KLINEDINST PC
501 West BROADWAY, SUITE 600
SAN DIEGO, CALIFORNIA 92101

Case 2:(.2-cv-08333-ODW-JC Document 157-1 Filed 05/20/13 Page 1of9 Page ID #:3201

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) 239-8131/FAX (619) 238-8707
5 || hrosing@klinedinstlaw.com
6 dmajchrzak@klinedinstlaw.com
pvineyard@klinedinstlaw.com
fi
Attorneys for Specially Appearing for
8 || PRENDA LAW, INC.
Z UNITED STATES DISTRICT COURT
10 CENTRAL DISTRICT OF CALIFORNIA
11
12 || INGENUITY 13 LLC, Case No. 2:12-cv-8333-ODW(JCx)
13 Plaintiff, APPLICATION OF PRENDA LAW,
INC. FOR ORDER STAYING
14 PROCEEDINGS AND
V. ENFORCEMENT OF ORDER
15 ISSUING SANCTIONS PENDING
APPEAL
16 || JOHN DOE,
Date:
17 Defendant. Time:
18 Judge: Hon. Otis D. Wright, II
Magistrate Judge: Hon, Jacqueline Chooljian
19 Complaint Filed: September 27, 2012
Trial Date: None set
20
oi Prenda Law, Inc. (“Prenda Law’) hereby applies to this court for an order

99 || staying the underlying proceedings and enforcement of the court’s May 6, 2013,
43 || Order Issuing Sanctions pending resolution of Prenda Law’s pending appeal before
44 || the United States Court of Appeals for the Ninth Circuit. The basis for this
95 || Application is that enforcement of the Order Issuing Sanctions could both
46 || materially harm Prenda Law’s reputation and financial concerns and cause undue
47 || scrutiny of, and potential injury to, the court’s application of its inherent authority.
-l-
APPLICATION OF PRENDA LAW, INC. FOR ORDER STAYING PROCEEDINGS AND

ENFORCEMENT OF ORDER ISSUING SANCTIONS PENDING 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 157-1 Filed 05/20/13 Page 2 0f9 Page ID #:3202

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
APPLICATION FOR ORDER STAYING PROCEEDINGS AND

eh

- ENFORCEMENT OF ORDER ISSUING SANCTIONS
3
4 | 1. INTRODUCTION
> Prenda Law, Inc. (“Prenda Law’), one of the many entities and persons
6 || subject to the court’s May 6, 2013, Order Issuing Sanctions, is appealing the May 6
7 || order, as well as at least three others concerning the Order to Show Cause (“OSC’’)
8 || proceedings initiated by the court on February 7, 2013. The gravamen of Prenda
9 || Law’s appeal will be that the court exceeded its inherent authority pursuant to
10 || Central District Local Rule 83, but more notably that the court deprived Prenda
11 || Law of Due Process in the issuing of sanctions. Specifically, the court informed
12 || Prenda Law and other similarly situated persons and entities that they were the
13 || targets of an investigation that could lead to incarceration and punitive sanctions,
14 || but thereafter treated the subsequent proceedings, if in name only, as civil
15 || proceedings.
16 In draping what could only be deemed a criminal investigation in the “civil”

17 || nomenclature, the court failed to provide Prenda Law the opportunity to cross-
18 || examine witnesses who had provided testimony at the March 11, 2013, OSC

19 || hearing; accepted into evidence, and drew inferences from, documents that were
20 || improperly authenticated or certified and for which there was no foundation; by
21 || way of the threatened criminal sanctions, invited key witnesses to invoke their
22 || Fifth Amendment rights, only to wrongfully take negative inferences from those
23 || invocations; failed to employ a disinterested prosecutor; and failed to apply the
24 || “beyond a reasonable doubt” standard for imposition of the punitive sanctions.
25 || These violations of Due Process, if given the continuing imprimatur of the District
26 || Court in the ongoing enforcement of the May 6 Order Issuing Sanctions, will

27 || damage the court’s ability to rely on its inherent authority in the future, because

