Monday was a busy day for Judge William Haskell Alsup. I already reported that on that day the judge stayed plaintiff’s subpoena pending a clarification of geolocation reliability. There was another good order issued on the same day: I will briefly touch upon it at the bottom of the post.

Those two orders were akin an appetizer and a dessert. Yet the “main course” served on Monday was the order denying plaintiff’s motion to dismiss counterclaim in Malibu Media v John Doe (CAND 15-cv-04441, defense attorney: Joseph C. Edmondson). As I will explain shortly, this order essentially destroyed one of the two main foundations of the copyright trolling.

While answering Malibu’s complaint on 4/26/2016, the defendant counterclaimed with a single count of declaratory judgment of non-infringement (basically asking the judge to formally rule that the defendant was not an infringer).

Malibu moved to dismiss the counterclaim, arguing that such counterclaim mirrors defendant’s denial of liability found in the Answer. The defendant replied, cleverly pointing to Oracle v Google (a lawsuit handled by the same judge), where Google made a similar counterclaim.

While Judge Alsup agreed that there is certain duplicity between the denial as an essence of the counterclaim and the denial as a part of the Answer, he nonetheless denied the plaintiff’s motion, leaving the defendant’s counterclaim alive.

In the past, Malibu furiously (and mostly successfully) opposed defendants’ counterclaims, and to be honest, I incorrectly thought that the sole reason of such oppositions was to delay proceedings (historically, time always worked on the troll’s side). Maybe it was a reason, but not the main one. As the judge clearly explained (emphasis is added throughout the post),

Malibu Media’s motion seems more like a gimmick designed to allow it an easy exit if discovery reveals its claims are meritless. Section 505 of Title 17 of the United States Code provides that a “prevailing party” may be awarded attorney’s fees in a copyright infringement action; however, when a copyright plaintiff voluntarily dismisses a claim without prejudice, the defendant is not a prevailing party. […] Absent defendant’s counterclaim, if events reveal that this case is meritless, Malibu Media could voluntarily dismiss its affirmative claims without prejudice under Rule 41(a)(2), seeking to avoid an award of attorney’s fees. If, however, defendant’s counterclaim remains alive, he will be able to press his counterclaim.

See? As I mentioned above, copyright trolling rests on two turtles: astronomically (and maybe unconstitutionally) high statutory fines, and the absence of downside for the troll as it can always cut and run, leaving the defendant with painful legal bills.

Judge Alsup just closed the second avenue, at least in his district. The case is now “locked,” and it is not in the plaintiff’s power to dismiss it unilaterally any longer. Thus, the troll is now exposed to possible attorney fees, and the judge has hinted (after quoting famous Judge Wright’s “essentially an extortion” line — not for the first time!) that if the case turns out to be meritless, awarding fees to the winning defendant is not a mere possibility:

The damages exposure in this case, as with Malibu Media’s many other cases, is significant, so a defendant may feel pressure to settle even a meritless case. Coupled with the taboo nature of the subject matter, there remains potential for abuse. The availability of attorney’s fees should any defendant facing a lawsuit against Malibu Media prevail protects those, such as our defendant herein, who elect to challenge Malibu Media’s case on the merits instead of accepting a nuisance-value settlement. Indeed, that may be the only factor motivating such defendants. C.f. Ingenuity 13 LLC v. Doe, Nos. 13-55859, 13-55880, slip op. at 13 (9th Cir. June 10, 2016) (“Without hope of receiving attorney’s fees for defending sanctions on appeal, Doe and other victims of abusive litigation would be left with no remedy.”).

Dismissing defendant’s counterclaim would eliminate one avenue for a fee award, and, as stated, maintaining the counterclaim would cause no prejudice to Malibu Media.

This precedent is undeniably a big blow to the porno-trolling collective, a blow that is especially painful after the Miami troll brain center was depleted, and the plaintiff, X-Art, appears to experience financial difficulties.

