by Lee Gesmer | May 21, 2013 | Copyright
Only one thing is impossible for God: to find any sense in any copyright law on the planet.
– Mark Twain’s Notebook, 1902-1903
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Click here to see Part 1 of this series of posts.
In part 1 of this series I described how Aereo’s technology allows users to watch, record and access broadcast TV over the Internet. At the heart of this system is the use of a set of dime-sized antennas assigned to each subscriber, short buffering in RAM for retransmission and the creation of a unique per-subscriber copy of each broadcast the user wants to record for later viewing.
Why did Aereo construct its system this way? Why not one antenna and one copy of each broadcast? Aren’t the thousands of antennas and thousands of personal copies expensive and unnecessary? The answer is that they may be expensive and technically unnecessary, but they are essential to Aereo’s ability to avoid broadcaster claims of copyright infringement. In fact, this Rube Goldberg system was designed to fit the legal parameters of a case decided by the Second Circuit in 2008. And, it is no accident that Aereo first released its service in New York, which falls in the Second Circuit, drawing a lawsuit by the broadcasters in the same circuit that had decided the 2008 case.
The case that Aereo based its design on is the Second Circuit’s famous (or, to the broadcast industry, infamous) decision in Cartoon Network v. CSC Holdings, usually referred to as the Cablevision case. In Cablevision the broadcasters tried to enjoin Cablevision—a cable operator with a license to retransmit cable programming to its paying subscribers—from introducing a remote storage digital video recorder (network-DVR) that would allow Cablevision customers who did not have a TiVo-like set-top DVR to record cable programming and receive playback through the cable system itself, or from “the cloud.”
Cablevision’s network-DVR system is itself something of a Rube Goldberg creation. Cablevision’s network-DVR utilizes a complex buffering and storage technology that splits a licensed cable broadcast feed into two streams, one of which includes a “buffer” copy directed to a router where it is stored in RAM for no more than 1.2 seconds as the router looks to see if any customers have asked that the program be recorded for them. If a customer has asked for the program to be recorded, the data is stored on a Cablevision hard drive storage area maintained by Cablevision and assigned solely to that customer, where it is available for later replay, much as it would be if it had been stored on a set-top DVR. If there is no “record” request from a subscriber, the data in the revolving buffer is not retained.
For example, if 50,000 Cablevision customers recorded the Super Bowl, Cablevision would create 50,000 copies, one for each customer. If a customer wanted to play back the program, Cablevision would transmit the specific copy created for that customer. No one else could access that copy.
The broadcasters filed suit in federal court in the Southern District of New York, claiming copyright infringement. In 2007 the district court judge, Denny Chin, enjoined Cablevision, but the Second Circuit issued a controversial decision reversing Judge Chin and rejecting the the broadcasters’ copyright challenge based on some highly technical interpretations of copyright law.*
*Ironically, Denny Chin, the district court judge reversed by the Second Circuit in Cablevision, was later elevated to the Second Circuit, and became a dissenting judge on the 3-judge panel that decided Aereo in 2013.
Cablevision’s Buffered Copies Do Not Meet Copyright Law’s Fixation Requirement
First, the Second Circuit held that the 1.2 second buffered copy was not an infringing copy because it was not embodied “for more than a transitory duration.” A 1.2 second copy does not, the court held, satisfy copyright law’s “fixation” requirement,* and therefore the buffered copy did not qualify as a “copy” under the Copyright Act’s definition of that term. However, the court did not state how long a copy wold have to be embodied to be more than transitory, and its holding arguably conflicts with the 9th Circuit’s 1993 ruling in MAI Systems v. Peak Computer, which held that copying, for purposes of determining copyright infringement, includes the transfer from a permanent storage device (such as a hard drive) to RAM.
*”A work is ‘fixed’ in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.” 17 U.S.C. §101.
Transmission of a Unique Copy to a Single Subscriber Is Not a “Public Performance”
In addition to making a copy, one of the exclusive rights of a copyright owner is the right to authorize a “public performance” of a work. This right is found in a section of the copyright statute that includes a provision known as the “transmit clause,” which states that to perform a work “publicly” includes:
to transmit … a performance or display of the work … to the public, by means of any device or process, whether the members of the public capable of receiving the performance … receive it in the same place or in separate places…, at the same time or at different times. 17 U.S.C. §101.