28 || enforcement of the May 6 Order, if found to be erroneous, will have caused
oO«
APPLICATION OF PRENDA LAW, INC. FOR ORDER STAYING PROCEEDINGS AND

ENFORCEMENT OF ORDER ISSUING SANCTIONS PENDING 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 157-1 Filed 05/20/13 Page 3o0f9 Page ID #:3203

—"

judicially-created injury to Prenda Law’s reputational and financial interests, as
well as to those interests of Prenda Law’s clients in other venues. Such injury
undermines the public’s trust in our judicial system.
Il STATEMENT OF RELEVANT FACTS

On February 7, 2013, this court issued an OSC regarding Sanctions ordering

Plaintiffs counsel, Brett Gibbs, to appear before the court to respond to several
allegations of improper behavior and attempted fraud on the court. At pages 10-11
of that order, the court stated it would consider whether sanctions, including fines

‘ ; ‘ , |
and incarceration, were appropriate “to deter future misconduct.” On March 5,

co Oo mA NHN DAH Se WY WL

2013, in response to representations made to the court, the court ordered, relevant
11 || to this application, non-parties John Steele, Paul Hansmeier, Paul Duffy, and

12 || Angela Van Den Hemel to appear before it on March 11, 2013.° The order was
13. || silent on the reasons why the non-parties were to appear.

14 On March 8, 2013, Steele, Hansmeier, Duffy, and Van Den Hemel filed an
15 |] ex parte application for an order withdrawing the court’s previous order for the
16 || non-parties’ appearance, based in no small part on lack of jurisdiction and

17 || improper notice. On March 14, 2013, after a lengthy March 11, 2013, hearing
18 || involving examination of witnesses and the submission of “evidence” and

19 || argument, the court denied the aforementioned ex parte application and amended
20 || its February 7, 2013, OSC regarding Sanctions to encompass the non-parties and
21 || Prenda Law.* The March 14 order also instructed the non-parties and Prenda,

22 || among others, to appear at a further OSC hearing on March 29, 2013, which was
23 || later continued to April 2, 2013, upon the court’s own order.” ° At the April 2

24 || hearing, the individuals that the court believed to be associated with Prenda Law

26 || , ECF No. 48, 10:27-28; 11:1-2
» ECE N 0. 66.
27 || | ECF Nos. 81-85, 91.
* ECF No. 86:18-22.
28 || > ECF No. 86, 2:22-23.
° ECF No. 88. 3.

APPLICATION OF PRENDA LAW, INC. FOR ORDER STAYING PROCEEDINGS AND
ENFORCEMENT OF ORDER ISSUING SANCTIONS PENDING APPEAL
2:12-cv-8333-ODW(JCx)

KLINEDINST PC
501 West Broapway, SUITE 600
SAN DieGoO, CALIFORNIA 92101

Case 2:12-cv-08333-ODW-JC Document 157-1 Filed 05/20/13 Page 4of9 Page ID #:3204

1 || invoked their Fifth Amendment privilege against self-incrimination, leading the

2 || court to adjourn the proceedings within 12 minutes. Just prior to adjournment,

3 || counsel for Prenda Law requested leave to present legal and evidentiary

4 || arguments, whether orally or via brief. The court chose the latter, and on April 8

5 || and 18, 2013, Prenda Law, Duffy, and Van Den Hemel filed their responses to the

6 || OSC.’

7 On May 6, 2013, the court filed its Order Issuing Sanctions against Gibbs,

8 || Steele, Hansmeier, Duffy, Prenda, and others, and in so doing, triggered the filing

9 || of at least three Notices of Appeal.> Those sanctions were significant, including an
10 || attorney’s fees award, a punitive doubling of that award, and referral of the
11 || sanctioned parties to the United States District Attorneys’ Office, the IRS, multiple
12 || courts throughout the country, and the respective State Bars of the practicing

13 || attorneys for potential criminal investigation.

