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Thursday, August 22, 2019

Herndon denies motion to stay pending appeal in Lightspeed case

By Heather Isringhausen Gvillo | Sep 15, 2015


After U.S. District Judge David Herndon issued an order staying sanctions against three attorneys who allegedly obstructed discovery in a computer hacking case involving porn sites, he denied their motions to stay proceedings pending an appeal by sanctioned attorney John Steele.

Herndon wrote that briefing shall proceed in accordance to his Aug. 12 order.

Steele appealed to the Seventh Circuit on Aug. 7 following Herndon’s June 5 order sanctioning him and fellow attorneys Paul Hansmeier and Paul Duffy in Lightspeed v. Anthony Smith for engaging in “unreasonable, willful obstruction of discovery in bad faith.” The case was originally brought in St. Clair County and was later removed to federal court by AT&T.

Steele, Hansmeier and Duffy were partners at Prenda Law, a Chicago firm that dissolved in 2013 after U.S. District Judge Otis Wright of the Central District of California hammered the trio for deceiving the court in a copyright infringement case. He said the lawyers engaged in “brazen misconduct” with their attempts at “outmaneuvering” the legal system.

Represented by attorney Dan Booth of Booth Sweet LLP in Cambridge, Mass., Smith filed a designation of record and notice for order on Sept. 4, designating the complete transcript of the Nov. 12, 2014, hearing necessary as part of the record on appeal, along with all in camera filings.

The November hearing was held to address Smith’s motion for contempt and discovery sanctions.

At the hearing, Steele indicated that he “never intentionally made misrepresentations to third parties” to obstruct discovery. He also denied misrepresenting his financial status.

During the hearing, the court ultimately sanctioned Steele for contempt and found discovery sanctions appropriate.

The court imposed those discovery sanctions in its July 23 order after Smith submitted his expense report iteming the additional costs incurred as a result of what the court identified as Steele and Duffy’s discovery obstruction. He claimed $94,343.51 in incurred expenses for conducting third-party discovery. Steele and Duffy were ordered to pay the full amount, apportioned equally between the two.

Steele appealed. Prior to his appeal, Steele filed an objection to the sanction on July 17, arguing that the actual cost of third-party discovery should not have exceeded $531.40. He likened Smith’s attempt to receive “inflated” costs to fraud and wrote that his actions amounted to a Class A felony.

However, Booth wrote, “At the hearing, Steele made further in camera filings and argued against Smith’s motions making misrepresentations that will be squarely at issue in his appeal. Therefore, a hearing transcript should be included in the record on appeal, along with all in camera filings.”

In his designation, Booth wrote that Steele’s reason for not ordering the hearing transcript is that “’[t]he District Court granted a motion for reconsideration without a hearing.’”

“That is a red herring. Steele is not appealing from the court’s grant of reconsideration but from its later entry of sanctions,” Booth wrote.

He added that Steele’s reason is irrelevant, because that type of motion for reconsideration does not require a hearing in court.

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