Judge grants Duffy's request for extension to respond to amended counterclaim in Prenda Law's defamation suit

A federal judge today granted Paul Duffy’s request for an extension of time to respond to an amended counterclaim filed last month by the defendants in a pair of defamation suits brought earlier this year by Duffy and Prenda Law.

Duffy --who represents himself and the now-dissolved firm in the suits that were consolidated this summer in Chicago’s federal court -- wrote in his Sept. 30 motion that he does not seek the extension “for purposes of causing undue delay or for any improper purpose.”

Saying he doesn’t believe an extension will have an impact on a status hearing that is set for Dec. 12, Duffy explained in his motion that he needs “additional time to prepare and submit a motion addressed to the counterclaim.”

He wrote the amended counterclaim that the defendants --Minnesota attorney Paul Godfread and his client, Alan Cooper-- brought on Sept. 16 “alleges a number of matters (a striking volume of which are outright false or, at a minimum, materially misleading) that were not included in the first iteration of their counterclaim.”

Duffy adds that he “believes that the amended counterclaim includes most or all of the same defects that led to the dismissal of their initial counterclaim.”

He told U.S. District Judge John Darrah at a hearing today that he plans to file a motion to dismiss. Darrah granted Duffy’s request for an extension of time and gave him until Oct. 15 to file his response.

In August, Darrah dismissed the defendants’ original counterclaim, saying that as it “is presently constructed, it is unclear what role Duffy played in the claims asserted.”

He added, “It is clear, however, Godfread and Cooper believe multiple other individuals and entities are involved, who have not been named as parties to this lawsuit.”

Darrah then gave the defendants 30 days to file an amended counterclaim, which they did.

In their amended counterclaim, Chicago attorney Erin Kathryn Russell and Massachusetts attorney Jason Sweet wrote that the defamation suit against their clients was brought in retaliation for an identity theft suit they brought against Prenda Law and its principals earlier this year in Minnesota.

The identity theft suit focuses on allegations that Cooper’s name had been used as an officer of director of AF Holdings, a client of Prenda Law, without his knowledge or consent.

Cooper had served as a caretaker for property owned by John Steele, a former name partner of Steele Hansmeier in Chicago. That firm, according to the defendants’ recent filing, was the predecessor in interest to Prenda Law, which voluntarily dissolved in July.

Cooper alleges that on numerous occasions, Steele bragged to him about a plan involving massive copyright litigation and told him to call him if he were ever contacted about any of his law firms.

In November 2012, Cooper claims he learned about copyright lawsuits being filed by AF Holdings and that the company had a CEO named Alan Cooper. He hired Godfread out of fear that he could be held liable in these suits.

Unable to get to the bottom of the identity issue, Cooper filed suit. A few weeks later, he and Godfread were sued for defamation by Prenda Law and Duffy in the circuit courts of Cook and St. Clair counties.

The lawsuits that were late removed to their respective federal courts accuse them, 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.”

In their amended counterclaim, the defendants assert that “As will become apparent, the appropriation of Cooper’s identity is but one instance in Prenda’s established pattern and practice of fraud and misappropriated identities.”

Their recent filing identifies the “key players and agents” of this "practice of fraud" as Duffy, Steele, Steele’s former law partner Paul Hansmeier and Mark Lutz, who the defendants note has been described as a paralegal for Prenda Law, as well as the CEO and manager of AF Holdings, among others.

The defendants contend that Duffy, Steele and Hansmeier are “responsible for directing the activities of Prenda Law and AF Holdings litigation through a retinue of misappropriated identities, aliases, shell corporations, sham plaintiffs, straw defendants and local ‘of Counsel’ attorneys.”

All four of these "key players and agents," according to the amended counterclaim, exercised their Fifth Amendment right against self-incrimination when they were called to testify in a California case about their involvement in AF Holdings and the appropriation of Cooper’s identity.

The first count of the defendants’ amended counterclaim seeks declaratory judgment pursuant to Minnesota’s Anti-SLAPP statute, which aims to protect citizens in lawsuits that intend to prevent public participation.

“A review of the complaint filed by Godfread on behalf of Cooper confirms that their conduct was genuinely aimed at procuring favorable government action, e.g. obtaining relief from the Minnesota court for the theft of Alan Cooper’s identity,” the filing asserts.

The second count of the amended counterclaim is for invasion of privacy based on the defendants' contention that Prenda Law and Duffy “have appropriated Cooper’s name for their own benefit.”

The amended counterclaim also includes counts for civil conspiracy and defamation, the latter of which stems from affidavits Prenda Law filed in a different lawsuit.

Those affidavits include statements from Steele’s brother-in-law and an acquaintance of Steele and Cooper about Cooper having a mental illness, a claim the defendants assert is “unsubstantiated and untrue.”

In addition, the defendants’ amended counterclaim includes a count for abuse of process in that Duffy and Prenda brought the defamation suit for “improper and unlawful purposes.”

Godfread and Cooper seek statutory, exemplary and punitive damages on their counterclaim, as well costs of the action.

Also at today’s hearing, Russell told Darrah she accidentally filed her reply to the plaintiffs’ response to her sanctions motion late and asked that it be deemed timely filed.

The defendants last month asked Darrah to impose sanctions on Prenda Law and Duffy for “lying to court officials, presenting false documents … and at all times following a course of action from which any reasonably prudent attorney would run.”

Among other allegations, the defendants claim that when the defamation suit was still pending in St. Clair Circuit Court, Prenda Law’s local counsel, Belleville attorney Kevin Hoerner, made misrepresentations to 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 helped further Prenda Law's argument that the suit should be remanded back to state court because the additional plaintiff destroyed diversity of citizenship since the defendants are also from Minnesota.

The defendants, however, did not ask Darrah to sanction Hoerner in their request under Rule 11, which allows courts to impose sanctions.

In response, Duffy and Prenda Law dubbed the defendants’ motion for sanctions as “a quagmire, short on substance and made up almost entirely of invective, pejoratives, and ad hominem attacks.”

He asked Darrah to deny the defendants’ sanctions motion, saying that it violated Rule 11, failed to cite a valid basis for the imposition of sanctions, contained false representations and misstated applicable law.

In their recently-filed reply brief, the defendants assert that Duffy and Prenda Law failed to withdraw their position over the amended complaint, waived Rule 11’s 21-day safe harbor provision and misrepresented the law, among other reasons, and as such, should be sanctioned.

If Darrah decides to deny their Rule 11 motion for sanctions, the defendants asked him in their reply brief to impose sanctions under Section 1927 of the U.S. Code and the court’s inherent authority.

And although they want dismissal of the defamation suit as a sanction, the defendants told Darrah in their brief that if he is not inclined to do so, he should order Prenda Law and Duffy to pay all costs and attorneys’ fees, as well as “a sanction payable to the court in an amount sufficient to deter such future conduct.”