Judge gives Prenda Law, Duffy two weeks to pay $11K-plus sanction in ongoing defamation case

CHICAGO - Attorney Paul Duffy and the now-dissolved Prenda Law firm have two weeks to fork over more than $11,000 in sanctions a federal judge ordered last year in the defamation suit they filed nearly two years ago.

U.S. District Judge John Darrah handed down the deadline Tuesday, when he also denied the embattled duo’s motion to dismiss the counterclaims levied by Minnesota attorney Paul Godfread and his client, Alan Cooper, the defendants in the ongoing case.

Darrah delivered his rulings from the bench at a brief hearing that Duffy, who is representing himself and the dissolved firm in the matter, did not attend. Chicago attorney, Erin Russell, appeared on behalf of the defendants and after being asked, told the judge she didn’t know why Duffy was a no-show.

The judge previously ordered Duffy to attend a hearing in person in September, after not requesting to attend some hearings via phone and not showing up for others.

In addition to imposing the two-week deadline, Darrah set a status hearing in the case for three weeks out –Feb. 11– to see if Duffy and Prenda comply and pay the defendants the $11,758 in legal fees he ordered as sanctions for the misrepresentations they made in a motion and before him.

Although Darrah didn’t say what would happen if they don’t pay up by then, other judges presiding over proceedings involving Prenda and the attorneys believed to be behind it — Duffy, John Steele and Paul Hansmeier — have found them in contempt, ordered additional sanctions and imposed daily fines for failing to pay.

Prenda and the trio of attorneys have been sanctioned in other jurisdictions and accused of creating sham corporations to exploit the courts’ subpoena powers and extort defendants into settling copyright infringement and computer hacking suits.

Darrah’s recent ruling comes in a defamation case that began nearly two years ago when Prenda and Duffy filed separate suits in the circuit courts of St. Clair and Cook counties, accusing Godfread and Cooper of making false and defamatory statements about them on various websites.

The suits were eventually transferred and consolidated before Darrah in Chicago’s federal court, where the defendants have argued they were sued in retaliation for filing an identity theft suit in Minnesota against Prenda and its principals.

In seeking sanctions, Cooper and Godfread in September 2013 accused Prenda and Duffy of lying to an employee of the St. Clair County Clerk’s Office to get an amended complaint filed and to Darrah about what U.S. Chief Judge David Herndon said when he denied their remand request in southern Illinois’ federal court.

Darrah granted the defendants’ motion for sanctions in January of last year, and in June, issued an order that set the sanctions price tag at $11,758.

The issue over sanctions has remained pending while Duffy tried to convince the judge he didn’t pay because he thought the sanction award was only imposed against Prenda as the June order listed the firm, but not him. Duffy, on behalf of Prenda, also asked the court to stay payment of the sanction based on its alleged inability to pay.

While Darrah didn’t seem to buy Duffy’s arguments, he said on Thursday that he amended the June order in an “abundance of caution” to make it clear the sanctions order applies to Duffy and Prenda, jointly and severally.

He also said he amended the order by adding his sources of authority for imposing sanctions, Rule 11 and Section 1927. Both changes are in direct response to challenges made by Duffy.

Sanctions aside, Darrah also denied Duffy and Prenda’s motion to dismiss the defendants’ counterclaims, which basically allege they were sued for defamation in retaliation for filing a lawsuit in Minnesota against Prenda and its principles for the theft of Cooper’s identity.

Cooper claims his name had been used as an officer or director of AF Holdings –one of Prenda’s clients that a few judges have dubbed as sham corporations created in order to benefit the attorneys representing them– without his consent.

In seeking the dismissal of the counterclaims, Duffy argued that the defendants failed to state a valid claim against an entity and cause of action against an actual party, among other allegations.

Darrah did not explain the reasoning behind his denial of Prenda and Duffy’s motion to dismiss, but it serves an important role in the case as the counterclaims essentially block the plaintiffs from voluntarily dismissing the defamation suit.

This defamation case is one of the last pending lawsuits out there that Prenda has brought. After judges and defense attorneys began accusing the firm and its key players of fraud in court documents, the firm voluntarily dismissed dozens of cases.