that (1) Prenda Law or its attorneys might themselves have undisclosed ownership interests in the entities like Ingenuity 13 LLC they purport to represent; (2) Prenda Law and its principal John Steele may have stolen the identity of a property caretaker named Alan Cooper to use as a figurehead officer of plaintiff entities (an allegation first raised by Alan Cooper himself, which led to the defamation suits against him and his lawyer I described yesterday); and (3) attorneys associated with Prenda Law have made inconsistent representations to courts about their connection to Prenda Law and its cases. In addition, Pietz argued that the Prenda Law cases pending here in Los Angeles presented related issues of law, like the question of whether courts should allow Prenda Law to subpoena ISPs to determine the identities of defendants identified only by IP addresses.

Prenda's Unsuccessful Sanctions Motion: Prenda reacted with fury. On December 17, 2012, Brett Gibbs filed a motion for sanctions against Pietz, arguing that he was grandstanding in multiple district courts to gain clients, promote the blog Fight Copyright Trolls, and improperly advance a cross-case agenda, and that other courts had rejected his efforts. Prenda Law scheduled the motion to be heard in January, but Judge Wright — to whom the case had been assigned on December 20, 2012 — denied it summarily on December 21, 2012. It's a bad sign when the judge denies your motion summarily before the other side can even oppose it.

John Doe Seeks and Is Granted Special Discovery: Meanwhile, John Doe filed an ex parte application (that is, a special request not on the normal noticed motion schedule, which takes at least 28 days in federal court in Los Angeles) for special discovery. Discovery in a federal civil case is strictly circumscribed by the Federal Rules of Civil Procedure; among other things, you can't simply leap into interrogatories and depositions until the court has set a schedule and the parties have made certain mutual disclosures purportedly designed to simplify things. Pietz, on behalf of John Doe, sought leave to conduct limited immediate discovery into the true identity of "Alan Cooper" and his role in companies that Prenda Law used as plaintiffs in illegal downloading cases. He also asked the court to extend the stay on Ingenuity 13 LLC's subpoena calculated to reveal John Doe's identity. Once again, Prenda Law responded furiously through Brett Gibbs, opposing the request, arguing that Pietz' documents did not prove any fraud in connection with "Alan Cooper," accusing Pietz of a multi-district campaign of libel and sanctionable behavior, and pointing out that another court had not credited Pietz' claims and had not taken action based on them.

I've been a lawyer for almost 19 years now. I've practiced in federal court that entire time. Here's what's very strange to me about Gibbs' opposition to the ex parte application, and about Gibbs' sanctions motion: they conspicuously avoid direct engagement with the most incendiary accusations Pietz makes. It's one thing to argue that Pietz' evidence is insufficient, or that other courts have failed to act based on them. It's quite another to evade the question of who "Alan Cooper" really is. I find it very difficult to imagine a scenario in which an experienced litigator would have a good reason to avoid confronting such a serious charge of fraud head on by saying, for instance, "the Alan Cooper who is a principal in Ingenuity 13 LLC is a real person who is resident of the State of X, living at Y, and has no relation to the Alan Cooper who has made scurrilous allegations against Prenda Law. Here is a declaration from the Alan Cooper who is a principal of Ingenuity 13 LLC, and here are reasons why the other Alan Cooper has a grudge against Prenda Law and is lying." It is very difficult to imagine an innocent scenario explaining why Prenda Law would not offer such a response if it could.

But it didn't. Perhaps that's why on the day after Christmas Judge Wright granted Pietz' ex parte application entirely, allowing him to take special discovery outside the normal Federal Rules of Civil Procedure into the identity of "Alan Cooper."

Judge Wright Orders Ingenuity 13 LLC To Justify Its Case Meanwhile, Judge Wright was questioning, of his own accord, Ingenuity 13 LLC's efforts to discover the identity of John Doe — and with it, Prenda Law's entire litigation strategy.

