KLINEDINST PC 501 West Broapway, SuITE 600 SAN DIEGO, CALIFORNIA 92101
Case 2)12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 1of35 Page ID #:3166
1 || Heather L. Rosing, Bar No. 183986 David M. Majchrzak, Bar No. 220860 2 || Philip W. Vineyard, Bar No. 233628 3 || KLINEDINST PC 501 West Broadway, Suite 600 4 || San Diego, California 92101 (619) 239-813 1/FAX (619) 238-8707 > || hrosing@klinedinstlaw.com 6 dmajchrzak@klinedinstlaw.com pvineyard@klinedinstlaw.com 7 Attorneys for Specially Appearing for 8 || PRENDA LAW, INC. 9 UNITED STATES DISTRICT COURT 10 CENTRAL DISTRICT OF CALIFORNIA 1] 12 || INGENUITY 13 LLC, Case No. 2:12-cv-8333-ODW(JCx) — Related cases: 2:12-cv-05709-ODW-(JCx) 13 Plaintiff, 2:12-cv-08322-ODW-(JCx) 14 V. PRENDA LAW, INC.'S NOTICE OF 15 || JOHN DOE, oiiaiaaiae 16 Defendant. Judge: Hon. Otis D. Wright, I Magistrate Judge: Hon, Jacqueline Chooljian 17 Complaint Filed: September 27, 2012 Trial Date: None set 18 19 . . " Please take NOTICE that specially appearing party Prenda Law, Inc. hereby - appeals to the United States Court of Appeals for the Ninth Circuit from the - following orders in the above-captioned matter: - (1) The District Court’s February 7, 2013, Order to Show Cause Re - Sanctions for Rule 11 and Local Rule 83-3 Violations; - (2) The District Court’s March 5, 2013, Order instructing appearances by - multiple out-of-state third parties for the Court’s March 11, 2013, hearing on the ZF 28
' Attached hereto as Exhibit A (ECF No. 48). -|-
PRENDA LAW, INC.'S NOTICE OF APPEAL 2:12-cv-8333-ODW(JCx)
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 2 o0f 35 Page ID #:3167
KLINEDINST PC 501 West Broapway, SuITe 600 SAN DIEGO, CALIFORNIA 92101
Oo CO ~~ DB UA HS WH bO —
jr eet Go
* Attached hereto as Exhibit B ECE No. 303
February 7, 2013, Order to Show Cause; (3) The District Court’s March 14, 2013, Order extending the February 7, 2013, Order to Show Cause to, among others, Prenda Law, Inc.”
(4) The District Court’s May 6, 2013, Order Issuing Sanctions."
Pers
Klinedinst PC 7
ra & oe = —cenensnnnncctn ER MEER
ye Pa emcee eo ky
DATED: Mav 20. 2013 By:
feather L. Rosing
David M. Majchrzak
Peso W. bb a ‘ _ ttorneys specia earing tor
PRENDA LAW. INC.
; Attached hereto as Exhibit C (ECF No. 86). Attached hereto as Exhibit D (ECF No. 130). 2D PRENDA LAW, INC.'S NOTICE OF APPEAL 2:12-cv-8333-ODW(JCx)
KLINEDINST PC
501 West BroaDway, SuITE 600 SAN DIEGO, CALIFORNIA 92101
Case 2)12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 3o0f 35 Page ID #:3168
—
———'
CSC OU FOF SH HN OH He WY LN
REPRESENTATION STATEMENT
Prenda Law, Inc. (“Prenda Law’’) files this Notice of Appeal through its current counsel, Klinedinst PC (“Klinedinst’”), but intends to obtain new counsel, because Klinedinst had a limited scope of representation agreement with Prenda Law. That agreement obligated Klinedinst to defend Prenda Law solely through the Order to Show Cause proceedings that are the subject of the intended appeal, and Prenda Law has consented to Klinedinst’s withdrawal as counsel of record.
Pursuant to the Federal Rules of Appellate Procedure, Rule 12(b) and Ninth Circuit Rule 3-2, Prenda Law submits the following Representation Statement. The following list identifies the relevant parties and third parties affected by the appealed Orders and identifies, when known, the counsel for those parties and the corresponding contact information. Where Prenda Law has no personal knowledge of, or must rely on information and belief for, the information necessary for the Representation Statement, it will disclose said lack of knowledge or the source of
its information and belief.
Party or Third Party Counsel of Record / Pro Se
Klinedinst PC 501 West Broadway, Suite 600 San Diego, CA 92101
619.239.8131
Prenda Law, Inc. 161 N. Clark St., Suite 3200 Chicago, IL 60601 | 800.380.0840
Paul Duffy Pro Se 2.N. La Salle St., 13" Floor
Chicago IL 60602
312.952.6136
Paul Hansmeier Pro Se
Alpha Law Firm, LLC 900 IDS Center
80 South 8" Street Minneapolis, MN 55402 612.234.5744
Taken from Paul Hansmeier’s Notice
ee PRENDA LAW, INC.'S NOTICE OF APPEAL 2:12-cv-8333-ODW(JCx)
KLINEDINST PC 501 West Broapway, Suite 600 SAN DieGO, CALIFORNIA 92101
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 4o0f35 Page ID #:3169
~ Ingenuity 13, LLC Pro Se 3 || Springates East Government Road 4 || Charlestown, Nevis 5 {I (Taken from Brett Gibbs’ Notice of 6 Appeal) 7 || AF Holdings, LLC Pro Se - Springates East 8 || Government Road 9 Charlestown, Nevis 19 || (Laken from Brett Gibbs’ Notice of | Appeal) 11 Putative John Doe Morgan Pietz, Esq. 12 | Contact Information unknown The Pietz Law Firm 3 3770 Highland Ave., Suite 206 Manhattan Beach, CA 90266 14 310.424.5557 15 Nicholas Ranallo 16 371 Dogwood Way Boulder Creek, CA 95006 17 §3 1.703.401 1 18 20 Lipo 91 || DATED: Mav 20. 2013 Bv vA . vf | _ Heather L. Rosing oe, David M. Majchrzak — W. pone er : — 23 ttorneys Specially Appearing for PRENDA LAW. INC. ' 24 > 26 27 1554984 1v1 28
PRENDA LAW, INC.'S NOTICE OF APPEAL 2:12-cv-8333-ODW(JCx)
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 5of35 Page ID #:3170
Exhibit A
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 6of35 Page ID #:3171
Case 2:12-cv-08333-ODW-JC Document 48 Filed 02/07/13 Page 1ofi11 Page ID #:600
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
INGENUITY 13 LLC, Case Nos. 2:12-cv-8333-ODW(JCx) Plaintiff, ORDER TO SHOW CAUSE RE V. SANCTIONS FOR RULE 11 AND
| | LOCAL RULE 83-3 VIOLATIONS JOHN DOE,
Defendant.
