Deep Dive: Prenda Law Is Dead

Legal Issues

from the no-one's-pining-for-the-fjords dept

Ken White blogs at Popehat. He’s a litigator and criminal defense attorney at Brown White & Newhouse LLP in Los Angeles. His views are his alone, not those of his firm.

All of my coverage of Prenda Law is collected here.

Today the Prenda Law enterprise encountered an extinction-level event. Faced with a federal judge’s demand that they explain their litigation conduct, Prenda Law’s attorney principals — and one paralegal — invoked their right to remain silent under the Fifth Amendment to the United States Constitution. As a matter of individual prudence, that may have been the right decision. But for the nationwide Prenda Law enterprise, under whatever name or guise or glamour, it spelled doom.

Hail, Hail, The Gang’s All Here

The crowd gathered early outside of the courtroom of United States District Judge Otis D. Wright II. As before, the spectators included journalists, former Prenda defendants and their lawyers, law clerks and externs, interested citizens, and Electronic Frontier Foundation activists. The little crowd went awkward-party-foul silent when a team of lawyers and nervous- looking men in suits filed into the courtroom. Some of us glanced at the chart that attorney Morgan Pietz created to see if we could match faces. We soon saw that we could. Bets regarding who would show up in response to Judge Wright’s Order to Show Cause were won and lost with some good-natured cursing.

A swarm of attorneys quickly checked in with the court clerk and took their places. On one side, attorneys Morgan Pietz and Nicholas Renallo looked calm. They had boxes of materials they wouldn’t need, and notes they wouldn’t have to consult. On the other side of the room, eight attorneys prepared to answer Judge Wright’s questions, mostly for naught. In the gallery, Brett Gibbs — unhappy witness at the last hearing before Judge Wright — sat looking sallow and grim. Paul and Peter, the Hansmeier brothers, sat together, looking ridiculously young and out-of-place. Paul Hansmeier’s face was beefy-red. John Steele looked conspicuously slick and immaculate in an impeccable suit, like a corporate executive in a bad Robocop sequel. Paul Duffy, Mark Lutz, and Angela Van Den Hemel stared straight ahead.

Not With A Whimper, But A Bang

At a few minutes past the hour the door to chambers slammed open and Judge Wright marched out and took the bench. Before he sat he strode back and forth once behind his chair, surveying the gallery and running his tongue over his teeth. Then he sat, and called the case. Attorneys announced their appearances — Brett Gibbs, Paul Hansmeier, John Steele, Paul Duffy, Angela Van Den Hemel, and Prenda Law all had counsel, but Peter Hansmeier and Mark Lutz did not. When Paul Hansmeier’s attorney announced Mr. Hansmeier was present, Judge Wright asked where he was. Paul Hansmeier stood. “Front row,” ordered Judge Wright, stabbing a finger at the first row of benches behind Hansmeier’s attorney. John Steele received the same treatment, and sat next to Hansmeier. One of the attorneys pointed out that Peter Hansmeier and Mark Lutz were present but not represented. “Welcome, sir,” Judge Wright said to Peter Hansmeier, not entirely convincingly. “Is there an Alan Cooper — any Alan Cooper present?” asked Judge Wright, referring to allegations that Prenda Law had stolen the identity of a Minnesota caretaker to serve as an officer of dummy clients. No such person was present.

Judge Wright wasted no time. He announced that he was “pleasantly surprised” that the people he had summoned had arrived. “It should be clear this court’s focus has shifted dramatically from litigation of intellectual property rights to attorney misconduct — such misconduct as brings discredit to the profession,” he began sternly. “I have questions for those present — including Mr. Steele. Mr. Steele can choose to answer those questions, or not.”

Steele’s attorney rose and said, in light of the “concerns” that Judge Wright had raised at the March 11 hearing, and “serious allegations” made by Judge Wright, Mr. Steele would be invoking his Fifth Amendment right to decline to answer questions. I expected a murmur in the courtroom, but there was a silence like after a thunderclap. “The word fraud was used,” said Steele’s lawyer. “It should have been,” shot back Judge Wright. Steele’s lawyer gamely continued, saying that Steele was also precluded from answering by the attorney-client privilege. “You think there is a difference between these clients and Mr. Steele?” demanded Judge Wright, referring to allegations that the Prenda Law plaintiffs were mere dummy entities concealing attorney interests in the cases. Steele’s lawyer said there was a real difference, but Judge Wright was clearly unconvinced. He made it clear, though, that Steele didn’t have to answer questions. “He doesn’t have to answer if he thinks it may incriminate him,” said Judge Wright. “I’m not saying that the answers would incriminate him,” protested Steele’s lawyer, thus muddying the question of whether his client was entitled to take the Fifth, “but you leave my client with no choice.”

Judge Wright grew steadily and visibly more outraged. “I want to know if some of my conjecture is accurate — and the only way to know is to have the principals here and ask them questions. This is an opportunity for them to protect themselves,” he said. But Steele’s lawyer confirmed his client would exercise his right to remain silent. Attorneys for Paul Hansmeier, Paul Duffy, and Angela Van Den Hemel confirmed their clients, too, would invoke their rights to remain silent. Judge Wright did not — unless I missed it — confirm whether Peter Hansmeier or Mark Lutz would answer questions.

