Prenda Law responds to sanctions motion, calls defendants' request " a quagmire"

A defense motion seeking sanctions against Prenda Law and Paul Duffy “is a quagmire, short on substance and made up almost entirely of invective, pejoratives, and ad hominem attacks,” the firm asserts in a recent court filing.

Duffy, who served as Prenda Law’s sole officer before it voluntarily dissolved in July, filed a memorandum this week in Chicago’s federal court in response to a sanctions request made by Minnesota attorney Paul Godfread and his client, Alan Cooper.

Godread and Cooper are the named defendants in a pair of since-consolidated defamation suits that Duffy and Prenda Law brought earlier this year.

In the memo, Duffy asks U.S. District Judge John Darrah to deny the defendants’ motion, saying that it violates Rule 11, fails to cite a valid basis for the imposition of sanctions, contains false representations and misstates applicable law.

He also asked Darrah --who invited the defendants’ attorneys to file the sanctions request during an August hearing --to award Prenda Law the costs and fees it has spent on defending itself against the defendants’ sanctions motion.

According to Duffy’s memo, “Prenda has incurred $16,294.43 in fees in defending itself against the Defendants’ twenty-three page sanctions motion.”

“An award of fees and expenses is particularly appropriate here because the Defendants made repeated, inexcusable misstatements of fact, failed to disclose contrary legal authority and have no colorable excuse for these violations,” the memo states.

The issue over sanctions stems from the defamation suits Duffy and Prenda Law brought earlier this year against Godfread and Cooper.

Originally filed in the circuit courts of Cook and St. Clair counties, the lawsuits accuse the two men, as well as 10 potential John Doe defendants, of making false and defamatory statements in a separate 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.

Represented by Chicago attorney Erin Kathryn Russell and Massachusetts attorney Jason Sweet, the defendants claim the defamation suits were brought in retaliation for an identity theft suit they brought in Minnesota against Prenda Law and its principals.

That suit dealt with Cooper’s contention that his name was being used as an officer of director of AF Holdings, a client of Prenda Law, without his knowledge or consent.

The defendants filed their sanctions motion earlier this month, when they accused 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.”

In Prenda Law’s recently filed memo, Duffy wrote that the defendants’ motion for sanctions “demonstrates a lack of adequate legal research … and suffers from conspicuous procedural violations, tenuous arguments and blatant misstatements of fact.”

“Perhaps the most disturbing of the statements in Defendants’ Motion are outright misstatements of fact to the Court,” Duffy wrote, pointing to the introduction of their motion that he claims “attempts to paint” his defamation suit as a retaliation for the defendants’ identity theft suit.

Duffy asserts that he “was not named as a defendant in the Minnesota suit and the claim that the dubious Minnesota lawsuit is against Mr. Duffy is demonstrably false.”

He also takes issue with a section of the defendants’ sanctions motion that states Prenda Law has a “significant recent and relevant history of being sanctioned for their litigation conduct.”

In their motion, the defendants contend that sanctions are appropriate in this case and needed as Prenda Law and Duffy “were undeterred in their conduct” by their previous sanctions in two similar suits in California, as well as one in Minnesota.

They specifically pointed to the sanctions order issued in May in the Central District of California, in which U.S. Judge Otis Wright II 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 wrote in their sanctions motion.

They added, “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.”

Duffy, however, asserts in his memo that “contrary to those misrepresentations, [he] has never been sanctioned in any case in which he has appeared as counsel.”

“And while the Central District of California opinion (referenced repeatedly in each filing Defendants have made in this case) did impose sanctions, that is the only time that Prenda or the undersigned has been sanctioned, despite repeated efforts by Defendants’ attorneys and their allied copyright infringement defense counsel throughout the Nation to obtain them,” Duffy asserts.

He further notes that “the Central District of California order is currently the subject of eight (8) now-consolidated appeals in the Ninth Circuit Court of Appeals.”

