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Defendants in Prenda Law's defamation suit ask judge to deny motion to dismiss counterclaim

By Bethany Krajelis | Dec 4, 2013

The defendants in a defamation suit brought by the now-dissolved Prenda Law firm and its former sole officer assert they have pleaded sufficient facts to advance their counterclaim.

In documents filed late last month, defendants Paul Godfread and Alan Cooper ask U.S. District Judge John Darrah to deny Chicago attorney Paul Duffy’s motion to dismiss their amended counterclaim and grant them any other relief he deems proper.

Duffy represents himself and Prenda Law, which dissolved this past summer, in the defamation suits they brought earlier this year against the two Minnesota men in the circuit courts of Cook and St. Clair counties.

The suits were later removed to Chicago’s federal court, where Godfread, an attorney, and his client, Cooper, are being represented by Chicago attorney Erin Kathryn Russell and Massachusetts attorney Jason Sweet.

Prenda Law and Duffy sued Godfread and Cooper, as well as 10 potential John Doe defendants, for allegedly making false and defamatory statements about them in a Minnesota lawsuit and on various websites.

Godfread and Cooper shot back, filing a counterclaim, which was later amended, that asserts the defamation suit was brought in retaliation for an identity theft suit they brought against Prenda Law and its principles over the alleged theft of Cooper’s identity.

The identity theft issue focuses on the allegation 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 one of the defendants’ previous court filings, was the predecessor in interest to Prenda Law.

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.”

The defamation suit is one of several cases across the nation involving Prenda Law that as it has proceeded through the court system, has begun to narrow in on the practices and strategies behind the firm’s copyright suits.

Parties in many of these cases have accused the firm and its principles of creating shell corporations in order to bring suits against alleged hackers of their clients’ websites, many of which are porn-related, and then try to push them into settling by threatening to identify and sue them.

In September, Godfread and Cooper filed an amended counterclaim that identified 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 say has been described as a paralegal for Prenda Law, as well as the CEO and manager of AF Holdings, among others.

Their counterclaim includes counts under Minnesota’s Anti-SLAPP statute and for invasion of privacy, civil conspiracy, defamation and abuse of process.

Duffy in October filed a motion to dismiss the amended counterclaim, asserting that the defendants “fail to articulate a single basis upon which the Court may grant them relief.” He also noted that the defendants’ “allegations are to a great extent implausible and baseless conspiracy theories.”

In his motion to dismiss the amended counterclaim, Duffy argues that Godfread lacks standing to allege the claims because he has not suffered any harm and has no connection to them, specifically those relating to the alleged theft of Cooper’s identity.

Duffy also contends the counterclaim should be dismissed because neither he nor Prenda Law can be liable for Steele’s alleged misappropriation of Cooper’s identity. He also contends that Godfread and Cooper are trying to combine 12 separate entities “into a single, fictitious entity which they seek to swap out for the actual, named Plaintiff.”

In his motion, Duffy identifies those 12 entities as: Prenda Law; Steele Hansmeier; Steele; Paul Hansmeier; Peter Hansmeier; Alan Mooney; Alpha Law Firm; Duffy Law Group, Law Offices of Paul Duffy; Anti-Piracy Litigation Group Inc.; AF Holdings LLC; and Ingenuity 13 LLC.

Duffy further claims that there are no allegations in the amended counterclaim over conduct that can be “directly attributable” to him and that the defendants have failed to show why he “should be held liable for the conduct they attribute to their 12-entity construct.”

In their response opposing the motion to dismiss, attorneys for the defendants disagree with Duffy’s various arguments.

They claim that Duffy, in defending against the counterclaim, “seeks to backpedal in its analysis by severing the agency link between an attorney and his client and to differentiate between harm to an agent and harm to a principal.”

Asserting that Godfread does have standing in bring the counterclaim, the defendants argue that Duffy’s filing of the defamation suit has caused the Minnesota attorney “to incur substantial attorney’s fees and costs” to defend against the litigation.

“Plaintiff knew that Godfread would incur such costs of defense when it filed” the suit, the defendants assert in their latest filing. “This is an individual harm Godfread has standing to bring, and cannot be dismissed.”

The defendants also claim that Duffy fails in arguing that their counterclaim under Minnesota’s Anti-SLAPP statue should be dismissed because the statements at issue bear no relationship to an attempt to procure a favorable government result.

They, however, assert otherwise, claiming that the timing of the defamation suit, “the speed with which it was filed,” and the damages demand is evidence of retaliatory intent.

“Further evidence of Plaintiff’s vindictiveness can be taken from their continued prosecution of its claims against the defendants,” the defendants contend.

Godfread and Cooper add that their counterclaim, “demonstrates that it was ‘genuinely aimed ... at procuring favorable government action and therefore falls within the protection of anti-SLAPP.”

In regards to Duffy’s argument that the counterclaim fails to allege conduct that can be directly attributed to him, the defendants point to findings and orders in other cases involving Prenda Law that mention the “copyright litigation scheme” and note that Cooper’s identity was stolen.

“While we may never know the specific, individual actions taken by Duffy, it does not preclude a finding that the acts of one member of the Plaintiff are attributable to all,” the defendants assert.

They add in their filing that, “There exists an increasingly vast body of legal opinions and court orders confirming that Mr. Cooper’s name was forged, that he was the victim of identity theft, and that Duffy, Prenda and its principals were engaged in a vast corrupt enterprise designed to line their own pockets with the proceeds of copyright litigation brought, in many instances, under false and fraudulent pretenses.”

The defendants further argue they have pleaded sufficient facts to advance their claim that Duffy and Prenda Law misappropriated Cooper’s identity for financial gain.

“It is astonishing that Duffy would resort to the preposterous argument that somehow Prenda’s bungling and inept handling of the theft of Mr. Cooper’s identity in any way affects the fact that it occurred or that it was perpetrated for the purpose of financial gain by Duffy, Prenda and its principals, John Steele and Paul Hansmeier,” they claim.

In their opposition to Duffy’s motion to dismiss the counterclaim, Godfread and Cooper assert that by using Cooper’s name, Prenda has brought suits across the country and collected “millions of dollars in settlements over the course of a couple of years.”

“It takes a special brand of hubris to file a motion to dismiss claiming that this enterprise was not embarked upon for financial gain,” the defendants assert. “Financial gain was its sole purpose.”

The most recent docket entry in the case shows that Duffy has until Dec. 13 to file a reply to the defendants’ response to his motion to dismiss the amended counterclaim. It also shows that a Feb. 26 status hearing has been reset to March 5.

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