A federal judge in California on Monday referred a Minneapolis attorney and several associates for investigation on criminal, tax and professional-standards charges related to their filing of hundreds of copyright cases nationwide involving pornographic videos.
U.S. District Judge Otis Wright concluded that the plaintiffs attorneys perpetrated a fraud on the court in their handling of the lawsuits and ordered them to pay defense costs and penalties of $81,300 in his Los Angeles court. But that may not be the end of it. Wright ordered the defense attorneys to provide him with a list of similar cases nationwide.
The judge did not mince words. “Plaintiffs have outmaneuvered the legal system,” he wrote in the first sentence of his order. “They’ve discovered the nexus of antiquated copyright laws, paralyzing social stigma, and unaffordable defense costs.”
Wright said that copyright owners, including the plaintiffs, have a right to assert their intellectual property rights if done properly. But he said that the plaintiffs’ use of offshore shell companies and allegations of forged signatures and identity fraud in the case caused him to go to “battlestations.”
The target of the judge’s sanctions are Paul Hansmeier, a young Minneapolis attorney, his associate from the University of Minnesota Law School, John Steele, now living in Florida and Las Vegas, and Chicago attorney Paul Duffy.
Hansmeier said he came up with the idea to sue people who allegedly downloaded pornography on the Internet using a software program called BitTorrent. Wright concluded that the lawsuits were a ploy to create a settlement mill in which the plaintiffs attorneys offered to settle their claims for about $4,000 apiece. The business model worked and produced millions in settlements because of the threat of statutory damages of $150,000 per claim, plus the high cost of litigation and the embarrassment associated with downloading porn, Wright wrote.
He said the plaintiffs showed little desire to press their claims when faced with a determined defendant. “Instead of litigating, they dismiss the case,” he said. “When pressed for discovery, the Principals offer only disinformation — even to the Court.”
Wright said they stole the identity of Alan Cooper, a groundskeeper in North Isle, Minn., who took care of Steele’s cabin, and submitted a document to the court that contained a forged signature for Cooper.
“Plaintiffs have demonstrated their willingness to deceive not just this Court, but other courts where they have appeared, ” the judge continued.
Wright lamented that he lacked authority to sanction everyone involved in the cases. But he said he did have the authority to award the defense their attorney fees and costs, and then doubled them as a punitive measure.
He said the plaintiffs’ attorneys “suffer from a form of moral turpitude unbecoming an officer of the court. To this end, the Court will refer them to their respective state and federal bars.”
Wright concluded by saying that their actions resemble a Racketeering Influenced Corrupt Organization (RICO). He said a federal agency “is familiar with their prime directive and will gladly refit them for their next voyage, ” adding that he would refer the matter to federal prosecutors in Los Angeles, to the IRS, and to “all of the judges before whom the attorneys have pending cases.”