from the the-big-debrief dept
My past coverage of the Prenda Law saga is here.
There are few things more terrifying to a lawyer than a furious federal judge.
Today I saw one of those things.
It was a federal judge who was furious, intimately familiar with the case, and consummately prepared for the hearing.
Today United States District Court Judge Otis D. Wright II made it explicitly, abundantly, frighteningly clear that he believes the principals of Prenda Law have engaged in misconduct -- and that he means to get to the bottom of it.
It was one of the most remarkable hearings I have ever witnessed.
Today was the hearing on Judge Wright's Order to Show Cause, directing former Prenda Law "Of Counsel" Brett Gibbs to show cause why he -- or others associated with Prenda Law -- should not be sanctioned. (I previously wrote about the circumstances leading up to that order.) The hallway outside Judge Wright's courtroom was crowded half an hour before the hearing -- crowded with lawyers, press, past defendants targeted by Prenda, Electronic Frontier Foundation representatives, and various interested citizens. I didn't know Mr. Gibbs by sight, nor his lawyers, but I guessed when they rounded the corner, looked at the crowd, and assumed facial expressions I'd summarize as aw, this has 'long day' written all over it.
Eventually I counted 42 spectators in the courtroom, not counting lawyers for people present.
Judge Wright Minces No Words
Judge Wright took the bench, grim and stentorian and bow-tied, and immediately commenced to take absolutely no shit from anybody. "I spent the whole weekend reading a deposition," he said, referring to the astounding deposition of Prenda principal Paul Hansmeier. "It is perhaps the most informative thing I have read in this affair so far." There was a collective intake of breath from the onlookers, who guessed that was not a good thing for Prenda Law. They were right. "There was so much obstruction in this deposition that it's obvious that someone has an awful lot to hide," Judge Wright commented later.
Wright began by establishing who was present. To his visible irritation -- if not surprise -- John Steele and Paul Hansmeier and Paul Duffy and their paralegal Angela Van Den Hemel were not present. Heather Rosing, their attorney who had filed a last-minute application seeking to excuse their presence, was there, but Judge Wright was not having any of her. She said her clients were "not physically here" -- implying they were here in spirit, of which I have no doubt. Judge Wright angrily pointed out that she had filed her application late Friday afternoon, very much the last minute. She began to protest that her clients had only been served last Thursday, but he cut her off and directed her to take a seat. She did not participate further in the hearing except to note that her clients were available by phone. Judge Wright did not take the opportunity to give them a call. He noted that he had "extended an offer" for them to attend (a rather gentle description of his order) and that an "opportunity to explain themselves" was all that he was required to give them. I, for one, took this to mean that he would make rulings about their involvement without further input from them.
What followed was three hours of witnesses and legal arguments. I will deal with them thematically rather than chronologically.
The Real Alan Cooper Stands Up And Reveals Threats
One of the most interesting live witnesses was Alan Cooper -- the actual Alan Cooper, who has accused Prenda attorney John Steele of stealing his identity to use as the figurehead executive of Prenda's various "clients." Cooper is a tall, rangy man, dressed modestly today in jeans and a t-shirt, looking a bit like a gray-haired Jim Caviezel. He took the stand at Judge Wright's bidding, and clearly nervous and out of place in the magisterial federal courtroom, told his story. He explained that he took care of two houses Steele owns, and Steele let him stay in one as payment. He knew Steele when Steele was in law school; later he knew Steele to aspire to be a divorce attorney, and then later something else. "Something in . . . internet porn piracy?" Cooper said hesitantly. "Internet porn piracy sounds pretty good," quoth Judge Wright. (In interacting with Cooper, Judge Wright became kindly, but with his anger writhing visibly just below the surface.) Cooper said that Steele bragged of wanting to make "$10,000 a day" by "sending letters to downloaders." Cooper himself is "not very internet savvy" and couldn't say more about the plan.
Eventually, Cooper said, Steele told him words to the effect that if anyone called him about Steele's law firm or anything "out of place," Cooper should call Steele. But Cooper was clear: he never signed anything as an executive for any of Prenda's clients, was never asked to be a representative of any of the Prenda Law client entities, and never agreed to do so. Shown signatures purporting to be his, he disclaimed them. "I use a middle initial," he said, and these signatures did not. He also disclaimed even seeing lawsuits filed using his signature or assignments of copyright bearing his signature in multiple cases. Cooper said that the address Prenda Law used for him wasn't his, and that the firstname.lastname@example.org email address Prenda Law used for him definitely wasn't his. He also wasn't familiar with web sites registered using his name. "No tissues dot com -- or perhaps that's pronounced not issues dot com," said Mr. Pietz, getting the best laugh of the day.