14 || I. ARGUMENT

15 Federal Rules of Appellate Procedure, Rule 8, applies to an appellant’s

16 || request for a stay of an order of the district court pending appeal. Fed. Rules App.
17 || Proc., Rule 8(a). The United States Supreme Court has created a 4-pronged

18 || analysis by which to determine whether an appellant should be granted a stay by

19 || the district courts. Those prongs are as follows:

20 (1) whether the stay applicant has made a strong showing
>] that he is likely to succeed on the merits;
09 (2) whether the applicant will be irreparably injured absent a
Stay;
23 . =
(3) whether issuance of the stay will substantially injure the
24 other parties interested in the proceeding; and
20 (4) where the public interest lies.
26
pa

28 || , ECF Nos. 108, 120. | |
ECF Nos. 140, 149, and Prenda Law’s Notice, filed concurrently herewith.

APPLICATION OF PRENDA LAW, INC. FOR ORDER STAYING PROCEEDINGS AND
ENFORCEMENT OF ORDER ISSUING SANCTIONS PENDING APPEAL
2:12-cv-8333-ODW(JCx)

KLINEDINST PC
501 West BRoaDway, SUITE 600

Case 2:1/2-cv-08333-ODW-JC Document 157-1 Filed 05/20/13 Page5of9 Page ID #:3205

SAN DiEGO, CALIFORNIA 92101

CoO WAN DH UM HS WY NS

—— a ee |
Noe

13

Hilton v. Braunskill, 481 U.S. 770, 776-77 (1987). Here, the equities clearly

gravitate toward Prenda Law, because both its and the public’s interests align.

A. A Strong Showing of Success on The Merits Is Satisfied By Virtue

That Serious Legal Questions Have Been Raised
In 2011, the Ninth Circuit decided Leiva-Perez v. Holder, 640 F.3d 962 (9

Cir. 2011), which massaged the standard by which an appellant seeking a stay must
show its potential success on the merits. The Ninth Circuit determined that the
standard did not require a showing that “success is more likely than not,” but rather
that an applicant show that there was a “fair prospect” for success; “a substantial
case on the merits;” or that “serious legal questions are raised.” Id. at 967-68
(numerous citations omitted). Here, violations of Prenda Law’s Due Process rights
have been raised, as has been the court exceeding its inherent authority not only to
impose punitive monetary sanctions, but also to hit Prenda Law where it hurts — in
its other cases across the country, its reputation, and its business model — all which
suffer because the court determined that it was appropriate to refer Prenda Law to
the U.S. District Attorneys’ Office, the IRS, courts in which Prenda Law is
prosecuting cases on behalf of its clients, and the corresponding State Bars in
which Prenda Law’s attorneys are licensed.

The extent of the sanctions begs analysis, as do the multiple findings of fact
justifying the sanctions, which were based on inferences taken from the invocation
of the Fifth Amendment and the review of unauthenticated, uncertified documents
from unrelated litigation. For example, in the Ninth Circuit, the inadmissibility of
an unauthenticated deposition transcript that a court reporter has failed to certify
has long been established. Orr v. Bank of Am., 285 F.3d 764, 774 (9" Cir.
2002)(“It is insufficient for a party to submit, without more, an affidavit from her
counsel identifying the names of the deponent, the reporter, and the action and
stating that the deposition is a ‘true and correct copy.’ Such an affidavit lacks
foundation even if the affiant counsel were present at the deposition.” (internal

APPLICATION OF PRENDA aw ING. FOR ORDER STAYING PROCEEDINGS AND

ENFORCEMENT OF ORDER ISSUING SANCTIONS PENDING APPEAL
2:12-cev-8333-ODW(JCx)

Case 2:112-cv-08333-ODW-JC Document 157-1 Filed 05/20/13 Page 6of9 Page ID #:3206

KLINEDINST PC
501 West Broapway, Surte 600
SAN DIEGO, CALIFORNIA 92101

Como OO A NI DB A |S Ww NO

citations omitted)); Pavone v. Citicorp Credit Servs., 60 F. Supp. 2d 1040, 1045
(S.D. Cal. 1997) (excluding a deposition for failure to submit a signed certification
from the reporter). Yet, the court, in both the OSC hearings and its May 6 Order,
relied heavily on the transcript from the deposition of Paul Hansmeier to support
the court’s ultimate conclusions of fact. |

