Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page1 of 29 1 2 3 4 Nicholas Ranallo, Attorney at Law #275016 371 Dogwood Way Boulder Creek, CA 95006 Telephone No.: (831) 703 - 4011 Fax No.: (831) 533-5073 Email: nick@ranallolawoffice.com Attorney for Defendant Joe Navasca 5 6 7 UNITED STATES DISTRICT COURT 8 FOR THE NORTHERN DISTRICT OF CALIFORNIA 9 10 AF HOLDINGS, LLC., 11 Plaintiff, Case No. 3:12-cv-02396-EMC NOTICE OF MOTION AND MOTION FOR SANCTIONS 12 v. 13 JOE NAVASCA Honorable Judge Edward Chen August 22, 2013 at 1:30 p.m. Courtroom 5 - 17th Floor 14 15 Defendants. 16 17 18 19 20 21 22 23 24 25 26 27 28 1 CV 12-2396-EMC Notice of Motion and Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page2 of 29 1 NOTICE OF MOTION AND MOTION 2 PLEASE TAKE NOTICE that on August 22, 2013 at 1:30 p.m., before the Honorable 3 Edward Chen in Courtroom 5 -17th Floor of the United States District Court for the Northern 4 District of California, San Francisco Division, located at 450 Golden Gate Avenue, San Francisco, 5 CA 94102. Defendant Joe Navasca will and hereby does move for an order holdings attorneys 6 John Steele and Paul Hansmeier jointly and severally liable for the full amount of Defendant's 7 costs and attorney fees incurred herein. 8 Defendant brings this motion pursuant to 28 U.S.C. ?1927 and this court's inherent 9 authority. Defendant's motion is based on this notice, the accompanying Memorandum of Points 10 and Authorities, the declarations and exhibits attached thereto, and all other papers filed and 11 proceedings held in this action. 12 13 14 15 16 DATED: July 2, 2013 Respectfully Submitted, NICHOLAS RANALLO, ATTORNEY AT LAW 17 18 19 20 21 22 By:________/s/ Nicholas Ranallo Nicholas Ranallo (Cal Bar #275016) Attorney for Joe Navasca 371 Dogwood Way, Boulder Creek, CA 95006 P: 831.703.4011 F: 831.533.5073 nick@ranallolawoffice.com 23 24 25 26 27 28 2 CV 12-2396-EMC Notice of Motion and Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page3 of 29 1 2 3 4 Nicholas Ranallo, Attorney at Law #275016 371 Dogwood Way Boulder Creek, CA 95006 Telephone No.: (831) 703 - 4011 Fax No.: (831) 533-5073 Email: nick@ranallolawoffice.com Attorney for Defendant Joe Navasca 5 6 7 UNITED STATES DISTRICT COURT 8 FOR THE NORTHERN DISTRICT OF CALIFORNIA 9 10 AF HOLDINGS, LLC., 11 Plaintiff, 12 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SANCTIONS v. 13 Case No. 3:12-cv-02396-EMC JOE NAVASCA 14 15 Defendants. 16 17 18 19 20 21 22 23 24 25 26 27 28 1 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page4 of 29 TABLE OF CONTENTS 1 2 3 I. 4 INTRODUCTION ...............................................................................................................2 A. 5 Relevant Persons and Entities.................................................................................2 1. 6 Individuals Identified by AF Holdings in this Matter.............................2 a) b) c) d) 7 8 9 2. 10 Individuals Associated With Prenda Law, Inc..........................................5 a) b) c) d) e) f) 11 12 13 14 B. 15 Alan Cooper...................................................................................................2 Salt Marsh......................................................................................................3 Anthony Saltmarsh.........................................................................................4 Mark Lutz.......................................................................................................4 Brett Gibbs.....................................................................................................5 6881 Forensics, LLC......................................................................................5 "Sharkmp4"....................................................................................................5 Paul Duffy......................................................................................................6 Paul Hansmeier..............................................................................................6 John Steele.....................................................................................................7 Specific Instances of Fraud In The Instant Case...................................................7 16 1. The Forged Assignment...............................................................................7 17 2. "Salt Marsh"...............................................................................................12 18 3. The Neville Declaration.............................................................................15 19 II. LEGAL AUTHORITY......................................................................................................16 20 III. ARGUMENT 21 A. Sanctions Are Appropriate Under This Court's Inherent Authority and 28 U.S.C. 1927............................................................................................................17 B. John Steele and Paul Hansmeier Are The Proper Subjects of Sanctions......20 C. John Steele and Paul Hansmeier Should Be Held Jointly and Severally Liable for Mr. Navasca's Attorney's Fees Herein........................................................22 22 23 24 25 26 27 28 IV. CONCLUSION.................................................................................................................23 i Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page5 of 29 TABLE OF AUTHORITIES 1 2 3 4 5 6 7 8 CASES Alyeska Pipeline Serv. Co. V. Wilderness Soc'y, 421 U.S. 240 (1975)...........................................16 Chambers v. Nasco, Inc., 501 U.S. 32, 54 (1991)............................................................................17 CTC Imports & Exports v. Nigerian Petroleum Corp., 739 F.Supp.966 (E.D. Penn. 1990)..........18 DAG Jewish Directories, Inc,. v. Y&R Media, LLC., 2010 WL 3219292 (S.D.N.Y. 2010)...........18 First Time Videos, LLC v. Paul Oppold, 6:12-cv-01493 (M.D. Fla.)..............................................15 Ingenuity 13 v. Doe, 2013 WL 1898633 (C.D. Cal. May 6, 2013)....................................................2 9 Miller v. Cardinale (In re DeVille), 361 F.3d 539 (9th Cir. 2004)...................................................18 10 Primus Automotive Financial Svcs., v. Batarse, 115 F.3d 644 (9th Cir. 1997)................................16 11 12 13 Roadway Express, Inc., v. Piper, 447 U.S. 752, 764-765 (1980)....................................................16 Sunlust Pictures v. Nguyen, 8:12-cv-1685-T35-MAP (M.D. Fla.)....................................................4 Universal Oil Products Co. v. Root Refining Co., 328 U.S. 575, 580 (1946).................................16 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ii Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page6 of 29 1 I. INTRODUCTION 2 Defendant Joe Navasca brings the instant motion seeking to hold the individual attorneys 3 that have knowingly committed fraud in this case responsible for their actions by making them 4 jointly and severally liable for the costs and attorney fees incurred. The evidence of fraud is clear 5 and unrebutted, and the involvement of John Steele and Paul Hansmeier is likewise clear. The 6 instant scheme was created by lawyers, for the benefit of lawyers, and it is entirely appropriate that 7 these lawyers should bear the burden that their actions have caused. Mr. Navasca has incurred 8 significant attorney's fees in defense of this action, which has now been wholly dismissed (along 9 with all of AF Holdings' other cases). As described further below, this court has ample authority 10 to issue sanctions against Mssrs. Steele and Hansmeier pursuant to 28 U.S.C. 1927 and this court's 11 inherent authority. Such a result is entirely appropriate. 