A new “veritable orgy of lawsuits”
I predicted that the divorce between long-time sweethearts Keith Lipscomb and Malibu Media would result in the latter winding down its operations. While it would be unreasonable to expect a mass dismissal of the existing lawsuits, I didn’t think the troll would start filing new cases. I was wrong.
Contrary to my expectations, on 7/21/2016 Malibu Media/X-Art, via its new counsel Pillar Law Group, powered by former Lipscomb, Eisenberg and Baker’s employees — two attorneys and two paralegals — resumed the shakedown. At the time of this post, 136 lawsuits were filed in six jurisdictions:
- California: 42 (CAED: 31, CASD: 11, unsurprisingly nothing in CAND or CACD)
- Connecticut (CTD): 12
- New Jersey (NJD): 29
- New York (NYSD): 21
- Texas (TXSD): 32. While the above cases are handled by the same locals (Brian Heit, Jacqueline James, and Patrick Cerillo), in Texas Malibu even managed to recruit fresh underemployed local lawyers — Michael Lowenberg and Andrew Kumar 1.
Truly, greed is a powerful drug, and I should have never underestimated the corrupting power of addiction to easy cash.
In addition, from an email sent by Angela Lipscomb to Lipscomb, Eisenberg and Baker’s (LEB) insurer, we learn that
[LEB’s Malibu Media] work stopped after a new investor became involved […]
Yes, “investor.” Malibu’s attorneys (both old and new) don’t wear a mask of righteous defenders of poor porn purveyor’s copyrights any longer: it’s all business, a heartless business of monetizing people’s anxiety and misery.
Usual suspects and something new
In the past, when Lipscomb was Malibu’s general counsel, the troll always waited one month from the lawsuit inception to the discovery motion. I still don’t understand the significance of this delay. This tradition was seemingly preserved, and we had the first opportunity to review the motions and the exhibits only on 8/22/2016.
One of the “experts” who filed a declaration accompanying discovery motions was Tobias Fieser of IPP International. Two years ago, after Malibu’s Illinois local Mary K. Schulz recklessly revealed IPP’s contingency interest, IPP was “replaced” by another Guardaley’s shell, Excipio 2. Fieser and IPP are now back as if the contingency scandal never took place.
The other declarant was also from the painfully familiar past: Patrick Paige, a former police investigator who was fired from the police force five years ago — after he was caught procuring illegal drugs while using his undercover identity.
Yet it was something new in the ex-parte application bundle: a declaration of one Erin Sinclair, purportedly a COO for Malibu Media from its inception (surprisingly, we never heard this name until now). Nothing really to see there — same usual hogwash such as “piracy kills our business,” except for the following statement that caught my attention:
We want to stop the infringement of Malibu Media’s movies. To further facilitate this goal, Malibu is opening investigations with law enforcement to stop the seeding of its movies. Our goal is to stop the prolific infringer responsible for initially seeding the “Unauthorized Packs.”
Coincidentally, on 6/29/2016, Free Speech Coalition (adult industry’s trade organization) claimed the FBI approached FSC’s Board Chair Jeffrey Douglas, alleging that there was a massive hack of 25 adult sites and that the perpetrator (who was caught) uploaded the ripped websites to Bittorent:
The FBI is hoping to work with Free Speech Coalition to inform the victims, as they have in previous data breach cases. Douglas has agreed to work as a volunteer liaison between the affected sites for members, allowing them to contact the FBI without having to disclose identifying information of any entities behind the site.
While a well-known industry gossip blogger Mike South was more than skeptical about the FSC’s claims, let’s assume that the event in question indeed took place. If so, Malibu may have taken advantage of this offer, believing it has nothing to lose, especially given that it did not have “to disclose identifying information of any entities behind the site.”
The question remains: why Malibu, after four years of mass litigation, suddenly decided to add this kind of a declaration? Simply jumping at the opportunity, or something else?