In an Order to Show Cause issued on December 20, 2012, Judge Wright ordered Ingenuity 13 LLC to show – in the multiple cases it had filed in Los Angeles — what steps it had taken already to identify defendants, and its basis for accusing those particular defendants of copyright violations:

The Court is concerned with the potential for discovery abuse in cases like this. Ingenuity 13 accuses the Doe Defendant of illegally copying a pornographic video. But the only information Ingenuity 13 has is the IP address of the Doe Defendant. An IP address alone may yield subscriber information. But that will only lead to the person paying for the internet service and not necessarily the actual infringer, who may be a family member, roommate, employee, customer, guest, or even a complete stranger. Malibu Media LLC v. John Does 1–10, No. 2:12-cv-01642-RGK-SSx, slip op. at 4 (C.D. Cal. Oct. 10, 2012). And given the subject matter of Ingenuity 13’s accusations and the economics of defending such a lawsuit, it is highly likely that the subscriber would immediately pay a settlement demand—regardless whether the subscriber is the actual infringer. This Court has a duty to protect the innocent citizens of this district from this sort of legal shakedown, even though a copyright holder’s rights may be infringed by a few deviants. And unlike law enforcement in child pornography or other internet crime cases, the Court has no guarantee from a private party that subscriber information will not abused or that it would be used for the benefit of the public. Thus, when viewed with the public interest in mind, the Court is reluctant to allow any fishing-expedition discovery when all a plaintiff has is an IP address—the burden is on the plaintiff to find other ways to more precisely identify the accused infringer without causing collateral damage. Thus, the Court hereby ORDERS Ingenuity 13 TO SHOW CAUSE in writing by December 31, 2012, why early discovery is warranted in this situation. No appearances are necessary. Under Ninth Circuit precedent, a plaintiff should ordinarily be allowed discovery to uncover their identities, but discovery may be denied if it is (1) clear that discovery would not uncover the identities, or (2) that the complaint would be dismissed on other grounds. Gillespie v. Civiletti, 629 F.2d 637, 642 (9th Cir. 1980). Ingenuity 13 must demonstrate to the Court, in light of the Court’s above discussion, how it would proceed to uncover the identity of the actual infringer once it has obtained subscriber information—given that the actual infringer may be a person entirely unrelated to the subscriber—while also considering how to minimize harassment and embarrassment of innocent citizens. Ingenuity 13 must also explain how it can guarantee to the Court that any such subscriber information would not be used to simply coerce a settlement from the subscriber (the easy route), as opposed to finding out who the true infringer is (the hard route).

I recognize that's a big-ass wall of text. But it's crucial to understanding what is going on. Judge Wright is questioning an assertion that is at the core of Prenda Law's litigation strategy — that identifying the IP address of an infringing download is a sufficient basis to force disclosure of the corresponding subscriber. This represents a challenge to the legal theory underlying Prenda Law's approach to these cases. It's also significant because it shows that Judge Wright believes what Prenda Law's critics have been saying — that it might be using the threat of identification to "coerce" settlements, and that this danger should be a factor in evaluating whether Prenda Law should be able to uncover the identity of IP subscribers.

This level of judicial initiative in early discovery matters is quite unusual. For one thing, in federal court — at least in vast and busy districts like the Central District of California — most discovery issues are resolved by Magistrate Judges, who are appointed by the Article III district judges. Magistrate Judges do the less glamorous work of the federal justice system — non-substantive hearings, discovery disputes, and the like. But here, a district judge — black-robed, with a lifetime tenure, appointed by the President and confirmed by the Senate — is getting involved in very specific discovery issues. At this point, Prenda Law was no doubt becoming very concerned.