Gibbs' attorney Andrew Waxler tried gamely to object to some of this evidence on the grounds that some of the cases mentioned weren't listed in Judge Wright's OSC. "It's about fraudulent practice in federal court" said Judge Wright in the sort of eerily level tone that makes a lawyer wish the judge were yelling again instead.
The most dramatic part of Cooper's testimony -- and perhaps the most dramatic moment in the hearing -- came when Cooper described what happened when his lawyer Paul Godfread notified Prenda Law that he was suing for the misappropriation of his identity. Within minutes, he said, John Steele began to call him. Steele called many times, and over the course of weeks sent texts and left several voice mail messages. Mr. Pietz played the messages for the court.
In each message, Steele began by telling Cooper that Steele understands that Cooper's lawyer is only representing Cooper in Cooper's lawsuit, not in Steele's and Prenda's and Duffy's lawsuits against Cooper. It's evident that Steele was saying that in an attempt to justify why he would be directly calling a represented party, which lawyers are prohibited from doing by the disciplinary rules of every jurisdiction. In the calls, Steele talked with escalating intensity about how Cooper was now facing lawsuits, that Cooper needed to call Steele to talk about being deposed and responding to discovery, how things were going to "get ugly" now, and how things were now "complicated." On hearing the voice messages, I thought there was only one reasonable interpretation: John Steele was trying to menace and intimidate Alan Cooper to get him to back off from talking about John Steele's use of his name. By the end of the calls, there was a stunned silence in the courtroom, and I suspected that many spectators were sharing with me a deep sympathy for Mr. Cooper and an abiding sense of revulsion for John Steele. Judge Wright rather clearly felt mercy towards Mr. Cooper as well, some of which bled into pointed comments to Brett Gibbs' legal team. "You turn it from the O-F-F position to the O-N position" he said rather sharply when Gibbs' counsel asked how to turn the monitor on their table on.
By the way, someone told me that the Electronic Frontier Foundation may be picking up Mr. Cooper's expenses for flying to Los Angeles. Good for them if that's true.
AT&T and Verizon Say They Didn't Get The Order
Judge Wright also permitted testimony from attorneys for AT&T and Verizon. You may recall that one of Judge Wright's concerns -- to use the mild term -- was the allegation that though he had ordered a stay on discovery in the Prenda Law cases before him and ordered Prenda Law to send his order to the ISPs, Prenda Law did not do so and in fact collected consumer data from the ISPs after Judge Wright's order. Today Verizon filed a declaration directly contradicting Brett Gibbs' assertion that they had been called off. On the stand, attorneys for Verizon and AT&T asserted that their clients never received Judge Wright's order from Prenda Law, and AT&T's lawyer said that Prenda Law paralegal Angela Van Den Hemel continued to contact AT&T seeking the status of the pending subpoenas. It was only after AT&T itself discovered Judge Wright's order on PACER and responded to her that discovery was stayed that she subsided.
Brett Gibbs' attorneys pointed out -- rather reasonably -- that the ISP's attorneys couldn't say of their own knowledge what their clients did or didn't receive, and suggested that ISPs are known for destroying such documents too quickly. (On this point Judge Wright pointed out that it seemed that Verizon had maintained everything else except the purported notification from Prenda Law, and characterized Gibbs' argument as "they eliminate their documents pretty much the way Mr. Gibbs eliminates original documents," which was perhaps not the response Gibbs was hoping for.)
On this point, Gibbs' attorneys represented -- and Gibbs testified -- that the other attorneys of Prenda Law were responsible for handling all subpoena-related correspondence, that Gibbs reported Judge Wright's decision to John Steele and Paul Hansmeier, and that they told Gibbs that they would take care of it, and later claimed they had. But Judge Wright made Gibbs admit that Gibbs found out that the ISPs had produced documents to Prenda Law after Judge Wright's order, and never updated the court about that or amended his prior status report to the court. To put it mildly, Judge Wright was not happy about that.
Client, Client, Who's The Client?
