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Another Day, And Another Smackdown For Righthaven: Told To Pay Up For Misleading The Court

Legal Issues

from the on-the-ropes dept

Fri, Jul 15th 2011 10:52am -

Yes, another day and another judicial smackdown for Righthaven. In the case before Judge Roger Hunt, where he dismissed Righthaven for its sham copyright assignment claims and threatened sanctions against the company, it appears that Judge Hunt was not convinced by Righthaven’s grovelling, that it was all the fault of former in-house attorneys, who failed to disclose that Stephens Media had a 50% stake in the outcome of any of these lawsuits.

Hunt has gone forward with the sanctions, telling Righthaven to pay $5,000 for misleading the court. It seems that defendants in the 200+ other lawsuits now have reasons to ask for similar sanctions against Righthaven as well. In fact, part of this ruling was to get this information attached to every other Righthaven case:

Besides the $5,000, Hunt ordered Righthaven to disclose its original lawsuit contract with Stephens Media in active lawsuits over R-J material. He also ordered that a transcript of today?s hearing, in which he made several negative comments about Righthaven?s conduct, be posted on Righthaven court dockets.

Separately, Judge Hunt publicly bolstered the chances of the attempts to file racketeering charges against Righthaven, under the theory that the company was involved in the unauthorized practice of law:

?In the court?s view, the arrangement between Righthaven and Stephens Media is nothing more, nor less, than a law firm ? which incidentally I don?t think is licensed to practice law in this state ? with a contingent fee agreement masquerading as a company.?

The judge also blasted the arguement from Righthaven that forgetting to disclose Stephens’ Media’s interest in the cases was a mere oversight, by specifically calling out Righthaven CEO Steve Gibson:

Hunt noted it was Righthaven?s CEO, Las Vegas attorney Steven Gibson, who drew up the lawsuit contract between Righthaven and Stephens Media. Defense attorneys have said it was Gibson who signed off on some of the false disclosures and that Gibson is behind the entire Righthaven litigation campaign.

I wonder if Steve Gibson is still trying to peddle his line about how the judges think that Righthaven is “genuine,” and that all these rulings are really about giving guidance to Righthaven copycats.

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Companies: righthaven, stephens media

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Comments on “Another Day, And Another Smackdown For Righthaven: Told To Pay Up For Misleading The Court”

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68 Comments
Ken (profile) says:

Media Conspiracy

I would have liked to see the fine be higher but just the fact Righthaven has now been sanctioned by a Federal Court for lying is a really big deal.

It is shocking to me this is not getting more coverage in the press. You have two major newspaper conglomerates that have been implicated in illegal dealings with Righthaven. This should be as big as a scandal as the Murdock hacking scandal but the main stream media is ignoring it. I suspect the news media is protecting its own and will have to be brought in kicking and screaming.

Jeff Brown (user link) says:

Re: Media Conspiracy

Ken. I disagree, I think that the news media, if left to its own devices, would eat its own children.

In the end most of the resources and bandwidth at this particular moment are being used up by another, larger, juicier and more entertaining News Corp scandal..

The Righthaven debacle is still a pretty boring thing to most people… only those of us that follow IP/Copyright closely are engaged.

The Incoherent One (profile) says:

But of course.

“I wonder if Steve Gibson is still trying to peddle his line about how the judges think that Righthaven is “genuine,” and that all these rulings are really about giving guidance to Righthaven copycats.”

If he thought about it any differently he would have been wrong from the beginning which obviously is not possible.

Ken (profile) says:

Re: Re:

Yeah at first we thought they bought the copyrights outright as well and then we found out they do not control the copyrights at all. They are only assigned the bare right to sue which is what the courts have rejected as a sham.

They are not even a lawfirm however they have set up a contingency fee arrangement with their media partners which amounts to an unauthorized practice of law.

Anonymous Coward says:

But wait...

Where’s Terekhov^H^H^H^H^H^H^H^Hfud_master^H^H^H^H^H^Hbuster complaining that this is all wrong, and that Righthaven isn’t lying because they’re legally in the right?

I mean if they’re right that the sale for just the lawsuit rights can be valid, then they can’t be subject to sanctions!

FUDbuster (profile) says:

Re: But wait...