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On the same day Judge Alsup granted another defendant’s motion to dismiss for insufficient service of process despite Malibu’s claims that the defendant dodged the service (CAND 15-cv-04443, defense attorney: Nicholas Ranallo):

Here, Malibu Media would suffer minimal prejudice — it would simply need to re-file the case and pay a new filing fee. Indeed, Malibu Media does not even argue that it would suffer any prejudice and notes that “the Court has the discretion to grant Defendant’s requested relief” (Pl.’s Opp. at 2). On the other side of the equation, our defendant would suffer moderate prejudice, in that allowing this action to proceed would reward Malibu Media’s counsel’s lack of diligence, both in effecting service and in opposing this very motion, and it would encourage that diligence as the case progresses. Such a result is especially troubling given that counsel’s lack of diligence is a chronic issue throughout Malibu Media’s numerous cases in this district. Thus, this order holds that the proper remedy for Malibu Media’s complete failure to show good cause for its delay is to dismiss this action without prejudice.

The strong language echoes this judge’s previous concerns regarding the merits of Malibu’s lawsuits, and coupled with the other rulings issued on Monday, it strengthens my cautious optimism that I expressed when I first learned that all the CAND Malibu cases were assigned to this judge — the judge whose ability to deeply understand complex issues earned huge respect from virtually everyone as a result of his handling of the famous Google v Oracle trial.

Coverage

• Techdirt: Judge Calls Out Malibu Media For Its Attempt To Cut And Run When Faced With Challenge To Its Infringement Claims

Update

11/17/2016

On 9/7/2016, Malibu Media asked the court to allow it to conduct a fishing expedition issue a subpoena to the defendant’s ISP for a broad range of data (e.g. third party DMCA notices) covering a long period. Defendant opposed to Malibu’s overreach discovery. The troll doubled down, and the defendant filed his evidentiary objections. On 10/28, visibly irritated Judge Alsup sided with the defendant, agreeing that the request was way overboard:

[…] Malibu Media, which pursues thousands of actions nearly identical to this one all over the country, should have proposed a more precise subpoena in the first instance, rather than requiring defendant’s opposition and the Court’s intervention to whittle it down to a proper level. Malibu Media’s haphazard motion unnecessarily drove up the cost of defending this litigation and wasted judicial resources. Accordingly, this order awards defendant his attorney’s fees reasonably incurred in opposing this motion (but not in meeting and conferring following the hearing).

On 11/17, following an order to itemize expenses, the defendant filed his motion for fees (asking $9,246.94).

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On 11/15, the defendant filed a motion to compel the plaintiff to provide further responses to deposition questions. The motion and the exhibits are very interesting. The defendant alleged (with a lot of supporting documentation) that the 7/27 deposition of Colette Pelissier (the transcript is a part of the omnibus exhibit embedded below) was cut short: to save time, both parties agreed that duplicative questions for each of the 23 allegedly infringed porn flicks would be answered in writing by Malibu later. However, the troll changed its mind and did not provide answers beyond boilerplate refusals.

Pay attention to the email correspondence between the parties (p. 160), from which we learn that the defendant proposed a settlement, and the troll ignored the proposal. I heard from more than one attorney that Malibu is religiously reluctant to pay. Well, this “we never pay” policy may backfire in this case: Malibu’s experts found no X-Art’s smut on the defendant’s hard drives, so the prospect of the plaintiff winning a jury trial is very slim (Malibu backed off from much more favorable cases in the past). And the defendant’s attorney is more than confident:

From your client’s testimony, I estimate that Malibu Media has a profit margin of at least 10%. At a gross revenue rate of approx 12M per year (50K subscribers @ 20/mo*12mo), there is enough money to settle actions that prior counsel improperly filed. It is appropriate for defendant to ask for reasonable attorney fees and costs to date. If this goes to trial, I will ask the Court for the same and a lodestar multiplier.

The last case I worked on where the other side drew a line in the sand saying “I will not pay”, ended up having a judgment of close to 5M against him personally. (appellate decision attached). Coincidentally, Mr. Galam, who I got the judgment against, was also in the adult entertainment business.

Darian Stanford at Slinde Nelson Stanford will be trial counsel for this case with over 100 completed trials.

(Due to Scribd’s incompetence, highlights in the original document would be rendered incorrectly, masking the text instead of highlighting, so I removed all the highlights.)

On 11/16 the motion to compel was denied without prejudice for a technical reason: the judge directed the defendant to supplement his motion with a Rule 37 declaration “setting forth the extent to which they met and conferred with plaintiff’s counsel by phone or by telephone [sic].”