The Court hereby orders Brett L. Gibbs, attorney of record for AF Holdings LLC and Ingenuity 13 LLC, to appear on March 11, 2013, at 1:30 p.m., to justify his violations of Federal Rule of Civil Procedure 11 and Local Rule 83-3 discussed herein. A. Legal Standard
The Court has a duty to supervise the conduct of attorneys appearing before it. Erickson v. Newmar Corp., 87 F.3d 298, 301 (9th Cir. 1996). The power to punish contempt and to coerce compliance with issued orders is based on statutes and the Court’s inherent authority. /nt’] Union, United Mine Workers of Am. v. Bagwell, 512 ' The violations discussed herein were committed in the following related cases: AF Holdings LLC v. Doe, No. 2:12-cv-6636-ODW(JCx) (C.D. Cal. filed Aug. 1, 2012); AF Holdings LLC v. Doe, No. 2:12-cv-6669-ODW(JCx) (C.D. Cal. filed Aug. 2, 2012); Ingenuity 13 LLC v. Doe, No. 2:12-cv- 6662-ODW(JCx) (C.D. Cal. filed Aug. 2, 2012); Ingenuity 13 LLC v. Doe, No. 2:12-cv-6668- ODW(JCx) (C.D. Cal. filed Aug. 2, 2012); Ingenuity 13 LLC v. Doe, No. 2:12-cv-8333-ODW(JCx)
(C.D. Cal. filed Sept. 27, 2012). To facilitate this matter, Mr. Gibbs will be given the opportunity to address these violations together in one hearing rather than in several separate hearings.
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 7 of 35 Page ID #:3172
Case 2:12-cv-08333-ODW-JC Document 48 Filed 02/07/13 Page 20f11 Page ID #:601
U.S. 821, 831 (1994). And though this power must be exercised with restraint, the
| Court has wide latitude in fashioning appropriate sanctions to fit the conduct. See
Roadway Express, Inc. v. Piper, 447 U.S. 752, 764-65 (1980). B. Rule 11(b)(3) Violations
By presenting a pleading to the Court, an attorney certifies that—after conducting a reasonable inquiry—the factual contentions in the pleading have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery. Fed. R. Civ. P. 11(b)(3). This precomplaint duty to find supporting facts is “not satisfied by rumor or hunch.” Bankers Trust Co. v. Old Republic Ins. Co., 959 F.2d 677, 683 (7th Cir. 1992). The reasonableness of this inquiry is based on an objective standard, and subjective good faith provides no safe harbor. Golden Eagle Distrib. Corp. v. Burroughs Corp., 801 F.2d 1531, 1538 (9th Cir. 1986); F.D..C. v. Calhoun, 34 F.3d 1291, 1296 (Sth Cir. 1994); Knipe v. Skinner, 19 F.3d 72, 75 (2d Cir. 1994). The Court wields the discretion to impose sanctions designed to “deter repetition of the conduct or comparable conduct by others similarly situated.” Fed R. Civ. P 11(c)(4).
In Ingenuity 13 LLC v. Doe, No. 2:12-cv-6662-ODW(JCx) (C.D. Cal. filed Aug. 2, 2012), the Court ordered Plaintiff on December 20, 2012, to show cause why it failed to timely serve the Defendant or, if the Defendant has already been served, to submit the proof of service. (ECF No. 12.) In response, Plaintiff noted that the delay was because it waited to receive a response from the subscriber of the IP address associated with the alleged act of infringement. (ECF No. 14.) Plaintiff further noted: “Though the subscriber, David Wagar, remained silent, Plaintiff's investigation of his household established that Benjamin Wagar was the likely infringer of Plaintiffs copyright.” (ECF No. 14, at 2.) Based on this investigation, Plaintiff filed an Amended Complaint, substituting Benjamin Wagar for John Doe. (ECF No. 13.)
Plaintiffs Amended Complaint alleges the following in connection with
Benjamin Wagar:
i]
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 8o0f 35 Page ID #:3173
Case 2:12-cv-08333-ODW-JC Document 48 Filed 02/07/13 Page 3of11 Page ID #:602
mesnah
“Defendant Benjamin Wagar (‘Defendant’) knowingly and _ illegally reproduced and distributed Plaintiff's copyrighted Video by acting in
concert with others via the BitTorrent file sharing protocol and, upon
information and belief, continues to do the same.” (AC 1);
e “Defendant is an individual who, upon information and belief, 1s over the age of eighteen and resides in this District.” (AC { 4);
e “Defendant was assigned the Internet Protocol (‘IP’) address of 96.248.225.171 on 2012-06-28 at 07:19:47 (UTC).” (AC 4);
e “Defendant, using IP address 96.248.225.171, without Plaintiff's authorization or license, intentionally downloaded a torrent file particular to Plaintiff's Video, purposefully loaded that torrent file into his BitTorrent client—in this case, Azureus 4.7.0.2—-entered a BitTorrent swarm particular to Plaintiff's Video, and reproduced and distributed the Video to numerous third parties.” (AC 22);
e “Plaintiff's investigators detected Defendant’s illegal download on 2012- 06-28 at 07:19:47 (UTC). However, this is a [sic] simply a snapshot observation of when the IP address was observed in the BitTorrent swarm; the conduct took itself [sic] place before and after this date and time.” (AC ¥ 23);
e “The unique hash value in_ this case is_ identified as F016490BD8E60E184ECS5B7052CEBIFAS70A4AF 11.” (AC ¢ 24.)
In a different case, Ingenuity 13 LLC v. Doe, No. 2:12-cv-6668-ODW(JCx) (C.D. Cal. filed Aug. 2, 2012), Plaintiff essentially makes the same response to the Court’s December 20, 2012 Order To Show Cause (ECF No. 12): “Though the subscriber, Marvin Denton, remained silent, Plaintiff's investigation of his household established that Mayon Denton was the likely infringer of Plaintiffs copyright.” (ECF No. 13, at 2.) And based on this information, Plaintiff filed an Amended
Complaint (ECF No. 16), similar in all respects to the one filed against Benjamin
Loe
Case 2:12-cv-08333-ODW-JC Document157 Filed 05/20/13 Page 9of35 Page ID #:3174
Case 2:12-cv-08333-ODW-JC Document 48 Filed 02/07/13 Page 4of11 Page ID #:603
Cat
Oo oe “I oN
Wagar in /ngenuity 13 LLC v. Doe, No. 2:12-cv-6662-ODW(JCx) (C.D. Cal. filed Aug. 2, 2012), with the following technical exceptions: e “Defendant was assigned the Internet Protocol (‘IP’) address of 75.128.55.44 on 2012-07-04 at 07:51:30 (UTC).” (AC 4 4); e “Defendant . . . purposefully loaded that torrent file into his BitTorrent client—in this case, uTorrent 3.1.3....” (AC § 22); e “The unique hash value in this case is _ identified as 0D47A7A035591BOBA4FASCB86AFE986885FS5EI8E.” (AC ¥ 24.) Upon review of these allegations, the Court finds two glaring problems that
Plaintiff's technical cloak fails to mask. Both of these are obvious to an objective
observer having a working understanding of the underlying technology.
i Lack of reasonable investigation of copyright infringement activity
The first problem is how Plaintiff concluded that the Defendants actually downloaded the entire copyrighted video, when all Plaintiff has as evidence is a “snapshot observation.” (AC { 23.) This snapshot allegedly shows that the Defendants were downloading the copyrighted work—at least at that moment in time. But downloading a large file like a video takes time; and depending on a user’s Internet-connection speed, it may take a long time. In fact, it may take so long that the user may have terminated the download. The user may have also terminated the download for other reasons. To allege copyright infringement based on an IP snapshot is akin to alleging theft based on a single surveillance camera shot: a photo of a child reaching for candy from a display does not automatically mean he stole it. No Court would allow a lawsuit to be filed based on that amount of evidence.
