Defendants urge Seventh Circuit to uphold $261K in sanctions against Prenda attorneys

The defendants in a computer hacking case brought by attorneys with the now-dissolved Prenda Law firm assert “this case could be the poster child for abusive litigation.”

In a brief filed Wednesday, Anthony Smith, AT&T and Comcast urge the Seventh Circuit Court of Appeals to uphold the sanctions order against Paul Duffy, Paul Hansmeier and John Steele, all three of whom at one point represented plaintiff Lightspeed Media Corp.

The matter came to the federal appeals panel after the trio of Prenda-affiliated attorneys appealed since-retired U.S. District Judge G. Patrick Murphy’s November order requiring them to pay $261,025 in fees to the defendants in the dismissed case.

Duffy, Hansmeier and Steele submitted their opening brief last month, when they laid out arguments over due process and personal responsibility in an attempt to convince the Seventh Circuit to reverse the sanctions Murphy imposed after finding they showed “a relentless willingness to lie to the Court.”

Their argument over personal responsibility almost sounded like they were trying to pass off the blame to Belleville attorney Kevin Hoerner, who they say signed the amended complaint in the case while serving as co-counsel, not local counsel.

The Prenda attorneys went on to question why Murphy declined to sanction Hoerner in the matter, but imposed a quarter of a million dollars in sanctions against them even though they only “took minimal discrete actions in the case.”

Attorneys for the defendants, however, assert in their recently-filed brief to the federal appeals panel that “[t]he record does not support attorneys’ arguments that they each undertook only certain ‘discrete’ actions.”

“Although Duffy, Hansmeier, and Steele would like to point the finger at each other or even at their local counsel, they are the attorneys who worked together to perpetuate the ‘bullying pretense’ that the district judge accurately perceived,” the defense brief states. “The record reflects extensive involvement.”

In their opening brief, the three Prenda attorneys argued that instead of apportioning personal responsibility, Murphy focused "on the nature and extent of the interrelationship between the sanctioned attorneys” to hold them “vicariously liable for others’ actions.”

The defendants --Smith, AT&T and Comcast -- contend Murphy didn’t impose “vicarious” liability on the three attorneys as he simply held them “liable for collective actions."

“The attorneys should not be permitted to avoid the sting of sanctions by forcing the court to participate in a fast‐moving shell game, guessing which attorney did what and when,” the defendants’ brief states.

It adds, “These attorneys have a long history of collective action, in both this and other lawsuits, and it was appropriate for them to be sanctioned collectively.”

The Prenda trio also made a few due process arguments to the Seventh Circuit, claiming  Steele and Hansmeier were never served with Smith’s sanctions motions and Duffy wasn’t given the chance to respond to the sanctions motions submitted by AT&T and Comcast.

Pointing out that Murphy rejected those same arguments at the district court level, the defendants assert in their brief that all three of the plaintiffs’ attorneys received sufficient notice and opportunities to be heard.

Regarding Steele and Hansmeier, the defendants contend Smith served notice on Duffy and the three attorneys’ close “affiliation obviates the need the need for each individual attorney to receive personal service of each document filed in the case, including a motion for sanctions.”

“If Steele and Hansmeier were unaware of Smith’s sanction motion (an unbelievable proposition for many reasons, including that they were all then jointly represented in the ongoing Ingenuity 13 sanctions proceedings), they have only Duffy to blame,” the defendants state in their brief.

When it comes to the claim that Duffy wasn’t given the chance to respond to sanctions motions from AT&T and Comcast, the defendants assert that “Duffy’s squandered opportunities do not constitute a violation of due process.”

They note that Hansmeier and Steele responded to the sanctions motions, but Duffy, for whatever reason, did not to do so by the deadline he was given.

They also claim the Prenda trio tried to put the blame on Murphy for Duffy’s silence at a hearing on the sanctions motions held in November in southern Illinois' federal court.

“Yet Steele spoke up unbidden, and the district court shushed Hansmeier for interrupting,” the defendants’ brief states. “Duffy could not expect to avoid sanctions by not filing a response and then keeping silent at a hearing on counsels’ misconduct.”

While Duffy, Hansmeier and Steele claim Murphy erred in determining Lightspeed's suit was baseless and they knew the claims were frivolous, the defendants argue the record more than supports the lower court’s findings.

“Appellants’ contrary arguments ring especially hollow against the backdrop of how this case fits into their larger scheme,” the defendants claim.

Summarizing the alleged scheme, their brief goes on to explain, “this conduct involved a patchwork of mass ‘Doe’ lawsuits to identify individuals, in order to accuse them of ‘hacking’ or illegal file sharing—accurately or not—so as to strong‐arm as many as possible into settlements before cases were dismissed (or collapsed of their own weight).”

The defendants contend the suit brought against them was “an opportunistic attempt to harvest some $15‐20 million in settlements from a single St. Clair County state‐court proceeding.”

Lightspeed brought the suit in the St. Clair County Circuit Court against a potential John Doe defendant and later amended it to name Smith, AT&T and Comcast as defendants, as well as an unnamed representative from each of the Internet Service Providers (ISPs).

Before it was amended, removed to federal court and eventually dismissed, the suit made a stop in the Illinois Supreme Court on an emergency motion over requests from the ISPs to quash subpoenas seeking the personally identifiable information about Internet Protocol (IP) addresses accused of hacking into the plaintiff’s website to download porn.

The high court in June 2012 ordered the circuit court to quash the subpoenas and Lightspeed in March 2013 voluntarily dismissed the suit. The defendants then filed motions seeking attorneys’ fees on the basis the claims lodged against them were baseless.

Those motions were granted and are now at the crux of the pending appeal.

“Ultimately, it is inconceivable that the appellants should harbor any doubt about the basis for the sanctions against them,” the defendants assert. “The record here—and the appellants’ track record overall—could not be clearer as to the propriety of sanctions.”

The defendants’ brief was submitted by attorneys Hugh S. Balsam of Locke Lord LLP in Chicago; Bart Huffman of Locke Lord in Texas; Jason Sweet and Dan Booth of Booth Sweet LLP in Massachusetts; and John Seiver and Ronald London of Davis, Wright, Tremaine LLP in Washington D.C.

Prenda attorneys are also appealing a sanctions order from U.S. District Judge Otis Wright II in the Ingenuity 13 v. John Doe case in California. They have until March 17 to file an optional reply brief with the Ninth Circuit of Appeals in that case.