The lawyers behind the Prenda Law "copyright trolling" enterprise have lost their key appeal and will have to pay more than $230,000 in sanctions.

The US Court of Appeals for the 9th Circuit issued a 12-page ruling [PDF] upholding the sanction order that began Prenda's downfall, issued by US District Judge Otis Wright in 2013. Today's ruling defends Wright's sanction in its entirety and doesn't give one iota of credit to the copyright troll's claims that its due process rights were violated.

Prenda Law, masterminded by two lawyers named John Steele and Paul Hansmeier, operated by filing massive lawsuits against thousands of defendants, accusing them of illegally downloading porn movies. After using the subpoena process to identify the subscribers behind the IP addresses, they'd send threatening letters about the lawsuit. Many defendants settled, either out of fear of humiliation or inability to pay for litigation. Typically, they paid around $4,000.

The scheme, which netted its principals millions, began to unravel after Wright's order. His order also referred them to regulators and criminal investigators. State bar authorities have moved to disbar both Hansmeier and Steele, and there's every indication that federal agents are pursuing them for criminal matters. (Paul Duffy, a third lawyer believed to be a principal of Prenda, died last year.)

More misconduct was discovered later. Steele was accused of identity theft and forgery, and some of the "stolen" porn was seeded by Prenda itself, placed on The Pirate Bay so it could be downloaded.

Justified sanctions

Given Prenda lawyers' actions, the district court didn't abuse its powers in sanctioning them, the appeals judges held.

"These consolidated cases began as minor copyright infringement suits, until courts nationwide started catching on to the plaintiffs' real business of copyright trolling," the opinion states. "Prenda Principals were found contradicting themselves, evading questioning, and possibly committing identity theft and fraud on the courts."

Due process for civil sanctions requires notice, an opportunity to be heard, and a finding of bad faith. The panel held that Prenda lawyers, despite their protestations to the contrary, got all three.

Before the trio of lawyers was even allowed to proceed with the appeal, Wright insisted that they pay two large bonds, totaling more than $230,000, so that they couldn't avoid any payment through bankruptcy. The first bond consisted of the full $81,000 sanction, multiplied by 125 percent to account for interest; a second bond was a bit more than $135,000, the estimated legal costs of defense lawyer Morgan Pietz.

The appeals court held those requirements and multipliers were also legitimate considering the lawyers' past actions. "The Prenda Principals have engaged in abusive litigation, fraud on courts across the country, and willful violation of court orders," the opinion states. "They have lied to other courts about their ability to pay sanctions. They also failed to pay their own attorney’s fees in this case."

The stern ruling holding Prenda accountable was a long time coming, but it's hardly a surprise given the tone of the hearing that took place in May 2015. When Prenda's appeal lawyer argued the case in May 2015, the judges at times seemed incredulous at their answers to questions.

"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," responded Prenda lawyer Daniel Voelker.

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

"This wasn't exactly a clean operation," said US Circuit Judge Jacqueline Nguyen.

"They used our court system for illegal purposes to extort money," Pregerson said later.

When defense lawyer Morgan Pietz got his turn to address the panel, he reminded them the Prenda operation at one point had been called "a disgrace to the profession."

"What happened here is why many people hate lawyers," said Pietz, whose client in the case was and remains an anonymous John Doe.