Ninth Circuit Affirms Substantial Prenda Sanctions

Somehow I missed this unpublished opinion from June 2016 in which the 9th Circuit affirmed substantial sanctions against the three Prenda attorneys, John Steele, Paul Hansmeier and Paul Duffy. (Duffy passed away in 2015). The District Court found that the three attorneys engaged in vexatious litigation and awarded sanctions based on the inherent authority of the court. The sanctions were affirmed in an unpublished opinion.

The main argument on appeal is that the Prenda lawyers did not receive sufficient notice that the district court would sanction them. The Ninth Circuit disagreed, explaining:

Appellants were also afforded an opportunity to be heard at both the first and second hearings and were allowed to submit responsive briefs. Finally, the district court made a finding of bad faith. Judge Wright found, inter alia, that the Prenda Principals “demonstrated their willingness to deceive not just this [c]ourt, but other courts where they have appeared,” and “borrow[ed] the authority of the [c]ourt to pressure settlement.”Because the Prenda Principals received the due process protections to which they were entitled—notice, the opportunity to be heard, and a finding of bad faith—the district court did not abuse its discretion in awarding $40,659.86 in compensatory attorney’s fees and costs.

The District Court ordered that the fees on appeal be doubled, with a portion used to compensate the defendant in the lawsuit and a portion to go to the Court. The District Court also required the Prenda lawyers to post an additional bond on appeal to cover the other side’s costs on appeal. The Ninth Circuit affirmed all the sanctions and the increased appeal bond. It explained:

The district court did not abuse its discretion in ordering the Prenda Principals to post additional bond to cover Doe’s attorney’s fees on appeal. The district court had ample reason to do so. The Prenda Principals have engaged in abusive litigation, fraud on courts across the country, and willful violation of court orders. They have lied to other courts about their ability to pay sanctions. See Lightspeed Media, 761 F.3d at 71. They also failed to pay their own attorney’s fees in this case. Considering the Prenda Principals’ tactics throughout this case, it was not an abuse of discretion to increase the bond amount to cover the projected cost of attorney’s fees on appeal.

In sum, the Prenda lawyers have the distinction of having sanctions awards against them affirmed by the Seventh Circuit and Ninth Circuit within the span of 30 days. Given the abusive conduct that the Prenda lawyers engaged in, I can understand the sanctions award. The federal courts concluded that the Prenda lawyers were using the power of the court to extort money from individual defendants. The federal courts also concluded that the Prenda Lawyers misrepresented facts to the courts. Given the findings, it is hard to believe that we will ever see another set of cases as egregious as these.

Source: INGENUITY 13 LLC v. Doe, Court of Appeals, 9th Circuit 2016 – Google Scholar

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