What is more, downloading data via the Bittorrent protocol is not like stealing candy. Stealing a piece of a chocolate bar, however small, is still theft; but copying an encrypted, unusable piece of a video file via the Bittorrent protocol may not be copyright infringement. In the former case, some chocolate was taken; in the latter
case, an encrypted, unusable chunk of zeroes and ones. And as part of its prima facie
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 10o0f35 Page ID #:3175
Cage 2:12-cv-08333-ODW-JC Document 48 Filed 02/07/13 PageSof11 Page ID #:604
copyright claim, Plaintiff must show that Defendants copied the copyrighted work. Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991). [fa download was not completed, Plaintiff's lawsuit may be deemed frivolous.
In this case, Plaintiff's reliance on snapshot evidence to establish its copyright infringement claims is misplaced. A reasonable investigation should include evidence showing that Defendants downloaded the entire copyrighted work——or at least a usable portion of a copyrighted work. Plaintiff has none of this—no evidence that Defendants completed their download, and no evidence that what they downloaded is a substantially similar copy of the copyrighted work. Thus, Plaintiffs attorney violated Rule 11(b)(3) for filing a pleading that lacks factual foundation.
2. Lack of reasonable investigation of actual infringer’s identity
The second problem is more troublesome. Here, Plaintiff concluded that Benjamin Wagar is the person who illegally downloaded the copyrighted video. But Plaintiff fails to allege facts in the Amended Complaint to show how Benjamin Wagar is the infringer, other than noting his IP address, the name of his Bittorrent client, and the alleged time of download.” Plaintiff’ s December 27, 2012 Response to the Court’s Order to Show Cause re Lack of Service sheds some light:
Though the subscriber, David Wagar, remained silent, Plaintiff's investigation of his household established that Benjamin Wagar was the likely infringer of Plaintiffs copyright. As such, Plaintiff mailed its Amended Complaint to the Court naming Benjamin Wagar as the Defendant in this action. (ECF No. 14, at 2.)
The disconnect is how Plaintiff arrived at this conclusion—that the actual infringer is a member of the subscriber’s household (and not the subscriber himself or anyone else)}—when all it had was an IP address, the name of the Bittorrent client used, the
alleged time of download, and an unresponsive subscriber.
° This analysis similarly applies in Ingenuity 13 LLC v. Doe, No. 2:12-cv-6668-ODW(JCx) (C.D. Cal. filed Aug. 2, 2012), where Plaintiff fails to allege sufficient facts to show how Mayon Denton is the infringer.
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 11o0f35 Page ID #:3176 Case 2:12-cv-08333-ODW-JC Document 48 Filed 02/07/13 Page 6of11 Page ID #:605
Plaintiff's December 27, 2012 Discovery Status Report gives additional insight 2 | into Plaintiff's deductive process:
In cases where the subscriber remains silent, Plaintiff conducts investigations to determine the likelihood that the subscriber, or someone in his or her household, was the actual infringer. .. . For example, if the subscriber is 75 years old, or the subscriber 1s female, it 1s statistically quite unlikely that the subscriber was the infringer. In such cases, Plaintiff performs an investigation into the subscriber’s household to determine if there is a likely infringer of Plaintiff's copyright... . Plaintiff bases its choices regarding whom to name as the infringer on factual analysis. (ECF No. 15, at 24.)
or a"
VO wa ~ OS
10 | The Court interprets this to mean: if the subscriber is 75 years old or female, then 11 || Plaintiff looks to see if there is a pubescent male in the house; and if so, he 1s named 12 | as the defendant. Plaintiff's “factual analysis” cannot be characterized as anything 13 } more than a hunch.
14 Other than invoking undocumented statistics, Plaintiff provides nothing to 15 | indicate that Benjamin Wagar is the infringer. While it is plausible that Benjamin 16 || Wagar is the infringer, Plaintiff's deduction falls short of the reasonableness standard 17 || required by Rule 11.
18 For instance, Plaintiff cannot show that Benjamin is the infringer instead of 19 | someone else, such as: David Wagar; other members of the household; family guests; 20 || or, the next door neighbor who may be leeching from the Wagars’ Internet access. 21 || Thus, Plaintiff acted recklessly by naming Benjamin Wagar as the infringer based on 22 || its haphazard and incomplete investigation.
23 Further, the Court is not convinced that there is no solution to the problem of 24 | identifying the actual infringer. Here, since Plaintiff has the identity of the subscriber, 25 | Plaintiff can find the subscriber’s home address and determine (by driving up and 26 || scanning the airwaves) whether the subscriber, (1) has Wi-Fi, and (2) has password- 27 || protected his Wi-Fi access, thereby reducing the likelihood that an unauthorized user
28 || outside the subscriber’s home is the infringer. In addition, since Plaintiff is tracking a
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 12 0f 35 Page ID #:3177
Cage 2:12-cv-08333-ODW-JC Document 48 Filed 02/07/13 Page 7 of11 Page ID #:606
number of related copyrighted videos, Plaintiff can compile its tracking data to
determine whether other copyrighted videos were downloaded under the same IP
| address. This may suggest that the infringer is likely a resident of the subscriber’s
home and not a guest. And an old-fashioned stakeout may be in order: the presence of persons within the subscriber’s home may be correlated with tracking data—the determination of who would have been in the subscriber’s home when the download was initiated may assist in discovering the actual infringer.
Such an investigation may not be perfect, but it narrows down the possible infringers and is better than the Plaintiff's current investigation, which the Court finds involves nothing more than blindly picking a male resident from a subscriber’s home. But this type of investigation requires time and effort, something that would destroy Plaintiff's business model.
The Court has previously expressed concern that in pornographic copyright infringement lawsuits like these, the economics of the situation makes it highly likely for the accused to immediately pay a settlement demand. Even for the innocent, a four-digit settlement makes economic sense over fighting the lawsuit in court—not to mention the benefits of preventing public disclosure (by being named in a lawsuit) of allegedly downloading pornographic videos.