The most controversial holding in Cablevision was the Second Circuit’s conclusion that the word “performance” did not refer to the performance of the underlying work being transmitted but rather the transmission itself. The court held that “the transmit clause directs us to examine who precisely is capable of receiving a particular transmission of a performance.” The court concluded that because Cablevision’s network-DVR required each transmission to be made to a single subscriber using a unique copy saved by that subscriber, the potential audience for a network-DVR playback transmission is limited to the single subscriber, and therefore the transmissions are not performances to the public.
In other words, for purposes of the “public performance” right the 50,000 copies of the Super Bowl (each of which has been “saved” to a separate directory by a single subscriber) should not be aggregated for purposes of determining whether Cablevision is engaged in a “public performance” of the Super Bowl.*
*Making individual copies for each subscriber in this manner requires thousands of terabytes of hard disk storage. The ability to provide this storage at low cost is a consequence of “Kryder’s Law,” which holds that magnetic disk storage density doubles every 13 months, a rate faster than the doubling of semiconductor chip performance according to Moore’s law.
It is this “unique copy” test that became critical when the broadcasters challenged Aereo in the Second Circuit.
Subscribers, Not Cablevision, Exercise the Volitional Conduct Necessary to Make a Stored Copy For Later Viewing
Third, the Cablevision network-DVR does save a copy for each subscriber that requests it, and these copies clearly do meet the copyright statute’s fixation requirement. However, the Second Circuit focused on the “volitional conduct” that caused the copy to be made, and held that while Cablevision created and maintained a system that allowed a copy to be made, it is the customer’s conduct in ordering the system to make a copy—”the person who actually presses the button to make the recording”—that causes the copy to be made. The Second Circuit analogized Cablevision to a store proprietor who charges customers to use a photocopy machine on the store’s premises, in which case (in most circumstances) it is the customer, not the store owner, who makes the copy for purposes of determining direct liability under the Copyright Act.*
*The court emphasized that the conduct Cablevision engaged in would better be analyzed under principles of contributory infringement. However, Cablevision had not pursued that theory of liability.
. . .
Clearly, the Cablevision network-DVR was designed to avoid copyright liability, not to achieve technical efficiency. And, if the Second Circuit’s three legal holdings strike you as threading the needle through some very tight legal loopholes, you are not alone. The case has its supporters, but their support is mostly based on copyright policy – why shouldn’t people who are paying for cable service that is being transmitted to them by the cable company under license be able to “time shift” their viewing of cable shows using a network-DVR, just as they can using a set-top DVR? However, strictly as a matter of copyright law each of the three conclusions has suffered scathing criticism by copyright law scholars—particularly the public performance and the “volitional conduct” holdings.
Nevertheless, this decision remains the law in the Second Circuit – copyright law’s most influential circuit. And, it didn’t take long for enterprising entrepreneurs to see how they could stretch this precedent even further, leading to the Second Circuit’s April 1, 2013 decision in WNET V. Aereo. In fact, Cablevision may have opened the door to creative destruction in the television industry. I will discuss Aereo in Part 3 of this series of posts.
Click here to continue to Part 3.
by Lee Gesmer | May 17, 2013 | Copyright
Whenever a copyright law is to be made or altered, then the idiots assemble.
– Mark Twain’s Notebook, 1902-1903
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Aereo is coming to Boston, and to 20 other cities before the end of the year.
Aereo is a company that has developed a system that captures over-the-air television (broadcast TV) and retransmits it to subscribers over the Internet. Subscribers are able to watch broadcast TV on their computers, tablets and smart phones. Even better, Aereo acts as a remote digital video recorder (a remote DVR) so subscribers can record programs and stream them at another time. Aereo launched in New York City in early 2012, but it has announced that it is expanding to 21 other cities in 2013.
Is this a problem for broadcasters? You bet it is. Cable companies pay broadcasters such as CBS, ABC, NBC and FOX for the right to retransmit their shows to cable subscribers. If people can access broadcast TV at Aereo’s rates (which are far less costly than cable rates), it may mean fewer cable subscribers and reduced network revenues. According to the New York Times, the use of Aereo and copycat services has the potential to cost the networks retransmission fee revenues of more than $2 billion/year, an amount projected to grow to $6 billion/year by 2018.
