Minnesota Judge Throws Book at Prenda Law/AF Holdings

PRENDALAND—It has taken many months and many different cases throughout the country to open the eyes of judges adjudicating copyright infringement cases brought by the Prenda Law gang, but it is finally happening, and because of it, one can almost see the light at the end of the tunnel that signals the final death throes of Prenda, by whatever name it may be using at the time. That may sounds harsh, but the damage wrought by this aggressive copyright troll—a term that sadly fits it like a glove—has not been a laughing matter. especially for an adult industry whose already iffy reputation has been further tarnished by the outrageous fabrications uttered under oath or in writing by Prenda principals. But as bad as it has been for the Prenda lawyers of late, Wednesday's ruling by U.S. Magistrate Judge Franklin L. Noel in five Minnesota cases involving Prenda shell company AF Holdings indicates a new depth in terms of sanctions levied against attorneys, most notably John L. Steele, Paul A. Duffy and Paul R. Hansmeier. In June, AVN wrote about the reopening of the five cases following an allegation by Judge Noel that the Prenda team had “attached a fraudulent document to the complaint.” The document was the same copyright-assignment agreement that the Prenda lawyers had used in previous cases, and which they swore had been legally signed by one Alan Cooper, assigning them the rights to the movies they were alleging had been illegally pirated by BitTorrent users, and over which they were filing suit and demanding settlement payments. Judge Noel, like other judges, had been profoundly influenced by the now legendary May 6, 2013 order issued by U.S. District Judge Otis D. Wright in a Los Angeles case, and liberally copied passages from it to use in his June order. He was especially interested in the part in which Judge Wright claimed, "The [Prenda] 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." Ingenuity 13 is another entity alleged by Wright to have been created and owned by the Prenda lawyers as a shell company used to bring lawsuits against alleged pirates. Judge Noel decided to reopen the five AF Holding cases in June "for the purpose of determining whether it was a victim of fraud." Following a subsequent case management conference, and a September 30 evidentiary hearing, during which "AF Holdings bore the burden of establishing the authenticity of each assignment," and at which "the Court heard testimony from John Steele, Jason Flesher, Brent Berry and Alan Cooper," Judge Noel issued yesterday's order, which contained the following findings of fact: 1. AF Holdings failed to meet its burden of proving the authenticity of the copyright assignment agreements for “Popular Demand” and “Sexual Obsession.” Both documents purport to be signed by Alan Cooper, on behalf of AF Holdings, LLC. John Steele testified that he was familiar with both agreements,16 but did not witness Cooper sign either of them. Steele testified that he had no knowledge of whether Cooper personally signed the agreements. Steele also testified that he was familiar with Cooper’s authentic signature and that what was purported to be Cooper’s signature on the assignments was not authentic. [Citations removed] 2. Steele testified that he introduced Cooper to Mark Lutz, the sole principal of AF Holdings. Steele testified that the introduction occurred via telephone. Specifically, Steele testified that after calling Lutz on March 18, 2011, he handed the phone to Cooper who spoke to Lutz. Steele only heard Cooper’s side of the conversation. Steele testified that he also heard Cooper’s side of a November 2011 conversation with Lutz. Steele described Lutz as the controlling member of AF Holdings and testified that he understood Cooper to be working with Lutz in the capacity of “a helper.” [Citations removed] 3. Based upon Cooper’s side of these two conversations, Steele testified that it was his “understanding that he [Cooper] had given authority to Mark and his people if he wasn’t available, that he could sign the various documents as long as he understood what the document related to . . . .” Finding Steele’s testimony regarding his “understanding” of an agreement between Cooper and Lutz to be vague, the Court asked directly, “Did you hear Mr. Cooper give Mr. Lutz authority or permission to sign his name to documents?” Steele replied “yes.” The Court expressly disbelieves Steele’s testimony in this regard. [Citations removed] 4. Alan Cooper testified that he (1) never spoke to Mark Lutz by telephone, (2) did not sign the agreements, (3) did not give anyone else permission to sign