And copyright lawsuits brought by private parties for damages are different than criminal investigations of cybercrimes, which sometimes require identification of an individual through an IP address. In these criminal investigations, a court has some guarantee from law enforcement that they will bring a case only when they actually have a case and have confidently identified a suspect. In civil lawsuits, no such guarantees are given. So, when viewed with a court’s duty to serve the public interest, a plaintiff cannot be given free rein to sue anyone they wish—the plaintiff has to actually show facts supporting its allegations. ag) ge
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 13 0f 35 Page ID #:3178
Case 2:12-cv-08333-ODW-JC Document 48 Filed 02/07/13 Page 8of11 Page ID #:607
C. Local Rule 83-3 Violations
Under Local Rule 83-3, the Court possesses the power to sanction attorney misconduct, including: disposing of the matter; referring the matter to the Standing Committee on Discipline; or taking “any action the Court deems appropriate.” L.R. 83-3.1. This includes the power to fine and imprison for contempt of the Court’s authority, for: (1) misbehavior of any person in its presence or so near thereto as to obstruct the administration of justice; (2) misbehavior of any of its officers in their official transactions; or, (3) disobedience or resistance to its lawful writ, process, order, rule, decree, or command. 18 U.S.C. § 401.
The Court is concerned with three instances of attorney misconduct. The first and second instances are related and concern violating the Court’s discovery order. The third instance concerns possible fraud upon the Court.
i. Failure to comply with the Court’s discovery order
In AF Holdings LLC v. Doe, No. 2:12-cv-6636-ODW(JCx) (C.D. Cal. filed Aug. 1, 2012) and AF Holdings LLC v. Doe, No. 2:12-cv-6669-ODW(JCx) (C.D. Cal. filed Aug. 2, 2012), the Court ordered Plaintiff to “cease its discovery efforts relating to or based on information obtained through any abovementioned Rule 45 subpoenas.” (ECF No. 13, at 1; ECF No. 10, at 1.) Further, Plaintiff was required to name all persons that were identified through any Rule 45 subpoenas. (/d.)
Plaintiff responded on November 1, 2012, and indicated that it did not obtain any information about the subscribers in both of these cases. (ECF No. 10, at 6-7, 10.)° But in response to the Court’s subsequent Orders to Show Cause, Plaintiff not only named the subscribers, but recounted its efforts to contact the subscriber and find additional information. (ECF No. 15; ECF No. 18.)
This conduct contravenes the Court’s order to cease discovery. Plaintiff has provided no justification why it ignored the Court’s order.
> This response was filed in AF Holdings LLC v. Doe, No. 2:12-cv-5709-ODW(JCx) (C.D. Cal. filed July 2, 2012).
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 14 of 35 Page ID #:3179
Cage 2:12-cv-08333-ODW-JC Document 48 Filed 02/07/13 Page 9 of11 Page ID #:608
2. Fraud on the Court
Upon review of papers filed by attorney Morgan E. Pietz, the Court perceives that Plaintiff may have defrauded the Court. (ECF No. 23.)’ At the center of this issue is the identity of a person named Alan Cooper and the validity of the underlying copyright assignments.” If it is true that Alan Cooper’s identity was misappropriated and the underlying copyright assignments were improperly executed using his identity, then Plaintiff faces a few problems.
First, with an invalid assignment, Plaintiff has no standing in these cases. Second, by bringing these cases, Plaintiff's conduct can be considered vexatious, as these cases were filed for a facially improper purpose. And third, the Court will not idle while Plaintiff defrauds this institution.
D. Conclusion
Accordingly, the Court hereby ORDERS Brett L. Gibbs, TO SHOW CAUSE why he should not be sanctioned for the following:
¢ In AF Holdings LLC v. Doe, No. 2:12-cv-6636-ODW(JCx) (C.D. Cal. filed Aug. 1, 2012), violating the Court’s October 19, 2012 Order instructing AF Holdings to cease its discovery efforts based on information obtained through any earlier-issued subpoenas;
e In AF Holdings LLC v. Doe, No. 2:12-cv-6669-ODW(JCx) (C.D. Cal. filed Aug. 2, 2012), violating the Court’s October 19, 2012 Order instructing AF Holdings to cease its discovery efforts based on information obtained through any earlier-issued subpoenas;
aa
* Although the papers revealing this possible fraud were filed in Ingenuity 13 LLC v. Doe, No. 2:12- cv-8333-ODW(JCx) (C.D. Cal. filed Sept. 27, 2012), this fraud, if true, was likely committed by Plaintiff in each of its cases before this Court.
> For example, in AF Holdings LLC v. Doe, No. 2:12-cv-6669-ODW(JCx) (C.D. Cal. filed Aug. 2, 2012), Plaintiff filed a copyright assignment signed by Alan Cooper on behalf of Plaintiffs. (ECF No. 16-1.)
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 15 of 35 Page ID #:3180
Cas@ 2:12-cv-08333-ODW-JC Document 48 Filed 02/07/13 Page 10 o0f11 Page ID #:609
coco Po SN OO HN ROH
e In Ingenuity 13 LLC v. Doe, No. 2:12-cv-6662-ODW(JCx) (C.D. Cal. filed Aug. 2, 2012), violating Rule 11(b)(2) by:
o alleging copyright infringement based on a snapshot of Internet activity, without conducting a reasonable inquiry; or,
o alleging that Benjamin Wagar is the infringer, without conducting a reasonable inquiry;
e In /ngenuity 13 LLC v. Doe, No. 2:12-cv-6668-ODW(JCx) (C.D. Cal. filed Aug. 2, 2012), violating Rule 11(b)(2) by:
o alleging copyright infringement based on a snapshot of Internet activity, without conducting a reasonable inquiry; or,
o alleging that Mayon Denton is the infringer, without conducting a reasonable inquiry;
e In /ngenuity 13 LLC v. Doe, No. 2:12-cv-8333-ODW(JCx) (C.D. Cal. filed Sept. 27, 2012), perpetrating fraud on the Court by misappropriating the identity of Alan Cooper and filing lawsuits based on an invalid copyright assignment.
This order to show cause is scheduled for hearing on March 11, 2013, at 1:30 p.m., to provide Mr. Gibbs the opportunity to justify his conduct. Based on the unusual circumstances of this case, the Court invites Morgan E. Pietz to present evidence concerning the conduct outlined in this order. The Court declines to sanction Plaintiffs AF Holdings LLC and Ingenuity 13 LLC at this time for two reasons: (1) Mr. Gibbs appears to be closely related to or have a fiduciary interest in Plaintiffs: and; (2) it is likely Plaintiffs are devoid of assets.
If Mr. Gibbs or Mr. Pietz so desire, they each may file by February 19, 2013, a brief discussing this matter. The Court will also welcome the appearance of Alan Cooper—to either confirm or refute the fraud allegations.
Based on the evidence presented at the March 11, 2013 hearing, the Court will
consider whether sanctions are appropriate, and if so, determine the proper
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 16o0f35 Page ID #:3181
Cas@ 2:12-cv-08333-ODW-JC Document 48 Filed 02/07/13 Page 11o0f11 Page ID #:610
ee
Co Oo SF SN DO we & WH bt
heeeerenit ‘prevereti,
punishment. This may include a monetary fine, incarceration, or other sanctions sufficient to deter future misconduct. Failure by Mr. Gibbs to appear will result in the automatic imposition of sanctions along with the immediate issuance of a bench warrant for contempt.
IT IS SO ORDERED.