The broadcasters are not taking this lying down. Claiming copyright infringement they sued Aereo in federal district court in New York. However Aereo successfully defended against the broadcasters motion for a preliminary injunction before the district court and the influential Court of Appeals for the Second Circuit.* CBS has threatened to sue Aereo anywhere it offers its service, and the broadcasters are almost certain to appeal the Second Circuit decision to the Supreme Court. Simply put, this has the potential to be a nation-wide litigation free-for-all.
*The case may not be over in the Second Circuit. Aereo has petitioned for the case to be heard en banc.
In order to understand the copyright issues involved in Aereo’s service we need to step back and look at three cases, one of which is an important copyright law precedent from the Second Circuit, and two of which involve Aereo’s or Aereo-like technology. First, however, it is important to understand how Aereo provides its service.
Aereo: Thousands of Tiny Antennas, and a Separate Copy of Recorded Programs for Each Subscriber
Imagine, for a moment, that you captured TV broadcast signals that are transmitted through the airwaves, transcoded them to make them available over the Internet, stored them on a server and streamed the shows to people who accessed a website you created for this purpose. Limited only by bandwidth, thousands of people could watch broadcast TV on their computers, tablets or smartphones by accessing your site. You would have allowed viewers to bypass cable service. And, you could allow users to watch the television shows at times convenient to them. 
Would this violate copyright law? You bet it would. Copyright owners have the exclusive right to public performances of their works, and you would be violating this right. The federal courts have made clear that retransmission of copyrighted television programming by streaming it over the Internet constitutes a “public performance” in violation of the Copyright Act. The broadcasters woud be able to shut you down in a New York minute.
Aereo, however, makes broadcast TV available to its subscribers. And, to make matters even worse (for broadcasters), it allows them to “record” programs and watch them later – in other words, to “time shift” TV broadcasts using Aereo’s remote DVR.
tiny antennas on circuit boards
Exactly how it implements this is important to the legality of its service, so here goes.
The technical features of Aereo’s service are unusual, to say the least. One Second Circuit judge described them as “a sham . . . a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law.” (Aereo Dissent).
First, rather than have one antenna to capture over-the-air broadcasts, its system allocates two “unbelievably small” (Aereo’s description) antennas, attached to antenna boards, to each customer. Each of the antennas is able to receive TV broadcast signals. Every Aereo subscriber is assigned a pair of these dime-sized antennas to handle that subscriber’s live feeds and recordings. One antenna is used to receive a show that can be streamed to the customer in near-real time. If the customer chooses to watch the show as it is broadcast it is stored for six or seven seconds on Aereo’s servers before it is digitized and streamed to the user, so the user is watching the broadcast with a slight delay. The second antenna is used to receive broadcasts that are recorded for later viewing.
Aereo’s “Unbelievably Small” Antenna
Massive cloud-based storage handles the storage of TV programs for subscribers who wish to “record” broadcasts for later viewing. However, Aereo does not store a single copy of a particular broadcast. It creates a unique copy of the program for each subscriber, which is saved on Aereo’s hard drives; only the subscriber assigned that disk space or directory can access that specific copy of the program for later viewing.
For example, if 50,000 Aereo subscribers are watching the Super Bowl as it is broadcast on CBS the broadcast is received by 50,000 personal so-called “watch” antennas and stored for several seconds individually on Aereo’s servers before being transmitted to subscribers. If these 50,000 Aereo subscribers choose to record the game as well, it is received by the 50,000 “record” antennas and stored on Aereo’s servers in 50,000 separate directories, each directory and recording being assigned to an individual Aereo subscriber and available for replay at the request of the subscriber.
**For a more detailed explanation of Aereo’s technology, with pictures of the components, see Inside Aereo: new photos of the tech that’s changing how we watch TV (Gigaom.com).
As discussed later in this series of posts, these features—the use of massive “antenna farms” utilizing small antennas and duplicative, individualized storage on Aereo’s servers—are what allowed Aereo to persuade the Second Circuit that its system was not being used to infringe the broadcasters’ copyrights. The extent to which other courts around the country, and perhaps the Supreme Court, will agree remains to be seen.
My next post will discuss the Cablevision case, which gave Aereo the legal protection it needed to create this “Rube Goldberg” system, and how it used its design to claim that its service does not violate broadcaster copyright rights.