I’ve made my position known in other threads. I think it probably is unauthorized practice of law and that Righthaven is about to be totally shut down by a ruling to that effect. I also think that Righthaven’s employers are probably going to be on the hook by the time this is all through. And I think the checks they write will be big ones. Nonetheless, I still think the standing and fair use rulings have been wrong.

FUDbuster (profile) says:

Re: But wait...

I think of it this way: The standing issue turns on ownership of the underlying copyrights. That’s the front end of the contract between Righthaven and their assignor. The unauthorized practice of law issue turns on the back end deal, where Righthaven splits the profits with their assignor. It doesn’t matter if Righthaven has standing on the front end since the back end is illegal. No amount of changing their contracts will fix this unless they cut out the back end profit sharing, which they obviously won’t do since that’s the whole point.

FUDbuster (profile) says:

Re: But wait...

As far as the sanctions goes, I’ve said all along that I think Righthaven should be sanctioned for making misrepresentations to the court. Judge Hunt ruled that Righthaven intentionally misled him, and I believe the judge. I don’t think Judge Hunt has a lot of experience with copyright law, but I trust that the man knows when he’s been lied to.

FUDbuster (profile) says:

Re: But wait...

I have to wonder too what Mangano is thinking. He’s now on notice that what he’s doing with Righthaven is possibly the unauthorized practice of law. If all the accusations of it to date didn’t bring the point home, certainly Judge Hunt’s words yesterday should have done the trick. But still, Mangano filed a new complaint the day before yesterday against Mostofi. After what the judge said yesterday, I’ll be amazed if he files another one without first settling this issue. Filing complaints after a judge tells you it’s probably the unauthorized practice of law sounds like a bad plan career-wise.

FUDbuster (profile) says:

Re: Re: Re:5 But wait...

Would damages be an option, or is injunctive relief all you can get in a UPL action? It seems to me that a finding of UPL would lead to damages under other tort theories, like fraud or civil conspiracy. Or do those turn on the standing/ownership issue? I don’t really have a clue how this all works.

Anonymous Coward says:

Re: Re: Re:6 But wait...

I don’t believe UPL is a recognized cause of action in any jurisdiction, and that is why in SC they had to petition the highest court for declaratory and injunctive relief. Moreover, since the petitioners were not injured by Righthaven, they could not have standing to bring a civil suit for damages.

Perhaps a civil RICO action may be the only viable option.

FUDbuster (profile) says:

Re: Re: Re:7 But wait...

Here’s what the petition cites for bringing the action in South Carolina:

Finally, we recognize that other situations will arise which will require this Court to determine whether the conduct at issue involves the unauthorized practice of law. We urge any interested individual who becomes aware of such conduct to bring a declaratory judgment action in this Court’s original jurisdiction to determine the validity of the conduct. We hope by this provision to strike a proper balance between the legal profession and other professionals which will ensure the public’s protection from the harms caused by the unauthorized practice of law.

In re Unauthorized Practice of Law Rules Proposed by S. Carolina Bar, 309 S.C. 304, 307 (1992).

So that confirms that the invitation by the Court is for a declaratory judgment. I don’t see how there’s no injury though. Since the petitioners were the target of this purported UPL, wouldn’t they be injured since they had to defend the illegal suit and that costs money?

It appears there is no private right of action in Nevada:

First, although Nevada has not yet recognized a private cause of action for the unauthorized practice of law, other jurisdictions have recognized such a claim.78 Luckett’s complaint **51 alleges that Doumani ?(lied) to me in telling me that he is a(CA) practicing lawyer,? and also gave Luckett legal advice concerning a pending Nevada Eighth Judicial District Court case. Luckett did not, however, assert that Doumani is not an attorney or that he falsely claimed to be licensed in Nevada, but only that the California State Bar has no record of Doumani as a California-licensed attorney. *74 And as noted above, he later stated that Doumani is a California-licensed attorney. Further, Luckett did not allege that any legal advice given by Doumani proximately caused, or was likely to cause, any damage to Luckett. In addition, although Luckett asserted that the advice was given on the La Concha Motel’s premises, and that the Motel served as a ?front … for this scam,? the Motel could be held liable directly for the unauthorized practice of law only under a theory of respondeat superior, in which case the underlying cause of action must exist.79 Thus, whether or not Doumani is a licensed attorney, Luckett failed to state a claim for the unlawful practice of law.