February 7, 2012 "
“ey it “ #
~*Z a OD S/S |
OTIS D. WRIGHT, I UNITED STATES DISTRICT JUDGE
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 17 of35 Page ID #:3182
Exhibit B
Case 2,12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 18 of 35 Page ID #:3183 Case 2:12-cv-08333-ODW-JC Document 66 Filed 03/05/13 Page lof2 Page ID #:1292
3
4
5
6
7 UNITED STATES DISTRICT COURT
8 CENTRAL DISTRICT OF CALIFORNIA
9 10 | INGENUITY 13 LLC, Case Nos. 2:12-cv-8333-ODW(JCx) 11 Plaintiff, ORDER
" V. i JOHN DOE,
a Defendant.
15 In light of the parties’ recent representations made in response to the Court’s
16 || Order to Show Cause, the Court hereby orders the following:
ly 1) The following persons are hereby ORDERED to appear on March 11, 18 | 2013, at 1:30 p.m.:
19 a) John Steele, of Steele Hansmeier PLLC and/or Livewire Holdings 20 LLC:
21 b) Paul Hansmeier, of Steele Hansmeier PLLC and/or Livewire 22 Holdings LLC;
23 Cc) Paul Duffy, of Prenda Law, Inc.;
24 d) Angela Van Den Hemel, of Prenda Law, Inc.;
25 e) Mark Lutz, CEO of AF Holdings LLC and Ingenuity 13 LLC;
26 f) Alan Cooper, of AF Holdings LLC;
274 g) Peter Hansemeier of 6881 Forensics, LLC; and
28 h) Alan Cooper, of 2170 Highway 47 North, Isle, MN 56342.
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 19 of 35 Page ID #:3184 Cage 2:12-cv-08333-ODW-JC Document 66 Filed 03/05/13 Page 2of2 Page ID #:1293
| 2) Brett L. Gibbs is hereby ORDERED to serve a copy of this order on the 2 || persons in subparagraphs a—g above by March 7, 2013.
3 3) Morgan E. Pietz is hereby ORDERED to serve a copy of this order on 4 || the person in subparagraph h above by March 7, 2013.
5 IT IS SO ORDERED.
6 March 5, 2013 % i;
8
9
oe Mh a r PS
OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE
I
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 20 of 35 Page ID #:3185
Exhibit C
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 21 0f 35 Page ID #:3186 Case 2:12-cv-08333-ODW-JC Document 86 Filed 03/14/13 Page 1lof3 Page ID #:2133
3
4
5
6
7 UNITED STATES DISTRICT COURT
8 CENTRAL DISTRICT OF CALIFORNIA 9 10 | INGENUITY 13 LLC, Case Nos. 2:12-cv-8333-ODW(JCx) fi Plaintiff, ORDER . V. a JOHN DOE, a Defendant.
15 The Court has received the Ex Parte Application filed on behalf of John Steele, 16 || Paul Hansmeier, Paul Duffy, and Angela Van Den Hemel, requesting the Court to 17 | withdraw its March 5, 2013 Order requiring their attendance on March 11, 2013.
18 Based on the papers filed and the evidence presented during the March 11, 2013 19 | hearing, the Court concludes there is at least specific jurisdiction over these persons 20 | because of their pecuniary interest and active, albeit clandestine participation in these 21) cases. Not only does the Ex Parte Application lack merit, its eleventh-hour filing 22 || exemplifies gamesmanship. Accordingly, the Ex Parte Application is DENIED.
23 The March I1, 2013 hearing raised questions concerning acts performed by 24 | other persons related to Prenda Law, Inc., Steele Hansmeier PLLC, Livewire Holdings 25 | LLC, AF Holdings LLC, Ingenuity 13 LLC, and 6881 Forensics, LLC. The evidence 26 || presented suggests these persons may be culpable for the sanctionable conduct 27 | explained in the Court’s February 7, 2013 Order to Show Cause, which the Court 28 | previously attributed to Brett Gibbs only. Further, it appears that these persons, and
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 22 of 35 Page ID #:3187
Case 2:12-cv-08333-ODW-JC Document 86 Filed 03/14/13 Page 2 of 3 Page ID #:2134
their related entities, may have defrauded the Court through their acts and
representations 1n these cases. Thus, the Court amends its February 7, 2013 Order to Show Cause (ECF
No. 48) to include sanctions against the persons and entities in subparagraphs a—m
below:
a) b) Cc)
d) e)
John Steele, of Steele Hansmeier PLLC, Prenda Law, Inc., and/or Livewire Holdings LLC;
Paul Hansmeier, of Steele Hansmeier PLLC and/or Livewire Holdings LLC;
Paul Duffy, of Prenda Law, Inc.;
Angela Van Den Hemel, of Prenda Law, Inc.;
Mark Lutz, of Prenda Law, Inc., AF Holdings LLC and/or Ingenuity 13 LLC;
Alan Cooper, of AF Holdings LLC;
Peter Hansemeier, of 6881 Forensics, LLC;
Prenda Law, Inc.;
Livewire Holdings LLC;
Steele Hansmeier PLLC;
AF Holdings LLC;
Ingenuity 13 LLC; and
6881 Forensics, LLC.
These persons and entities are ORDERED to appear on March 29, 2013, at 10:30 a.m., TO SHOW CAUSE for the following:
l)
2)
Why they should not be sanctioned for their participation, direction, and execution of the acts described in the Court’s February 7, 2013 Order to Show Cause;
Why they should not be sanctioned for failing to notify the Court of
all parties that have a financial interest in the outcome of litigation;
hs
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 23 of 35 Page ID #:3188
Ca
2:12-cv-08333-ODW-JC Document 86 Filed 03/14/13 Page 3o0f3 Page ID #:2135
3) Why they should not be sanctioned for defrauding the Court by misrepresenting the nature and relationship of the individuals and entities in subparagraphs a~—m above;
4) Why John Steele and Paul Hansmeier should not be sanctioned for failing to make a pro hac vice appearance before the Court, given their involvement as “senior attorneys” in the cases; and
5) Why the individuals in subparagraphs a-g above should not be sanctioned for contravening the Court’s March 5, 2013 Order (ECF No. 66) and failing to appear on March 11, 2013.
Gibbs is ORDERED to serve a copy of this order on the persons and entities in subparagraphs a—n above by March 15, 2013, and must file proofs of service with the Court by March 18, 2013. Gibbs is further ORDERED to appear on March 29, 2013, at 10:30 a.m.
No other parties are required to appear on March 29, 2013. If so desired, Morgan E. Pietz and Nicholas R. Ranallo may appear on behalf of Defendant Doe.
Should the persons and entities in subparagraphs a—m above not appear on March 29, 2013, the Court is prepared to draw reasonable inferences concerning their conduct in the cases before the Court, including any inferences derived from their failure to appear. Failure to comply with this order will result in the imposition of sanctions.
IT IS SO ORDERED.
