Lawyers believed to be affiliated with the defunct "porn-trolling" organization Prenda Law have now been sanctioned several times when judges found that their lawsuits over alleged porn downloads weren't justified. Prenda-linked lawyers John Steele, Paul Hansmeier, and Paul Duffy have paid some of those sanctions and resisted others. The first sanction, handed down by US District Judge Otis Wright, is being appealed.

In the most recent case, Hansmeier, Steele, and Duffy spent months try to out-maneuver a heavy sanction. It hasn't worked, and this week the hammer appears to be crashing down on them.

The case stems from a 2012 lawsuit, in which Prenda went beyond suing regular Internet users and sued Comcast and AT&T. Prenda wanted customer information for 6,600 users it believed were engaged in illegal downloads, and the ISPs wouldn't cough it up fast enough.

The bold step ended in a complete loss. In November, a judge found the lawsuit "smacked of bullying pretense" and ruled that Prenda should pay a total of around $261,000 to lawyers representing Comcast, AT&T, and defendant Anthony Smith.

It hasn't happened. A new judge inherited the case due to a retirement, and in February, he held a "show cause" hearing, demanding to know why Hansmeier, Steele, and Duffy haven't paid up.

The hearing (transcript) is a stunner even by Prenda standards. In it, Hansmeier and Steele try to argue the sanction isn't really a sanction but a judgment, and therefore it's subject to more lenient rules and deadlines about payment.

The judge actually did give them a chance to plead their case that they couldn't afford the sanction, but apparently they blew it. In an order published Monday, US District Judge David Herndon increased the sanction amount by 10 percent as a punishment for dragging the whole situation out. That's an additional $7,236.70 for Smith, $11,963.75 for AT&T, and $6,902.13 for Comcast—$26,102.58 in all.

He also wrote that if Duffy, Hansmeier, and Steele don't pay by March 31, additional fines will accrue, starting at $500 per day per lawyer.

"[T]he Court cannot ignore the behavior of plaintiff’s counsel... at the show cause hearing," wrote Herndon. "While the Court was unable to nail down any specific lies due, in significant part, to plaintiff’s counsel excellent 'attorney speak,' the misrepresentations and half-truths presented indicate plaintiff’s counsel’s clear disrespect of the Court."

"If we can't pay it, we can't pay it."

At the February hearing, Hansmeier and Steele made two arguments. First, Hansmeier argued that the sanction should actually be treated as a "judgment," essentially because the judge used that word. "The first factor we point to is the language of the order itself where it says: For a total judgment of the sanctions amount with interest as provided by law," said Hansmeier.

The judge barely even acknowledged that argument, instead quoting Judge Murphy's order and repeatedly asking if Hansmeier and Steele had paid anything (they hadn't.)

Steele stressed his lack of involvement in the whole proceeding. He also started a second line of argument: that he simply doesn't have the cash. Hansmeier echoed that plea of poverty.

"I'm not clear as to what part of this case, given that I appeared merely for one oral argument, what percentage of the $250,000 ... that I'm responsible for," said Steele. "I would also like to have the opportunity to submit documentation under seal that I do not have the ability to write a check for $250,000."

Steele's lack of involvement was immediately rebutted by defense counsel who said Steele was intimately involved in every step of the process.

"I'd be happy to recount in detail Mr. Steele's involvement throughout this proceeding, beginning in state court and with the Prenda law firm being primary counsel," offered AT&T's lawyer, Bart Huffman.

He didn't have to get into it. "[P]erhaps you are in complete disagreement with Judge Murphy," said Judge Herndon, who went on to quote Murphy's order, noting that "these men acted in concert throughout the entirety of the proceedings in this matter" and "shared total responsible [sic] for their actions."

As the hearing continued, both Hansmeier and Steele said they absolutely wouldn't be able to pay the sanctions.

"With all due respect to opposing counsel, it's extremely important, because if the Court issues a sanction order for, I don't know, a billion dollars, we can't pay it," said Steele. "And I don't believe that there's any case law to establish that—there's not a debtor's prison. I mean if we can't pay it, we can't pay it. I do think it's very important."

"They've made millions of dollars across the country," responded Huffman. "When they were sanctioned per day in Judge Wright's court in situation, they went ahead and posted the bond at that time and somehow had the money to do so, so I think we know what's really going on."

Steele denied ever making millions, as he did in an interview with Ars last year. Confidential papers submitted by Steele's former colleague in a different case show Prenda-related entities made at least $1.9 million in 2012.

"I doubt that AT&T and, you know, Comcast are going to be unduly harmed by a brief stay," pled Steele. "I know for a fact that I will be incredibly harmed, and I believe, talking to some of the other attorneys, that this is literally a life-changing, in a negative way, event."

Herndon actually did seem open to the idea of tamping down the sanctions if Hansmeier and Steele couldn't afford them. But he made it clear he wasn't going to take their word for it.

"I don't want your affidavit," said Herndon. "I want your assets statement... I don't want it from you. After looking at Judge Murphy's order, I want that from a certified public accountant. I want a certified profits and loss or certified net worth statement."

Herndon went on to give his view on who had been harmed.

"The community has to worry about lawyers who file unreasonable and vexatious claims," he said. "That's where the harm to the community is. The community is worried about lawyers, worried about lawyers that file these kind of lawsuits. So if, in fact, Judge Murphy is right—and for the time being, until the Seventh Circuit says something differently, I have to assume he is—the community is worried about guys like you."

Suspicious, "to say the least"

Steel and Hansmeier did submit financial documentation, but Herndon found it unconvincing. In Monday's order, he wrote:

They submitted incomplete, and to say the least suspicious, statements of financial condition. Attached to each statement was a letter from their certified public accountant (CPA). In these letters, the CPA indicates a departure from generally accepted accounting principles. He further notes that plaintiff's counsel elected to omit substantially all of the disclosures required by generally accepted accounting principles. The Court finds these statements insufficient to establish plaintiff's counsel's inability to pay. Plaintiff's counsel significantly violated an unambiguous order of the Court. They also failed meet their burden regarding their inability to pay defense.

Hansmeier, at least, appears ready to make at least one more plea for mercy. Just this afternoon, he submitted an emergency motion, with an updated letter from his accountant "that provides an explanation of how the statement departed from GAAP [generally accepted accounting principles]." The CPA letter and financial info are not included in the public filing.

"Reconsideration is necessary to prevent manifest injustice," Hansmeier pleads. "Hansmeier’s ability to maintain his license to practice law is under threat due to the Contempt Order... Hansmeier’s original statement of financial condition, his updated statement of financial condition, and Smith’s discovery (as discussed below) both demonstrate that—at all relevant times— Hansmeier did not have the ability to pay $261,025.11."

He also notes that the defendant has submitted more than 180 pages of evidence about the finances of Prenda-linked entities, acquired through discovery. That evidence, which is not public, also backs up his argument that he can't pay, he says.

"Yet, despite Smith’s seemingly omniscient access to Hansmeier’s financial transactions, despite his apparent possession of over three years of Hansmeier’s bank statements, credit card charges, wire transfers and checks (not to mention those of Steele, Duffy and over a dozen third-party entities), Smith has totally and completely failed to make a presentation of Hansmeier’s ability to comply with the Sanctions Order," writes Hansmeier.

It seemed clear earlier this week that Herndon has already made a decision, based on the fact before him. But Hansmeier, representing himself, has nothing—or at least, nothing further—to lose.