Jordan v. State ex rel. Dept. of Motor Vehicles & Pub. Safety, 121 Nev. 44, 73-74 (2005).

So I guess the claim has to be brought by the state bar or something like that. It seems to me that the UPL claim is just to get Righthaven to stop practicing law. Damages would come under some other theory, like a RICO action as you say. I don’t really know though. I’ve only been reading about what constitutes UPL, not what it means if it is UPL.

FUDbuster (profile) says:

Re: Re: Re:8 But wait...

Footnote 78 from the Nevada case I cited says that many states do have a private right of action for UPL, and that there is a cognizable injury:

See, e.g., McMahon v. Advanced Title Services Co., 216 W.Va. 413, 607 S.E.2d 519, 524 (2004) (noting that many jurisdictions recognize a private right of action for the unauthorized practice of law, and holding that ?a party who has suffered or may likely suffer a legally cognizable injury, wrong, or other actionable violation of his or her personal legal rights and interests as a proximate result of the unlawful and unauthorized practice of law by another has standing to assert a claim alleging such actual or threatened unlawful and unauthorized practice and seeking relief appropriate to the injury, wrong, or violation?); see also Paso Builders, Inc. v. Hebard, 83 Nev. 165, 172, 426 P.2d 731, 736 (1967) (recognizing that whether or not a claim for negligence per se based on the unauthorized practice of law is viable in Nevada was of no import when the conduct complained of did not proximately cause any damage).

FUDbuster (profile) says:

Re: Re: Re:9 But wait...

I see. The petitioners are CALA and Lowcountry 9/12 Project. Lowcountry’s website is run by Eiser, and she was sued by Righthaven for content on the Lowcountry website: http://ia700300.us.archive.org/14/items/gov.uscourts.scd.178965/gov.uscourts.scd.178965.1.0.pdf

It’s not exactly clear to me that Lowcountry wasn’t injured somehow via Eiser. It probably doesn’t matter though since damages don’t appear to be available for UPL under the Court’s invitation for only declaratory judgment actions.

FUDbuster (profile) says:

Re: Re: Re:8 But wait...

That West Virginia case cites other jurisdictions:

Our research indicates that in cases from a number of jurisdictions, courts have recognized the right of plaintiffs to predicate claims for damages and other relief upon allegations of the unauthorized practice of law by a defendant. See, e.g., Armstrong v. Brown Service Funeral Home West Chapel, 700 So.2d 1379 (Ala.Civ.App.1997) (claims for damages and class action relief for unauthorized practice held cognizable); American Abstract and Title Co. v. Rice, 186 S.W.3d 705, 2004 WL 1354273 (Ark. June 17, 2004) (unfair trade practices and class action claims cognizable, existence of State Bar Committee on unauthorized practice did not oust trial court of jurisdiction); accord, Speights v. Stewart Title Guaranty Co., 186 S.W.3d 715, 2004 WL 1354279 (Ark. June 17, 2004); Herman v. Prudence Mutual Casualty Company, 41 Ill.2d 468, 244 N.E.2d 809 (1969) (plaintiff could seek injunctive relief against unauthorized practice); Kim v. Desert Document Services, 101 Wash.App. 1043, 2000 WL 987005 (Div. 1 2000) (unpublished) (plaintiffs could bring private action asserting unauthorized practice of law), review denied, 142 Wash.2d 1026, 21 P.3d 1149 (Wash.2001); J.H. Marshall & Associates v. Burleson, 313 A.2d 587 (D.C.1973) (individual plaintiff had standing to seek injunction against unauthorized practice of law); Dressel v. Ameribank, 468 Mich. 557, 664 N.W.2d 151 (2003) (plaintiffs asserted class action claim for unauthorized practice); accord, Perkins v. CTX Mortgage Co., 137 Wash.2d 93, 969 P.2d 93 (1999); but compare Reliable Collection Agency, Ltd. v. Cole, 59 Haw. 503, 584 P.2d 107 (1978) (statute prohibiting unauthorized practice of law did not confer standing).

McMahon v. Advanced Title Services Co. of W. Virginia, 216 W. Va. 413, 417 (2004).

FUDbuster (profile) says:

Re: Re: Re:8 But wait...

First, although Nevada has not yet recognized a private cause of action for the unauthorized practice of law, other jurisdictions have recognized such a claim.