March 14, 2013 7
is os, — LB J, wg
a | i
Parner nnnrvWruurereerve nwa wrvurve FVvTrTTan SPT TeVR.TEYT Van OTSPP OT WSO 0 WWW We We O_o
OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE
oe
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 24 of 35 Page ID #:3189
Exhibit D
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 25 of 35 Page ID #:3190
Case@i2:12-cv-08333-ODW-JC Document 130 Filed 05/06/13 Page lofil Page ID #:2889
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
INGENUITY 13 LLC, Case No. 2:12-cv-8333-ODW(JCx) Plaintiff, ORDER ISSUING SANCTIONS Vv. JOHN DOE, Defendant.
“The needs of the many outweigh the needs of the few.” —Spock, Star Trek II; The Wrath of Khan (1982). I. INTRODUCTION Plaintiffs’ have outmaneuvered the legal system.” They’ve discovered the nexus of antiquated copyright laws, paralyzing social stigma, and unaffordable defense costs. And they exploit this anomaly by accusing individuals of illegally
downloading a single pornographic video. Then they offer to settlhe—for a sum
' The term “Plaintiffs” used in this order refers to AF Holdings LLC, Ingenuity 13 LLC, as well as
related entities, individuals, and attorneys that collaborated in the underlying scheme fronted by AF Holdings and Ingenuity 13.
* This order concerns conduct committed in the following related cases: AF Holdings LLC v. Doe, No. 2:12-cv-6636-ODW(JCx) (C.D. Cal. filed Aug. 1, 2012); AF Holdings LLC v. Doe, No. 2:12-cv-
| 6669-ODW(JCx) (C.D. Cal. filed Aug. 2, 2012); Ingenuity 13 LLC v. Doe, No. 2:12-cv-6662-
ODW(JCx) (C.D. Cal. filed Aug. 2, 2012); Ingenuity 13 LLC v. Doe, No. 2:12-cv-6668-ODW(JCx) (C.D. Cal. filed Aug. 2, 2012); Ingenuity 13 LLC v. Doe, No. 2:12-cv-8333-ODW(JCx) (C.D. Cal. filed Sept. 27, 2012).
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 26 of 35 Page ID #:3191
Case] 2:12-cv-08333-ODW-JC Document 130 Filed 05/06/13 Page 2of11 Page ID #:2890
calculated to be just below the cost of a bare-bones defense. For these individuals, resistance is futile; most reluctantly pay rather than have their names associated with illegally downloading porn. So now, copyright laws originally designed to compensate starving artists allow, starving attorneys in this electronic-media era to plunder the citizenry.
Plaintiffs do have a right to assert their intellectual-property rights, so long as they do it right. But Plaintiffs’ filing of cases using the same boilerplate complaint against dozens of defendants raised the Court’s alert. It was when the Court realized Plaintiffs engaged their cloak of shell companies and fraud that the Court went to battlestations.
Il. PROCEDURAL HISTORY
The Court issued its February 7, 2013 Order to Show Cause re Sanctions to allow counsel, Brett Gibbs, to explain why he ignored the Court’s discovery-stay Order, filed complaints without reasonable investigation, and defrauded the Court by asserting a copyright assignment secured with a stolen identity. (ECF No. 48.) As evidence materialized, it turned out that Gibbs was just a redshirt.
Gibbs’s behavior in the porno-trolling collective was controlled by several attorneys, under whom other individuals also took their orders. Because it was conceivable that these attorneys (and others) were culpable for Gibbs’s conduct, the Court ordered these parties to appear.
The following additional parties were ordered to appear: (a) John Steele, of Steele Hansmeier PLLC, Prenda Law, Inc., and/or Livewire Holdings LLC; (b) Paul Hansmeier, of Steele Hansmeier PLLC and/or Livewire Holdings LLC; (c) Paul Duffy, of Prenda Law, Inc.; (d) Angela Van Den Hemel, of Prenda Law, Inc.; (e) Mark Lutz, of Prenda Law, Inc., AF Holdings LLC, and/or Ingenuity 13 LLC; (f) Alan Cooper, of AF Holdings LLC; (g) Peter Hansemeier, of 6881 Forensics, LLC; (h) Prenda Law, Inc.; (1) Livewire Holdings LLC; (j) Steele Hansmeier PLLC; (k) AF Holdings LLC; (1) Ingenuity 13 LLC; (m) 6881 Forensics, LLC; and (n) Alan Cooper,
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 27 of 35 Page ID #:3192
Case] 2:12-cv-08333-ODW-JC Document 130 Filed 05/06/13 Page 3of11 Page ID #:2891
of 2170 Highway 47 North, Isle, MN 56342. (ECF Nos. 66, 86.) These parties were ordered to show cause why they should not be sanctioned for their behind-the-scenes role in the conduct facially perpetrated by Gibbs. These parties were also ordered to explain the nature of their operations, relationships, and financial interests.
Il. LEGAL STANDARD
The Court has a duty to supervise the conduct of attorneys appearing before it. Erickson v. Newmar Corp., 87 F.3d 298, 301 (9th Cir. 1996). The power to punish contempt and to coerce compliance with issued orders is based on statutes and the Court’s inherent authority. /nt’] Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 831 (1994). Though this power must be exercised with restraint, the Court has wide latitude in fashioning appropriate sanctions to fit the conduct. See Roadway Express, Inc. v. Piper, 447 U.S. 752, 764-65 (1980).
Under the Court’s inherent authority, parties and their lawyers may be sanctioned for improper conduct. Fink v. Gomez, 239 F.3d 989, 991 (9th Cir. 2001). This inherent power extends to a full range of litigation abuses, the litigant must have engaged in bad faith or willful disobedience of a court’s order. /d. at 992. Sanctions under the Court’s inherent authority are particularly appropriate for fraud perpetrated on the court. See Chambers v. NASCO, Inc., 501 U.S. 32, 54 (1991).
IV. DISCUSSION A. Findings of fact
Based on the evidence presented on the papers and through sworn testimony, the Court finds the following facts, including those based on adverse inferences drawn from Steele, Hansmeier, Duffy, and Van Den Hemel’s blanket refusal to testify.”
l. Steele, Hansmeier, and Duffy (“Principals”) are attorneys with shattered
law practices. Seeking easy money, they conspired to operate this enterprise and
> Even if their refusal was based on the Fifth Amendment privilege against self-incrimination, the Court still may draw adverse inferences against them in this civil proceeding. Baxter v. Palmigiano, 425 U.S. 308, 318 (1976).
re
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 28 of 35 Page ID #:3193
Cas@l2:12-cv-08333-ODW-JC Document 130 Filed 05/06/13 Page 4of11 Page ID #:2892
WC oO ~ co. ws os Cad
formed the AF Holdings and Ingenuity 13 entities (among other fungible entities) for the sole purpose of litigating copyright-infringement lawsuits. They created these entities to shield the Principals from potential liability and to give an appearance of legitimacy.
