Federal judge calls out Prenda and Duffy for lying in defamation case

By Bethany Krajelis | Feb 4, 2014

CHICAGO - The federal judge presiding over Prenda Law’s defamation suit handed down an opinion Monday, calling out the now-dissolved firm and Chicago attorney Paul Duffy for lying, engaging in duplicitous behavior and “grasping at straws” in their unsuccessful arguments against sanctions.

U.S. District Judge John Darrah’s memorandum opinion comes nearly two weeks after he granted the sanctions request from Minnesota attorney Paul Godfread and his client, Alan Cooper, the defendants in the consolidated defamation suit.

Chicago attorney Erin Russell, who represents the defendants along with Jason Sweet in Massachusetts, has until Thursday to submit an itemization of fees. She said today she is still crunching the numbers, but expects the total will be “substantial."

Saying that "Darrah acknowledged the wrongdoing started in the Southern District and continued up here,” Russell said her fees will include the time she spent on the sanctions and remand motions, the latter of which were fought in two different federal courts.

Once she files the itemization of fees, Duffy, who is representing himself and the now-dissolved Chicago firm in the matter, will have until Feb. 20 to respond and Russell will have to reply by Feb. 27.

But, if the previous actions of the firm and attorneys with ties to it – Duffy, Paul Hansmeier and John Steele -- are any indication, the end of the briefing schedule and Darrah's subsequent order setting the sanctions amount will likely just mark the beginning of an appeal.

In his recently-released opinion, Darrah noted that “Prenda, Duffy and his affiliates are well known to this Court and many other courts around the country,” a few of which have found that they “have shown a relentless willingness to lie to the Court."

Duffy, Hansmeier and Steele have been accused of being in cahoots in a nationwide litigation practice some defense attorneys and judges say included creating sham corporations, exploiting the courts’ subpoena powers and extorting defendants into settling computer hacking and copyright infringement suits.

In September, Godfread and Cooper asked Darrah to impose sanctions on Prenda and Duffy for “lying to court officials, presenting false documents … and at all times following a course of action from which any reasonably prudent attorney would run.”

Duffy, in response, offered a handful of arguments in opposition and referred to the sanctions request as “a quagmire, short on substance and made up almost entirely of invective, pejoratives, and ad hominem attacks.”

In his analysis, Darrah first addressed Prenda’s conduct in the clerk’s office of the St. Clair County Circuit Court. Duffy and Prenda filed their defamation suits in the circuit courts of St. Clair and Cook counties last year before they were removed and consolidated in Chicago’s federal court.

The defendants asserted in their sanctions motion that Prenda and Duffy engaged in misconduct in relation to the February attempt of Prenda local counsel, Belleville attorney Kevin Hoerner, to file an amended complaint without permission from the court.

In an affidavit, Judy Kent, an employee of the St. Clair County Clerk’s office, said she filed the amended complaint because Hoerner, who was not subjected to Darrah’s sanctions order, told her leave from the court wasn’t required because the defendants had not yet been served with the original complaint.

The defendants, however, claim they had been served at the time and Prenda knew that.

The amended complaint added Alpha Law of Minnesota as a plaintiff, a move that would have destroyed diversity and let the plaintiffs remand the matter back to circuit court.

When the matter was in southern Illinois’ federal court, U.S. District Judge David Herndon rejected Prenda’s motion to remand by adopting defendants’ reasoning and rationale and then transferred it to Chicago’s federal court, noting that a “virtually identical” case was pending there.

After its transfer and at the first status hearing in August, Duffy presented Darrah with a renewed remand motion that was pretty much the same as the one Herndon denied, except that the caption was changed to show Alpha Law as a plaintiff.

Duffy admitted to Darrah at the hearing that he filed a similar motion in the Southern District and it was denied it, but that “the Court indicated that on the four corners of the complaint, it stated that it was a Minnesota corporation. However, the complaint also states that its principal place of business is in Minnesota.”

“However,” Darrah asserts in his opinion, “the record reflects that the Southern District of Illinois Court said nothing of the sort. Duffy had the opportunity to address this lie in his response to the Motion for Sanctions and did not.”

He adds, “To fabricate what a federal judge said in a ruling before another court falls well outside the bounds of proper advocacy and demonstrates a serious disregard for the judicial process.”

Referring to the filing of the remand request as “duplicitous behavior,” Darrah notes that Duffy sought to withdraw it a few hours later, “generously explaining the reason for the withdrawal was ‘due to the apparent confusion arising from [the] motion.’”

Darrah also rejected an argument from Duffy and Prenda that the defendants failed to show Hoerner was aware they had been served when he tried to file the amended complaint in St. Clair County Circuit Court.

“Demonstrating Hoerner was aware that service had been accomplished is not necessary to determine the deception inherent in Hoerner’s affirmative (and false) representation to Kent that service had not been accomplished,” Darrah wrote, adding in a footnote that “this type of sophistry alone approaches sanctionable conduct.”

Darrah goes on his opinion to reject the other arguments Prenda and Duffy made in their opposition to sanctions, saying that “rather than explain their conduct, they seek to attack the form and procedure by which defendants filed their motion  for sanctions.”

For instance, Prenda and Duffy asserted they were entitled to the safe harbor provision, which prevents the filing of a sanctions motion “if the challenged paper, claim, defense, contention, or denial is withdrawn or appropriately corrected within 21 days after service.”

“Here, however, Prenda does nothing to explain or withdraw its assertions regarding what the Southern District of Illinois purportedly said about Alpha,” Darrah explained. “Moreover, in its motion to withdraw the renewed motion for remand, Prenda continues to stand on its rejected assertions …”

Among other arguments in their motion opposing sanctions, Prenda and Duffy claimed the defendants failed to properly serve the motion because Duffy never consented to accepting service electronically.

Saying this argument was “grasping at straws,” Darrah wrote in his opinion that “Duffy is an E-Filer of the Northern District of Illinois. Therefore, whether or not Duffy realizes it, as an E-Filer, he has accepted service by electronic means.”

Darrah further notes that “in a final act of audacity,” Prenda and Duffy argued that he should award them attorneys’ fees for having to defend them the sanctions motion.

“Prenda and Duffy’s arguments against the motion for sanctions are unpersuasive at best,” he wrote, adding elsewhere in his opinion that, “Based on the conduct of Prenda and its counsel, it is clear that sanctions are warranted.”

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