Defendants in Prenda Law's defamation suit seek sanctions

By Bethany Krajelis | Sep 11, 2013

In a motion seeking sanctions against Prenda Law and Paul Duffy, the defense attorneys in a federal defamation suit claim that “in every conceivable way” the recently-dissolved firm and its sole officer “have crafted their own doom.”

Filed this week in Chicago’s federal court, the defendants’ motion lays out the events that led to their sanctions request and accuses Prenda Law and Duffy of “lying to court officials, presenting false documents … and at all times following a course of action from which any reasonably prudent attorney would run.”

The motion comes about three weeks after U.S. District Judge John Darrah held a status hearing in the case, at which time he invited the attorneys representing Minnesota attorney Paul Godfread and his client, Alan Cooper, to file a Rule 11 petition.

Rule 11 allows courts to impose sanctions on attorneys, law firms or parties if it is determined they made misrepresentations to the court.

It’s a rule and process that isn’t so new to Prenda Law, which voluntarily dissolved in July. Since May, the motion states, the firm and some of its attorneys have been slapped with sanctions in two similar suits in California, as well as one in Minnesota.

In the defendants’ recently-filed motion, Chicago attorney Erin Kathryn Russell and Massachusetts attorney Jason Sweet assert that the firm’s recent history “is relevant to the Court’s analysis of a motion for sanctions, and consideration of sanctions that will be sufficient to deter future misconduct by them.”

“Plaintiff Prenda Law and its attorney, Paul Duffy, have blazed a trail of sanctionable conduct from St. Clair County, Illinois, through the United States District Court for the Southern District of Illinois, and continuing before this Court,” the defense motion states.

“At every turn,” the motion adds, “Prenda and Duffy have seized opportunities to present false evidence, make material misrepresentations, and to attempt to deceive court officials and judges alike.”

When it comes to the case involving their clients, Russell and Sweet claim that Prenda Law and Duffy have “falsely accused” them of wrongdoing and “have been brazen in an attempt to cover their fraud and deception.”

“They have been brazen in their willingness to test the Court’s tolerance for this conduct, as well as Defendants’ determination to bring that conduct to light before the Court,” the motion states.

Russell and Sweet contend in their sanctions motion that Prenda Law and Duffy sued their clients earlier this year in Minnesota in retaliation for filing an identity theft suit against Prenda Law and its principals.

“In an effort to maximize expense and inconvenience to Defendants, Plaintiffs filed identical lawsuits in distant jurisdictions,” the motion states, explaining that Duffy filed a defamation suit against Godfread and Cooper in Cook County and Prenda Law filed an identical suit in St. Clair County.

The lawsuits accuse Godfread and Cooper, as well as 10 potential John Doe defendants of making false and defamatory statements in a Minnesota lawsuit and on various websites.

Among other allegations, the suits claim the defendants accused Prenda Law and some of its attorneys of “criminal offenses; want of integrity in the discharge of employment; lack of ability in its profession; and the commission of fornication and adultery.”

The two suits were removed to their respective federal courts before they were consolidated this summer in Chicago’s federal court.

Before the St. Clair County case was removed, however, Russell and Sweet claim that Prenda’s local counsel, Belleville attorney Kevin Hoerner, made misrepresentations to the St. Clair County Circuit Clerk’s office to get an amended complaint filed without leave of the court.

The amended complaint sought to add Alpha Law Firm in Minnesota as a plaintiff, a move that would have destroyed diversity of citizenship since the defendants are also from Minnesota.

At last month’s status hearing, Duffy asked Darrah to remand the suit back to St. Clair County, claiming that it couldn’t proceed in federal court because diversity of citizenship didn’t exist between the parties.

Russell, however, told Darrah at that hearing that Prenda Law’s amended complaint “should never have been filed” because the firm didn’t ask for leave to file the amended complaint and no order granting leave was ever filed in St. Clair County Circuit Court

In the recently filed motion, Russell and Sweet explain that they began to investigate the amended complaint in March after Duffy sent Russell an email, telling her the additional plaintiff destroyed diversity and “threated to file a motion seeking sanctions if” she didn’t withdraw the suit’s removal to federal court.

Through their investigation, the defense attorneys assert, they learned that shortly after Prenda Law filed its suit in February in St. Clair County, Hoerner personally delivered the amended complaint to the circuit clerk’s office and asked for it to be filed.