12 A. 13 RELEVANT PERSONS AND/OR ENTITIES Although many of the key events in this case have been covered in previous filings, the 14 relationships amongst the relevant characters is complex and potentially confusing. A preliminary 15 introduction is therefore appropriate, though the role of each will be set forth in greater detail 16 below. As will become apparent, all roads in this case lead to John Steele and Paul Hansmeier. 17 1. Individuals Identified by AF Holdings in This Case 18 a. 19 Alan Cooper's name appears on behalf of AF Holdings on the assignment in the instant 20 case (ECF No. 13-2). On March 11, 2013, Alan Cooper denied under oath that he had signed the 21 assignment in this case while testifying in at an Order to Show Cause hearing in Ingenuity 13 v. 22 John Doe. A copy of the March 11th Transcript of this hearing was previously filed herein at ECF 23 84-2. 24 declaration to the same effect, which was previously filed in the instant case (ECF 22-7). Mr. 25 Cooper is a former caretaker for John Steele (ECF No.22-6 at 2). Mr. Cooper's identity has been 26 appropriated by Mr. Steele on multiple occasions, including in connection to Prenda Law plaintiffs 27 AF Holdings, Ingenuity 13, and VPR, Inc. See Ingenuity 13 v. Doe, 2013 WL 1898633 at *2 Alan Cooper Cited excerpts are annexed hereto as Exhibit A. Mr. Cooper has also executed a 28 2 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page7 of 29 1 (C.D. Cal. 2013) & ECF No 55-1. Mr. Cooper is listed with the Nevada Secretary of State as the 2 President of VPR Inc., as well as the Vice President, Treasurer, and all other executive positions 3 (ECF No. 55-1 and 55-5). The address listed for Mr. Cooper with the Nevada SOS is 4532 East 4 Villa Theresa in Phoenix, Arizona (hereinafter the "Villa Theresa Address"). Id. Mr. Cooper has 5 denied under oath that he has any knowledge of VPR and has denied ever living at the Villa 6 Theresa Address, or even having ever been to Arizona (March 11 Transcript at 30:23-33:3). 7 b. 8 Salt Marsh is, we are told, the Owner of AF Holdings. Salt Marsh's name appears as 9 owner on AF Holdings' ADR Statement in the instant action (ECF No. 8). Prior to February 19, 10 2013, Salt Marsh was consistently identified as a natural person with decidedly human 11 capabilities, including the ability to read and discuss the details of Early Neutral Evaluation. Salt 12 Marsh was also identified in a Rule 26(f) Statement as an "Individual Having Knowledge" of AF 13 Holdings claims. See Exhibit B. Brett Gibbs was specifically directed to identify Salt Marsh on 14 the ADR filing and Rule 26 Statement by Paul Hansmeier (Gibbs Dec. at ?5). "Salt Marsh" 15 On February 19, 2013, Paul Hansmeier testified that AF Holdings was wholly owned by a 16 trust, and had been since its initial conception. When presented with the Salt Marsh ADR filings, 17 Mr. Hansmeier claimed to have virtually no knowledge regarding Salt Marsh, and pointedly 18 avoided stating that it was the name of the trust (Hansmeier Dep. at 51). 19 Hansmeier's deposition was previously filed at ECF No. 84-1, cited excerpts are annexed hereto as 20 Exhibit J. A copy of Mr. 21 Following the February 19, 2013, deposition, Salt Marsh has been identified as the name of 22 the Nevis trust that owns AF Holdings (See, e.g. ECF No. 80). Mark Lutz has claimed that it was 23 his practice to sign the name of Salt Marsh on behalf of the trust on ADR filings (ECF No. 80). 24 Brett Gibbs has explicitly denied that he ever had any contact with Mark Lutz about the ADR 25 filing in this case or previous cases and at all relevant times believed Salt Marsh to be a natural 26 person (Gibbs Dec. at ?4-5). 27 28 3 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page8 of 29 1 c. 2 Anthony Saltmarsh is a natural person residing at the Villa Theresa Address described 3 below. Anthony Saltmarsh has no connection to "Salt Marsh," we are told. Anthony Saltmarsh 4 formerly (and perhaps currently) resided with Jayme Steele, sister of John Steele (ECF 55-1). 5 According to Paul Hansmeier, Mr. Saltmarsh was formerly identified as a "corporate 6 representative" of AF Holdings, and Anthony Saltmarsh's name may have appeared on AF 7 Holdings' foundational documents. See Hansmeier Dep. at 142:22 - 144:8. Mr. Saltmarsh never 8 received any compensation for being a "corporate representative." Id. 9 d. Anthony Saltmarsh Mark Lutz 10 Mark Lutz is a former paralegal at Steele Hansmeier, Prenda Law, and the Anti Piracy Law 11 Group. See, e.g. ECF No. 22, 55-1 & 80. Mr. Lutz is widely known as the telephone agent that 12 makes dunning calls to putative defendants, and has called Defendant's family (on behalf of Anti- 13 Piracy Law Group) as recently as February 8, 2013. See ECF No. 55-1 at ?2-3. 14 Mark Lutz is alternatively described as the "CEO", "Manager" and/or "Corporate 15 Representative" of AF Holdings, though even Brett Gibbs was unaware until recently that the 16 paralegal had any purported role in the company (Gibbs Dec. at ?4). 17 been deemed a "fraud upon the court" for attempting to appear as the "corporate representative" of 18 another Prenda Law plaintiff in the Southern District of Florida in Sunlust Pictures v. Nguyen, 19 8:12-cv-1685-T35-MAP. A copy of this transcript (hereinafter "November 27th Transcript1") has 20 previously been filed at ECF No. 22-10, and cited excerpts are annexed hereto as Exhibit C. 21 During his November 27th testimony, Mr. Lutz was accompanied by John Steele, and testified that 22 he had never met or spoken to Mr. Duffy (November 27th Transcript at 17-18). Mr. Lutz did not 23 identify AF Holdings' as one of the companies that he worked for on November 27, 2012 24 (November 27 Transcript at 16-17). 25 Mark Lutz has previously According to AF Holdings Rule 26 disclosures in this matter, Mark Lutz is the sole 26 27 1 The November 27th Transcript incorrectly cites the year "2011" on the first page. The hearing was, in fact, on November 27th, 2012, as shown on page 2 and the court certification. 28 4 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page9 of 29 1 individual that they intended to call regarding the forged assignment herein (Exhibit D). 2 3 2. Individuals Associated With Prenda Law, Inc. 4 a. 5 Brett Gibbs is former counsel herein, and played an active role in AF Holdings litigation Brett Gibbs 6 campaign throughout the country. 7 immediately following Paul Hansmeier's 30(b)(6) deposition herein. 8 Hansmeier, and Duffy, Mr. Gibbs testified openly and when called to discuss his involvement in, 9 inter alia, AF Holdings and the forged assignments in AF Holdings' copyrights suits. Mr. Gibbs 10 testified that he was directed in litigation, including the instant case, by John Steele and Paul 11 Hansmeier (March 11th Transcript at 74-77 and Gibbs Dec. at ?3). 12 Gibbs is filed concurrently herewith. Mr. Gibbs discontinued his involvement in this matter Unlike Mrssrs Steele, A declaration from Brett 13 b. 14 6881 Forensics is the sole source for AF Holdings' technical data herein (ECF No 4-1 ). 