his name on the agreements, (4) was not familiar with the agreements until someone informed him that his signature appeared on the documents and (5) never held any position with AF Holdings, LLC. The Court finds Cooper’s testimony credible. [Citations removed] Not surprisingly, the judge determined that "AF Holdings failed to produce any credible evidence that the assignments were authentic," and more to the point determined that, "The Court has been the victim of a fraud perpetrated by AF Holdings, LLC." As a result, he continued, "The Court concludes that the appropriate remedy for this fraud is to require AF Holdings to return all of the settlement money it received from all of the Defendants in these cases, and to pay all costs and fees (including attorneys’ fees) incurred by the Defendants. After all settlement payments are returned and other fees are paid, all five cases should be dismissed on the merits, with prejudice." But the judge was not finished. Cognizant that other cases involving AF Holdings and other Prenda entities are still active in other jurisdictions, he added, "The Court further concludes that, once all of the ill-gotten gains are fully disgorged from AF Holdings, it would not be a wise use of the Court’s limited resources to sua sponte attempt to fully untangle the relationship between Hansmeier, Steele, Duffy, Dugas, Lutz and Prenda Law, on the one hand—and the Plaintiff, AF Holdings, LLC., on the other. Such investigation can more effectively be conducted by federal and state law enforcement at the direction of the United States Attorney, the Minnesota Attorney General and the Boards of Professional Responsibility in the jurisdictions where the attorneys involved in this apparent scheme are licensed to practice law." Alan Cooper, who the judge agreed had also been a victim of Prenda fraud, "can be fully vindicated in the case he has pending before this Court," a lawsuit he has filed against Steele et al. Incredibly, or not, there are several other cases involving the Prenda gang that are still unresolved, many of which are going very badly for what must be considered one of the most infamous law firms to come along in a long time. In late October, Popehat, a site run by Los Angeles defense attorney Ken White, compiled an amazingly up-to-date compilation of the state of those cases as they stood at that date (things move fast in Prendaland.) As much of a slog as it is to read through a recitation of numerous legal cases and the painful twists and turns that define these particular ones, White makes it read like a steamy crime novel, complete with a cast of characters out of central casting. Indeed, with its main plotlines of unfettered greed, sex and global piracy, Team Prenda may one day be the title of a Hollywood movie. If such a thing comes to pass, however, few viewers will believe that such activity was allowed to go unchecked for so long. For the adult industry, a significant part of which embraced Prenda with open arms, recent revelations regarding the amount of money collected by Prenda in 2012 should be of particular interest, especially the part about 70 percent of the proceeds going not to adult companies seeking to protect their copyrights, but to two of the main Prenda masterminds, John Steele and Paul Hansmeier. TechDirt, in a devastating Oct. 17 article, has the complete lowdown of that part of the story, including the exhibits (E and F) that contain Prenda's financial records for 2012, which had been submitted to the court by Brett Gibbs, a Prenda lawyer who turned on his former colleagues in a last ditch effort to save his career.  What the financial records reveal is that the Prenda gang was putting one over on the industry as surely as Judge Noel believes his court was duped. They rode in making high-minded promises about protecting the sacred copyrights of adult producers, and proceeded to do to those producers what their performers do to one another on-screen. Along the way, they were accused of running honeypot schemes that at the end of the day were concocted for the sole purpose of enriching themselves. They learned well from their time in porn; unfortunately, the lessons were ones no one expected or wanted them to learn. The story is not done yet, either, but the take away for the industry is already as clear as day: If it sounds too good to be true, it is; if the money is too easy, it's probably ill-gotten gains; treating judges like idiots is a fool's gambit; you live by the sword, you die by the sword. At the end of the day, however, it's hard not to  think of Prenda's treatment of its supposed partners in porn as a brutally karmic form of justice.