Prenda Law hit with $1,000 per day penalty for failing to pay sanctions

By Bethany Krajelis | May 23, 2013


After missing Tuesday’s deadline to pay $81,000 in sanctions, a federal judge in California has slapped Prenda Law with an order to show cause as to why it didn’t pay up.

U.S. Otis D. Wright II also imposed “a penalty of $1,000 per day, per person or entity, until this attorney’s fee award is paid or a bond for the same amount is posted” on the Chicago law firm, four attorneys, as well as AF Holdings LLC and Ingenuity 13 LLC.

“Failure to comply will result in additional sanctions,” Wright wrote in his order.

The $81,000 in sanctions that Wright ordered earlier this month stems from a copyright infringement case in California’s federal court.

In addition to those attorney’s fees, Wright ordered the referral of Paul Duffy of Prenda Law, John Steele and Paul Hansmeier of Steele Hansmeier in Chicago and Brett Gibbs of San Francisco to the criminal investigation unit of the Internal Revenue Service, the U.S. Attorney in Central California and their respective state and federal bars where they are admitted to practice.

Wright said these lawyers engaged in “brazen misconduct and relentless fraud” and that attorneys Duffy, Steele and Hansmeier created business entities for the sole purpose of litigating copyright infringement cases.

Jim Grogan, deputy administrator and chief counsel at the Illinois Attorney Disciplinary and Registration Commission (ARDC), said last week that he could not confirm nor deny if the ARDC is investigating any Illinois attorneys involved with Prenda Law.

Prenda Law has filed a number copyright infringement suits across the nation, accusing defendants by name or potential defendants by their Internet Protocol (IP) addresses of illegally downloading pornography. The firm filed a similar suit in St. Clair County in January, though not alleging copyright infringement. Rather, it accuses the named defendant and his alleged co-conspirators of illegally downloading pornography.

In his Tuesday order, Wright wrote that Prenda Law had attached an ex parte application to stay enforcement of his order issuing sanctions.

“Not only was this application improperly filed; but once again, Prenda resorted to an eleventh-hour plea for relief,” Wright wrote. “Even assuming this application was properly filed, the Court finds no basis to grant Prenda’s request.”

Wright goes on to say that instead of paying the sanctions, Prenda Law filed an emergency motion with the 9th Circuit to stay enforcement of his order, a request that was “promptly denied.”

“Prenda now seeks to remedy a problem of their own making,” Wright wrote.

In his order, the judge also requested that Gibbs file requests to withdraw as attorney in this case and related cases, saying that “Gibbs appears to have withdrawn from these cases.”

“Given the circumstances and the relationship between Gibbs and his clients,” Wright wrote in his order that he would approve the requests.

Gibbs on Wednesday followed through with Wright’s request and filed a motion of withdrawal.

In his motion, Gibbs wrote that he represented Ingenuity LLC in the case, which closed in late January 2013, and that he is “no longer employed by Prenda Law, Inc. or any other corporation or LLC that is involved in these types of cases.”

Duffy of Prenda Law represents the plaintiff in the St. Clair County case of LW Systems v. Christopher Hubbard.

The suit accuses Hubbard and his alleged co-conspirators of hacking into LW System’s computer system that supplies content for adult Web site operators.

Shortly after the case was first filed, Chief Judge John Baricevic signed an agreed discovery order to allow LW Systems to subpoena the names, addresses, phone numbers and email addresses associated with certain IP addresses.

Several Interest service providers filed a joint motion to quash the subpoenas. They also asked the court to investigate possible collusion between the plaintiff and defendant in the suit.

St. Clair County Circuit Court Judge Andrew Gleeson will hear arguments over the motion next month. He’s also scheduled to hear arguments later in June over motions to quash filed by “John Does” who object to the release of their personal information.

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