As I will try to explain below, the answer may be found in recent aggressive defense by some attorneys, particularly in the assertion of deliberate pre-release leaking either by the pornographer or the unlicensed German IP addresses harvesters / investors.
Defense attorneys go for the troll’s jugular
Nick Ranallo is one of the attorneys who currently accuses X-Art of gross misconduct, and those accusations translate to affirmative defenses stemmed from the “unclean hands” doctrine. To my observation, these defenses proved to be effective. For example, out of ten cases defended by Ranallo in California, four ended in a walk-away settlement: no money changed hands 3.
Another example of an aggressive defense is Malibu Media v Neill Jacobson (ILND 15-cv-10707, attorneys: James Kelly and Patrick Rollins): the defense does not beat around the bush in their requests for production and interrogatories.
Let’s look at the first affirmative defense (“Unclean hands”) in one such Answer (CAND 16-cv-01014, Ranallo). This defense arises in part from the following allegations:
- 18 U.S.C. §2257 violations (failure to keep records detailing performers ages);
- Filming at X-Art owners’ home without permission and mandatory barrier protection in violation of Ventura County Ordinance No. 44 (“Safer sex in adult industry”);
- Intentional pre-release leaking (and subsequent initial seeding on Bittorent) of X-Art porn flicks.
18 US 2257 (Child Protection and Obscenity Enforcement Act)
is part of a United States Act of Congress which places stringent record-keeping requirements on the producers of actual, sexually explicit materials. The guidelines for enforcing these laws (colloquially known as 2257 Regulations (C.F.R. Part 75), part of the United States Code of Federal Regulations, require producers of sexually explicit material to obtain proof of age for every model they shoot, and retain those records. Federal inspectors may at any time launch inspections of these records and prosecute any infraction.
Malibu historically vehemently denied violations of 2257 requirements, also arguing that if the records were out-of-order, it wouldn’t matter because even child pornography enjoys copyright protection. No matter how cynical this argument sounds, Malibu may be correct: this is what the copyright law became today. Speech integral to criminal conduct wouldn’t enjoy First Amendment protection, yet it still would be copyrightable.
Some judges sided with the troll and ordered to strike affirmative defenses based on such allegations, but one judge agreed with the defense (Morgan Pietz) in 2013: this order created quite a stir in the adult industry.
Also, strictly speaking, applying the unclean hands doctrine here would be a stretch because alleged 2257 violations are hardly related to the underlying infringement:
[…] the equitable defense of unclean hands was recognized rarely, when the plaintiff’s transgression was of serious proportions and relates directly to the subject matter of the infringement action.
However, despite the case law may be on the pornographers’ side, it looks to me that X-Art is trying hard to avoid any publicity regarding this matter (and, of course, a possible discovery).
Significantly, right after the abovementioned case was settled (and it was a walk-away!), X-Art hastily removed keywords “erotic teens,” “teens,” and “barely legal” from its site’s metadata:
Filming without permission and violation of Ventura Co Ordinance
Not being protected by litigation privilege, and knowing nothing about X-Art’s 2257 record keeping, I naturally cannot make the previous section’s allegations.
Accusations in illegal filming is a different matter: evidence here is so abundant that I can explicitly allege the following as a fact: from 2013 to 2016 X-Art filmed dozens and dozens of porn flicks at their owner’s home without required permits and in violation of Ventura County Ordinance No 4452, which provides for criminal penalties:
Any person or entity who produces or films an adult film for commercial purposes in the County without a valid permit, or any person, who violates any law, ordinance or regulation governing any activity regulated by this chapter, or who, upon demand of the Director, refuses or neglects to conform to a lawful order or directive of the Director pertaining to conduct regulated by this chapter, is guilty of a misdemeanor punishable by a fine of $1,000, imprisonment in the County jail for a period not exceed six months, or both. Each such act is punishable as a separate offense.
Alas, like in the 2257 case, there is no private right of action here, and these violations do not “relate directly to the subject matter of the infringement action.”