Prenda Law Tries To Disqualify Judge Wright: Prenda Law believes that the best defense is a good offense, and responded to Judge Wright's orders by attempting to disqualify him upon allegations that he is biased against them and porn copyright holders. Prenda Law's motion was — well, I respectfully submit that it is ill-considered. You can't get rid of a federal judge because he rules against you. Prenda Law's motion tries to do just that, arguing that Judge Wright should be disqualified because of a series of rulings in copyright cases in which he questioned Prenda Law's requests to identify subscribers and because of his suggestion that Prenda Law's model may rely on coercion. United States District Court Judge Michael Fitzgerald (a former colleague at the U.S. Attorney's Office) reviewed the motion and issued an order denying it on January 15, 2013, summarizing the matter as follows: "Plaintiff’s argument boils down its disagreement with the merits of Judge Wright’s discovery orders. This is not a cognizable basis for disqualification." That's correct.

Things were now going badly for Prenda Law at a faster pace.

Prenda Law Dismisses The Case: On January 28, 2013, Prenda Law — still through Mr. Gibbs — filed a voluntary dismissal of Ingenuity 13 LLC's case against this particular John Doe. Federal plaintiffs can dismiss a case voluntarily without prejudice (that is, maintaining the right to bring it again) fairly freely. Generally a notice of dismissal is a form; Prenda's was a petulant swipe at Judge Wright:

The Court before which the instant action presently sits has recently held that “[T]he Court is not convinced that that there is no way of identifying John Doe through an IP address other than obtaining ISP subscriber information—Plaintiff has presented nothing but argument suggesting that it is so. Plaintiff maintains its contention that it is factually impossible to identify a John Doe through an IP address without obtaining ISP subscriber information; as such, Plaintiff now dismisses this action without prejudice in order to avoid the futility of attempting to litigate these cases under such circumstances.

But here's the thing: even when a plaintiff dismisses a case, a federal judge does not lose jurisdiction and power to inquire into the conduct of the attorneys and parties in the case. When a federal judge is angry at you, filing a dismissal is akin to dropping the red flag, backing away, and telling the charging bull "hey man — we cool, we cool." As we'll see, Judge Wright intended to exercise his power.

Judge Wright Demands Answers: On February 7, 2013, things got much worse for Prenda Law.

Judge Wright issued an OSC — an Order to Show Cause — in this case and in connection with multiple related cases brought by Prenda Law on behalf of Ingenuity 13 LLC and AF Holdings LLC. Judge Wright cited Federal Rule of Civil Procedure 11 — which governs sanctions for misconduct — and articulated his inherent power to investigate and punish misconduct in cases before him:

The Court has a duty to supervise the conduct of attorneys appearing before it. Erickson v. Newmar Corp., 87 F.3d 298, 301 (9th Cir. 1996). The power to punish contempt and to coerce compliance with issued orders is based on statutes and the Court’s inherent authority. Int’l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 831 (1994). And though this power must be exercised with restraint, the Court has wide latitude in fashioning appropriate sanctions to fit the conduct. See Roadway Express, Inc. v. Piper, 447 U.S. 752, 764–65 (1980).

Judge Wright's order suggested that he is very concerned with Pietz' allegations about Prenda Law. In fact, he invited Pietz to submit a brief and to appear at the March 11, 2013 hearing on this OSC. In the order, Judge Wright suggested that he was concerned with (1) lack of adequate investigation of infringement before bringing suit for infringement, (2) lack of adequate investigation of the true identity of infringers, and (3) alleged violation of his orders restricting efforts to discover the subscribers of IP addresses. These, so far, are not atypical subjects of Rule 11 motions — they are allegations (not yet adjudicated, bear in mind) that someone filed suit without adequate investigation or violated a court's order. But more ominously, Judge Wright said the following:

Upon review of papers filed by attorney Morgan E. Pietz, the Court perceives that Plaintiff may have defrauded the Court. (ECF No. 23.)4 At the center of this issue is the identity of a person named Alan Cooper and the validity of the underlying copyright assignments.5 If it is true that Alan Cooper’s identity was misappropriated and the underlying copyright assignments were improperly executed using his identity, then Plaintiff faces a few problems. First, with an invalid assignment, Plaintiff has no standing in these cases. Second, by bringing these cases, Plaintiff’s conduct can be considered vexatious, as these cases were filed for a facially improper purpose. And third, the Court will not idle while Plaintiff defrauds this institution.

