Righthaven: Blame Our Clueless Lawyer, But Don't Sanction Us, For Failing To Name Stephens Media As An Interested Party

Legal Issues

from the that's-not-going-to-fly dept

The flailing disaster that is Righthaven just got that much more desperate and ridiculous. As you may recall, when Judge Roger Hunt ruled that the Stephens Media/Righthaven copyright transfer was a sham, the part that he got really incensed about (and it seems he was already pretty upset about the bogus transfer), was the fact that Righthaven totally failed to name Stephens Media as having an interest in the outcome of the lawsuit, as required by the law. This is pretty basic stuff that any trial lawyer knows. Judge Hunt called this “factually brazen” and demanded that Righthaven provide an explanation why it shouldn’t be sanctioned:

As shown in the preceding pages, the Court believes that Righthaven has made multiple inaccurate and likely dishonest statements to the Court. Here, however, the Court will only focus on the most factually brazen: Righthaven?s failure to disclose Stephens Media as an interested party in Righthaven?s Certificate of Interested Parties. (Dkt. #5.) Rule 7.1-1 of the Local Rules of Practice for the District of Nevada requires parties to disclose ?all persons, associations of persons, firms, partnerships or corporations (including parent corporations) which have a direct, pecuniary interest in the outcome of the case.? This Local Rule requires greater disclosure than Federal Rule 7.1, which only requires non-governmental corporate parties to disclose parent corporations or corporations owning more than 10% of the party?s stock. Frankly, if receiving 50% of litigation proceeds minus costs (Dkt. #79, SAA Section 5) does not create a pecuniary interest under Local Rule 7.1-1, the Court isn?t sure what would.

Making this failure more egregious, not only did Righthaven fail to identify Stephens Media as an interested party in this suit, the Court believes that Righthaven failed to disclose Stephens Media as an interested party in any of its approximately 200 cases filed in this District. Accordingly, the Court orders Righthaven to show cause, in writing, no later than two (2) weeks from the date of this order, why it should not be sanctioned for this flagrant misrepresentation to the Court.

So, now, Righthaven has filed its response, and I get the feeling it’s not going to satisfy Judge Hunt at all. The response, written by Righthaven lawyer Shawn Mangano, basically throws an unnamed “former in house counsel for Righthaven” under the bus, claiming that he “failed to consider the full scope” of the rules that meant he had to disclose Stephens Media’s monetary interest. This is, frankly speaking, ridiculous. The law is pretty clear:

Unless otherwise ordered, in all cases except habeas corpus cases counsel for private (non-governmental) parties shall identify in the disclosure statement required by Fed. R. Civ. P. 7.1 all persons, associations of persons, firms, partnerships or corporations (including parent corporations) which have a direct, pecuniary interest in the outcome of the case.

The filing insists that Righthaven was not willfully trying to avoid complying with the law and suggests that reasonable minds could differ over the interpretation of the above, because the monetary interest Stephens Media had in the case was “indirect” because money gets paid to Righthaven first, and then Righthaven paid Stephens Media. That may be the most tortured reading of “direct” I’ve ever seen:

Rather, former in house counsel for Righthaven apparently failed to consider the full scope of the “direct, pecuniary interest” language under Local Rule 7.1-1 in failing to list Stephens Media on its Certificate of Interested Parties…. Unlike its federal rule counterpart, Local Rule 7.1-1 does not define what constitutes a direct, pecuniary interest and there is an absence of case law addressing the scope of the required disclosures. While the Court has concluded otherwise, it is certainly understandable how Local Rule 7.1-1 could have arguably been reasonably construed to not require the disclosure of Stephens Media?s interest in any recovery in excess of costs under the Strategic Alliance Agreement (the “SAA”).

The obligation to disclose Stephens Media as an interested party pursuant to Local Rule 7.1-1 was certainly not appreciated by Righthaven’s undersigned outside counsel, who has been licensed to practice before this Court since 1998…. Counsel reasonably viewed any contingent payment to Stephens Media under the SAA as constituting an indirect interest that required a two-step payment process assuming any case resulted in a recovery…. Simply put, receipt of settlement funds through settlement or recovery by the enforcement of a judgment would be made to Righthaven…. Righthaven would then be contractually obligated under the SAA to subsequently pay Stephens Media any recovered sums over and above costs incurred…. Thus, while counsel certainly appreciates the Court’s guidance and will adhere to its decision, there is certainly an arguable and reasonable basis to construe Stephens Media’s pecuniary interest as indirect, and not direct, under the SAA.

Somehow, I don’t think that’s going to fly, at all. The filing goes on to note that the court obviously should have just known about Stephens Media’s interest in the case because there was so much press coverage about it. I’m not sure the point of that. Are they implying that if something is in the news, they don’t have to follow the disclosure law?

Also, as Eric Goldman notes, the filing is extremely disingenuous in that in throwing the “former in house counsel” under the bus, it ignores the fact that Righthaven CEO Steve Gibson signed the complaint in this case (against Democratic Underground), meaning he was taking responsibility for the statements. Furthermore, it doesn’t address the other 270 or so cases Righthaven has filed, all of which have the same problem, and not all of which were signed by the same “former in house counsel.” Indeed, many of those were signed by Mangano himself. And Judge Hunt knows this — which is why he mentioned the other 200+ cases in the question about sanctions.

This is characteristically weak from Righthaven, and it seems likely that the company is about to get slammed hard by Judge Hunt here.

Filed Under: nevada, sanctions, shawn mangano
Companies: righthaven, stephens media