15 Peter Hansmeier, brother of Paul Hansmeier, is purportedly a "technician" at 6881 Forensics, and 16 Peter Hansmeier's declarations are used in Prenda's litigation nationwide . Peter Hansmeier's 17 signature, in this matter and many others, bears an uncanny resemblance to Paul Hansmeier's own, 18 previously-filed signature. See Exhibit E and ECF No. 4-1. Both John Steele and Paul Hansmeier 19 have maintained email addresses under the 6881forensics.com domain and have used such 20 addresses to communicate regarding Prenda Law infringement cases. See Exhibit F. The domain 21 name for 6881forensics.com is registered using the GoDaddy accounts of John Steele. See Exhibit 22 G, at Bates #189-190. Nonetheless, Mr. Hansmeier testified that neither he nor John Steele have 23 any interest in, or association with, 6881 Forensics. 6881 Forensics, LLC 24 c. 25 As described in the Neville Declaration, "Sharkmp4" is the screen name for a particular 26 user who has uploaded torrent links to the Pirate Bay for a large number of works that would later 27 form the basis for Steele Hansmeier/Prenda Law copyright infringement suits. See ECF No. 91 at "Sharkmp4" 28 5 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page10 of 29 1 ?24. 2 "GoDaddy" account. ECF No. 91 at ?50. This user has been identified as John Steele, or someone with access to Mr. Steele's 3 d. 4 Paul Duffy is present counsel for AF Holdings in the instant matter. Mr. Duffy took over 5 for Brett Gibbs after Mr. Gibbs severed his association with Prenda, with full knowledge of the 6 allegations of fraud herein. 7 incrimination when called to testify about his involvement in, inter alia, AF Holdings and the 8 forged assignments in AF Holdings' copyrights suits on April 2, 2013 Ingenuity 13 v. Doe, 12-cv- 9 08333-ODW; 2013 WL 1898633 at *2 (C.D. Cal. May 6, 2013). Paul Duffy Mr. Duffy exercised his Fifth Amendment rights against self- 10 e. 11 Paul Hansmeier was a partner in Steele Hansmeier, the predecessor in interest to Prenda 12 Law, Inc (Exhibit H). Steele Hansmeier represented Heartbreaker Productions, the purported 13 assignor herein, in copyright infringement lawsuits prior to the purported assignment in the instant 14 case (Exhibit I). Mr. Hansmeier was AF Holdings' 30(b)(6) representative in the instant case, 15 despite testifying that he has involvement with either AF Holdings or Prenda Law, Inc. A copy of 16 Mr. Hansmeier's transcript was previously filed at ECF No. 84-3, cited excerpts are annexed 17 hereto as Exhibit J. Paul Hansmeier 18 Paul Hansmeier likewise exercised his Fifth Amendment rights when called to testify 19 about his involvement in, inter alia, AF Holdings and the forged assignments in AF Holdings' 20 copyrights suits. Ingenuity 13 v. Doe, 12-cv-08333-ODW; 2013 WL 1898633 at *2 (C.D. Cal. 21 May 6, 2013). Mr. Hansmeier, along with Mr. Steele, is responsible for directing AF Holdings 22 litigation campaign through local counsel, including Mr. Gibbs, former counsel herein. 23 Ingenuity 13 v. Doe, 12-cv-08333-ODW; 2013 WL 1898633 at *3 (C.D. Cal. May 6, 2013) and 24 Gibbs Dec. at ? 3. Mr. Hansmeier represented to Mr. Gibbs that Salt Marsh was a natural person, 25 and represented that he had obtained the signature of Salt Marsh for relevant filings. (Gibbs Dec. 26 at 5. Mr. Hansmeier's brother, Peter Hansmeier, is purportedly a "technician" for 6881 Forensics, 27 LLC, and the sole source of technical evidence in support of AF Holdings' copyright claims (ECF 28 6 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions See Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page11 of 29 1 4-1). 2 3 f. 4 John Steele was a partner in Steele Hansmeier, the predecessor in interest to Prenda Law, 5 Inc. (Exhibit H). Steele Hansmeier represented Heartbreaker Productions, the purported assignor 6 herein, in copyright infringement lawsuits prior to the assignment of rights to AF Holdings 7 (Exhibit I). Alan Cooper, the purported signatory of the assignment in this case, was formerly a 8 caretaker for Mr. Steele's property in Minnesota (See, e.g. ECF No. 22-6 at 2). John Steele 9 Mr. Steele exercised his Fifth Amendment rights when called to testify about his 10 involvement in, inter alia, AF Holdings and the forged assignments in AF Holdings' copyrights 11 suits. Ingenuity 13 v. Doe, 12-cv-08333-ODW; 2013 WL 1898633 at *2 (C.D. Cal. May 6, 2013). 12 Mr. Steele, along with Mr. Hansmeier, are responsible for directing AF Holdings litigation 13 through a retinue of local "Of Counsel" attorneys, including Brett Gibbs. Id. at *3. 14 Mr. Steele's sister, Jayme Steele, formerly lived with Anthony Saltmarsh at the Villa 15 Theresa Address attributed to Alan Cooper (ECF 55-1). Mr. Steele employed Mark Lutz as a 16 paralegal at Steele Hansmeier and Prenda Law. Mr. Steele controls the 6881forensics.com domain 17 name, and receives emails via a 6811 Forensics email address (See ECF No. 91 at ?20 and Exhibit 18 G at Bates # GD 189-190). 19 20 B. SPECIFIC INSTANCES OF FRAUD IN THE INSTANT CASE 21 1. 22 As Defendant has described at length throughout this case, the assignment that forms the The Forged Assignment 23 basis of Plaintiff's claims is a forgery. 24 assignment, and has never had any association with AF Holdings, LLC. Mr. Cooper has testified 25 to these facts, under oath. Based upon this testimony, the Central District explicitly found that Alan Cooper has explicitly denied executing the 26 "The Principals 2 stole the identity of Alan Cooper (of 2170 Highway 47 27 28 2 "The Principals" in Judge Wright's Order refers to John Steele, Paul Hansmeier and Paul Duffy. 7 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page12 of 29 4 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." Ingenuity 13 v. Doe, 2013 WL 1898633 at * 3 (C.D. Cal., May 6, 2013). 5 This court (and Mr. Gibbs) were apprised Mr. Cooper's renunciation during the initial case 6 management conference in this case, over 6 months ago. According to Prenda Law's attorney at 7 that time, Brett Gibbs, this issue was immediately brought to the attention of Mr. Steele and Mr. 8 Hansmeier. Gibbs Dec. at ? Mr. Steele and Mr. Hansmeier assured him that it was merely a 9 "conspiracy theory," and that he should continue litigating this action against Mr. Navasca (as well 10 as continue with all of AF Holdings' other cases in this district and throughout the state). See 11 Gibbs Dec. at ?6. 1 2 3 12 In the months that have followed, it has become exceedingly clear that the assignment is, 13 in fact, a forgery. AF Holdings and its attorneys have been wholly unable to explain who actually 14 executed the instant assignment, and have given several conflicting and nonsensical accounts 15 when forced to try and explain the signature. They have since adopted the position that, since the 16 assignor's signature is all that is necessary for a copyright assignment, it simply doesn't matter if 17 they have submitted forged documents to this court and countless others. As recognized by Judge 18 Wright, however, "Although the recipient of a copyright assignment need not sign the document, a 19 forgery is still a forgery. And trying to pass that forged document by the Court smacks of fraud." 20 Ingenuity 13, 2013 WL 1898633 at *4 (C.D. Cal. May 6, 2013). 21 AF Holdings' first attempt to explain this assignment came on February 19th, when Paul 22 Hansmeier appeared as AF Holdings' 30(b)(6) deponent in this action. In a clearly rehearsed 23 explanation, Mr. Hansmeier stated that Mark Lutz, paralegal for Steele Hansmeier, Prenda Law, 24 and the Anti-Piracy Law Group tasked his boss, John Steele, with arranging a "corporate 25 representative3" to acknowledge the assignment in this case (Hansmeier Dep. at 121:11-128:12). 26 3 27 28 "Corporate Representative" is a euphemism used by the Prenda Parties to mean an unpaid individual with no authority and no relationship to the company, whose name is signed to documents in order to disguise the true interested parties. See, e.g. Hansmeier Dep. at 121:17-122:11 and November 27th Transcript at 1415. 