Nov 7, 2013 1:45 PM PST    Text size: 

MINNEAPOLIS — In a scolding opinion yesterday, U.S. Magistrate Judge Franklin Noel ordered Prenda Law and porn copyright holder AF Holding to reimburse five defendants the entire $3,500 to $6,000 settlements they paid, plus their attorney's fees and costs.

"In short, the court concludes that AF Holdings used fraudulent copyright-assignment agreements, attached to each complaint in all five of the instant cases, in order to expedite discovery and leverage settlement agreements," the federal magistrate judge in Minnesota said.

Noel also indicated that he expects to ask the U.S. Attorney for Minnesota, the state attorney general and attorney disciplinary authorities to investigate what he describes as a fraud on the court.

Through the past several years, Prenda Law and copyright holders have earned millions in legal settlements as they exacted payments from thousands of defendants accused of illegally sharing porn through torrents.

Noel's sharp order follows a 2½- hour hearing conducted in late September when he tried to discern who really signed the copyright documents attached to AF Holdings' content.   

Prenda Law had sued defendants on behalf of shell porn companies such as AF Holdings and Ingenuity 13, whose copyright assignments are now alleged to be have been fraudulent.

Some of the documents were signed by Alan Cooper, a former caretaker of a cabin for Steele — the Chicago litigator who founded Prenda Law. Cooper, however, denied signing the documents and told that to Noel at the hearing.

Noel, according to his ruling, found Cooper's testimony convincing enough to slam Prenda Law and AF Holdings.

"The copyright-assignment agreements ... to each complaint in each of these five cases are not what they purport to be. Alan Cooper denies signing either agreement and also denies giving anyone else the authority to sign them on his behalf," Noel ruled. "AF Holdings failed to produce any credible evidence that the assignments were authentic.

"The court has been the victim of a fraud perpetrated by AF Holdings LLC. 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."

Noel's ruling follows other adverse rulings for Prenda Law, which disbanded in July after posting more than $237,000 in bonds in a case adjudicated in Los Angeles.

In that case, Prenda Law was originally hit with $81,000 in sanctions after U.S. District Judge Otis Wright said that the firm "outmaneuvered the legal system." (Prenda Law was sanctioned even further for missing bond payment deadlines.)

Wright ordered the Prenda Law attorneys — Steele, as well as Paul Hansmeier, Paul Duffy and Brett Gibbs —  to pay legal fees and penalties in a case they filed against an alleged illegal downloader on behalf of porn copyright holder Ingenuity 13.

Wright, calling the attorney group a "porn trolling collective" in his ruling, said that Prenda Law "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," Wright said in his ruling. "Then they offer to settle — for a sum calculated to be just below the cost of a bare-bones defense."

In the Los Angeles case, Wright made sanctions and referred the firm's attorneys to state and federal bar disciplinary panels, as well as federal prosecutors and the IRS.

Wright also ordered the notification of “all judges before whom these attorneys have pending cases” over similar allegations of fraud involving Cooper's identity.

One of those judge's made aware was Noel in Minnesota, who ruled against Prenda Law yesterday.

Morgan Pietz, the attorney representing the John Doe in front of Wright in Los Angeles, commented on yesterday's decision by Noel, calling it "an important step forward in holding Prenda et al. to account."

"The concept of having to refund settlement money to John Doe defendants is an important precedent that other plaintiffs engaged in industrial-scale end user litigation should probably note with concern," Pietz told XBIZ.

"For the adult industry, which depends on federal court enforcement of First Amendment rights to keep everyone out of jail, the idea of filing thousands of fraudulent or abusive lawsuits in federal court, would appear to be a lousy long term strategy. I appreciate that piracy is a problem, but abusive end-user litigation is not the solution."