SAN FRANCISCO—Copyright-trolling operation Prenda Law has made big business out of suing thousands of John Does for allegedly downloading porn files, and it's now finding itself under fire throughout California. Faced with an angry federal judge in Los Angeles, the lawyers behind Prenda clammed up and pled the Fifth. Once it became clear that case was going south fast, the firm started dismissing its other cases as fast as it could.

But it may not be that easy. There's a risk that the firm could be slapped with attorneys fees in some of its cases before they just disappear down the memory hole. In a San Francisco courtroom Thursday, US District Judge Edward Chen wanted to know exactly why Prenda was dismissing the case it had once promised to see through to the end. And Chen let the sole Prenda representative who showed up today—Paul Duffy—know that he was considering ordering them to pay attorneys' fees in the case.

It began like this: In May 2012, a shell company based in St. Nevis called AF Holdings sued [PDF] a Northern California man named Joe Navasca for downloading an adult movie called Popular Demand, a movie produced by a porn company called Heartbreaker Productions. At first, all Prenda had was an IP address: 69.109.216.238.

Prenda was ultimately able to turn that IP address into a name. For reasons that aren't completely clear, the firm ultimately chose to sue Navasca, who is the son of the account holder. Navasca's defense lawyer, Nick Ranallo, told Ars that Navasca lives with his wife and parents in a house with six adults and didn't download the porn videos he's accused of grabbing. "It comes down to, he's a male of about the right age," in Prenda's view, said Ranallo.

But earlier this year, Prenda's whole operation began to fall apart when a Los Angeles federal judge started to suggest that the real problem may be attorney misconduct and "fraud" upon the court, not piracy. Ranallo argued to Judge Chen that in order to proceed with their case against Navasca, Prenda should have to put up a bond in case it loses. Chen agreed, finding that there was a substantial chance that Prenda might lose the case and need to pay costs or fees. He issued an order that Prenda had to put up a $50,000 bond to move forward. Then things started to go south in the Los Angeles case—and Prenda started trying to shut everything down.

Judge asks: Is late dismissal a ploy “to avoid adverse rulings?”

"What is the motivation for dismissing this case, at this point?" asked Judge Chen.

Prenda lawyer Paul Duffy explained that once the judge required $50,000 to move forward, Prenda decided it wasn't worth the money to move ahead with the case. "So in consideration of that, [the plaintiff] found the amount to be more than—more than it wanted to post to continue to the litigation."

In addition, the best evidence was probably gone, Duffy said. He repeated an allegation he'd made before that Navasca had destroyed evidence using a product called CCleaner, to "not only clean his hard drive... but to clean every single hard drive in his household."

Ranallo denied that. CCleaner doesn't "delete any relevant evidence," he said. "It cleans up unused and inaccessible portions of a hard drive." In any case his client had installed CCleaner on computers in his household as a matter of course, many months before any litigation took place.

No, Duffy insisted. "It was used to delete video files."

From there, Chen moved on to the ownership of AF Holdings. A document filed earlier in the case stated that "Salt Marsh" was the owner of AF Holdings. "My understanding is that a trust, with that name, owns [AF Holdings]," said Duffy.

But Prenda mastermind Paul Hansmeier had already said that "no human being named Salt Marsh owns AF Holdings," said Ranallo, referencing Hansmeier's dodgy deposition. "To even say that the trust is named Salt Marsh gets us no closer to describing or explaining ECF #8," the document in the case that's electronically "signed" by Salt Marsh.

That wasn't good enough, said Chen. "Isn't it a fair inference that one reason for dismissal is because of the problems of documenting the ownership of AF Holdings? [Documentation] which I said was necessary in order to bring this suit? Why isn’t this a situation where dismissal is simply an attempt to avoid adverse rulings in this case?"

Duffy insisted that the case was dismissed because of the bar of the $50,000 payment Chen had required, and the "spoliation" issue around CCleaner. That was it.

But the spoliation argument is problematic. If Duffy really believed there had been spoliation he should be positively gleeful about moving his case forward, Chen noted. When defendants in copyright cases—or any kind of case—destroy evidence, it can be devastating to their argument, as judges and juries begin to assume the worst. That's what happened to TorrentSpy in 2007, as the MPAA was handed a clear victory after a judge ruled the defendants destroyed evidence. "If you could prove that [spoliation occured] you might actually win the case. Most plaintiffs like [spoliation], in an inverse way... So it's strange to say 'We gave up because there was spoliation,'" said Chen.

“What if I deny the motion... and we dig deeply?”

"What if this case was pursued?" asked Chen. "What if I deny the motion and we dig deeply into who is Salt Marsh, and who owns AF Holdings?"

Ranallo answered before Duffy did.

"They had an opportunity to breach all those issues in the April 2nd hearing," he said. "Mr. Duffy and the other individuals exercised their Fifth Amendment rights against self-incrimination. That tells us to some extent why this case is ending now as quickly as it is. I think it's clear a court is able to draw reasonable inferences."

"I don’t think it’s a civil matter," protested Duffy. "The [Los Angeles] court has indicated it’s a criminal matter," and thus he should have the right to not say anything about it.

The judge's continued questioning suggested he was likely to make some kind of finding that AF Holdings owes some money for bringing this case. He asked both lawyers about what kinds of legal work should be applicable and what shouldn't be if he finds some fees are owed. The question is whether there will be anything there, or whether this murky entity known as AF Holdings—an "undefined beneficiary trust" apparently owned by another trust named "Salt Marsh"—will be able to slide away. The company may turn out to be a shell specifically designed to not hold any assets, under-capitalized by design.

The Prenda case was the last on Judge Chen's calendar, and after the motion was argued the courtroom cleared. Duffy walked out quickly; he declined to speak to me about his case or about his legal troubles. Ranallo, who had showed up without his client, spoke to an Electronic Frontier Foundation lawyer who came to observe the hearing today. Several other observers who appeared to be affiliated with EFF also were in attendance.

After the hearing, Ranallo and I spoke briefly about his background and this case. He has several clients defending themselves from copyright trolling claims. He got involved when a personal friend got a letter from a troll and and asked his advice. That inspired him to write an article for TorrentFreak about copyright trolling. After that, the clients began calling him.

Ranallo is seeking to make Prenda pay in more than one case now. Another case in which he's asking for attorney's fees has a hearing coming up on May 10.