Similarly, the primary bases for the court’s extension of the February 7,
2013, OSC re Sanctions to Prenda Law were multiple filings by Morgan Pietz,
counsel for the putative John Doe Defendant, and Brett Gibbs, Pietz’s opposing
counsel. Yet, when the opportunity presented itself to permit counsel for Prenda to
cross-examine Gibbs and Pietz (whose demonstrative exhibit made it into the
court’s May 6 Order Issuing Sanctions) at the March 11, 2013, hearing, the court
simply told Prenda Law’s counsel to “have a seat” and refused her the opportunity
to participate in the hearing.’ Thereafter, the court accepted into evidence
numerous exhibits for which no or little foundation was laid (e.g., the
aforementioned demonstrative exhibit prepared by Pietz'°), begging the question
on what basis or bases the court could lawfully form conclusions of fact for its
May 6 Order.

There is a simple threshold issue that likely determines whether the court’s
procedures meet Due Process standards — were the OSC proceedings criminal or
civil in nature? Whether a court’s threat of potential incarceration and punitive
sanctions turns a civil proceeding into a criminal one is a serious question of law
that implicates society’s interests in freedom, a non-coercive judiciary, and the
premature destruction of a person’s or company’s reputation and business interests.
Pursuant to Leiva-Perez, these are “serious legal questions” that have been raised

by Prenda Law and justify a stay of the instant proceedings and the enforcement of

9 Fs |
” ECF No. 93, 6:15-25; 7:1-7.

When asked by Brett Gibbs’ counsel whether the court would permit |
examination of Mr. Pietz concerning his testimony about the demonstrative
exhibit, the court responded “I don’t make a habit of placing lawyers under oath,
but this case may change that.” ECF No. 93, 58:17-23.

APPLICATION OF PRENDA LAW, INC. FOR ORDER STAYING PROCEEDINGS AND
ENFORCEMENT OF ORDER ISSUING SANCTIONS PENDING APPEAL
2:12-cv-8333-ODW(JCx)

KLINEDINST PC
501 West Broapbway, SuITE 600
SAN DIEGO, CALIFORNIA 92101

Case 2:12-cv-08333-ODW-JC Document 157-1 Filed 05/20/13 Page 7 of9 Page ID #:3207

the court’s May 6, 2013, Order Issuing Sanctions.

B. Prenda Law Will Assuredly Be Injured If the Court Proceeds to

Enforce Its May 6, 2013, Order
The Ninth Circuit has noted the stigmatizing effect a formal sanction has

over an attorney. See United States v. Talao, 222 F.3d 1133, 1138 (9" Cir.
2000)(“If the court's formal finding is permitted to stand, it is likely to stigmatize
Harris among her colleagues and potentially could have a serious detrimental effect
on her career.”’). “Public criticism of a lawyer in an opinion in which the court

does not undertake the job of fact-finding with all the procedural safeguards

Co ODO DAN DW OH HR WY NNO =

involved in a disciplinary proceeding may destroy or severely damage a lawyer's
11 || reputation.” Andrew L. Kaufman, Judicial Ethics: The Less-Often Asked

12 || Questions, 64 Wash. L. Rev. 851, 864 (1989). Furthermore, the court’s

13 || conclusions of fact, which Prenda Law believes to be unsupported by admissible
14 || evidence, are currently being used against Prenda Law’s clients in cases

15 || throughout the country. Those clients should not be prejudiced by an order that
16 || Prenda Law believes has questionable merit.

17 The court should stay enforcement of its order and publicly pronounce in
18 || language as equally provocative as the underlying May 6, 2013, order that an

19 || appeal is pending regarding both the legal and factual conclusions therein. If the
20 || court was correct in its decision-making, a stay merely delays the inevitable

21 || punishment, and no prejudice can arise. If, on the other hand, the Ninth Circuit
22 || agrees with Prenda Law, the court would have caused great harm to both Prenda

23 || Law and its clients, thereby undermining judicial authority.