Za AF Holdings and Ingenuity 13 have no assets other than several copyrights to pornographic movies. There are no official owners or officers for these two offshore entities, but the Principals are the de facto owners and officers.
a The Principals started their copyright-enforcement crusade in about 2010,. through Prenda Law, which was also owned and controlled by the Principals. Their litigation strategy consisted of monitoring BitTorrent download activity of their copyrighted pornographic movies, recording IP addresses of the computers downloading the movies, filing suit in federal court to subpoena Internet Service Providers (“ISPs”) for the identity of the subscribers to these IP addresses, and sending cease-and-desist letters to the subscribers, offering to settle each copyright- infringement claim for about $4,000.
4. This nationwide strategy was highly successful because of statutory- copyright damages, the pornographic subject matter, and the high cost of litigation. Most defendants settled with the Principals, resulting in proceeds of millions of dollars due to the numerosity of defendants. These settlement funds resided in the Principals’ accounts and not in accounts belonging to AF Holdings or Ingenuity 13. No taxes have been paid on this income.
>. For defendants that refused to settle, the Principals engaged in vexatious litigation designed to coerce settlement. These lawsuits were filed using boilerplate complaints based on a modicum of evidence, calculated to maximize settlement profits by minimizing costs and effort.
6. The Principals have shown little desire to proceed in these lawsuits when faced with a determined defendant. Instead of litigating, they dismiss the case. When
pressed for discovery, the Principals offer only disinformation—even to the Court.
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 29 of 35 Page ID #:3194
Case) 2:12-cv-08333-ODW-JC Document 130 Filed 05/06/13 Page 5of11 Page ID #:2893
a The Principals have hired willing attorneys, like Gibbs, to prosecute these cases. Though Gibbs is culpable for his own conduct before the Court, the Principals directed his actions. In some instances, Gibbs operated within narrow parameters given to him by the Principals, whom he called “senior attorneys.” |
8. The Principals maintained full control over the entire copyright-litigation operation. The Principals dictated the strategy to employ in each case, ordered their hired lawyers and witnesses to provide disinformation about the cases and the nature of their operation, and possessed all financial interests in the outcome of each case.
9. The Principals stole the identity of Alan Cooper (of 2170 Highway 47 North, Isle, MN 56342). The Principals fraudulently signed the copyright assignment for “Popular Demand” using Alan Cooper’s signature without his authorization, holding him out to be an officer of AF Holdings. Alan Cooper is not an officer of AF Holdings and has no affiliation with Plaintiffs other than his employment as a groundskeeper for Steele. There is no other person named Alan Cooper related to AF Holdings or Ingenuity 13.
10. The Principals ordered Gibbs to commit the following acts before this Court: file copyright-infringement complaints based on a single snapshot of Internet activity; name individuals as defendants based on a statistical guess; and assert a copyright assignment with a fraudulent signature. The Principals also instructed Gibbs to prosecute these lawsuits only if they remained profitable; and to dismiss them otherwise.
11. Plaintiffs have demonstrated their willingness to deceive not just this Court, but other courts where they have appeared. Plaintiffs’ representations about their operations, relationships, and financial interests have varied from feigned ignorance to misstatements to outright lies. But this deception was calculated so that the Court would grant Plaintiffs’ early-discovery requests, thereby allowing Plaintiffs to identify defendants and exact settlement proceeds from them. With these granted
requests, Plaintiffs borrow the authority of the Court to pressure settlement.
At
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 30 of 35 Page ID #:3195
Cas@j2:12-cv-08333-ODW-JC Document 130 Filed 05/06/13 Page 6of11 Page ID #:2894
B. = Sanctions
Although the Court originally notified the parties that sanctions would be imposed under Federal Rule of Civil Procedure 11(b)(3) and Local Rule 83-3, the Court finds it more appropriate to sanction the parties under its inherent authority. See In re DeVille, 361 F.3d 539, 550 (9th Cir. 2004) (“[T]he bankruptcy court’s failure to specify, in advance of the disciplinary proceedings, that its inherent power was a basis for those proceedings, did not serve to undercut its sanctioning authority.”). The sanctions for Plaintiffs’ misconduct are as follows.
e Rule 11 sanctions
The Court maintains that its prior analysis of Plaintiffs’ Rule 11 violations is accurate. (ECF No. 48.) Plaintiffs can only show that someone, using an IP address belonging to the subscriber, was seen online in a torrent swarm. But Plaintiffs did not conduct a sufficient investigation to determine whether that person actually downloaded enough data (or even anything at all) to produce a viewable video. Further, Plaintiffs cannot conclude whether that person spoofed the IP address, is the subscriber of that IP address, or is someone else using that subscriber’s Internet access. Without better technology, prosecuting illegal BitTorrent activity requires substantial effort in order to make a case. It is simply not economically viable to properly prosecute the illegal download of a single copyrighted video.
Enter Plaintiffs and their cottage-industry lawsuits. Even so, the Court is not as troubled by their lack of reasonable investigation as by their cover-up. Gibbs argued that a deep inquiry was performed prior to filing. Yet these arguments are not credible and do not support Gibbs’s conclusions. Instead, Gibbs’s arguments suggest a hasty after-the-fact investigation, and a shoddy one at that.
For instance, Gibbs characterized Marvin Denton’s property as ‘“‘a very large estate consisting of a gate for entry and multiple separate houses/structures on the property.” (ECF No. 49, at 19.) He stated this to demonstrate the improbability that
Denton’s Wi-Fi signal could be received by someone outside the residence. But
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 31 0f 35 Page ID #:3196
Cas
2:12-cv-08333-ODW-JC Document 130 Filed 05/06/13 Page 7of11 Page ID #:2895
Denton’s property is not a large estate; 1t is a small house in a closely packed residential neighborhood. There are also no gates visible.
it 16353. Vanderevil mon. (at iesna. California 714! Coole Maoy. Mociie f tom - th few Mgtey Goce fe cep
| = a4 . ‘ - j wm Spake De Sh ae e+ Lie = - = . a ec. | a ee es oe 4
(50 gle 6355 Vanderwed Averue. West Cowna, Calfora 91790
| 4 £25 5 Vanderwedl Ave
Nest Coum CA V1
a.
_ ; 3 f + ———— _ == ~—
Gibbs’s statement is a blatant lie. His statement resembles other statements given by Plaintiffs in this and their other cases: statements that sound reasonable but lack truth. Thus, the Court concludes that Gibbs, even in the face of sanctions, continued to make factual misrepresentions to the Court.
Nevertheless, Rule 11 sanctions are inappropriate here because it is the wrong sanctions vehicle at this stage of litigation. The cases have already been dismissed and monetary sanctions are not available. Fed. R. Civ. P 11(c)(5)(B) (a court cannot impose a monetary sanction on its own unless it issued the show-cause order before
voluntary dismissal). The more appropriate sanction for these Rule 11 violations is
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 32 of 35 Page ID #:3197
Case] 2:12-cv-08333-ODW-JC Document 130 Filed 05/06/13 Page 8of11 Page ID #:2896
1 || what the Court had already imposed: denial of requests for early discovery. (ECF 2 No. 28.)