Click here to go to Part 2.
by Lee Gesmer | May 15, 2013 | Copyright
Aereo captures over-the-air television broadcasts and streams them to Aereo subscribers over the Internet. While the broadcasters claim this is copyright infringement (unauthorized public performance), Aereo has created an “antenna-farm” system designed to avoid allegations that its rebroadcast is a public performance under U.S. copyright law. CBS Broadcasting and other broadcasters brought suit for copyright infringement in federal court in New York. However, Aereo convinced both the federal district court and the Second Circuit Court of Appeals that Aereo does not violate copyrights in the broadcasts. (Aereo shows “how it works” here).
Aereo rolled out its first implementation in New York, and the Second Circuit “test case” was decided there. Now, Aereo plans to launch its service in 22 cities before year end. Boston is scheduled to launch on May 30th. Apart from the legalities of the underlying copyright claim, this raises the question whether the broadcasters can re-challenge the Aereo service as it launches in new locations outside the Second Circuit (which is comprised of New York, Connecticut and Vermont). Unfortunately, federal law in the U.S. is not always uniform. For example, Aereo may have prevailed in the Second Circuit (i.e., New York), but the broadcasters may be able to successfully challenge Aereo in the First Circuit (Boston) when it launches here, and perhaps get a different result. In fact, according to Aereo CBS has threatened to do just that, stating (after losing in New York), “we will sue in Boston.”
Aereo, whose legal acumen should not be underestimated, does not want to wait to be sued in Boston (or anywhere else in the U.S.), at least not by CBS Broadcasting or CBS’s affiliates. On May 6th it filed a preemptive suit in the Southern District of New York, asking that court to enjoin CBS from filing what Aereo calls “duplicative follow-on suits” or “do overs.” Its new lawsuit was assigned to the same federal district court judge that refused to enjoin Aereo’s system in the first place.
After reviewing Aereo’s complaint, it seems that this suit is tactical rather than strategic.
The suit names 12 defendants in cities where Aereo intends to offer its service, but they are all owned by or are affiliates of CBS Broadcasting. Aereo asserts that CBS’s New York lawsuit sought a nationwide injunction against Aereo, and therefore the outcome of the New York suit governs the nationwide legal relationship between Aereo and CBS, including CBS subsidiaries and affiliates. CBS should not, Aereo argues, be entitled to relitigate the same issue in another federal court.
CBS may be the most aggressive Aereo plaintiff, and it is possible that Aereo believes that by excluding CBS from follow-on cases it will weaken the plaintiff side of the case. But even if CBS is precluded from filing suits outside the Second Circuit (not a foregone conclusion), that will leave several large broadcasters free to file suit in those districts. For example, even though NBC, ABC, PBS and Fox were parties to the New York case, they are not named in Aereo’s declaratory judgment suit. Even if they were added to the suit, it should not be difficult for the broadcasters to find a broadcaster that was not a party to the New York case to carry the flag for them outside of New York. The broadcasters’ strategy may be to challenge Aereo in every federal circuit that Aereo enters, obtain at least one favorable decision (which shouldn’t be hard to do — the Second Circuit’s Aereo decision is controversial and vulnerable to a different interpretation of the law),* and seek Supreme Court review when a split in the circuits develops.
*A federal district court in California has already ruled that an Aereo-like system violates broadcaster copyrights. (Fox v. BarryDiller, CD Cal. 2012).
The bottom line is that the Second Circuit decision favoring Aereo was, as far as the broadcasters are concerned, a battle, not the war. I anticipate that the broadcasters will ultimately prevail, and that Aereo’s attempt to block additional suits by CBS will turn out to be a minor impediment in the broadcasters’ campaign to have Aereo’s “antenna farm” system of rebroadcast declared illegal under U.S. copyright law.
by Lee Gesmer | May 14, 2013 | Contracts
“Yet Another Hierarchical Officious Oracle” is Yahoo!, of course. And, its lawyers should be embarrassed by Yahoo!’s inability to create enforceable online Terms of Service (TOS).
The issue arose in Ajemian v. Yahoo!, decided by the Massachusetts Appeals Court on May 7, 2013. In this case the plaintiffs were the administrators of a decedent’s estate. They wanted access to the decedent’s email account to let his friends know of his death and memorial service, and later to locate assets of his estate. Yahoo! refused to provide the online password, and the administrators filed suit in Massachusetts to compel access.