8 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page13 of 29 1 We are to believe that Mr. Steele did this as a favor to his paralegal, because the paralegal 2 was himself too busy to personally sign his own name on behalf the company he supposedly runs. 3 It is unclear how Mr. Lutz saved any time this way, since it undoubtedly took at least as long to 4 arrange for the "representative" as it would have to sign his own name, but nonetheless, we are 5 told that efficiency was the motivation. See Hansmeier Dep. at 127:22- 128:8 ("...Mr. Lutz is an 6 individual. There are a certain number hours in a day and for him to accomplish everything he's 7 going to accomplish in a given day, or for anyone in any capacity in any business, you rely on 8 third parties to aid you to accomplish tasks.") 9 According to Mr. Hansmeier, Mr. Steele then sought out his property caretaker in 10 Minnesota, Alan Cooper, to serve as "corporate representative" to acknowledge the assignment. 11 Hansmeier Dep. at 122:5-11. According to Mr. Hansmeier, Mr. Steele was therefore the sole 12 individual that could shed any light on the circumstances surrounding the execution. Hansmeier 13 Dep. at 122:11-126:21. Specifically, Mr. Hansmeier testified that 14 17 "Mark Lutz spoke to Mr. Steele and said, Well, I understand that there's an issue with this Alan Cooper and asked Mr. Steele point-blank, Is the signature a forgery. Mr. Steele said the signature is not forgery. And he asked him, Is the-- is the signature authentic. Mr. Steele says, yes, the signature is authentic..." and, "...all I can say is that AF Holdings - the only person who knows who this Alan Cooper is is John Steele...". Hansmeier Dep. 122:11-18 and 126:10-127:2. 18 Mssrs. Steele, Hansmeier, and Duffy were each given a chance to forward their own 19 explanation(s) for the Cooper assignment on April 2, 2013 at a hearing in the Central District of 20 California. Rather than testifying under oath (and subject to cross examination), however, each 21 invoked their Fifth Amendment right. Ingenuity 13 v. Doe, 2013 WL 1898633 at * 2 (C.D. Cal., 22 May 6, 2013). 15 16 23 Mr. Steele later decided to address this issue in the form of an affidavit- safe from cross- 24 examination - in response to yet another Order to Show Cause regarding sanctions in the District 25 of Arizona. A copy of the Arizona Order to Show Cause is annexed hereto as Exhibit K , AF 26 Holdings response is annexed as Exhibit L, and Mr. Steele's affidavit in support is annexed hereto 27 28 9 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page14 of 29 1 as Exhibit M. 4 2 events, and Mr. Steele cannot bring himself to even claim that Mr. Cooper actually executed the 3 assignment.5 What Mr. Steele does say, however, contradicts Mr. Hansmeier's testimony and 4 various publicly available documents. See, e.g. Exhibit M at ?7-11. Specifically, Mr. Steele 5 describes the Alan Cooper circumstances as follows: Mr. Steele's affidavit is wholly inconsistent with Mr. Hansmeier's version of 6 "8. ...I agreed to help him set up a company for him and help him out in getting started with his business. 9. Shortly thereafter, Alan told me that he could not put any time into the project and I believe that he never ended up following through with getting his new company off the ground. As a less time intensive alternative, I suggested that if Alan wanted to learn more about the adult industry, I could connect him to a new company that was run by Mark Lutz. 10. I informed Alan that one way to get his name established would be to serve in a corporate representative role, which would let him gain exposure to the types of deals Mr. Lutz was doing and see if that was something that appealed to him. 11. My understanding is that Alan took me up on the offer and participated in a limited number of transactions in 2011 with Mr. Lutz's companies. I am not aware of any post-2011 transactions in which Alan participated." Steele Aff. at 811. 7 8 9 10 11 12 13 14 15 16 Several things are notable about Mr. Steele's version of events. First, and most 17 conspicuously, is his purported ignorance regarding the Alan Cooper transactions, notwithstanding 18 Mr. Hansmeier's testimony that Mr. Steele was the only one with information. In contrast to Mr. 19 Hansmeier's testimony, which makes it clear that Mark Lutz specifically tasked Mr. Steele with 20 finding a corporate representative for the purpose of acknowledging AF Holdings' assignments, 21 Mr. Steele implies that this was a favor for Mr. Cooper, wholly unrelated to any specific task. 22 Moreover, Mr. Steele disclaims any personal knowledge regarding the "limited number of 23 transactions" that Mr. Cooper was involved in, and disclaims any knowledge that would allow him 24 25 26 27 4 Curiously, this affidavit was executed on May 28, 3 days after AF Holdings Response to the Order to Show Cause which references the document. 5 The Arizona court was not satisfied with AF Holdings' initial response, and has ordered further responses to be provided in Court on June 21, 2013. This hearing was subsequently continued until July 19th at the request of Plaintiff's counsel. The Arizona court's second order is annexed hereto as Exhibit N. 28 10 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page15 of 29 1 to reassure Mr. Lutz and Mr. Hansmeier that the relevant assignments were not forgeries, as he 2 apparently did. Indeed, Mr. Steele's affidavit seems to indicate that Mr. Lutz would himself have 3 all the necessary information regarding the assignment, and there would be no reason for Mr. Lutz 4 to go to Mr. Steele for confirmation regarding the validity of the assignments. 5 6 Secondly, AF Holdings response and Mr. Steele's affidavit simply do not square with documented reality. AF Holdings' response to the OTSC indicates that 7 10 "At some point in early 2011, Steele and Cooper discussed how a friend of Steele's was exploring opportunities related to purchasing and marketing adult content. Cooper expressed interest in learning more about these opportunities, and Steele offered to help him learn more...Cooper ended up not moving forward with the ideas Steele proposed to him..." See Exhibit N at 6. 11 This explanation does not square with history. Indeed, John Steele began misappropriating 12 Mr. Cooper's identity before "early 2011," in connection with VPR, Inc., and other entities. As 13 previously described in ECF No. 55, 55-1, and 55-5, VPR, Inc., was formed and registered with 14 the Nevada Secretary of State in late 2010 and identified Alan Cooper as the president, secretary, 15 and all other relevant positions in the entity. As previously described, the corporate address 16 identified by the Nevada Secretary of State is 4532 East Villa Theresa Drive ("the Villa Theresa 17 Address"), an address previously shared by John Steele's sister and Anthony Saltmarsh. See ECF 18 Nos. 55-1, 55-3 and 55-4. 8 9 19 VPR, Inc. cannot be the entity that never came to fruition, as described in Mr. Steele's 20 affidavit, as it has filed copyright lawsuits against more than a thousand Does, through its counsel, 21 Steele Hansmeier. 22 misappropriating Mr. Cooper's identity prior to the AF Holdings assignments described herein. See Exhibit O.6 Moreover, this is not the only instance of Mr. Steele On November 6, 2010, at 10:01 a.m. John Steele created a GoDaddy account and was 23 24 assigned Shopper ID 39706492. 