In his memo, Duffy contends that sanctions are not warranted under Rule 11, which allows courts to impose sanctions, because the defendants failed to comply with mandatory safe harbor requirements and Prenda Law “has—and continues to have—a good faith basis for asserting that federal subject matter jurisdiction is lacking in its case.”

In regards to the safe harbor requirements, Duffy’s memo states that Rule 11 requires a sanctions motion to be made separately from any other motion, served pursuant to Rule 5 and “not filed or presented to the court unless the challenged paper is not withdrawn or corrected within 21 days.”

Duffy asserts that the defendants didn’t bring their sanctions motion separately from any other motion, saying they combined it with their request for relief under Section 1927 of the U.S. Code and the court’s inherent authority.

“Defendants’ request for Rule 11 sanctions should be denied for this reason alone,” Duffy asserts.

In addition, he claims the defendants failed to properly serve their sanctions motion under Rule 5 because one of their attorneys sent him an email threatening to seek sanctions if he didn’t withdraw Prenda Law’s motion to remand the suit back to circuit court.

Rule 5, the memo states, doesn’t allow service via electronic means without consent and Duffy asserts he never consented to accept service of papers by electronic means.

And lastly, the memo notes that Prenda Law withdrew the challenged paper – its renewed motion to remand – within the 21-day safe harbor window.

“The Defendants made no attempt, whatsoever, to assure or prove compliance with the twenty-one day safe harbor under Rule 11, which renders their request to obtain Rule 11 relief impermissible,” the memo states.

In addition, the memo discusses Prenda Law’s amended complaint, which Duffy dubbed “the centerpiece of the defendants’ sanctions motion.”

The defendants argue that before the St. Clair County suit was removed to federal court, 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.

The defendants, however, contend that the 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, making it a “legal nullity.”

In their sanctions motion, Russell and Sweet explained that they began to investigate the amended complaint in March and learned that Hoerner personally delivered it 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 and that Prenda Law knew so.

“Despite the prominence of this argument in their Motion,” Duffy contends in his memo that the "Defendants have failed cite relevant case authority from the Illinois Supreme Court which rejects their ‘legal nullity’ argument.”

Duffy asserts that the Illinois Supreme Court in its 1998 ruling in Ragan v. Columbia Mut. Ins. Co. held that a “failure to obtain leave to amend a complaint is not a jurisdictional defect.”

“Indeed, such a failure is a ‘technical defect’ and ‘a party may waive its right to object to the defect,’ Duffy wrote, adding that “other Illinois appellate court authority notes that the outdated ‘legal nullity’ doctrine runs counter to the ‘modern trend of cases related to jurisdiction.’”

He explains that “Here, while Plaintiff did not obtain leave prior to filing its amended complaint, the Defendants failed to timely request its withdrawal or move to strike it. They instead chose to ignore its existence, proceeding to file a notice of removal as though it did not exist.”

“As such,” he adds, “Prenda had—and continues to have—a good-faith basis for asserting that the amended complaint is the operative filing in this matter and that diversity jurisdiction is lacking.”

In regards to the defendants’ “misleading allegations regarding the circumstances of the filing of the amended complaint in St. Clair County,” Duffy asserts that “the Defendants have made no showing that attorney Hoerner was aware that service had been accomplished at the time he attempted to file the amended complaint.”

He also claims that while the defendants didn’t seek sanctions against Hoerner because they don't have evidence showing wrongdoing on his part, they still accuse him of such.

In addition, Duffy claims that “the Defendants’ accusations miss an obvious commonsense point: the amount of time that lapsed between service on Cooper and Godfread and the filing of the amended complaint was less than one week.”

He notes, “The Defendants provide literally no evidence that the affidavit of service from the process server reached Mr. Hoerner before he attempted to file the amended complaint.”

Under the briefing schedule previously set by Darrah, the defendants have until Oct. 1 to reply to Prenda Law’s response to their sanctions motion. A Dec. 12 status hearing has been set in the case.