I read into that the possibility that the Nevada Supreme Court could recognize a private cause of action for UPL in the future. Perhaps Righthaven will be the first.

Karl (profile) says:

Re: Re: Re:4 But wait...

I don’t really know if they have an action against Mangano and Gibson personally, or just Righthaven. Good question.

In theory it is just against Righthaven. However, the SC case specifically requests a “piercing of the veil,” i.e. the ability to hold the owners of Righthaven personally accountable (which would be Gibson and the Stephens Media financiers, though I don’t think Magnano would be hit).

Judges have to grant this explicitly, from what I understand. They do so based on the theory that the individuals are responsible for the actions of the company; and that the business itself can’t afford the damages and fees, so without the “veil piercing,” the prevailing party wouldn’t get relief. This seems to be the case here, so I would not be surprised if this was granted.

Of course, I got this from reading the Eiser filing, so who knows if it’s accurate.

Ken (profile) says:

Re: Re: Re:2 But wait...

It is being argued that Righthaven is also guilty of UPL because they are sharing to what amounts to a contingency fee with both Stephens Media and MediaNews Group. Their are rules barring lawyers from sharing fees with non-laywers. Doing so has been ruled in other cases to be an UPL on the part of the non-lawyer since they are essentially getting paid for legal services that they are not licensed to perform.

G Thompson (profile) says:

Re: Re: But wait...

I’ve been thinking the exact same thing.

Especially since Mangano has an absolute duty (legally and ethically) as an officer of the court. This is something that most clients don’t realise when dealing with lawyers, they have the duty to the client yes, but they also have to weigh that up with a duty to the court as well. Not sure what can occur to him at moment, or how much he is skirting on gray areas, [USA attorney rules are not my forte thankfully] but if I was him I would be getting my own counsel on obligations and how to CTOA (Cover Thyne Own Arse)

FUDbuster (profile) says:

Re: Re: Re: But wait...

Mangano should look at Nevada Rules of Professional Conduct 1.16(a)(1):

Rule 1.16. Declining or Terminating Representation.

(a) Except as stated in paragraph (c), a lawyer shall not represent a client or, where representation has commenced, shall withdraw from the representation of a client if:

(1) The representation will result in violation of the Rules of Professional Conduct or other law;

http://www.leg.state.nv.us/courtrules/rpc.html

So if the representation results in a violation of the law (like here where the representation results in UPL), then that lawyer must terminate the representation.

Anonymous Coward says:

Re: Re: Re:2 But wait...

Thanks for that. Pretty similar to Australia’s conduct codes as well (I’d be surprised if they weren’t actually)

Reading through (and it’s not the most readable html file *bleg*) 2 things jumped out at me as well.

Rule 1.13. Organization as Client.
(b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law that reasonably might be imputed to the organization, and that is likely to result in substantial injury to the organization, then the lawyer shall proceed as is reasonably necessary in the best interest of the organization. Unless the lawyer reasonably believes that it is not necessary in the best interest of the organization to do so, the lawyer shall refer the matter to higher authority in the organization, including, if warranted by the circumstances, to the highest authority that can act on behalf of the organization as determined by applicable law. [emphasis added]

AND lets not forget

Rule 3.1. Meritorious Claims and Contentions
&
Rule 3.3. Candor Toward the Tribunal.

As I said, My advise to Mr Mangano would be to seek external counsel ASAP and be prepared for a long and excruciating public audit of your role.

I actually feel for the guy, especially if he is being set up, as it seems, as a scapegoat.

FUDbuster (profile) says:

Re: Re: Re:3 But wait...

The part right after the section you quoted is the good part. If Mangano goes to Gibson and tells him it’s UPL, and Gibson refuses to stop, then Mangano “may reveal information relating to the representation whether or not Rule 1.6 permits such disclosure, but only if and to the extent the lawyer reasonably believes necessary to prevent substantial injury to the organization.” So he can spill the beans publicly, including information that he couldn’t otherwise reveal under the duty of confidentiality. The reason he can do this is because he represents Righthaven, not Gibson or anyone in Righthaven. Mangano’s duty is to the company.

FUDbuster (profile) says:

Re: Re: Re:4 But wait...

If I’m reading that right it’s kind of crazy. If Mangano thinks Righthaven is committing UPL that the UPL will substantially hurt Righthaven, then Mangano has a duty to try and get the administrators of Righthaven to stop. And if they refuse to stop, then Mangano can (if he wants to; he can also choose not to) reveal information about the company and the crime. So Mangano could be instrumental in bringing down Righthaven.