25 6 26 27 See Exhibit K hereto, Bates #00074, previously filed in Although these suits were filed under "VPR Internationale," the copyright registrations corresponding to the works at issue are all under the name "VPR, Inc.," and include the address for VPR, Inc.'s Registered agent, in Las Vegas. See Exhibit P. These include the work "Girlfriend Lost Bet." The domain name "mygirlfriendlostabet.com" was registered using John Steele's GoDaddy Shopper ID, 39706942. See Exhibit G, Bates # GD00002. 28 11 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page16 of 29 1 connection with Prenda Law Inc., et. al. vs. Godfread, 3:13-cv-00207 in the Southern District of 2 Illinois. 3 Hansmeier/Prenda Law, Inc./Anti-Piracy Law Group on the account. Notably, a mere 15 minutes 4 later, Mr. Steele changed the customer name from "John Steele" to "Alan Cooper" and replaced 5 the Steele Hansmeier address with the Villa Theresa Address described above. Id. Notably, the 6 email address associated with this account was johnlsteele@gmail.com, the same email address 7 that John Steele used in connection with his appeal of the Central District of California sanctions 8 order. See Exhibit Q. Mr. Steele initially used his own name and the business address for Steele 9 It is apparent, based on the foregoing, that Mr. Steele and/or Mr. Hansmeier have 10 deliberately misstated Mr. Steele's role in "obtaining" the Alan Cooper signature in this matter. 11 Moreover, their combined testimony amounts to a statement that no one knows about the 12 assignment from Steele Hansmeier's former client to Mr. Steele's former caretaker. 13 14 2. 15 AF Holdings was not content with perpetrating a single fraud upon this court, however, 16 and additionally filed false documents under the signature of "Salt Marsh" in this action and others 17 throughout the district. AF Holdings repeatedly and intentionally represented to this court - and 18 others in this district, that "Salt Marsh" was a natural person and the owner of AF Holdings, LLC, 19 in a deliberate attempt to conceal the true owners of the company. These include the ADR 20 Certification, ECF No. 8, filed in this action and similar certifications filed in cases throughout the 21 district. This certification identifies "Salt Marsh" as the individual that completed a number of 22 decidedly human tasks in connection with this court's ADR program. The "Salt Marsh" Filings 23 Indeed, this is not the only context where "Salt Marsh" has been identified as a natural 24 person in this district. On January 4, 2012, AF Holdings filed its Rule 26(f) Report in AF 25 Holdings v. Doe 1, 4:11-cv-03067-CW in this district. A copy of this filing is annexed hereto as 26 Exhibit B. This filing specifically identifies "Salt Marsh" under the heading "Individuals Likely 27 to Have Discoverable Information." It simply is not credible to suggest that numerous 28 12 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page17 of 29 1 attorneys consistently identified a trust as an individual that was in possession of discoverable 2 information, and the person that read various documents and discussed various alternatives with 3 its attorney. 4 In response to an order to produce the "Salt Marsh" signatures in this case, AF Holdings 5 filed ECF No. 80, an affidavit from Mark Lutz, purportedly detailing the involvement of the "Salt 6 Marsh" trust in this action. Unfortunately for AF Holdings, Mr. Lutz declaration simply does not 7 comport with reality, and has been specifically contradicted by Brett Gibbs, counsel for AF 8 Holdings when the relevant documents were filed. Mr. Gibbs specifically states that: 9 10 11 12 13 14 15 16 17 18 4. I have reviewed the Affidavit of Mark Lutz filed in this case on May 13, 2013 (Doc. #80). I believe that the information provided in the fifth paragraph regarding my interactions with Mr. Lutz is not an accurate description of those events. I did not "from time to time" send certificates for Mr. Lutz to sign on behalf of the Salt Marsh Trust. I did not have the alleged conversations with Mr. Lutz. In fact, I did not know that Mark Lutz was directly affiliated with these companies, as an owner or otherwise, until months after filing the ADR Certification in this case. 5. Instead, I was specifically told by Mr. Hansmeier that Salt Marsh was the owner of AF Holdings, and that he, Salt Marsh, had read and understood the ADR handbook and that I could go ahead and file the ADR Certification with the electronic signature of Salt Marsh. Again, I never spoke with Salt Marsh directly. Through my conversation with Mr. Hansmeier, I was under the impression that the [sic] Salt Marsh was an individual who had in fact complied with the Local Rule and that his original signature existed on a document that was being held by my then-employer, Prenda Law Inc...." Gibbs Dec. at ?5. 19 20 In addition to Mr. Gibbs specific contradiction, Mr. Lutz affidavit fails to accord with his 21 own prior statements. For example, at the November 27th Hearing in Tampa, Mr. Lutz was asked 22 whether he was a corporate representative for any plaintiffs other than Sunlust. 23 identified two additional companies, Hard Drive Productions and Guava, LLC. See November 24 27th Transcript at 16:22-17:3. Notably, Mr. Lutz does not identify AF Holdings, LLC as one of his 25 companies, despite (purportedly) being the CEO/Manager/Corporate Representative/Sole 26 Employee for nearly eighteen months prior to this testimony. 27 Mr. Lutz The simple explanation for this omission is that Mr. Steele and Mr. Hansmeier had not yet 28 13 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page18 of 29 1 decided that they needed Mr. Lutz to feign involvement in AF Holdings, as "Salt Marsh" was still 2 being held out as the owner and corporate representative. 3 specifically states that he was not aware that Mr. Lutz had any connection with AF Holdings, LLC 4 until long after the "Salt Marsh" filings in this case and others throughout the district. Mr. Lutz' 5 declaration regarding Salt Marsh is apparently perjury. Mr. Lutz cannot produce a single email 6 from Mr. Gibbs regarding these certifications, nor a single email transmitting any certifications to 7 Mr. Gibbs. Indeed, Mr. Gibbs declaration 8 Additionally, as is apparent from AF Holdings' ADR Certification in AF Holdings v. 9 Magsumbol, attached hereto as Exhibit R, once Mr. Gibbs became aware of Mark Lutz' role in AF 10 Holdings, he identified Mark Lutz (not Salt Marsh) as the individual that had read the ADR 11 handbook and discussed its contents. This filing again contradicts Mr. Lutz testimony that it was 12 his "practice to sign those certifications on behalf of the Salt Marsh Trust and return them to Mr. 13 Gibbs." The reason for these contradictions is simple: Mark Lutz' affidavit is patently false, and 14 was procured purely for the purpose of shielding the Mr. Steele and Mr. Hansmeier from 15 responsibility for their actions herein. 16 Mr. Gibbs declaration is especially interesting when compared with Mr. Hansmeier's 17 testimony as a 30(b)(6) representative of AF Holdings, wherein Mr. Hansmeier disclaims any 18 knowledge as to the identity of "Salt Marsh," or even whether Salt Marsh is a natural person. See, 19 e.g. Hansmeier Dep. at 49-50 ("...my testimony is that AF Holdings is owned by a trust and 20 whether the name of the trust on the date in question was Salt Marsh or not, I'm saying I just don't 21 know what the name of the trust was on that date....Q: And so if AF Holdings had previously filed 22 something in this case indicating that it was owned by an individual named Salt Marsh, that would 23 be false; is that correct? A: I guess I'm not sure what the legal analysis on that would be. To the 24 extent a trust is considered an individual for the purposes of filing, then I don't know"). 