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Defense attorneys: Prenda litigation is ‘unbelievable,’ ‘just epic’

By Bethany Krajelis | Dec 23, 2013

To an outsider, documents filed in copyright infringement suits brought by the now-dissolved Prenda Law and its associated firms may read like a legal thriller.

Over the past few years, these lawsuits, as well as the affidavits, motions and orders filed in state and federal courthouses spanning from California to Florida, have culminated into what one defense attorney described as an epic saga.

These cases, however, are far from fiction for the thousands of people who have faced the threat of litigation, those who have been sued and the attorneys representing them.

“You could really write a book on it,” said Laura Beasley, a Belleville, Ill. attorney. “It’s unbelievable.”

Beasley has handled cases for dozens of “John Does” accused of illegally downloading pornography by various companies represented by Chicago-based Prenda Law, which dissolved this past summer, and firms with ties to it, like Steele Hansmeier, Alpha Law Group and Anti-Piracy Law Group.

While some of these suits are against named defendants, many of them list potential John Doe defendants because the plaintiff companies only know the Internet Protocol (IP) addresses allegedly associated with the downloads, as opposed to their actual identities.

Like many of the defense attorneys involved, Beasley said she didn’t know much about Prenda’s practice behind its nationwide litigation, but has quickly come to the conclusion that she has “never seen anything like it before.”

Massachusetts attorney Jason Sweet said the business model believed to have put millions of dollars into the pockets of the attorneys representing the plaintiffs is “so convoluted” and describes the evolving “saga” as “just epic.”

Sweet said he first got involved in defending these types of suits in 2010, before the Chicago firm of Steele Hansmeier dissolved and became Prenda’s predecessor-in-interest.

As the years have passed, Sweet, who represents John Does and named defendants, said details have surfaced, spurring sanctions orders against the plaintiffs’ attorneys for conduct described by a few federal judges as “brazen misconduct and relentless fraud.”

While strongly-phrased judicial findings, several sanctions orders and referrals to state and federal agencies would make a “sane person” stop, Sweet said attorneys with ties to Prenda don’t seem to be fazed as they continue to push their suits and appeal rulings.

“I don’t know why they keeping going,” he said. “But, I’m not surprised by anything they do anymore.”

The plot
The story behind these suits apparently started in 2010, when the plaintiff companies began accusing IP address owners of hacking into their computer systems and illegally downloading porn.

At some point, Steele Hansmeier dissolved and passed on its business model to Prenda Law, which began ­subpoenaing Internet Service Providers (ISPs) in attempt to obtain information about the IP addresses they alleged engaged in copyright piracy.

In a 2012 Forbes article, attorney John Steele of Steele Hansmeier said he’s “considered the original copyright troll,” a somewhat derogatory term that refers to parties who enforce copyrights to make money.

The article notes that Steele “claims to have come up with the idea of pursuing people for illegal downloads while in law school at the University of Minnesota” with Paul Hansmeier.

“When we were in law school, we could look at the router and see people ripping movies and songs. We thought, ‘Wouldn’t it be amazing if we could find a way to identify these people and go after them?’” Steele said in the Forbes article. “Adult entertainment companies were the only ones that would work with us.”

Characterizing the illegal downloading of copyrighted porn as “a huge problem,” Steele said in the article that “I think we’ve made a difference. Otherwise, we wouldn’t have made so many people so mad.”

The practice has definitely have angered some people, including an online community that has created a handful of websites and blogs dedicated to sharing the latest information on these cases.

Defense attorneys have described one aspect of Prenda’s practice –sending John Does letters that accuse them of illegally downloading specific porn movies and inform them they can either settle the matter or be sued – as extortion.

The attorneys contend these letters offer their clients the “opportunity” to settle the matter for a few thousand dollars or face the shame of being identified in a lawsuit over porn and the possibility of having to pay even more if they go to trial.

In a well-known affidavit filed in a Minnesota case brought by Guava LLC, Spencer Merkel explained that he received one of these letters from Prenda Law in 2012.

Prenda’s letter, Merkel wrote, explained that experts for its client used “sophisticated computer software to capture illegal downloading activities” and that these “experts preserved a piece of the file that the user of your IP address distributed to other infringers.”

Merkel asserted that when he called the number on the letter to explain he couldn’t afford to pay the $3,400 settlement, he was offered a different deal.

“I would agree to be sued,” Merkel wrote in his affidavit, adding that Prenda Law would then “ask for, and I would provide, a copy of the bit-torrent log from my computer. The excuse for gathering this log is that it would corroborate the IP address evidence that they had already gathered through the use of Prenda’s software.”

Merkel claimed it was only after subpoenas were served in the case against him that he learned of Prenda’s “practice of finding one John Doe to be a named defendant, and then discovering the names of and requesting settlement money from other John Does by issuing subpoenas to ISPs.”

In the Forbes article, Steele was cited as saying, “Critics say we never actually file suit against people, just get their information, then pressure them to settle. But we’re prepared to fight if you don’t want to settle.”

The characters
The web of characters on the plaintiffs’ side includes attorneys Steele, Hansmeier and Paul Duffy, among others, as well the firms they have been associated with: Prenda Law, Steele Hansmeier, Minnesota-based Alpha Law Firm and Anti-Piracy Law Group in Chicago.

In addition to several others, plaintiff companies like AF Holdings LLC and Ingenuity 13 LLC are also part of the web. These two companies have been called out as fakes by judges who suggest they were created for the sole purpose of bringing these suits.

There’s also Brett Gibbs, who served as of counsel to Steele Hansmeier and then Prenda Law, and Mark Lutz, who has been identified in documents as a paralegal for Prenda Law, the CEO and manager of AF Holdings and a corporate representative of Prenda-client Sunlust Pictures.

After submitting an affidavit in the Central District for California’s federal court, Gibbs testified in March he eventually quit and said anything that may have been improper in these cases was done under the direction of his superiors.

In response to a question from U.S. District Judge Otis Wright II over whether he felt like he was duped by Steele and Hansmeier, Gibbs said, “In a way, yes.”

Wright sanctioned Gibbs, Steele, Hansmeier and Duffy in a May order that included several Star Trek references and has been cited in several other Prenda-related cases since.

Lutz, however, appears to be playing the “man of mystery” character in Prenda’s story.

When he testified in a case in Florida, Lutz identified himself as a corporate representative of Sunlust, but could not name any of its officers or the person who signs his checks.

In a March deposition, Hansmeier described Lutz as the only employee of AF Holdings, a company that has been accused of being a sham.  He said Lutz was not compensated for his position at AF Holdings, which he also testified was owned by a trust, another aspect of the story that remains somewhat of a mystery.

Documents show Lutz has failed to attend court appearances in a few different courts, which has left several attorneys, including Erin Kathryn Russell in Chicago, to consider “Where is Mark Lutz?” one of the main questions in this litigation.

The large web of characters and companies involved in the litigation has forced some attorneys to use a flowchart-of-sorts at hearings to help describe the players and evolving plot. Wright included one in his sanctions order.

Russell said she has her own version of a flowchart on a board she likened to the wall of photos, maps and clues that the CIA agent played by Claire Danes on the Showtime series, “Homeland,” used to track a terrorist plot.

Among other clients, Russell represents Alan Cooper, a man who is also part of the defense’s list of characters, along with his attorney, Paul Godfread. Sweet represents these two Minnesota men with Russell.

Cooper, who served as a caretaker for some of Steele’s property in Minnesota, sued Steele, Prenda, AF Holdings and Ingenuity 13 for identify theft after finding out his name was used as an officer of AF Holdings without his approval.

Duffy and Prenda Law then sued Cooper and Godfread for defamation in two state courts in Illinois. Russell and Sweet assert the defamation suits now pending in Chicago’s federal court were brought in retaliation for the identity theft suit.

Besides numerous attorneys, another character on the defense side is collectively played by several ISP providers, including Comcast and Verizon, which have fought subpoenas seeking identifying information about the owners of IP addresses.

Evolving storyline
As these suits have worked their way through the system over the past few years, the plot has only thickened and become more complex.

Not only do some defense attorneys claim attorneys with Prenda-ties created sham companies in order to bring the suits, but some further allege they planted the porn online to induce infringement.

Attorneys and ISPs have also accused Prenda attorneys of colluding with some defense counsel to obtain agreed orders in an attempt to exploit the court’s subpoena power and find more potential defendants.

Florida attorney Graham Syfert said every time he thinks the Prenda saga is nearing an end; “another juicy story” comes out.

“Any rock you flip over there is something underneath it,” said Syfert, who represents the defendant in the Sunlust case, which he declined to discuss.

He also represents the defendant in another Florida case, in which he submitted a declaration from expert witness Delvan Neville, who said Steele is linked to the account that uploaded porn content to a download site.

Given that he hasn’t seen any new cases filed in some time and the skepticism raised by several judges, Syfert said he considers the business model used by Steele Hansmeier and Prenda Law to be dead.

“They won’t be doing it like this” anymore, he said, noting that while he expects Prenda cases to wrap up in a few years, he can’t help but wonder “what are they working on next?”

Sweet said he sees an end in sight for Prenda-related litigation, but isn’t sure how far away it is.

He said plaintiffs’ attorneys managed to get away with their practice for so long because they continued to change their strategies in regards to where they brought the suits and against how many defendants, among other moves.

Russell said even though there are judicial findings calling out Prenda for misconduct, the cases still need to work their way through the system, which can take time.

The right arguments need to be raised and attorneys have to provide judges the evidence required to properly resolve these suits under the law, she said.

And like Syfert, Russell and Beasley wonder what may be up next for their courtroom opponents given that they didn’t seem to lose any steam after being referred to attorney disciplinary agencies, the criminal division of U.S. Attorney’s office in California and the Internal Revenue Service.

“I have no doubt they will come up with something else,” Beasley said. “They like to ride the rollercoaster and go on to the next one.”

This story is the first installment in a series and was first published in Legal Newsline.

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