Yahoo!, in turn, argued the suit should have been brought in California and, in any event, it was too late. These arguments were based on Yahoo!’s terms of service which provide, in part, as follows:
You and Yahoo agree to submit to the personal and exclusive jurisdiction of the courts located within the county of Santa Clara, California…. You agree that regardless of any statute or law to the contrary, any claim or cause of action arising out of or related to use of the Service or the TOS must be filed within one (1) year after such claim or cause of action arose or be forever barred.”
The decedent in this case had opened his account in 2002, and he died in 2006. In the interim Yahoo! had updated its TOS to provide that “any rights to your Yahoo! ID or contents within your account terminate upon your death,” providing Yahoo! with another basis on which to deny the administrators access to the email account.
According to the Appeals Court, this was the first time a Massachusetts state court had been asked determine to the enforceability of an online agreement of this sort. The court found that Yahoo! was unable to establish the legal requirements necessary to enforce this provision:
The burden is on Yahoo! to demonstrate that the forum selection and limitations clauses in the TOS were reasonably communicated and accepted. … The only information on this point is Yahoo!’s affidavit stating that “[p]rospective users are given an opportunity to review the Terms of Service and Privacy Policy prior to submitting their registration data to Yahoo!.” Standing alone, this is not enough to establish that the forum selection provision and limitations provision of either the 2002 or the amended TOS were reasonably communicated, or to whom they were communicated. We do not know, and cannot infer, that the provisions of the 2002 TOS were displayed on the user’s computer screen (in whole or in part). It is equally likely … that the user was expected to follow a link to see the terms of the agreement. If that was the case, the record would need to contain information concerning the language that was used to notify users that the terms of their arrangement with Yahoo! could be found by following the link, how prominently displayed the link was, and any other information that would bear on the reasonableness of communicating the 2002 TOS via a link.
Yahoo! submitted nothing to establish whether or how the provisions of the 2002 TOS were accepted by [Yahoo! end users] or how the provisions of the amended TOS were accepted by [Yahoo! end users] , or how they manifested their assent.
Although forum selection clauses contained in online contracts have been enforced, courts have done so only where the record established that the terms of the agreement were displayed, at least in part, on the user’s computer screen and the user was required to signify his or her assent by clicking “I accept.” … This is known as a “clickwrap” agreement. … By contrast, a “browsewrap” agreement is one “where website terms and conditions of use are posted on the website typically as a hyperlink at the bottom of the screen.” Although forum selection clauses have almost uniformly been enforced in clickwrap agreements, we have found no case where such a clause has been enforced in a browsewrap agreement.
The fact that this case arose in the context of administrators seeking access to a decedents email account made it a harder case. In fact, the Appeals Court held that even if Yahoo! had used a clickwrap agreement, it would not be reasonable to enforce the forum selection and limitations clause against the administrators based on a variety of considerations, including the fact that the case was in probate court, that the decedent lived in Massachusetts, that the administrators are in Massachusetts and the scope of the forum selection clause (which, the Court of Appeals noted, was of unreasonable breadth for a consumer contract).
Nevertheless, the court’s holding with respect to the enforceability of “clickwrap” agreements and lack of enforceability with respect to “browsewrap” agreements stands as the current state of the law in Massachusetts, probate court or not. Simply put, browsewrap areements are not enforceable under Massachusetts law.
The inability to create an enforceable online license seems almost endemic to online companies. Craigslist failed in the 3Taps case (post here). Zappos failed in the Security Breach Litigation (post here). CollegeSource failed in its case against AcadamyOne (post here).
And, companies seem not to realize that even if they do have a proper clickwrap agreement, they cannot retain the right to modify the agreement unilaterally. See “Sign This Contract. By the Way, We Can Modify It At Any Time.” Is This Enforceable?
In the Yahoo! case the Massachusetts courts joins the majority across the country: get consent by means of a click, and if you update your TOS, get consent again.
Of course, this case also raises a bigger issue surrounding email accounts and social media – who is entitled to access an email account after the owner’s death? What about a Facebook, Twitter or other social media account? Facebook has addressed the digital afterlife by allowing relatives to memorialize an account after its owner has died. And, Google lets account owners “plan their digital afterlives” with “inactive account manager.” So, perhaps a second lesson from this case—and a more important one—is to exercise one of these options where it is available, or make sure your heirs are able to access your online accounts by using your passwords after your death.*
*Personal note: when my father died in 2010 he had not left a record of his AOL email log-in information. However, AOL was more accommodating than Yahoo! A phone call to AOL was all it took to get his user name/password.
by Lee Gesmer | May 10, 2013 | General
I didn’t think I’d have a chance to write another “what were they thinking” post only two weeks after the last one. But, here goes ….