25 Mr. Hansmeier's testimonial ignorance comes many months after the "Salt Marsh" filing 26 in this suit and months after Mr. Gibbs was "specifically told by Mr. Hansmeier that Salt Marsh 27 was the owner of AF Holdings and that he, Salt Marsh, had read and understood the ADR 28 14 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page19 of 29 1 Handbook." Gibbs Dec. at ?5. Moreover, although "Salt Marsh" has been identified in several 2 recent filings as the name of the mysterious trust that purportedly owns AF Holdings, it is 3 noteworthy that there is not a single instance where this explanation was given prior to Mr. 4 Hansmeier's testimony. Clearly, Mr. Hansmeier painted himself into a corner with his testimony, 5 and Mr. Hansmeier and Mr. Steele have decided to adopt the best possible explanation - despite 6 the fact that it makes little sense in light of the repeated identifications of Salt Marsh as an 7 "individual" with decidedly human capabilities. 8 9 3. The Neville Declaration 10 Finally, as has recently become apparent, even the claimed "infringements" underlying AF 11 Holdings' litigation are themselves a fraud. On June 3, 2013, the Declaration of Delvan Neville 12 (hereinafter "Neville Declaration") was filed in First Time Videos, LLC v. Paul Oppold, 6:12-cv- 13 01493 (M.D. Fla.). A copy of this declaration has been filed at ECF No. 91. 14 The Neville Declaration analyzed the data collection methods of 6881 Forensics (the firm 15 used by AF Holdings in the instant case) and the origin of many of the works that have formed the 16 basis of Prenda Law Inc.'s copyright actions. Mr. Neville's declaration is extremely detailed, and 17 analyzes information from a variety of sources in order to come to his alarming conclusions. 18 Mr. Neville states that one purpose of the investigation was "to pinpoint the likely origin of 19 the user 'sharkmp4' on the website known as the Pirate Bay that originated torrents relating to 20 copyrights held by companies 'AF Holdings' and 'Ingenuity 13.'" Neville Dec. at ?24. 21 In order to identify the sharkmp4 user, Mr. Neville compared information from a variety of 22 sources (each of which is exhaustively discussed) and concluded that "It appears from all the 23 evidence that John Steele (or someone under his control or with access to his Go-Daddy account 24 records with authorization to make changes to domain names) is the most probable candidate for 25 the identity of Pirate Bay user sharkmp4." 26 conclusion in ?48, noting that 6881 Forensics is closely linked to the sharkmp4 user, and that this 27 "leads again to the conclusion that John Steele or his agents are sharkmp4..." Neville Dec. at ?48. Neville Dec. at ?47. Mr. Neville reiterates this 28 15 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page20 of 29 1 Finally, Mr. Neville ends with the coup de grace: 2 "Normally, in situations where a copyright is being enforced, based upon the investigation, I would advise the owner of the copyright to pursue further inquiry of John Steele and/or 6881 Forensics to determine the identity of Pirate Bay user sharkmp44. Because all three entities appear under the same control, it is my belief that the purpose of sharing the file by sharkmp4 appears to have been in an effort to induce infringement for the purpose of monetization of copyrights of commercially low value." Neville Dec at ?50. 3 4 5 6 7 II. LEGAL AUTHORITY 8 28 U.S.C. ?1927 provides that "any attorney or other person admitted to conduct cases in 9 any court of the United States or any Territory thereof who so multiplies the proceedings in any 10 case unreasonably and vexatiously may be required by the court to satisfy personally the excess 11 costs, expenses, and attorneys' fees reasonably incurred because of such conduct" (emphasis 12 added). 13 In addition, "[t]he inherent powers of federal courts are those which are 'necessary to the 14 exercise of all others,'" and include the '"well-acknowledged' inherent power...to levy sanctions 15 in response to abusive litigation practices." Roadway Express, Inc., v. Piper, 447 U.S. 752, 764- 16 765 (1980)(internal quotations omitted). Piper stands for the proposition that federal courts have 17 the inherent power to assess attorney fees against counsel who willfully abuse judicial processes. 18 Indeed, the Supreme Court has specifically held that sanctions under a court's inherent authority 19 are appropriate if the court finds "that fraud has been practiced upon it, or that the very temple of 20 justice has been defiled." Universal Oil Products Co. v. Root Refining Co., 328 U.S. 575, 580 21 (1946). 22 Sanctions under this authority go beyond a court's equitable concerns regarding the 23 relationships and equities between the parties, and goes straight to a Court's ability to police itself, 24 thereby serving two distinct purposes: "vindicating judicial authority without resort to the more 25 drastic sanctions available for contempt of court and making the prevailing party whole for 26 expenses caused by his opponent's obstinancy." Id. 27 The most common utilization of inherent powers is a sanction levied "to protect the due 28 16 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page21 of 29 1 and orderly administration of justice" and "maintain the authority and dignity of the court." Cooke 2 v. United States, 267 U.S. 517, 539 (1925). "When a losing party has acted 'in bad faith, 3 vexatiously, wantonly, or for oppressive reasons, sanctions under the court's inherent power may 4 take the form of attorney fees. Primus Automotive Financial Svcs., v. Batarse, 115 F.3d 644 (9th 5 Cir. 1997)(quoting Alyeska Pipeline Serv. Co. V. Wilderness Soc'y, 421 U.S. 240 (1975)). 6 7 8 A. III. ARGUMENT SANCTIONS ARE APPROPRIATE UNDER THIS COURT'S INHERENT AUTHORITY AND 28 USC ?1927 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 It is well established that forgery and fraud upon the court are sufficient to support sanctions under this court's inherent authority. Indeed, AF Holdings, LLC, Prenda Law, Inc., and Mssrs. Steele and Hansmeier have first-hand experience with this principle. Although Judge Wright initially considered sanctions pursuant to Rule 11, he subsequently determined that sanctions were more appropriate under the court's inherent authority. Ingenuity 13 v. Doe, 2013 WL 1898633 at * 2-3 (C.D. Cal., May 6, 2013). Judge Wright, citing Chambers v. Nasco, Inc., 501 U.S. 32, 54 (1991), noted that "sanctions under the Court's inherent authority are particularly appropriate for fraud perpetrated on the court. The conduct which led to sanctions in Ingenuity 13 includes precisely the conduct complained of herein. As described previously, Judge Wright made the following findings of fact, based upon evidence that has all been introduced in the instant case: 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. 5. For defendants that refused to settle, the Principals engaged in vexatious litigation designed to coerce settlement... 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... 9. The Principals stole the identity of Alan Cooper... 