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Defendants in defamation case want Prenda Law, Duffy held in contempt, further sanctioned; hearing slated for Thursday in Chicago

By Bethany Krajelis | Feb 11, 2015

The defendants in an ongoing defamation suit have asked a federal judge to hold Chicago attorney Paul Duffy and the now-dissolved Prenda Law firm in contempt and impose additional sanctions on them for failing to pay a previously ordered $11,000-plus sanctions award on time.

Defense counsel filed the motion in Chicago's federal court on Feb.  6, one day after the deadline for the duo to pay up passed. U.S. District Judge John Darrah set the Feb. 5 date at a Jan. 22 hearing that Duffy did not attend.

At that hearing, Darrah also scheduled a Feb. 12 status hearing to see if Duffy and Prenda comply with his order by paying the defendants the $11,758 in legal fees he handed down as sanctions for the misrepresentations they made in a motion and before him.

Court records show attorneys for the defendants in the defamation case that Duffy and Prenda brought nearly two years ago -- Minnesota attorney Paul Godfread and his client, Alan Cooper-- will present their motion for contempt at Thursday's hearing.

The motion alternatively asks for an order requiring Duffy and Prenda to show cause why they shouldn't be held in contempt for failing to comply with Darrah's Jan. 22 order, which set the deadline to pay the sanctions he agreed to last year and imposed in June.

Duffy previously argued that he didn't pay because he was thought the sanction award was only against Prenda because the June order only listed the firm, not him and the firm. Darrah rejected that argument, but amended his June order last month "in an “abundance of caution” to make it clear the order applies to Duffy and Prenda, jointly and severally.

In his order, Darrah also made it clear that if Duffy and Prenda planned to assert an inability to pay, they would need to file a financial statement from an accountant to verify financial status, as well as records related to the dissolved firm's assets and distributions.

"Prenda and Duffy have made no good faith efforts to comply with the [Jan. 22] sanctions Order," the defendants assert in their recent filing.

"In fact," the motion adds, "they made no efforts at all. No payment has been received. No motion regarding inability to pay has been filed in lieu of payment. No financial statement by a certified public accountant has been filed or tendered by either Prenda or Duffy. All in violation of the Court’s clear and unequivocal [Jan. 22] Order."

Saying that "Prenda and Duffy have flagrantly ignored the Court’s [Jan. 22] sanctions Order as part of a continuing pattern of deception and delay," the defendants' motion contends that "remedial and coercive civil contempt sanctions are appropriate, and likely necessary, in order to maintain the orderly administration of justice in this matter."

The defendants' motion, submitted by Chicago attorney Erin Russell and Massachusetts attorney Jason Sweet, explains that remedial sanctions intend to "compensate the complainant for the contemptuous conduct" and "coercive sanctions aim to coerce
the contemnor’s compliance with a court order."

In seeking additional sanctions, the defendants point Darrah to previous cases against Prenda, a now-dissolved firm that has been accused of creating sham corporations to exploit the courts’ subpoena powers and extort defendants into settling copyright infringement and computer hacking suits.

Duffy is believed to be one of the key players behind Prenda, along with Paul Hansmeier in Minnesota and John Steele in Chicago. They have all been the subject of contempt and sanctions orders, including California Judge Otis Wright II's well-known Star Trek-themed ruling in Ingenuity 13 LLC v. John Doe.

Wright's 2013 ruling in Ingenuity, one of the first to publicly accuse Prenda of creating shell companies and engaging in other misconduct, ordered the firm's principles to pay $1,000 per day, per person, per entity until they paid an attorney's fee award previously entered against them.

And in the Southern District of Illinois, the defendants' motion notes, Prenda and Duffy were held in contempt for not paying more than a quarter of a million dollars in sanctions in Lightspeed Media Corp. v. Anthony Smith, et al.

In that case, U.S. District Judge David Herndon imposed an additional $26,000 in sanctions against Prenda and its principles for not paying the $260,000-plus award the now-retired Judge Patrick Murphy ordered them to pay.

Although the sanctions were upheld by the Seventh Circuit Court of Appeals and the suit was already dismissed, the case remains pending while one of the defendants seeks reconsideration of an order that denied a request for contempt and discovery sanctions against Prenda and its principles.

The defendant in Lightspeed claims Prenda and its principles obstructed discovery to hide evidence showing they had money even though they were asserting an inability to pay the sanctions award.

In his December response, Steele, among other claims, basically accused defense counsel of having a business model in which they "continuously file sanctions motions against anyone associated with copyright enforcement across the country, and hope that the salacious accusations anger a court enough to award" them money.

The defendants in the defamation case assert that Ingenuity and Lightspeed show how that the imposition of additional sanctions have garnered compliance from Prenda. They want Darrah to hold Duffy and Prenda in contempt, and award additional sanctions for failing to pay, specifically a daily fine for each day they fail to pay.

The sanctions issue is just the latest aspect of the defamation case, which began nearly two years ago when Duffy and Prenda filed separate suits in the circuit courts of St. Clair and Cook counties.

Those suits, which are now proceeding together before Darrah in Chicago's federal court, accuse Godfread and Cooper of making false statements about Prenda and its principles on various websites.

Godfread and Cooper fired back with counterclaims, alleging they were sued in retaliation for filing an identity theft suit in Minnesota against Prenda and its principals. Darrah at last month's hearing denied Duffy's request to dismiss the counterclaims.

In seeking sanctions, Cooper and Godfread in September 2013 accused Prenda and Duffy of lying to an employee of the St. Clair County Clerk’s Office to get an amended complaint filed and to Darrah about what U.S. Chief Judge David Herndon said when he denied their remand request in southern Illinois’ federal court.

Since then, the case has almost exclusively focused on the sanctions issue.

This case is one of the last pending lawsuits out there that Prenda has brought. After judges and defense attorneys began accusing the firm and its key players of fraud in court documents, the firm voluntarily dismissed dozens of cases.

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