Judge Wright concluded as follows:

Based on the evidence presented at the March 11, 2013 hearing, the Court will consider whether sanctions are appropriate, and if so, determine the proper punishment. This may include a monetary fine, incarceration, or other sanctions sufficient to deter future misconduct. Failure by Mr. Gibbs to appear will result in the automatic imposition of sanctions along with the immediate issuance of a bench warrant for contempt.

[Emphasis added, pants-shitting terror in the original.]

From the perspective of Prenda Law, this order is what we call in the convoluted nomenclature of federal practice a Very Bad Thing.

Most of the text of Judge Wright's OSC is devoted to his questioning of the legal theories underlying Prenda Law's litigation strategy — to questioning whether an IP match is a sound basis to bring suit, let alone compel identification of a subscriber. But Judge Wright's conclusion that there is cause for him to inquire into alleged fraud on the court is far more unusual and far graver for Prenda Law. I have not seen an order like that in 19 years of practice.

Gibbs Responds, But Judge Wright Is Not Satisfied: Mr. Gibbs — now, wisely, represented by his own counsel — responded to the OSC on February 19, 2013. Mr. Gibbs indicated that he always intended to act honestly and forthrightly, and in his declaration explained how he became involved with Prenda Law. He was first hired by Steele Hansmeier PLLC ("S&H") (that would be the Steele of John Steele, referenced above, I believe), and says he began working for Prenda Law when it bought S&H's business. He describes working without direct contact with any of the principals of Prenda Law's clients and getting instructions from unspecified principals of S&H. For instance, with respect to Alan Cooper, he says this:

I have never met Alan Cooper, and do not know what the extent of Mr. Cooper's role is in A F Holdings aside from seeing a signature from an "Alan Cooper" on the copyright assignments and pleadings. Based on the assignment agreement, A F Holdings held the valid and exclusive rights to reproduce and distribute the film Popular Demand. I was not present when the assignment agreement was executed. I also never had any direct contact with either Raymond Rogers or Alan Cooper. I have never executed a document as "Alan Cooper." I did not play a role in or have knowledge of the assignment transaction at issue. Senior members of S & H provided the assignment agreement to me and informed me that the copyright assignment was a true and correct copy of the copyright assignment and to include it as an exhibit in complaints filed on behalf of A F Holdings L L C . Before filing any such complaints, I confirmed that A F Holdings L L C was in fact listed as the valid copyright holder.

Here's the thing — when a federal judge asks you whether you committed fraud and mentions incarceration, you need to do better than "some guys told me." Gibbs' "senior members of S&H," without naming them under these circumstances, is asking for trouble.

If Mr. Gibbs asked for trouble, he got it. Judge Wright responded with a February 27, 2012 order requiring him to show up in person at the March 11, 2013 hearing and requiring him to make a supplemental filing explaining who the unnamed people in his declaration were and to specify the owners of Ingenuity 13 LLC and AF Holdings LLC and their contact information. This is a sign that Judge Wright is following the pleadings very closely and is very determined to uncover the specifics behind Pietz' allegations.

Mr. Gibbs responded with a supplemental declaration, in which he said that he understands that attorney Paul Duffy is the principal of Prenda Law and that attorneys John Steele and Paul Hansmeier gave him his instructions as to what to do on behalf of Prenda Law. He also indicated that he understood that Mark Lutz is the CEO of AF Holdings LLLC and Ingenuity 13 LLC.

(Who is Mark Lutz? Mr. Lutz is alleged to be a former employee of Mr. Steele and of Prenda Law. Mr. Lutz showed up in court in that disastrous Florida hearing, where he was scolded for not wearing a jacket or tie — though he was, I am reliably informed, wearing shoes. At that hearing, ably described by Mike Masnick at TechDirt, Mr. Lutz appeared as the "corporate representative" of a company called "Sunlust," but could not answer any meaningful questions about the company or its leadership. Also at that hearing — at which John Steele was present — the attorney appearing for Sunlust claimed he was hired through Prenda Law, but Paul Duffy sent a letter claiming that Prenda Law was not involved. The resulting hearing was . . . unusual.)