Deliberate pre-release leaking of the films
In my opinion, the last bullet point is more promising. Unlike the previous two, this conduct, if proven, would clearly satisfy the unclean hands defense requirement — deliberate leaking to catalyze lawsuits is not only directly related to infringement, but can possibly constitute barratry (which is a crime in many states, including California).
As with 2257 record keeping, I don’t have enough evidence to claim that either X-Art or the Germans deliberately created honeypots. However,
- I documented 50 X-Art’s movies that appeared on the Pirate Bay prior to their release — steadily over the period of four years, which is hard to explain by “hacking.”
- A liaison between the troll lawyers (including Malibu’s) and the Germans, Thomas Hein (German American Services, Inc. — a shell entity created for the purpose of siphoning money from the pockets of hard working Americans to German champertors), confessed in now deleted (Internet Archive FTW!) 2008 interview:
No one working for DigiProtect [one of Guardaley’s early shells] has a fixed salary,” Hein said. “If we make money, everybody makes money. If we don’t, nobody does. This means the lawyers, sales people and customers. It’s all about how much money can be recouped and then sharing it. But there is no financial risk to the customer whose content we protect. We pay for everything like court costs and legal costs. The studios give us the rights to distribute their material for free to P2P networks, which really shows a lot of trust in our company.
While, again, I’m reluctant to make direct factual allegations, all this stinks badly, and I hope that this smell will reach someone with investigative powers much greater than mine. Remember that FBI’s interest in Prenda was first sparked by the discovery that the infamous troll seeded smut itself.
Fighting off this type of accusations preemptively is a natural, expected strategy for the troll. I think this is the very reason behind the “we want to nail the initial seeder” claims, even if such claims are unsubstantiated.
Do not call up that which you cannot put down.|
|H.P. Lovecraft, The Case of Charles Dexter Ward|
I think that the claim that X-Art wants to catch the initial seeder sounds shallow:
- It sounds shallow because Malibu, to the best of my knowledge, never employed widely available and not that expensive watermarking technology to track the leaks.
- It sounds shallow because while claiming an intention to go after the initial seeder, Malibu instead continues targeting vulnerable population without a zero intent to bring a single case to the trial (the very definition of vexatious conduct).
- It sounds shallow, because it is a business, there is an “investor,” and it is contrary to any conceivable business model to work towards diminishing revenue.
- It sounds shallow because a liaison for the German champertors admitted on the record that Guardaley distributed its clients’ copyrighted material on Bittorent.
- It sounds shallow because Malibu has a colorful history of lying to the courts.
- It sounds shallow because this claim looks like a preventive strike against powerful counterclaims.
- It sounds shallow because the hands of X-Art’s owners and their attorneys are unclean.
However, if my skepticism is overboard, and X-Art indeed requested help from a federal agency, and if this federal agency opened an active investigation, I wonder if its agents would close their eyes and wouldn’t look at the circumstances surrounding the shakedown empire: a lack of action upon early leaks, a dirty connection with the Germans, illegal pornography production, and allegations of 2257 record keeping violations, you name it…
Time will tell. For now, if you are a defense attorney in a Malibu case, not making unclean hands defenses discussed above is akin to knowingly discarding four aces in a poker game.
1 TXSD Judge Lynn Hughes consolidated seven cases assigned to him on 9/13/2016. The resulting case is 16-cv-02338, and it is worth watching, given this judge’s reputation: I strongly suspect that Judge Hughes is allergic to scams and BS.
3 The other Ranallo’s cases: in 15-cv-04443 (CAND) defendant’s motion to dismiss was granted due to Malibu’s service shenanigans, in 16-cv-01005 (CAND) the troll attempted to cut and run, prompting a powerful motion for sanctions; 16-cv-01014 (CAND), 15-cv-02926 (CASD), and 16-cv-00786 (CASD) are currently pending; 15-cv-04176 (CAND) and 16-cv-01622 (CAND) settled pursuant to undisclosed terms.