The AF Holdings v Patel (GAND 12-cv-00262) Show Cause Hearing, which was abruptly interrupted by a snowstorm on the 1/28/2014 afternoon, was finally continued and concluded almost ten months later, on 11/20/2014. I was not there — Kat was, and she wrote a detailed and vivid three-part story. It doesn’t make sense to retell it in my own words: firstly, as I said, I was not there; second, Kat is simply a terrific storyteller, so pour yourself a glass of wine and read:

• Part 1. A Midnight Train to Georgia
• Part 2. A Midnight Train to Georgia: Nazaire Strikes Back
• Part 3. A Midnight Train to Georgia: Sanity’s Return

 

While we are waiting for the written order, the minute sheet is worth mentioning: in part because

The Court verbally adopted as part of its Findings of Fact and Conclusions of Law, Judge Wright’s Order, Central District of California, paragraphs, 1, 2, 3, 4, 5, 6, 8, 9 & 11¹. (See Wright Order 2:12-cv-8333-CDW).

 

I’ll copy and paste the adopted paragraphs for your convenience:

1. Steele, Hansmeier, and Duffy (“Principals”) are attorneys with shattered law practices. Seeking easy money, they conspired to operate this enterprise and formed the AF Holdings and Ingenuity 13 entities (among other fungible entities) for the sole purpose of litigating copyright-infringement lawsuits. They created these entities to shield the Principals from potential liability and to give an appearance of legitimacy.

2. AF Holdings and Ingenuity 13 have no assets other than several copyrights to pornographic movies. There are no official owners or officers for these two offshore entities, but the Principals are the de facto owners and officers.

3. The Principals started their copyright-enforcement crusade in about 2010, through Prenda Law, which was also owned and controlled by the Principals. Their litigation strategy consisted of monitoring BitTorrent download activity of their copyrighted pornographic movies, recording IP addresses of the computers downloading the movies, filing suit in federal court to subpoena Internet Service Providers (“ISPs”) for the identity of the subscribers to these IP addresses, and sending cease-and-desist letters to the subscribers, offering to settle each copyright infringement claim for about $4,000.

4. This nationwide strategy was highly successful because of statutory copyright damages, the pornographic subject matter, and the high cost of litigation. Most defendants settled with the Principals, resulting in proceeds of millions of dollars due to the numerosity of defendants. These settlement funds resided in the Principals’ accounts and not in accounts belonging to AF Holdings or Ingenuity 13.

No taxes have been paid on this income.

5. For defendants that refused to settle, the Principals engaged in vexatious litigation designed to coerce settlement. These lawsuits were filed using boilerplate complaints based on a modicum of evidence, calculated to maximize settlement profits by minimizing costs and effort.

6. The Principals have shown little desire to proceed in these lawsuits when faced with a determined defendant. Instead of litigating, they dismiss the case. When pressed for discovery, the Principals offer only disinformation—even to the Court.

8. The Principals maintained full control over the entire copyright-litigation operation. The Principals dictated the strategy to employ in each case, ordered their hired lawyers and witnesses to provide disinformation about the cases and the nature of their operation, and possessed all financial interests in the outcome of each case.

9. The Principals stole the identity of Alan Cooper (of 2170 Highway 47 North, Isle, MN 56342). The 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.

11. Plaintiffs have demonstrated their willingness to deceive not just this Court, but other courts where they have appeared. Plaintiffs’ representations about their operations, relationships, and financial interests have varied from feigned ignorance to misstatements to outright lies. But this deception was calculated so that the Court would grant Plaintiffs’ early-discovery requests, thereby allowing Plaintiffs to identify defendants and exact settlement proceeds from them. With these granted requests, Plaintiffs borrow the authority of the Court to pressure settlement.

 

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¹ The paragraphs 7 and 10 deal with Brett Gibbs’s conduct, and were not adopted by Judge O’Kelley simply because they are irrelevant for this case.