The Crazy Saga of Prenda Law

All the geeks are passing around an order written by U.S. District Judge Otis Wright in Los Angeles, because it is so full of Star Trek references. It begins with "The needs of the many outweigh the needs of the few, or the one" and goes on to say things like "It was when the Court realized Plaintiffs engaged their cloak of shell companies and fraud that the Court went to battlestations."

But once I started reading about this case, I couldn't stop; it is well worth your time even without the geek fun. Judge Wright was giving their comeuppance to a bunch of Ferengi-level scoundrels who perpetrated the scam known as Prenda Law. Wright found that the attorneys behind Prenda Law (the "Principals") engaged in a fraud that worked like this: First, they acquired the copyrights to some pornographic videos available online. They set up shell companies that would own those copyrights, and for which they would serve as attorneys. They monitored BitTorrent download activity of their movies, recorded IP addresses, and sued the ISPs to give them the names of the owners of those addresses. Then they issued cease-and-desist letters to the subcribers, offering to settle each copyright claim for about $4,000. As Judge Wright said, this amount was calculated to be just less than the cost of a bare-bones defense. Many people settled, because it was cheaper than hiring a lawyer and because they did not want to admit in court that they had downloaded porn. The three or four lawyers behind this may have made millions from this strategy -- although, as Judge Wright said, the exact amount in unclear because they did not pay taxes on this income.

To hide what they were doing, the Principals hired local attorneys to bring their cases, and when asked by courts to explain their corporate structure they lied repeatedly about how the ownership of their companies was set up. This is what really got them in trouble with Judge Wright and other judges who have slammed them lately -- judges hate it when attorneys lie to them. To get an idea of the level of double-dealing involved, consider this one bit of testimony from Mark Lutz, a paralegal who works for a law firm belonging to the Principals, about a firm called Sunlust:

THE COURT: Mr. Lutz, you're under oath, you have to give truthful answers or you face penalties of perjury. Do you understand that?
MR. LUTZ: Yes.
THE COURT: What is your position with Sunlust?
MR. LUTZ: I'm a representative of them.
THE COURT: What does that mean?
MR. LUTZ: Corporate representative.
THE COURT: What does that mean?
MR. LUTZ: They asked me to appear on various matters throughout the country.
THE COURT: Are you an officer of the company?
MR. LUTZ: I'm not, no.
THE COURT: Are you authorized to bind the company to any legal contracts?
MR. LUTZ: I am not.
THE COURT: Are you salaried?
MR. LUTZ: No, 1099.
THE COURT: So you are a 1099 contracted entity and you just go around and sit in a Court and represent yourself to be the corporate representative of the company?
MR. LUTZ: Yes.
THE COURT: Mr. Torres, did you know this was Mr. Lutz's position, a paid corporate representative?
MR. TORRES: No, Your Honor, I did not.
THE COURT: Who is the president of Sunlust?
MR. LUTZ: I'm unaware.
THE COURT: Who is the vice president?
MR. LUTZ: I'm unaware
THE COURT: Who is the secretary?
MR. LUTZ: I have no idea.
THE COURT: Who owns Sunlust?
MR. LUTZ: I do not know.
THE COURT: Who signs your checks?
MR. LUTZ: I believe somebody in the accounting department.
THE COURT: What is their name?
MR. LUTZ: To be honest with you, I can't read the signature.
THE COURT: Where is the accounting department located?
MR. LUTZ: I'm sorry?
THE COURT: Where is the accounting department located?
MR. LUTZ: I've received checks from California.
THE COURT: How much are you paid monthly to be the corporate representative?
MR. LUTZ: Again, it depends on my appearances, the number of appearances that I do.
THE COURT: How much were you paid last month?
MR. LUTZ: Approximately $1,000.

When faced with a similar string of "I don't knows" from another Prenda representive in a San Francisco case, Judge Edward Chen asked, "Well, what do you know?" Judge Wright ordered the Principals into his courtroom to answer questions about who was in charge of what, but they all pled the Fifth. Unable to get answers, Judge Wright wrote that he was accepting an org chart offered by opposing attorneys in his case.

Judge Wright ordered the schemers to pay all of their opponents' legal fees, which he then doubled because of their misconduct, noting that the resulting amount was just less than the likely cost of an appeal. He also referred the matter to the U.S. District Attorney's office and the IRS. These guys are in big trouble, and we ought to give out awards to the men who decided to fight them, and to their attorneys.