28 17 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page22 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 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.... Ingenuity 13 v. Doe, 2013 WL 1898633 at * 2-3 (C.D. Cal., May 6, 2013). Notably, the District Court for the District of Arizona has recently concurred that AF Holdings' forgeries, if established represent adequate cause for an award of sanctions. A copy of this Order to Show Cause is annexed hereto as Exhibit L. The District of Minnesota has gone further, and re-opened previously dismissed AF Holdings' cases based on the Alan Cooper forgery. A copy of the Minnesota Order is annexed hereto as Exhibit S. Other courts across the country have recognized the general principle that submitting forgeries to the court is a sanctionable offense. See, e.g. DAG Jewish Directories, Inc,. v. Y&R Media, LLC., 2010 WL 3219292 (S.D.N.Y. 2010) (sanctions appropriate for submitting forged contract), CTC Imports & Exports v. Nigerian Petroleum Corp., 739 F.Supp.966 (E.D. Penn. 1990)(Rule 11 sanctions were warranted against consignee and attorneys for failure to take adequate steps to verify information on forged bill of lading). As such, if a court finds "that fraud has been practiced upon it, or that the very temple of justice has been defiled," it may assess costs and attorney fees against the responsible party. Miller v. Cardinale (In re DeVille), 361 F.3d 539 (9th Cir. 2004) ,citing Universal Oil v. Root Refining Co., 328 U.S. 575, 580 (1946). There is ample evidence before this court to conclude that the principals have committed fraud and forgery in the instant matter. As to the Alan Cooper forgery, this court has been presented with a sworn declaration from Mr. Cooper, indicating that he did not have any role in AF Holdings and did not authorize anyone to use his signature or identity. In addition, this court has been provided with a certified copy of the transcript from March 11 th, wherein Mr. Cooper explicitly denies - under oath and subject to cross-examination - executing the assignment in this matter. In addition, the court has also been presented with evidence that the Principals have pled the Fifth when asked to explain the assignments in this matter and their operations. In response, AF Holdings has offered...nothing. Mr. Hansmeier has stated that John Steele procured the signature of Alan Cooper, and only he could vouch for it. Mr. Steele, by 28 18 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page23 of 29 1 contrast, purports to have virtually no information in this regard. Mark Lutz is the only individual 2 that has been identified in AF Holdings' Rule 26 disclosures as having any information about the 3 assignment. 4 The situation with "Salt Marsh" is similar, though AF Holdings' was compelled to try and 5 provide some explanation, by order of this court. As described in detail above, their explanation 6 simply does not makes sense. AF Holdings has consistently identified "Salt Marsh" as a person, 7 and as the owner of AF Holdings. There is simply no argument about this fact, and the Rule 26 8 disclosures attached hereto as Exhibit B remove all shadow of doubt. 9 Mr. Hansmeier affirmatively represented to Brett Gibbs that "Salt Marsh" was a natural 10 person. 11 acquaintance of Mr. Steele and cohabitant of Mr. Steele's sister. Nonetheless, we are now told 12 that, in reality, Mr. Steele's paralegal simply chose the name of Mr. Steele's acquaintance as the 13 name of the trust that owns "his" company, and proceeded to personally sign the name of an 14 incorporeal entity to dozens of documents over the course of many months. No record of these 15 documents exist however, and no record of Mr. Lutz sending them to Mr. Gibbs, as he claims he 16 did. When compared with Mr. Gibbs declaration, it is obvious which one is to be believed. The 17 only reasonable conclusion is that Mr. Steele and Mr. Hansmeier deliberately misrepresented the 18 ownership of AF Holdings in order to disguise their own roles as client, attorney, and sole source 19 of evidence for AF Holdings' copyright cases. Moreover, as previously described "Anthony Saltmarsh" is a natural person and 20 Finally, Plaintiff has offered no evidence to contradict the Neville Declaration. As a matter 21 of simple fact, the individual that controlled the GoDaddy accounts associated with John Steele 22 and 6881 Forensics used the exact same IP address as the Pirate Bay user that posted links to 23 "Popular Demand," on the Pirate Bay. Moreover, as described by Mr. Neville, this user posted 24 links to Prenda Law works before those works were publicly available from any source. 25 For the reasons outlined above, sanctions are likewise appropriate under 28 U.S.C. ?1927. 26 The entire course of this matter has been designed to unreasonably and vexatiously impose costs 27 upon defendants. Indeed, Judge Wright specifically found that "For defendants that refused to 28 19 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page24 of 29 1 settle, the Principals engaged in vexatious litigation designed to coerce settlement..." Ingenuity 13 2 v. Doe, 12-cv-08333-ODW; 2013 WL 1898633 at *2 (C.D. Cal. May 6, 2013). These costs are a 3 defendant's chief motivation to settle with AF Holdings, as defending yourself often costs far 4 more than simply paying the tribute. Mr. Steele and Mr. Hansmeier actively misled the attorneys 5 that they employed, and pursued litigation based upon documents that they knew were forged and 6 "infringements" that they actively induced. At the very least, Mr. Steele and Mr. Hansmeier were 7 informed of questions about the Alan Cooper assignment after the initial case management 8 conference. It was only because of their active concealment and misrepresentation that this matter 9 continued for months after this initial disclosure. 10 11 B. JOHN STEELE AND PAUL HANSMEIER ARE THE PROPER SUBJECTS OF SANCTIONS 12 Attorneys John Steele and Paul Hansmeier are the proper subjects of sanctions in the 13 instant case because they have knowingly and intentionally perpetrated the frauds described 14 above, and therefore have the requisite bad faith to support such a sanction. The various frauds 15 committed herein were designed to disguise their effective control of AF Holdings. Moreover, 16 their actions in covering up the Alan Cooper fraud and encouraging Mr. Gibbs to continue with 17 the instant suit have needlessly and vexatiously increased Mr. Navasca's costs in this action. 18 All roads lead back to Mr. Steele and Mr. Hansmeier in this case. Mr. Gibbs has testified 19 that Mr. Steele and Mr. Hansmeier remained responsible for dictating AF Holdings' litigation 20 decisions, even after Prenda Law purportedly took over for Steele Hansmeier. Mr. Steele was 21 (according to everyone but John Steele) wholly responsible for the Alan Cooper forgery in this 22 instant suit, and repeatedly appropriated Mr. Cooper's identity in connection with various 23 companies. Mr. Hansmeier specifically testified that John Steele was the only individual who 24 could vouch for Mr. Cooper's signature on the assignment in this matter. Hansmeier Dep. 122:11- 25 18 . According to Mr. Hansmeier, after AF Holdings was informed of the alleged forgery, it went 26 directly to Mr. Steele to confirm the authenticity of the assignment. Hansmeier Dep. 126:10- 27 127:2.This court is again urged to compare this testimony with Mr. Steele's own purported 28 20 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page25 of 29 1 ignorance, as set forth in Exhibit M.7 2 Mr. Hansmeier has likewise exhibited the requisite bad faith, and has been Mr. Steele's 3 chief co-conspirator in this scheme. Mr. Hansmeier has "conspired to operate this enterprise and 4 formed the AF Holdings and Ingenuity 13 entities (among other fungible entities) for the sole 5 purpose of litigating copyright-infringement lawsuits." As the evidence above demonstrates, Mr. 6 Hansmeier is the source of much of the misinformation that found itself in Mr. Gibbs filings, 7 regarding both Alan Cooper and Salt Marsh. Mr. Hansmeier appeared as AF Holdings' 30(b)(6) 8 witness herein, and his testimony is incredible on a number of points. 