It was clear from the beginning of the hearing that Judge Wright viewed Prenda Law's clients as shams -- as mere instruments of the lawyers involved. "The only entities getting funds are law firms," said Judge Wright. There was "no effort to transmit those funds to the entities," which got "not dime one," and the entities had not filed income tax returns, because they had no income. Wright also pronounced it "very interesting" that Hansmeier's declaration suggested that settlement funds were being moved from one firm's client trust account to another. He demanded of Waxler: "Is that what you get? That's what I get." Waxler responded that Gibbs had no personal knowledge of such things, and suggested that Hansmeier's deposition showed he was the one with knowledge. "Mr. Hansmeier has no knowledge of anything," Judge Wright scoffed, rather accurately depicting Mr. Hansmeier's know-nothing stance at his deposition. There was a nervous titter -- one of many -- in the courtroom.
Waxler suggested that Prenda Law retains the funds to pay litigation expenses for things like forensics. "Like Hansmeier's brother?" Judge Wright shot back, referring to payments to Hansmeier's brother who acted as a computer forensic expert. Waxler later suggested that the funds are used to retain law firms. "They retain firms? Seriously? You can barely keep a straight face!" retorted Judge Wright. Judge Wright concluded that the law firms "basically prosecuted on their own behalf."
All of that is important, by the way, because it goes to the disclosures that litigants must make in filing a federal case. Adam Steinbaugh has a good description of the federal rules requiring lawyers to disclose the parties with an interest in the lawsuits they file or defend. Judge Wright's comments strongly suggested that he believed that Prenda Law's principals were the only beneficiaries of these lawsuits, and that by concealing their interest, they were violating applicable federal rules. Under tough questioning from Judge Wright, Gibbs' attorneys said that Gibbs made no such disclosures because he was aware of no such hidden interests -- he relied entirely on Hansmeier and Steele for client information.
No Crying in Baseball, No Speaking Objections In Los Angeles
Mr. Pietz called a former client, Jessie Nason, who briefly testified that Brett Gibbs sued him in state court on various harebrained substitute-for-copyright state law claims, and that Gibbs had represented to a state court that he was able to identify Nason as a downloader because he lived alone. Nason noted indignantly that he doesn't live alone, he lives with his wife, and therefore it wasn't right to assume that he was the downloader. Dude, I don't think you've thought this plan all the way through. This testimony fell largely flat -- Judge Wright had already clearly formed an opinion that Mr. Gibbs' investigation of the identity of downloaders was insufficient, and Nason's testimony didn't seem to accomplish anything. When one of Gibbs' attorneys objected, at length, Judge Wright rather sternly told him that there are no speaking objections in Los Angeles (meaning you say "objection, irrelevant," and then sit down -- you don't speechify). Damn straight.
Brett Gibbs' Terrible, Horrible, No Good, Very Bad Day
Eventually Gibbs' lawyers called him to the stand. He's a tall, thin, dark-haired young man with a serious expression. He looked appropriately unhappy. I felt bad for him. "Let me be honest with you," he stuttered at one point. "That would be good" said Judge Wright, deadpan.
Gibbs explained that he was hired as an independent contractor -- not an employee -- by Steele & Hansmeier, and later by Prenda Law. He took all his direction from Hansmeier and Steele -- which cases to file, what to do with them, etc. Later, when Judge Wright began to question Prenda Law's approach, he and Hansmeier and Steele together made a "cost benefit analysis" and decided to pull out of cases in this district. I'm sure. Later in January 2013, he said, Hansmeier offered him a job as "in house counsel" at Livewire LLC. This made him, Hansmeier told him, in house counsel of AF Holdings as well, because Livewire LLC owned AF Holdings.
On this point there was a rustling in the audience, where many people remembered that in February 2013 Hansmeier testified in San Francisco that a mysterious "undefined beneficiary trust" owned AF Holdings, not Livewire. Gibbs nervously explained that he was informed that the trust had sold AF Holdings to Livewire, but then learned at the time of the deposition that the transaction had not happened yet, hence Hansmeier's testimony. I'm not sure what that made Gibbs between January and February, but that's neither here not there.
Gibbs explained that he learned that Prenda Law, without his permission or knowledge, was sending out many letters with his signature stamp demanding settlements in cases across the nation. Ever optimistic, he asked Mark Lutz to stop it -- but Lutz unsurprisingly responded that this was a matter for Steele. Gibbs smartened up and quit, substituting out of all California cases and letting Paul Duffy of Prenda Law substitute in.