An Opportunity To Be Heard

Heather Rosing, appearing for Paul Duffy, Angela Van Den Hemel, and Prenda Law, rose and asked Judge Wright for an opportunity to present “about a half hour” of argument on the points in his Order to Show Cause. Look: when you are a lawyer, representing a client, you have to stand up. You have to hold your ground even in the face of a furious federal judge. When a judge is yelling at you, however unsettling it is, you have to hold fast and remember you are there to represent the interests of your client against the terrible power of the court. Heather

Rosing stood up, and has my admiration, whatever I think of her clients.

Judge Wright was uninterested in hearing legal argument, as opposed to testimony or evidence. “My clients have a right to a reasonable opportunity to be heard,” Ms. Rosing protested. “Excuse me?” thundered Judge Wright, probably thinking — not unreasonably — that Ms. Rosing’s clients could have filed briefs in advance to address any legal arguments they had, and that Ms. Rosing’s clients have been evading questions for months. Judge Wright began to count off the questions he wanted answered. “I’m looking for facts,” he said. He wanted to know who directs Prenda Law’s litigation efforts, who makes its decisions, whether there is another Alan Cooper, and what happens with the money Prenda Law makes from settlements. Ms. Rosing answered (wisely, and properly) that she could not personally testify to those things. Why, Judge Wright demanded, did Prenda Law conceal its attorneys’ financial interest in the cases? “There’s no evidence that they have an interest,” Ms. Rosing protested. “Excuse me?” Judge Wright boomed even louder. Were there windows, they would have rattled. “Have you read Paul Hansmeier’s deposition?” he demanded, referring to the bizarre deposition in which Paul Hansmeier failed to explain Prenda Law’s shadowy owners or flow of funds. “I have,” Ms. Rosing said, but stood her ground.

Ms. Rosing suggested that she might file a brief addressing her arguments. “Do so,” said Judge Wright acidly. “We’re done,” he said abruptly, and stormed off the bench. The whole hearing took about fifteen minutes.

Death Comes For Prenda Law

The significance of today’s hearing cannot be overstated.

Yesterday I wrote about the tools Judge Wright had at his disposal to sanction or otherwise punish Prenda Law’s principals. It appears to me he likely won’t invoke his contempt power, but the other remedies — his inherent sanctions power, and referrals to state bars and to the U.S. Attorney’s Office for criminal investigation — remain available. I expect a detailed written order.

By invoking their Fifth Amendment rights, Prenda Law principals John Steele, Paul Hansmeier, Paul Duffy, and paralegal Angela Van Den Hemel have avoided incriminating themselves. In light of the evidence adduced — evidence that Prenda Law may have created sham entities to conceal its lawyers’ interest in litigation, and may have misled courts across the country — that was very likely the smart thing to do. I might have advised it myself if I were representing them. With respect to their individual exposure to potential criminal consequences, it stops things from getting worse, which is often an attorney’s first task.

I’m a criminal defense attorney. I cherish and support the Fifth Amendment. Its invocation here was completely lawful. But its invocation will have catastrophic consequences for the Prenda Law enterprise, which cannot possibly continue. When they appeared today, John Steele, Paul Hansmeier, and Paul Duffy were not merely individuals facing the overwhelming power of the state. They were also officers of the court and, according to the testimony of Brett Gibbs, the very attorneys who directed nationwide litigation for the Prenda Law enterprise. Judge Wright ordered them to answer for the conduct of that enterprise in his court, as he had the right and power to do. Their invocation of their Fifth Amendment rights in the face of that order is utterly unprecedented in my experience as a lawyer. In effect, the responsible lawyers for a law firm conducting litigation before a court have refused to explain that litigation to the court on the grounds that doing so could expose them to criminal prosecution.

However well grounded in the individual rights of Steele, Hansmeier, and Duffy, the invocation eviscerates their credibility as lawyers and the credibility of Prenda Law as an enterprise in every court across the country. I expect that defense attorneys will file notice of if in every state and federal case Prenda Law has brought, through whatever guise or cutout. The message will be stark: the attorneys directing this litigation just took the Fifth rather than answer another judge’s questions about their conduct in this litigation campaign. I expect federal and state judges across the country will take notice and begin their own inquiries. Moreover, Prenda’s lawyers may face adverse consequences from the invocation in Alan Cooper’s counterclaim against them. A defendant’s exercise of the right to remain silent can’t be used against him or her in a criminal case, but it often can in a civil case.

Some inquiries will come quite quickly. In the Northern District of California, where Prenda Law’s Paul Duffy is fighting Morgan Pietz’s demand for attorney fees in a case Prenda Law tried to dismiss, Paul Duffy has asked to appear by telephone, but Judge Edward Chen has rejected the request and ordered Duffy to appear in person on April 18, 2013. Duffy will once again have to decide whether to assert his Fifth Amendment rights. Moreover, he likely now has an irreconcilable conflict with his putative client. He may seek to withdraw before April 18.

The consequences for the individuals behind Prenda Law may arrive slowly — particularly by the standards of Twitter and anxious blogs. But they will come — and they may come from many directions at once.

Prenda Law may still be standing. But it’s dead.

Filed Under: brett gibbs, john steele, mark lutz, otis wright, paul duffy, paul hansmeier, peter hansmeier, prenda
Companies: prenda, prenda law