Meanwhile, Pietz filed a scathing brief attacking Mr. Gibbs' response to the OSC.

Judge Wright's Fateful March 5, 2012 Order: This brings us to yesterday's remarkable order from Judge Wright. In that order, Judge Wright ordered as follows based on all the parties' submissions:

1) The following persons are hereby ORDERED to appear on March 11, 2013, at 1:30 p.m.:

a) John Steele, of Steele Hansmeier PLLC 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, CEO of AF Holdings LLC and Ingenuity 13 LLC;

f) Alan Cooper, of AF Holdings LLC;

g) Peter Hansemeier of 6881 Forensics, LLC; and

h) Alan Cooper, of 2170 Highway 47 North, Isle, MN 56342.

He also ordered Pietz and Gibbs to serve the order on all of those people.

The order shows that Judge Wright (1) wants to talk to both the "Alan Cooper" who is a principal of Prenda Law's clients and the Alan Cooper who claimed his identity was stolen, and (2) wants to ask questions of attorneys John Steele, Paul Hansmeier, and Paul Duffy about Prenda Law, as well as "CEO" Mark Lutz of Prenda Law's clients.

What will happen now? Here's what I expect:

1. Some of the individuals named could object that Judge Wright lacks jurisdiction over them because they are not parties to this case or attorneys before the court. Leaving the merits of that aside, it's an epically disastrous argument to make with respect to the credibility of Prenda Law or any of its associated attorneys. The question of whether Judge Wright has jurisdiction over the individuals is beyond the scope of this post; suffice it to say that I think the evidence presented to Judge Wright gives him a colorable basis to say that he does on several legal theories.

2. Some of the individuals named could appear, but assert their Fifth Amendment right against self-incrimination. That could be prudent, but also disastrous.

3. Some of the individuals named could assert that exigent circumstances or medical conditions prevent them from attending, or could ask for an extension to allow them to retain counsel and get their new counsel of up to speed.

4. Some of the individuals named could show up and answer Judge Wright's questions.

My prediction is a combination of 3 and 4.

The individuals summoned before Judge Wright may yet demonstrate to him that they have not done anything wrong and that Mr. Pietz' allegations are untrue. But what can Judge Wright do if he is not satisfied with what he hears at the March 11 hearing?

Judge Wright could certainly issue monetary sanctions against, at a minimum, Mr. Gibbs. The question of what other attorneys he could sanction under Rule 11 and his own inherent authority depends on a tedious discussion too long for this post; suffice it to say that he might conclude that he can sanction supervisory attorneys with Prenda Law.

Judge Wright's terrifying comment aside, his ability to jail people before him for contempt is quite limited when they have not been charged with a crime by the executive. That, too, is a discussion too complex for this post. But Judge Wright might well refer the case to the U.S. Attorney's Office for criminal prosecution if he concludes that criminal contempt or fraud has occurred. Such referrals tend to get immediate and intense attention. Moreover, if Judge Wright finds misconduct, he could refer the matter to various state bars.

Whatever happens on March 11, one thing is clear: Judge Wright has concluded that the evidence before him justifies an intense inquiry, including summoning multiple people associated with Prenda Law to his court. Judge Wright's actions are, though within his power, quite rare and exceptionally ominous for Prenda Law and its principals.

I plan to observe the hearing if possible.

Edited to add: Mike Masnik's writeup is not to be missed. See also Ars Technica coverage.

Second edit: I see some people have pointed out that Mr. Gibbs' attorneys have sought and obtained leave to make a "special appearance" for him. That doesn't excuse him from showing up. Making a "special appearance," at least in federal court, means making an appearance for a limited purpose, as opposed to making an appearance as counsel of record for the rest of the proceedings in the case. Lawyers make special appearances to limit their exposure to being kept in the case past the particular event on which they have been asked to assist.

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