I’ve written about Bittorrent swarm mass copyright suits in the past, but Monday’s decision by California federal district court judge Otis D. Wright tops everything that has come before. A lot of people have followed this case and similar cases filed by so-called “Prenda Law”—Ingenuity 13 v. John Doe. In other words, the plaintiffs in this case have made a lot of people mad.*
*Techdirt is at or near the top of this lengthy list.
The Ingenuity 13 case has been dismissed, but on Tuesday the judge issued a withering sanctions decision in the case. Here is some of what he had to say.
The opening paragraph of the opinion sets the stage for the indictment that follows:
Plaintiffs have outmaneuvered the legal system. They’ve discovered the nexus of antiquated copyright laws, paralyzing social stigma, and unaffordable defense costs. And they exploit this anomaly by accusing individuals of illegally downloading a single pornographic video. Then they offer to settle—for a sum calculated to be just below the cost of a bare-bones defense. For these individuals, resistance is futile; most reluctantly pay rather than have their names associated with illegally downloading porn. So now, copyright laws originally designed to compensate starving artists allow, starving attorneys in this electronic-media era to plunder the citizenry.
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. …
After that dramatic introduction Judge Wright introduces the actors in the “porno-trolling collective,” and introduces their modus operandi:
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. … The Principals’ web of disinformation is so vast that the Principals cannot keep track—their explanations of their operations, relationships, and financial interests constantly vary. …
The opinion then presents the following graphic, in an attempt to untangle the “web of disinformation” (an enlarged version of this graphic appears in the opinion):
Incredibly, since 2010 this strategy has resulted in gross settlements approaching $15 million:
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. …
However, there was one small problem with these cases. It appears that the plaintiff forged the copyright assignment to one of the porn films:
The Principals stole the identity of Alan Cooper (of 2170 Highway 47 North, Isle, MN 56342). The Principals fraudulently signed the copyright assignment for [porn movie] “Popular Demand” using Alan Cooper’s signature without his authorization, holding him out to be an officer of AF Holdings. …
Every conspiracy needs a henchman, and in this story it is attorney Brett Gibbs:
The Principals ordered [attorney] Gibbs to commit the following acts before this Court: file copyright-infringement complaints based on a single snapshot of Internet activity; name individuals as defendants based on a statistical guess; and assert a copyright assignment with a fraudulent signature. The Principals also instructed [attorney] Gibbs to prosecute these lawsuits only if they remained profitable; and to dismiss them otherwise. …
. . . [attorney] Gibbs, even in the face of sanctions, continued to make factual misrepresentions to the Court.
The judge then assesses sanctions, the least of which is the approximately $40,000 in attorney’s fees which he doubled to over $83,000:
The Principals, AF Holdings, Ingenuity 13, Prenda Law, and [attorney] Gibbs are liable for [over $83,000 in attorney’s fees] jointly and severally, and shall pay this sum within 14 days of this order. …
[T]here is little doubt that that [attorneys] Steele, Hansmeier, Duffy, Gibbs suffer from a form of moral turpitude unbecoming of an officer of the court. To this end, the Court will refer them to their respective state and federal bars.
The Court will refer this matter to the United States Attorney for the Central District of California. The will also refer this matter to the Criminal Investigation Division of the Internal Revenue Service and will notify all judges before whom these attorneys have pending cases. For the sake of completeness, the Court requests Pietz to assist by filing a report, within 14 days, containing contact information for: (1) every bar (state and federal) where these attorneys are admitted to practice; and (2) every judge before whom these attorneys have pending cases. …
Ouch! A few weeks ago I posted about at case in which defendants angered a Massachusetts federal district court judge (“What Happens When You Get a Federal District Court Judge Really, Really Mad”). The California judge in the Ingenuity 13 case showed that, by comparison, the Massachusetts judge was throwing cotton balls.
Seriously, theses lawyers are in big trouble with the IRS (apparently they didn’t report their settlements as income), the courts and, worst for them, the U.S. Attorney’s Office. Since lawyers from the U.S. Attorney’s Office are the prosecutors that appear before federal judges, they are unlikely to disregard a federal judge’s request that they conduct an investigation to determine whether there are grounds for criminal prosecution.
What were they thinking?