9 Mr. Hansmeier represented to Mr. Gibbs that Salt Marsh was an individual person, and 10 represented that Prenda was in possession of "Salt Marsh's" signature. 11 subsequently feigned ignorance when deposed on the topic. 12 (purportedly) the source of every declaration upon which Steele Hansmeier/Prenda Law relied in 13 obtaining early discovery of thousands of Doe defendants, and Peter Hansmeier's signature on 14 these documents bears a striking resemblance to Paul Hansmeier's own signature - including stray 15 pen marks that appear on both Hansmeier's "signatures." See Exhibit D. Notwithstanding, Paul 16 Hansmeier claimed to be unable testify to virtually anything about his brother, and even claimed to 17 be unable to identify whether a particular recorded voice belonged to his brother. See Hansmeier 18 Dep. at 172, 174-175, and 262:9-16. Mr. Hansmeier Mr. Hansmeier's brother is 19 Mr. Hansmeier disclaimed any relationship with Prenda Law, Inc., despite being identified 20 as a Prenda Law attorney on various filings, including the AF Holdings' status report attached 21 hereto as Exhibit T. Mr. Hansmeier likewise disclaimed any connection with 6881 Forensics, 22 despite having an email address via the 6881forensics.com domain name and receiving mail at that 23 address 24 prhansmeier@6881forensics.com. Mr. Hansmeier testified that he did not have any interest in AF 25 7 26 27 related to the Florida Sunlust litigation. See Exhibit F, bcc'd to Mr. Hansmeier's repeated use of the pronoun "we" when describing AF Holdings investigation is also interesting, given his purported lack of any involvement with the corporation. See, e.g. Hansmeier Dep. at 122:22-24 ("And so when that occurred, we -or AF Holdings and Mark Lutz specifically..."); 124:1-2 ("We further - Mr. Steele further reached out to Paul Godfread..."); 124:11 ("we concluded"); 124:21 ("When I say our, I mean AF Holdings"); 28 21 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page26 of 29 1 Holdings, though he appeared on their behalf in this matter and "obtained" at least one of the 2 signatures on the suspect assignment. 3 Holdings as a member of Alpha Law, his own law firm, though he claims never to have received 4 any income for this representation nor any share of the settlement proceeds. Hansmeier Dep. at 5 95:19-96:6 & 112. Notably, Alpha Law Firm's AF Holdings' cases in the District of Minnesota 6 were re-opened on June 20, 2013, due to the fraudulent Alan Cooper assignment. See Exhibit S. Mr. Hansmeier also testified that he represented AF 7 Mr. Hansmeier is wholly unable to explain why he would represent an unrelated company, 8 both as an attorney and a 30(b)(6) deponent, wholly free of charge, while maintaining an email 9 address at yet another Prenda-affiliated company that he has no connection with. Mr. Hansmeier's 10 entire testimony in this matter is indicative of bad faith and, as recognized by Judge Wright, his 11 deposition is notable primarily because of what he attempts to conceal. 12 responsible for most of the disinformation that found itself in AF Holdings' filings in the instant 13 case and, therefore, should be held responsible for the costs resulting from the disinformation. Mr. Hansmeier is 14 15 C. JOHN STEELE AND PAUL HANSMEIER SHOULD BE HELD JOINTLY AND SEVERALLY LIABLE FOR MR. NAVASCA'S ATTORNEY'S FEES HEREIN 16 In the instant case, John Steele and Paul Hansmeier should be held jointly and severally 17 liable with AF Holdings' for the $23,554.058 in attorney's fees incurred by Mr. Navasca in this 18 action. This sanction is appropriate for a number of reasons. First, the entire scheme orchestrated 19 by Mr. Steele and Mr. Hansmeier relies upon using litigation costs as a weapon of extortion. It is 20 entirely appropriate that Mr. Steele and Mr. Hansmeier should feel the other edge of this blade. 21 Second, the frauds that were committed in this action were committed in order to shield 22 Mr. Steele and Mr. Hansmeier from financial responsibility for their actions in these cases. This is 23 why they created an offshore entity without assets or (supposedly) any living beneficiaries. This 24 is also why they have gone to great lengths to use a nearly impenetrable corporate structure and 25 why they regularly use "corporate representatives" to conceal the true parties in interest. This 26 27 8 For a complete breakdown on charges, see Declarations at ECF Nos. 85, 86 & 89. 28 22 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page27 of 29 1 court should not enable this scheme by holding an essentially fictitious9 offshore entity wholly 2 responsible for the actions of individual attorneys and officers of the court. Mr. Steele and Mr. 3 Hansmeier have used the privileged position of attorneys, and the benefit of the doubt that we are 4 often given, in order to perpetrate a fraud upon Mr. Navasca, and thousands of other individuals 5 and shield themselves from liability. 6 IV. CONCLUSION 7 This court has been presented with ample evidence that Mr. Steele and Mr. Hansmeier 8 have perpetrated a fraud upon this court under, the auspices of AF Holdings, by appropriating the 9 identities of acquaintances and actively misrepresenting the facts surrounding their roles in the 10 company. They have needlessly and vexatiously subjected Mr. Navasca to $23,554.05 in costs 11 and fees, solely because he has chosen to defend himself against claims that he knows to be false. 12 They have cowed countless others in Mr. Navasca's position to pay dubious "settlements", and 13 have made literally millions of dollars in the process. The public opinion of the legal profession is 14 no secret, and no point of pride. I have no illusion that a just resolution of the instant case will 15 forever change the course of public opinion regarding our profession. What we can be certain of, 16 however, is that without a just resolution, Mr. Navasca will forever be a cynic on the topic and, in 17 all honesty, can we even pretend that he is wrong? 18 19 DATED: July 1, 2013 20 Respectfully Submitted, NICHOLAS RANALLO, ATTORNEY AT LAW 21 22 By:________/s/ Nicholas Ranallo 23 24 25 26 27 9 "They have no business. They have no employees. They have no function really. They are not even really a shell, are they?" March 11th Transcript at 17:6-9. 28 23 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page28 of 29 1 2 3 4 Nicholas Ranallo (Cal Bar #275016) Attorney for Joe Navasca 371 Dogwood Way, Boulder Creek, CA 95006 P: 831.703.4011 F: 831.533.5073 nick@ranallolawoffice.com 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 24 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions Case3:12-cv-02396-EMC Document93 Filed07/02/13 Page29 of 29 1 3 CERTIFICATE OF SERVICE THE UNDERSIGNED HEREBY CERTIFIES that on this 2st day of July, 2013, a true and correct copy of the foregoing was filed with the Clerk of the Court using the CM/ECF system and served on all of those parties receiving notification through the CM/ECF system. 4 Courtesy copies have been sent via regular mail and email to the addresses below: 2 5 6 7 John Steele 1111 Lincoln Rd., Suite 400 Miami Beach, FL 331139 service@livewireholdings.com 8 9 10 11 Paul Hansmeier Alpha Law Firm, LLC 900 IDS Center 80 South 8th Street Minneapolis, MN 55402 prhansmeier@thefirm.mn 12 13 14 /s/ Nicholas R. Ranallo 15 Nicholas Ranallo, Attorney at Law 16 17 18 19 20 21 22 23 24 25 26 27 28 25 CV 12-2396-EMC Memorandum in Support of Defendant's Motion for Sanctions