24 C. There Are No Parties Who Will Be Prejudiced By a Stay
25 The underlying matter has been dismissed. No defendants were named to

26 || the underlying Complaint. The only person who will complain of prejudice will be
27 || the attorney of an unknown John Doe, who has made it his life’s work to chase

28 || after Prenda Law. Depending on your perspective, this may or may not be a good
.
APPLICATION OF PRENDA LAW, INC. FOR ORDER STAYING PROCEEDINGS AND

ENFORCEMENT OF ORDER ISSUING SANCTIONS PENDING APPEAL
2:12-cv-8333-ODW(JCx)

Case 2:1/2-cv-08333-ODW-JC Document 157-1 Filed 05/20/13 Page 8of9 Page ID #:3208

KLINEDINST PC

501 West BRoaDway, Suite 600
SAN DieGO, CALIFORNIA 92101

Co ODO 7A IN HD On Se WD PO

rene es es |
Nooo

thing, but in any event, that pursuit was a voluntary decision made by Mssrs. Pietz
and Ranallo. Further, the court awarded to Pietz and Ranallo a majority of the
attorneys’ fees for work performed after the underlying lawsuit’s dismissal and
then doubled the award as a punitive measure. Therefore, no “party” will be
prejudiced by a stay of the proceedings or enforcement of the May 6 Order.

D. The Public’s Interest Lies In The Upholding of Due Process

The court, in one of its many Star Trek quotations, eschewed the needs of
the many over those of the few, undoubtedly in reference to the many John Doe
defendants who may or may not have engaged in illegal piracy and the relatively
few persons subjected to the court’s Order Issuing Sanctions. However, more
fundamental than the interest of not being accused of doing something illegal are
the methods and procedures memorialized in the United States Constitution and its
Bill of Rights to protect those accused of crimes and to protect the property
interests of the citizenry. Upholding Due Process means that a falsely accused
perpetrator gets his or her day in court; it means that a single branch of government
cannot become prosecutor, judge, jury, and warden. How the court conducted its
OSC proceeding in the instant case has trumped any interest a John Doe infringer
might have in remaining free of a Prenda Law settlement letter. Due Process is at
issue; there is nothing as fundamental and important to society in general than this
concept. The fourth prong of the stay analysis militates to an order granting
Prenda Law’s requested stay.
IV. CONCLUSION

The court has its order. Whether landing today, tomorrow, next month, or
next year, the court has dropped an anvil on Prenda Law’s interests across the
country. There is no prejudice in slowing down the inevitable if the bases for the
court’s May 6, 2013, Order Issuing Sanctions can withstand the Ninth Circuit’s
scrutiny. However, if it cannot, then this court has initiated a great injustice on
Prenda Law. The equities and responsibilities that arise with the exercise of great

APPLICATION OF PRENDA CWC FOR ORDER STAYING PROCEEDINGS AND

ENFORCEMENT OF ORDER ISSUING SANCTIONS PENDING APPEAL
2:12-cev-8333-ODW(JCx)

KLINEDINST PC
501 West Broapway, SurIte 600
SAN DIEGO, CALIFORNIA 92101

Case 2:12-cv-08333-ODW-JC Document 157-1 Filed 05/20/13 Page9of9 Page ID #:3209

1 || power dictate that the court slowly, and with great care, utilize its inherent
2 || authority to punish, lest it abrogates the trust society has placed beneath it to mete
3 |} out such punishment. For all of the foregoing reasons, the court should grant
4 |; Prenda Law’s Application for a Stay.
>
6 Klinedinst PC
7 ae = | cennn er cster nS es,
g || DATED: May 20. 2013 By: 2
Heather L. Rosing
9 David M. Majchrzak
Philip W. Vineyard .
10 Attorneys for eo Appearing for
PRENDA LAW. INC.
I] 15550224v1
2
13
14
15
16
17
18
19
20
21
pp)
23
24
Z>
26
2)
28
«Ox

APPLICATION OF PRENDA LAW, INC. FOR ORDER STAYING PROCEEDINGS AND
ENFORCEMENT OF ORDER ISSUING SANCTIONS PENDING APPEAL
2:12-cv-8333-ODW(JCx)