According to an affidavit from Judy Kent, an employee of the circuit clerk’s office, there was no motion seeking leave to file an amended complaint or an order granting such relief in the record.

“I was informed by Mr. Hoerner, one of Prenda Law’s attorneys, that no one had been served with the original complaint, which is why I file stamped the amended complaint without a motion for leave,” Kent states in her affidavit. “I verified on my computer that my office had not received a return as of February 21, 2013.”

At that time, however, Russell and Sweet assert that both Godfread and Cooper had been served. Exhibits attached to one of their previous court filings show that Godfread had been served on Feb. 15 and that Cooper was served on Feb. 20.

They further claim that Prenda Law knew their clients had been served because attorney John Steele of Steele Hansmeier in Chicago left a message with Godfread about an hour after he was served, saying “I understand you just got served” and asked whether he would be representing Cooper.

Godfread and Cooper had filed a counterclaim in which Cooper alleged he was a caretaker for property owned by Steele and eventually learned his name was being used as an officer or director of AF Holdings, a client of Prenda Law, without his knowledge or consent.

Darrah dismissed their counterclaim last month, but Russell said Tuesday that she plans to file an amended counterclaim soon.

A footnote to the sanctions motion states that the defendants are not seeking sanctions against Hoerner at this time. It notes that given the seriousness of the conduct alleged, they will not do so unless evidence comes to light proving Hoerner acted in bad faith and with direct knowledge.

In regards to the amended complaint, Russell and Sweet contend that it was “a legal nullity” as it was filed without a court order.

“Even if the amended complaint was not a legal nullity and complete sham engineered by Prenda and its attorneys for their own benefit, to harass defendants and to vexatiously expand these proceedings, it still would not govern the removal analysis in this case,” the defendants’ sanctions motion states, explaining that “it had not been served as of the date the case was removed” and as such, “essentially did not exist.”

Even though the defendants provided information in their opposition to the motion to remand that detailed “how Prenda obtained the amended complaint by deception,” the motion states Duffy filed a renewed motion to remand the suit to St. Clair County.

Duffy, however, withdrew his motion to remand a few hours after he presented it to the court at last month’s status hearing.

He wrote that Prenda Law “vehemently disagrees with representations made by Defendants counsel at the August 14, 2013 hearing regarding its Motion, but nevertheless due to the apparent confusion arising from Plaintiff’s Motion, Plaintiff seeks to withdraw its motion.”

Russell and Sweet also claim in their motion for sanctions that Prenda Law and Duffy tried to advance the “preposterous argument” that the St. Clair County and Cook County suits against their clients were not related.

The motion alleges that at a June hearing on the defendants’ motion to transfer and consolidate the two suits, Duffy told Darrah that he objected to the transfer and consolidation because the cases weren’t identical.

A transcript of that hearing, which is attached as an exhibit to the defendants’ motion for sanctions, shows that Darrah allowed Duffy to file a response, but cautioned him that his response must comply with Rule 11’s requirements.

“After being warned that his objection would need to satisfy the requirements of Rule 11, Duffy notified the Court that his objection was withdrawn,” the defendants’ motion for sanctions states.

In their motion, Russell and Sweet ask Darrah to sanction Prenda Law and Duffy, dismiss the claims against their clients and award attorneys’ fees “in light of the extensive and pervasive history of misconduct by Prenda and Duffy, and in light of their unrelenting course of obstructive and vexatious conduct in the instant cases (and elsewhere).”

They contend that sanctions are appropriate in this case and needed as Prenda Law and Duffy “were undeterred in their conduct” by their previous sanctions, including one issued in May by U.S. Judge Otis Wright II in California.

Wright’s “scathing” sanctions order awarded attorneys’ fees and referred Prenda Law and some of its attorneys to the criminal investigation units of the U.S. Attorney’s Office and the Internal Revenue Service, as well to attorney disciplinary commissions.

“Any reasonable person, and certainly any reasonable attorney, would take significant pains in the wake of such a ruling to ensure that their every step was the very definition of honest, forthright and upstanding,” Russell and Sweet state in their sanctions motion.

They add, “Prenda and Duffy have not acted reasonably. In fact, their continued course of conduct before this Court shows that only the strongest of sanctions has any hope of deterring future misconduct by them.”

Russell said Darrah held a status hearing in the case on Tuesday, at which time he set a Sept. 24 deadline for Duffy to file a response to the sanctions motion and gave her until Oct. 1 to reply. He also rescheduled a November status hearing until Dec. 12.

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