Quitting under those circumstances sounds reasonable. Yet Judge Wright was aghast that Gibbs knowingly allowed Prenda Law to use his phone number and email address on Prenda Law cases filed in other states across the country by other lawyers. Gibbs explained he was tasked to help those other lawyers, and that he would forward messages to them. "That doesn't sound sensible to me," said Wright, rather understating it.
Judge Wright also questioned Gibbs rather harshly on how he identified downloaders, suggesting that he found Gibbs' methodology (which included looking at maps to determine how far wifi signals from houses might reach) to be entirely insufficient. Judge Wright was looking at different maps. In fact he revealed that he looked up things on Google Earth himself -- a comment that bought him much geek cred in the courtroom. (Pietz had more, by virtue of using an iPad mini to display his exhibits on the monitors, which I regarded as simply showing off.)
I found Gibbs believable as a young attorney out of his depth who fell in with the wrong crowd and made bad choices. But Judge Wright was clearly not entirely satisfied. He quizzed Gibbs on why he didn't file notice of related cases informing the court that the various Prenda Law cases were related. Gibbs responded that courts in San Francisco had said that in Prenda Law cases up there, Prenda improperly joined multiple defendants in the same case even though they should be separate. That, Judge Wright points out, confuses the question of joinder of parties in one case with the question of whether cases are related, as every attorney in the room (save Gibbs') nodded. Ultimately, on this point as on others, Gibbs said that Steele and Hansmeier made the decision.
We're All Perry Mason In Here
In real life, people in the audience in court proceedings do not spring up to make dramatic revelations, because that gets you arrested. Today, it happened. Just after Gibbs testified that he had only limited responsibility for AF Holdings, an attorney in the audience stood and asked to be heard. I cringed, waiting for the kill. But Judge Wright asked him who he was and what he wanted. He identified himself as an attorney for Paul Godfread, who in turn is Alan Cooper's attorney. Gibbs, he said, spoke with him in November 2012 and represented himself as "national counsel" for AF Holdings, one of the Prenda Law clients. Wright shook his head. "Have you noticed," he said in rhetorical tones, "that every representation made by a lawyer with Prenda Law is not true." The lawyer sat back down again. Some might say that didn't bode well for Prenda.
The Road Ahead
Ultimately Judge Wright took the matter under submission, meaning he will rule in writing. "Good luck to you," he said to Gibbs as he stepped down, eliciting more nervous chuckles.
Brett Gibbs is in trouble. I buy him as a dupe here. Indeed, he admitted that "maybe" he felt duped. Yet though he pointed to Hansmeier and Steele as the decision-makers in this travesty, and disclaimed any knowledge of wrongdoing, he and his attorneys seemed oddly reluctant to throw Steele and Hansmeier all the way under the bus. It's more like he handed them a bus schedule and gave them a gentle shove in that general direction. Gibbs continued to argue that it wasn't clear until Cooper's testimony today that the Cooper signatures weren't genuine, a position that drew guffaws in the courtroom and an incredulous expression from Judge Wright. He and his attorneys seemed to want to suspend judgment about whether Prenda committed any misconduct at all -- a tactical error at this point, I think, and harmful to their credibility. The judge interrupted their closing arguing by asking pointedly whether a lawyer -- even if he is supervised by people out of state -- has an obligation to investigate facts himself. Ultimately, Judge Wright did not sound inclined to accept Gibbs' innocent stance.
Wright did not say, explicitly, what he would do about Steele, Hansmeier, Duffy, or the rest of the Prenda Law team. But when Pietz began laboriously to explain the basis for jurisdiction over each of them, Wright cut him short, suggesting that he found the evidence clear. (So, for the record, did I, given the evidence of Steele's contacts with California, Steele's and Hansmeier's supervision of Gibbs in California, and Duffy's substitution into cases in California and membership in the California bar. Their lack-of-jurisdiction argument is borderline frivolous.) I suspect, based on his comments, that Judge Wright will not let the consequences of this situation rest entirely on Gibbs' shoulders. What could he do? He could probably sanction the Prenda Law parties under his inherent authority based on their supervision of Gibbs. But I suspect Judge Wright will go further than that, with criminal referrals and messages to various state bars. There could also be further orders to show cause, or even bench warrants. Judge Wright didn't seem inclined to give them warning. But every indication is that they are in real legal peril.
There's been a lot of anticipation of today's hearing. The hearing lived up to it. It was a disastrous day for Prenda Law.
I'll analyze Judge Wright's order when he issues it.