Honestly though, I don’t see how Righthaven can pursue its cases after Judge Hunt said this: “In the court’s view, the arrangement between Righthaven and Stephens Media is nothing more, nor less, than a law firm ? which incidentally I don’t think is licensed to practice law in this state ? with a contingent fee agreement masquerading as a company.” How in the world can Righthaven pursue their cases with this hanging over them? Gibson’s got to be worried. I bet he and Mangano haven’t slept well the past couple days.

Daniel Webster's Devil says:

Re: "Sanctions"

Why can you get fined hundreds of thousands for copyright infringement, and a lawyer gets a $5K “sanction”?

http://ssrn.com/abstract=976478

“Many legal outcomes can be explained, and future cases predicted, by asking a very simple question: is there a plausible result in this case that will significantly affect the interests of the legal profession (positively or negatively)? If so, the case will be decided in the way that offers the best result for the legal profession.”

It’s a good ol’ boys and girls club, judges and lawyers together.

Ken (profile) says:

Punishment will be far more than $5000

It may only be $5000 but the net effect is going to be devastating to Righthaven. Judge Hunt also gave a lot of ammunition to current and past victims. Righthaven regardless of whether they stay in business or not will be fending off a swarm of lawsuits for years to come. If they go bankrupt then Stevens Media and MediaNews group will be on the hook so don’t be surprised if these media companies artificially prop up Righthaven to shield themselves from liability.

Anonymous Coward says:

Re: ?That Which Does Not Kill Me, Makes Me Stronger?

If they are such thieving pirates why can’t the publishers bring suit and prove damages? Why do they need to rely on Righthaven as a proxy plaintiff to seek statutory damages? Usually when there has been theft it is easy to prove damages, yet every judge who has ruled on the merits has found no injury.

FUDbuster (profile) says:

Re: Abuse of Process

I agree that Righthaven instituted the suits for the ulterior purpose of coercing a nuisance settlement, but did Righthaven really have no basis in bringing the suits in the first place? Wouldn’t you have to show that Righthaven knew it didn’t have standing? It seems to me they really believed they had standing when they brought suit. What’s the argument that they didn’t?

Anonymous Coward says:

Re: Re: Abuse of Process

Righthaven knew the assignment was a sham and that is precisely why the SAA and the profit sharing agreement was never disclosed. In fact, in CIO’s show cause hearing Mangano lied to Judge Mahan and claimed he didn’t know if the copyright had been assigned to anyone.

FUDbuster (profile) says:

Re: Re: Re:2 Abuse of Process

I think you’re making the logical leap that the lying to the court was because Righthaven knew they didn’t have standing and it was a sham. Perhaps they were just lying to keep Stephens Media’s share in the profits a secret for some other reason. I think it’s a bit of an uphill battle to show that Righthaven knew the assignments were shams. As far as Mangano goes, isn’t it possible that he himself had not seen the SAA at that point and that he might really not have known?

Anonymous Coward says:

Re: Re: Re:6 Abuse of Process

There is certainly a colorable claim for abuse of process and no one knows what will be revealed through discovery. Democratic Underground filed its counterclaims predicated on a theory and without any proof that Righthaven and Stephens Media had a profit sharing agreement. But look what came out of discovery. Of course you can sit there and question every single allegation simply because an alternative theory may be presented. My response is so what.

FUDbuster (profile) says:

Re: Re: Re:7 Abuse of Process

I get ya. I was just wondering if there was anything more than speculation at this point to believe it is abuse of process. Sounds like you’re banking on information coming out later to back the claim. Maybe that’ll happen. I don’t pretend to know. I was just wondering what reason there is now to think it. You’re right about Democratic Underground. I really didn’t think anything would have come from the counterclaim. Boy was I wrong about that.

Anonymous Coward says:

Abuse of Process

I am amazed that under Nevada law anyone filing a frivolous lawsuit with the intent to exact a settlement is guilty of abuse of process. In other states you need a lot more to be liable for this tort. No wonder Stephens Media wanted to hide behind Righthaven. Injured parties are entitled to compensatory and punitive damages, which means Gibson, Mangano and Stephens Media have a whole lot of checks to write in the coming months.

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