Z. Sanctions under the Court's inherent authority
In addition to Gibbs’s misrepresentations, there is the matter of the ignored
Court Order vacating early discovery. (ECF No. 28.) The evidence does not show
3
4
=
6 || that the Order was ignored because of miscommunication among Plaintiffs. The
7 || Order was purposely ignored—hoping that the ISPs were unaware of the vacatur and
8 || would turn over the requested subscriber information.
9 Then there is the Alan Cooper forgery. Although a recipient of a copyright 10 || assignment need not sign the document, a forgery 1s still a forgery. And trying to pass 11 || that forged document by the Court smacks of fraud. Unfortunately, other than these 12 || specific instances of fraud, the Court cannot make more detailed findings of fraud.
13 Nevertheless, it is clear that the Principals’ enterprise relies on deception. Part 14 of that ploy requires cooperation from the courts, which could only be achieved 15 || through deception. In other words, if the Principals assigned the copyright to 16 || themselves, brought suit in their own names, and disclosed that they had the sole 17 | financial interest in the suit, a court would scrutinize their conduct from the outset. 18 || But by being less than forthcoming, they defrauded the Court. They anticipated that 19 | the Court would blindly approve their early-discovery requests, thereby opening the 20 |} door to more settlement proceeds.
21 The Principals also obfuscate other facts, especially those concerning their 22 | operations, relationships, and financial interests. The Principals’ web of 23 | disinformation is so vast that the Principals cannot keep track—their explanations of 24 || their operations, relationships, and financial interests constantly vary. This makes it 25 | difficult for the Court to make a concrete determination.
26 Still, the Court adopts as its finding the following chart detailing Plaintiffs’
27 || relationships. Though incomplete, this chart is about as accurate as possible given
28 || Plaintiffs’ obfuscation.
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 33 of 35 Page ID #:3198
Case 2:12-cv-08333-ODW-JC Document 130 Filed 05/06/13 Page 9of11 Page ID #:2897
[| ss "\rrorNEvS”) PRENDA ... 4 John Steele Paul Duffy Brett Gibbs 3 4 5 | Lutz “Principal” Pau! Hansaneier Michac! Dugas f Mark Lutz Cabbs = In House Counsel - Al Dugas’ wife also Counsel | gi ts 9 cies Hansemeier ~Ajan Cooper” “SaltMarsh” I Heartbreaker Digital, LLCG) Counsel 4 _ Boy? Racer, inc 10 =—e i a ~_ Bu Bubble Gum Prods., L uc | eae ikon riavieetate am 11 | CP Productions, Inc. | __¥PR, Ine. (Nevada} | -.__ First Time Videos, LLC | 12 H Future Blue, Inc. 13 H Hard Drive Prods, Inc. 14 -— Millennium TGA, inc, 9 4532 Fast Villa eras van eTEeaaairnne SSSR ca 15 : Openmind Solutions, inc. ys mio (Unknown) 16 : Pink Lotus Entertainment Ce =i COMPUTER “FORENSICS” en cunksteiaures 17 : —_—S_ SS —— At ee a ptear un namire Boh ntthe Rr A ES MRITAT ee iatne 18 As for Van Den Hemel, Lutz, and Hansemeier, they are not without fault even
19 though they acted under orders from the Principals. They were not merely 20 || assimilated; they knowingly participated in this scheme, reaping the benefits when the 21 || going was good. Even so, their status as non-attorneys and non-parties severely limits 22 | the sanctions that could be levied against them. |
23 Despite these findings, the Court deems these findings insufficient to support a 24 || large monetary sanction—a seven-digit sanction adequate to deter Plaintiffs from 25 || continuing their profitable enterprise. Even if the Court enters such a sanction, it is 26 | certain that Plaintiffs will transfer out their settlement proceeds and plead paucity. 27 || Yet Plaintiffs’ bad-faith conduct supports other more fitting sanctions.
28 ///
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 34 of 35 Page ID #:3199
Case [2:12-cv-08333-ODW-JC Document 130 Filed 05/06/13 Page 10 of11 Page ID #:2898
First, an award of attorney’s fees to Defendants is appropriate. This award compensates them for expenses incurred in this vexatious lawsuit, especially for their efforts in countering and revealing the fraud perpetrated by Plaintiffs.
So far, only Morgan Pietz and Nicholas Ranallo have appeared.” Upon review, the Court finds Pietz’s expenditure of 120.5 hours at an hourly rate of $300 reasonable based on his experience, work quality, and quantity of necessary papers filed with the Court. (ECF No. 102.) Although many of these hours were spent after the case was dismissed, these hours were spent in connection with the sanction hearings—time well spent. Similarly, the attorney’s fees and costs incurred by Ranallo also appear reasonable.
Therefore, the Court awards attorney’s fees and costs in the sum of $40,659.86 to Doe: $36,150.00 for Pietz’s attorney’s fees; $1,950.00 for Ranallo’s attorney’s fees; $2,226.26 for Pietz’s costs; and $333.60 for Ranallo’s costs. As a punitive measure, the Court doubles this award, yielding $81,319.72.°. This punitive multiplier is justified by Plaintiffs’ brazen misconduct and relentless fraud. The Principals, AF Holdings, Ingenuity 13, Prenda Law, and Gibbs are liable for this sum jointly and severally, and shall pay this sum within 14 days of this order.
Second, there is little doubt that that Steele, Hansmeier, Duffy, Gibbs suffer from a form of moral turpitude unbecoming of an officer of the court. To this end, the Court will refer them to their respective state and federal bars.
Third, though Plaintiffs boldly probe the outskirts of law, the only enterprise they resemble is RICO. The federal agency eleven decks up is familiar with their prime directive and will gladly refit them for their next voyage. The Court will refer this matter to the United States Attorney for the Central District of California. The
will also refer this matter to the Criminal Investigation Division of the Internal
: They appeared on behalf of the Doe Defendant in the case Ingenuity 13 LLC v. Doe, No. 2:12-cv- 8333-ODW(JCx) (C.D. Cal. filed Sept. 27, 2012). > This punitive portion is calculated to be just below the cost of an effective appeal.
Case 2:12-cv-08333-ODW-JC Document 157 Filed 05/20/13 Page 35 of 35 Page ID #:3200
Case |2:12-cv-08333-ODW-JC Document 130 Filed 05/06/13 Page 11 0f11 Page ID #:2899
Revenue Service and will notify all judges before whom these attorneys have pending cases. For the sake of completeness, the Court requests Pietz to assist by filing a report, within 14 days, containing contact information for: (1) every bar (state and federal) where these attorneys are admitted to practice; and (2) every judge before whom these attorneys have pending cases.
4. Local Rule 83-3 sanctions
For the same reasons stated above, the Court will refer Duffy and Gibbs to the Standing Committee on Discipline (for this District) under Local Rule 83-3.
V. CONCLUSION
Steele, Hansmeier, Duffy, Gibbs, Prenda Law, AF Holdings, and Ingenuity 13 shall pay, within 14 days of this order, attorney’s fees and costs totaling $81,319.72 to Doe. The Court enters additional nonmonetary sanctions in accordance with the discussion above.
IT ISSO ORDERED.
May 6, 2013
Soe aay iA OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE