BEFORE THE HEARING BOARD

OF THE

ILLINOIS ATTORNEY REGISTRATION

AND

DISCIPLINARY COMMISSION

In the Matter of:

JOHN LAWRENCE STEELE,

Attorney-Respondent,

No. 6292158.

Commission No. 2015PR00068

FILED --- January 31, 2017

SECOND AMENDED COMPLAINT

Jerome Larkin, Administrator of the Attorney Registration and Disciplinary Commission, by his attorneys, Wendy J. Muchman and Chi (Michael) Zhang, pursuant to Supreme Court Rule 753(b), complains of Respondent John Lawrence Steele, who was licensed to practice law in the State of Illinois on July 9, 2007, and alleges that Respondent has engaged in the following conduct which subjects Respondent to discipline pursuant to Supreme Court Rule 770:

ALLEGATIONS COMMON TO ALL COUNTS

1. BitTorrent websites, including a website named Pirate Bay, allow users to share movies or other copyrighted files with one another without paying fees to the copyright holder. Many Bit Torrent websites store their servers in foreign countries, allow users to participate anonymously, only requiring a used-generated screen-name, and take other measures to cloak the activities taking place on the website. BitTorrent is a protocol for sharing large files over the internet in which there is no centralized server, and each downloading server becomes a channel for another user who wants to download the same file by breaking large files into smaller ones. It is a method and is widely used for transferring videos and movies.

2. An Internet Service Provider ("ISP") is a company that provides services for accessing, using or participating in the Internet. An ISP assigns an identifying number called an Internet Protocol address ("IP address") to each ISP subscriber whose wireless router or other networking device the ISP connects to the Internet. An IP address reflects the location at which computer devices may be deployed, and serves to route traffic through the network, but does not identify the computer being used or its user.

Steele Hansmeier, Prenda Law, Anti-Piracy Law Group and their purported
clients, AF Holdings LLC, Ingenuity 13 LLC, Guava LLC, Livewire Holdings
LLC, LW Systems LLC, Hard Drive Productions, and Sunlust Pictures

3. On May 7, 2007, Respondent created Steele Law LLC focusing its practice on domestic relations matters. Between 2008 and 2010 Steele Law LLC had other attorneys and employees. Respondent was the sole owner and shareholder of Steele Law LLC until its sale in 2011. On February 24, 2012, Respondent's former law firm was reincorporated, and currently operates, as Chicago Family Law Group, LLC.

4. In or about 2010, Respondent created the law firm known as Steele Hansmeier, PLLC ("Steele Hansmeier"), with attorney Paul Hansmeier ("Hansmeier"), who was admitted to practice law in Minnesota in 2007. Steele and Hansmeier were law school friends. Between 2010 and approximately November 2011, Steele Hansmeier maintained an office at 161 N. Clark Street, Suite 3200, in Chicago. Respondent used Steele Hansmeier to bring copyright infringement lawsuits on behalf of purported clients.

5. In about 2010, Steele Hansmeier also maintained a registered business address at the Alpha Law Firm, 80 S. 8th Street, Suite 900, in Minneapolis. Alpha Law Firm was Steele Hansmeier's registered agent for service of process, as required to be designated under Minnesota law. Respondent appeared in some litigation matters as an attorney for Alpha Law. In matters which Alpha Law handled for certain pornographic film companies, proceeds were paid and deposited into a bank account maintained by Prenda Law, an entity further described in paragraph 6, below.

6. In or about fall 2011, Respondent recruited Illinois attorney Paul Duffy ("Duffy"), licensed in 1992, to work with Steele Hansmeier's on its copyright infringement cases. Respondent created a successor law firm to Steele Hansmeier that would operate under the name Prenda Law, Inc. ("Prenda Law"). Prenda Law was a law firm nominally owned by Duffy but was substantially controlled by, and financially benefitted, Respondent and Hansmeier. Between November 2011 and about 2013, Respondent Hansmeier used Prenda Law to cause copyright infringement lawsuits to be filed in numerous jurisdictions across the United States and collected settlements on behalf of purported clients.

7. While Duffy held the title of managing member of Prenda Law, Respondent continued to control and perform work for Prenda Law, including filing pleadings and communicating with opposing counsel, handling the financial aspects of the firm, and managing client relationships. At all times alleged in this complaint, Prenda Law maintained its office at 161 N. Clark Street, Suite 3200, in Chicago, having assumed the office space of Steele Hansmeier. Duffy died in on August 10, 2015.

8. In or about November 2012, during a time when Prenda Law's litigation practice was receiving negative publicity, Respondent created the Anti-Piracy Group, LLC ("Anti-Piracy Group"), as a successor law firm to Prenda Law. The Anti-Piracy Group took over the copyright infringement practice of Prenda Law, and assumed Prenda Law's office suite in Chicago. Anti-Piracy Law Group was another law firm nominally owned by Paul Duffy but in fact substantially controlled by, and benefitted, Respondent and Hansmeier. In about 2013, Respondent and Hansmeier used Anti-Piracy Law Group to cause copyright infringement lawsuits to be filed and collected settlements on behalf of purported clients.

9. From 2010 to 2015, Mark Lutz worked for Respondent and Hansmeier. Mark Lutz generally worked as a paralegal and, for the most part, took directions from Respondent. Lutz's assigned duties included making phone calls and sending letters to alleged copyright infringers, threatening legal action unless they paid a settlement fee. Lutz occasionally served, at Respondent's direction, as a corporate representative of some of the purported clients that Respondent represented in copyright infringement litigation, including Sunlust Pictures LLC, Guava LLC, and Hard Drive productions. Lutz worked in offices in Chicago, Las Vegas and Miami with Respondent and was paid a salary at various times by Steele Hansmeier and its successor law firms.

10. AF holdings LLC and Ingenuity LLC were entities that Respondent and Hansmeier caused to be founded under the laws of St. Kitts and Nevis, an island country, located in the West Indies. At all times relevant to this complaint, St. Kitts and Nevis had laws preventing the recording or disclosure of corporate ownership information of any entity organized there. Although AF Holdings and Ingenuity 13 were, on paper, owned and managed by a trust benefitting Mark Lutz, they were, in reality, owned and controlled by Respondent and Hansmeier. Respondent and Hansmeier used AF Holdings and Ingenuity 13 as sham clients that purportedly owned copyrights on pornographic movies, or as entities that operated computer systems associated with pornographic movies, but which the Respondent and Hansmeier owned and produced themselves. At various times in litigation filed by Respondent and his various law firm entities there were attempts to ascertain the ownership of these West Indian entities, but Respondent, or those acting at his direction, always resisted those attempts.

11. Guava LLC, Livewire Holdings LLC, and LW Systems LLC were U.S. based entities that Respondent caused to be created. Guava, Livewire and LW Systems were purportedly owned and controlled by Mark Lutz, but Respondent and Hansmeier were the de facto owners of the entities. Respondent and Hansmeier used Guava, Livewire and LW Systems as sham clients that purportedly owned copyright to pornographic movies or operated computer systems associated with pornographic movies but which Respondent and Hansmeier owned and controlled themselves.

12. Beginning in approximately September 2010, Respondent and Hansmeier, using the Steele Hansmeier PLLC, began representing individuals and entities that owned copyrights to pornographic movies. Respondent and his agents monitored file-sharing websites and obtained IP addresses of individuals who downloaded or attempted to download movies belonging to their "clients". Respondent or his agents then filed copyright infringement lawsuits against these anonymous individuals, often referred to as "John Does", and sought authority from the court, in early discovery, to subpoena ISPs for subscriber information associated with the IP addresses.

13. Under certain circumstances, a party to a lawsuit may be able to obtain "early" discovery through an ex parte proceeding in order to obtain evidence necessary, such as the identity of the opposing party, to allow the lawsuit to proceed. If the evidence is in the possession of a third party, the party seeking early discovery must obtain permission from the court to send a subpoena to the third party which compels the third party to turn over evidence. Accordingly, after initiating these lawsuits, Respondent, or someone acting at his direction, would request early discovery and seek orders to compel the ISPs to turn over information associated with the IP addresses of the alleged copyright infringers.

14. After receiving the subscriber information, Respondent, or someone acting at his direction, engaged in settlement tactics such as making phone calls or sending letters to the internet subscribers whose information Respondent obtained through early discovery, in which they threatened overwhelming financial penalties. These letters advised their recipients that "the copyright statue permits plaintiffs to recover damages of up to $150,000 per infringement" and threatened public disclosure unless the purported infringers agreed to pay a settlement of approximately $4,000. Many of the individuals who received Respondent's letters and phone calls agreed to pay the settlement rather than incur the expense of defending the lawsuit which would exceed the settlement amount, or risk being publically shamed for allegedly downloading pornographic movies.

15. In October 2011, Respondent sent settlement demand letters to various alleged copyright infringers in California. For example, on October 10, 2011, Respondent sent a letter on Steele Hansmeier PLLC letterhead, entitled RE: AF Holdings LLC v. Does, 1-135 Case No. 4:11-cv-03336-DMR. The letterhead reflected that Respondent was a partner with Steele Hansmeier PLLC and indicated that the firm had "been retained by AF Holdings to pursue legal action against people who illegally downloaded their copyrighted content (i.e. digital pirates)." The letter went on to state that a "lawsuit had been filed in the United States Federal court in the Northern District of California against several anonymous digital pirates." The letter continued as follows:

We have received a subpoena return from your ISP confirming that you are indeed the person that was associated with the IP address that was performing the illegal downloading of our client's content listed above on the exact date(s) listed above.

On July 7, 2011 we filed a lawsuit in the United States Federal Court in the Northern District of California against several anonymous digital pirates. (Case no. 4:11-cv-03336-DMR) Under the Federal Rules of Civil Procedure, our lawsuit against you personally will not commence unless we serve you with a Complaint, which we are prepared to do if our settlement efforts fail. While it is too late to undo the illegal file sharing associated with your IP address, we have prepared an offer to enable our client to recover damages for the harm caused by the illegal downloading and to allow both parties to avoid the expense of a lawsuit.

Under the Copyright Law of the United States, copyright owners may recover up to $150,000 in statutory damages (in cases where statutory damages are applicable, which may or may not be the case here) per infringing file plus attorney's fees in cases, whereas here, infringement was willful. In at least one case where the Copyright Law has been applied to digital piracy and statutory damages were applicable, juries have awarded over $20,000 per pirated file. During the RIAA's [Recording Industry Association of America] well-publicized campaign against digital music piracy, over 30,000 people nationwide settled their cases for amounts ranging from an average of $3,000 to $12,000. More recently, on December 22, 2010, a case in which a defendant was accused of illegally downloading six works via BitTorrent, a settlement was reached for $250,000.

In light of these factors, we believe that providing you with an opportunity to avoid litigation by working out a settlement with us, versus the costs of attorneys' fees and the uncertainty associated with jury verdicts, is very reasonable and in good faith.

In exchange for a comprehensive release of all legal claims in this matter, which will enable you to avoid becoming a named Defendant in our lawsuit, our firm is authorized to accept the sum of $3,400.00 as full settlement for the claims. This offer will expire on 10/24/11 at 4:00 p.m. CST. If you reject our settlement offers, we expect to serve you with a Complaint and commence litigation.

To reiterate: If you act promptly you will avoid being named as a Defendant in the lawsuit. You may pay the settlement amount by:

  1. Mailing a check or money order payable to "Steele Hansmeier Trust Account" to:
    Steele Hansmeier
    111 Lincoln Road, Suite 400
    Miami Beach Florida 33139

  2. Completing and mailing/or fazing the enclosed payment authorization to:
    Steele Hansmeier
    1111 Lincoln Road, Suite 400
    Miami Beach Florida 33139

(hereinafter referred to as "settlement shakedown letters")

Respondent signed the letter and included a release of claims to be signed by Respondent upon receipt of the $3,400.

16. Between September 2010 and February 2012, Respondent caused to be filed 118 copyright infringement actions in various United States federal district courts on behalf of pornographers and against 15,878 John Doe defendants. During that time, Respondent communicated with the John Doe defendants by letters which identified an entity that allegedly produced a pornographic work or owned a copyright to that work. As set forth in paragraph 15, above, Respondent also identified the name of the movie or video, and the date of the alleged illegal download. Respondent's settlements demands ranged from $2,500 to $4,000.

17. At the time Respondent sent the settlement shakedown letters described in paragraph 15, above, while Respondent had an IP address, he did not know the identity of the individual who had actually downloaded the pornographic work at issue, had not taken steps to determine who had "illegally" downloaded the copyrighted content, and did not have a reasonable basis to believe that the recipient of the letter was an actual "infringer."

18. As of October 2012, Respondent had settled approximately 5,000 copyright infringement matters, and recovered millions of dollars in settlement funds.

COUNT I
(Dishonest Conduct and Fraud on the Court
in California matters consolidated as Ingenuity 13 LLC v. John Doe
)

19. In 2011, Respondent drafted, signed and sent a settlement demand letter to various "John Does," on behalf of AF Holdings requesting that settlement of claims be sent to Steele Hansmeier, located at 1111 Lincoln Rd, Suite 400, Miami, Florida 33139 described in paragraph 15 above. That same settlement letter was used in various other California litigation matters on behalf of clients of Steele Hansmeier and Prenda law. The settlement letter indicated that the John Does must mail the money to Steele Hansmeier's trust account at the Miami Florida address to avoid being named as defendants in a lawsuit.

20. In 2011, Respondent operated an office for Prenda Law and Steele Hansmeier out of the Lincoln Road Miami Florida address referred to in the letter set forth in paragraph 15, above. On September 27, 2012, while operating under the firm name Prenda Law, and through California local counsel Brent Gibbs ("Gibbs"), Respondent filed a complaint in the United States District Court for the Central District of California on behalf of Ingenuity 13, LLC. The complaint alleges that John Doe illegally downloaded "A Peek Behind the Scenes at the Show," an adult entertainment video to which Ingenuity 13 claimed it had an exclusive copyright. The Clerk of the Court received the matter and docketed it as Ingenuity 13, LLC v. John Doe, case number 12-CV-8333.

21. At all times related to this matter, communications with Ingenuity 13 were done through Respondent and Hansmeier.

22. In the complaint filed by Prenda Law in case number 12-CV-8333, Respondent only identified the IP address of John Doe. The IP address identified in the complaint did not identify the computer used to download the pornographic video, or who was allegedly downloading the pornography. Shortly after filing suit, Gibbs, at Respondent's direction, sought leave of court to engage in "early discovery" in order to issue subpoenas to ISPs so that plaintiff can determine the identities of the John Does.

23. At the time Respondent caused case number 12-CV-8333 to be filed, he had 49 cases pending in the Central District of California which Respondent were filed on behalf of Ingenuity 13 and AF Holdings, LLC, all relating to violations of their purported exclusive copyrights to pornographic videos. As alleged in the complaints filed by Prenda law, Ingenuity 13 and AF Holdings were both limited liability companies organized under the laws of the Federation of Saint Kitts and Nevis. Respondent identified "Alan Cooper" as the principal of Ingenuity 13 and AF Holdings in documents filed in their pending cases, including copyright assignment forms and verifications that used an electronic signature for "Alan Cooper."

24. At the time Respondent caused to be filed the cases described in paragraphs 23 above, Respondent employed Alan Cooper ("Cooper") as a caretaker of his vacation home and property in McGrath, Minnesota.

25. At no time was Cooper an owner or officer of any West Indian entity, or any entity associated with Prenda Law or any of its successor firms, and at no time did Cooper give Respondent permission to use his name or sign documents.

26. Respondent's assertions in various court pleadings that Cooper was a principal of AF Holdings and Ingenuity 13 were false, and Respondent knew those assertions were false because Cooper was not a principal of AF Holdings or Ingenuity 13 and held no position with either West Indian entity. Respondent also knew Cooper was in no way connected with AF Holdings and Ingenuity 13 at the time those statements were made.

27. At all times alleged in this complaint, Local Rule 83-1.3 for the United States District Court of the Central District of California, titled "Notice of Related Cases," provided, in pertinent part, as follows:

It shall be the responsibility of the parties to promptly file a Notice of Related Cases whenever two or more civil cases filed in this District:

(a) Arise from the same or a closely related transaction, happening, or event;

(b) Call for determination of the same or substantially related or similar questions of law and fact; or

(c) For other reasons would entail substantial duplication of labor if heard by different judges.

Local Rule 83-1.3 further required that the Notice of Related Cases be filed at the time any case appearing to relate to another is filed, or as soon thereafter as it reasonably should appear that the case relates to another.

28. The cases Respondent and Prenda Law and Steele Hansmeier filed in the Central District of California described in paragraph 23 above, were identical except for the particular pornographic work at issue and the varying IP addresses identified in the complaints.

29. At no time did Respondent or Prenda Law file a Notice of Related Cases in the Central District of California notifying the court that the cases which they had filed on behalf of Ingenuity 13 and AF Holdings were related, as required by Local Rule 83-1.3.

30. On December 3, 2012, John Doe's attorney, Morgan E. Pietz ("Pietz"), filed a "Notice of Related Cases" in case number 12-CV-8333 on behalf of John Doe in which Pietz identified multiple Ingenuity 13 cases filed by Prenda Law in the Central District of California. In that notice, Pietz informed the court that Prenda Law had filed multiple "John Doe pornographic copyright infringement actions" in United States District Courts, including 49 cases then-pending in the Central District of California on behalf of Ingenuity 13 and AF Holdings, LLC; that the complaints filed by Prenda Law were identical except for the particular pornographic work at issue and the varying IP addresses identified in the complaints; and that common issues of law and fact relating to the propriety of pre-service discovery could best be addressed in a unified proceeding before a single judicial officer.

31. On December 18, 2012, Pietz filed "Putative John Doe's ex parte Application for Leave to Take Early Discovery and For a Further Stay of the Subpoena Return Date" in case number 12-CV-8333. In the application, Pietz requested leave to take limited discovery because of concerns that Prenda Law misused Alan Cooper's identity, and held Cooper out to be the principal of Ingenuity 13 without Cooper's knowledge or consent. In support of his application, Pietz attached an affidavit of Alan Cooper in which Cooper averred that he was not the owner or CEO of AF Holdings, that he was not the owner or manager of Ingenuity 13, and that he never gave Respondent permission to use his name or sign documents on his behalf.

32. On December 19, 2012, the court issued a General Order by which all of the Ingenuity 13 cases pending in the Central District of California were transferred to the Honorable Otis D. Wright, who was already assigned to several copyright infringement actions Respondent had filed on behalf of AF Holdings.

33. On December 20, 2012, Judge Wright entered an order in case number 12-CV-8333. In his order, Judge Wright vacated all earlier orders permitting Respondent and Prenda Law to issue subpoenas, ordered all discovery efforts to cease, and quashed all previously issued subpoenas. Judge Wright also ordered Ingenuity 13 to show cause, in writing, by December 31, 2012, why early discovery was warranted. In his order, Judge Wright stated:

The Court is concerned with the potential for discovery abuse in cases like this. Ingenuity 13 accuses the Doe Defendant of illegally copying a pornographic video. But the only information Ingenuity 13 has is the IP address of the Doe Defendant. An IP address alone may yield subscriber information. But that will only lead to the person paying for the internet service and not necessarily the actual infringer, who may be a family member, roommate, employee, customer, guest, or even a complete stranger. (citation omitted) And given the subject matter of Ingenuity 13's accusations and the economics of defending such a lawsuit, it is highly likely that the subscriber would immediately pay a settlement demand-regardless whether the subscriber is the actual infringer. This Court has a duty to protect the innocent citizens of this district from this sort of legal shakedown, even though a copyright holder's rights may be infringed by a few deviants. And unlike law enforcement in child pornography or other internet crime cases, the Court has no guarantee from a private party that subscriber information will not be abused or that it would be used for the benefit of the public. Thus, when viewed with the public interest in mind, the Court is reluctant to allow any fishing-expedition discovery when all a plaintiff has is an IP address-the burden is on the plaintiff to find other ways to more precisely identify the accused infringer without causing collateral damage.

Thus, the Court hereby ORDERS Ingenuity 13 TO SHOW CAUSE in writing by December 31, 2012, why early discovery is warranted in this situation…Ingenuity 13 must demonstrate to the Court, in light of the Court's above discussion, how it would proceed to uncover the identity of the actual infringer once it has obtained subscriber information—given that the actual infringer may be a person entirely unrelated to the subscriber—while also considering how to minimize harassment and embarrassment of innocent citizens. Ingenuity 13 must also explain how it can guarantee to the Court that any such subscriber information would not be used to simply coerce a settlement from the subscriber (the easy route), as opposed to finding out who the true infringer is (the hard route).

34. On December 26, 2012, Judge Wright granted Pietz's ex parte application seeking leave to propound limited written discovery. On January 4, 2013, Pietz propounded special interrogatories and a request to produce documents to Respondent and Prenda Law, seeking answers about the identity of Alan Cooper.

35. On December 31, 2012, rather than show cause why early discovery was warranted in case number 12-CV-8333, as required by Judge Wright's December 20, 2012 order, Respondent and Prenda Law instead filed a motion to disqualify Judge Wright for cause.

36. On January 15, 2013, the Honorable Michael W. Fitzgerald entered an order denying Respondent's motion to disqualify Judge Wright. In that order, Judge Fitzgerald stated that "[p]laintiff's argument boils down to its disagreement with the merits of Judge Wright's discovery orders. This is not a cognizable basis for disqualification."

37. On January 28, 2013, Prenda Law filed a "notice of voluntary dismissal of action without prejudice" in case number 12-CV-8333, and the case was dismissed without prejudice on that date.

38. On February 7, 2013, Judge Wright issued an Order to Show Cause re Sanctions ("OSC") in case number 12-CV-8333. The OSC required Respondent, through Prenda Law's local counsel Gibbs, to address Respondent's lack of reasonable investigation of copyright infringement activity and lack of reasonable investigation of the actual infringer's identity. The OSC further required an explanation of why Respondent ignored the Court's discovery-stay Order, filed complaints without reasonable investigation, and defrauded the Court by asserting a copyright assignment secured with a stolen identity. Judge Wright stated:

Upon review of papers filed by attorney Morgan E. Pietz, the Court perceives that Plaintiff may have defrauded the Court. At the center of this issue is the identity of a person named Alan Cooper and the validity of the underlying copyright assignments. If it is true that Alan Cooper's identity was misappropriated and the underlying copyright assignments were improperly executed using his identity, then Plaintiff faces a few problems.

First, with an invalid assignment, Plaintiff has no standing in these cases. Second, by bringing these cases, Plaintiff's conduct can be considered vexatious, as these cases were filed for a facially improper purpose. And third, the Court will not idle while Plaintiff defrauds this institution.

Judge Wright scheduled a hearing for the OSC on March 11, 2013.

39. On March 5, 2013, Judge Wright entered an order in case number 12-CV-8333 requiring Respondent to attend the March 11, 2013 hearing on the OSC. On Friday, March 8, 2015, Respondent caused to be filed an ex parte application requesting that Judge Wright withdraw his March 5, 2013 order requiring their attendance on Monday, March 11, 2013.

40. On March 11, 2013, Judge Wright held a hearing on the OSC, at which Respondent did not appear. On that day, Judge Wright consolidated cases Ingenuity v. Doe, 12-6662 (ODW), 12-6668 (ODW), and AF Holdings LLC v. Doe 12-6636 (ODW), 12-6669 (ODW).

41. During the OSC hearing on the Ingenuity and AF Holdings cases referenced in paragraph 46, above, Alan Cooper testified. Cooper advised the court that the signature of his name which appears on a copyright assignment agreement related to the Ingenuity litigation was not his signature, and that he had never signed it or seen the copyright assignment. He testified that several other copyright assignments, corporate documents and pleadings in related federal litigation matters which appeared to contain his signature were not, in fact, signed by him. In addition, Cooper also testified that he had never given anyone permission to sign his name on any of the documents. Although he was listed as a manager of Ingenuity 13 LLC, the president of VPR, Inc. and the registrant of an internet domain name called notissues.com, Cooper testified that had nothing to do with any of those entities, signed any of the documents, or given permission for his name to be signed. Cooper was never the manager or president of any corporation and has never lived in Phoenix, Arizona, the address of record for those entities. In addition, one of the documents contained an e-mail contact address of johnsteele@gmail.com, which Mr. Cooper testified was never his email address.

42. At the March 11, 2013 OSC hearing Brett Gibbs testified about his relationship with Prenda Law. Gibbs was supervised at all times by Respondent and Paul Hansmeier, who informed Gibbs that Prenda Law was taking over the business of Steele Hansmeier. Gibbs testified that at all times, he was acting at the direction of Respondent and Hansmeier, and that he was given instructions on what cases to file and guidelines on the actions to be taken for each case.

43. On March 14, 2013, Judge Wright entered orders denying Respondent's ex parte application and requiring Respondent to appear on April 2, 2013, to show cause why he should not be sanctioned for his participation, direction and execution of the acts described in the February 7, 2013 OSC, set forth in paragraph 39, above; why he should not be sanctioned for failing to notify the court of all parties that have a financial interest in the outcome of the litigation; why he should not be sanctioned for defrauding the court by misrepresenting the nature and relationship of the individuals and entities involved in the litigation; why Respondent and Hansmeier should not be sanctioned for failing to make pro hac vice appearances before the court, given their involvement as "senior attorneys" in the cases; and why Respondent should not be sanctioned for contravening the court's March 5, 2013 order and failing to appear on March 11, 2013.

44. On April 2, 2013, Judge Wright held a hearing in case number 12-CV-8333 on the OSC. At that time, Respondent appeared and invoked his right to remain silent under the 5th Amendment to the United States Constitution. Respondent refused to answer any questions concerning case number 12-CV-8333, or address the questions raised by Judge Wright in his February 7 and March 14 orders described in paragraphs 39 through 43, above.

45. On May 6, 2013, Judge Wright entered an order issuing sanctions against Respondent in case number 12-CV-8333, and ordered Respondent to pay John Doe's, within 14 days of the order, attorneys' fees and costs totaling $81,319.72. The sanction included a punitive multiplier justified by Respondent's "brazen misconduct and relentless fraud." In his sanction order, Judge Wright found that Respondent formed AF Holdings and Ingenuity 13 for the sole purpose of litigating copyright-infringement lawsuits: the entities served to shield Respondent and Hansmeier from potential liability and to give an appearance of legitimacy. Judge Wright also found that that AF Holdings and Ingenuity 13 have no assets other than several copyrights to pornographic movies; that Respondent and Hansmeier are the de facto owners and officers of those entities; that Respondent engaged in vexatious litigation designed to coerce settlement; and that Respondent stole the identity of Alan Cooper and fraudulently signed his name to a copyright assignment and held him out to be an officer of AF Holdings. Regarding his abuse of the judicial system, the court held that Respondent and Hansmeier:

Demonstrated [a] willingness to deceive not just [that] Court, but other courts where they have appeared. [Their] representations about their operations, relationships and financial interests have varied from feigned ignorance to misstatements to outright lies. But this deception was calculated so that the Court would grant [their] early discovery requests, thereby allowing [them] to identify defendants and exact settlement proceeds from them.

46. On May 17, 2013, Respondent caused to be filed notices of appeal of Judge Wright's May 6, 2013 order to the United States Court of Appeal for the Ninth Circuit on behalf of himself individually, as well as Prenda Law, Ingenuity 13, and AF Holdings.

47. Judge Wright's May 21 and June 6, 2013 orders required Respondent post bond totaling $237,583.66, as security for the May 6, 2013 sanction order, and to cover costs and attorneys' fees on appeal. On May 23, and July 18, 2013, Respondent caused the required bond to be posted. On May 4, 2015, a three-judge panel heard oral arguments in the appeal.

48. On June 10, 2016, the Ninth Circuit affirmed Judge Wright's sanctions holding that the district court did not abuse its discretion in imposing sanctions against Respondent, Hansmeier and Duffy. The Court held that:

Based upon the myriad of information before it—including depositions and court documents from other cases around the country where the Prenda Principals were found contradicting themselves, evading questioning, and possibly committing identity theft and fraud on the courts—it was not an abuse of discretion for Judge Wright to find that Steele, Hansmeier and Duffy were principals and the parities actually responsible for the abusive litigation. Similarly, it was not an abuse of discretion for Judge Wright to find that the Prenda Principals were indeed the decision makers behind Prenda Law's national trolling scheme…the district court did not abuse its discretion in awarding $40,659.86 in compensatory attorney's fees and costs. The doubling of the attorney's fees award was also appropriate.

49. By reason of the conduct described above, Respondent has engaged in the following misconduct:

  1. bringing a proceeding without a basis in law and fact for doing so that is not frivolous, by conduct including filing lawsuits without supporting facts, under the names of fictional entities, and misusing the identity of Alan Cooper, for purposes of exacting settlements, in violation of Rule 3.1 of the Illinois Rules of Professional Conduct;

  2. knowingly disobeying an obligation under the rules of a tribunal by conduct including failing to abide by Judge Wright's order quashing discovery, and failing to appear as ordered at the OSC hearing, in violation of Rule 3.4(c) of the Illinois Rules of Professional Conduct;

  3. in a pretrial procedure making a frivolous discovery request(s), by conduct including filing the motions for early discovery on behalf of shell corporations in violation of Rule 3.4(d) of the Illinois Rules of Professional Conduct;

  4. in representing a client, using means that have no substantial purpose other than to embarrass or burden a third person, or using methods of obtaining evidence that violate the legal rights of such a person, by conduct including sending the settlement shakedown letters in violation of Rule 4.4 of the Illinois Rules of Professional Conduct;

  5. conduct involving dishonesty, fraud, deceit, or misrepresentation, by conduct including filing lawsuits without supporting facts, under the names of fictional entities, misusing the identity of Alan Cooper as a principal of Ingenuity 13 and AF holdings, for purposes of exacting settlements, in violation of Rule 8.4(c); and

  6. conduct that is prejudicial to the administration of justice, by conduct including failing to respond to reasonable inquiries posed by the tribunal regarding lawsuits Respondents initiated, in violation of Rule 8.4(d) of the Illinois Rules of Professional Conduct (2010).

COUNT II
(Entry of Default Judgment in Alan Cooper v. John Lawrence
Steele and Prenda Law
)

50. The Administrator re-alleges paragraphs 1 through 48of Count I, above.

51. On January 23, 2013, Cooper filed suit against Respondent, Prenda Law, AF Holdings, and Ingenuity 13 in the Fourth Judicial District Court, Hennepin County, Minnesota. The Clerk of the Court received the matter and docketed it as Alan Cooper v. John Lawrence Steele, Prenda Law, LLC, AF Holdings and Ingenuity 13, case number 27-CV-13-3463. In the complaint, Cooper alleged that Respondent engaged in identity theft by using Cooper's name in connection with AF Holdings and Ingenuity 13's purported purchase of copyrights to pornographic movies, and then bringing lawsuits using Cooper's identity without his permission.

52. On or about April 21, 2015, Respondent agreed to settle Cooper's claims against him in the amount of $35,000. On that date, the court also dismissed AF Holdings and Ingenuity 13 from case number 27-CV-13-3463 because the entities had never been served; Prenda Law remained the only defendant in case number 27-CV-13-3463.

53. As of April 27, 2015, Respondent had not filed an answer on behalf of Prenda Law in case number 27-CV-13-3463. On that date, the court entered an order finding Prenda Law in default, and scheduled a hearing for June 10, 2015, to determine the appropriate damages to be awarded Cooper.

54. On June 10, 2015, the court held a hearing in case number 27-CV-13-3463 to determine Cooper's damages, at which Paul Duffy appeared "in his personal capacity as a former principle of Prenda Law." At the hearing, Paul Duffy stated that Prenda Law is no longer in business. The court allowed Paul Duffy until July 10, 2015 to respond to Cooper's affidavits regarding his damage claim. Paul Duffy then requested additional time to respond to Cooper's affidavits, and the court extended the time to July 13, 2015 for Paul Duffy and Respondent to submit their response.

55. At no time did Respondent or Duffy file any response to Cooper's affidavits in case number 27-CV-13-3463.

56. On July 15, 2015, the court entered an order for judgment in case number 27-CV-13-3463. The court found that Cooper was entitled to a judgment against Prenda Law in the amount of $5,000 as damages for humiliation. The court also found that Cooper was entitled to judgment against Prenda Law in the amount of $250,000 as punitive damages, stating:

Attorneys have a special obligation not to use another person's name without their explicit permission. If such permission had been given, Prenda as a law office could have and should have gotten that permission in writing. It is also obvious that Prenda undertook this deception to avoid naming its principles as the driving force of this scheme. Cooper was a straw man put up to protect them from obvious ethical violations of creating litigation. Although the court is uncertain about the exact gains that Prenda reaped from this enterprise, it has no doubt that substantial gains were made. The gains were sufficiently tempting that Prenda was willing to overlook what it considered minimal risk. Punitive damages are critical in situations like this where money damages does not adequately encompass the wrong done in stealing a person's name for one's own benefit. Punitive damages must be sufficient to deter similar abuses of professional integrity. The court finds that $250,000 in punitive is appropriate and necessary to act as stern warning not to engage in this type of conduct.

57. At the time this complaint was filed with the Hearing Board of the Commission, Respondent had not paid the judgments entered against Prenda Law in case number 27-CV-13-3463.

58. By reason of the conduct described above, Respondent has engaged in the following misconduct:

  1. bringing proceedings without a basis in law and fact for doing so that is not frivolous, by conduct including filing lawsuits under the names of fictional entities and misusing the identity of Alan Cooper, for purposes of exacting settlements, in violation of Rule 3.1 of the Illinois Rules of Professional Conduct;

  2. conduct involving dishonesty, fraud, deceit, or misrepresentation, by conduct including filing lawsuits without supporting facts, under the names of fictional entities, misusing the identity of Alan Cooper as a principal of AF Holdings and Ingenuity 13, for purposes of exacting settlements, in violation of Rule 8.4(c); and

  3. conduct that is prejudicial to the administration of justice, by conduct including filing lawsuits without supporting facts, under the names of fictional entities, misusing the identity of Alan Cooper as a principal of AF Holdings and Ingenuity 13, for purposes of exacting settlements, in violation of Rule 8.4(d) of the Illinois Rules of Professional Conduct.

COUNT III
(Bad Faith Litigation and Improper Use of the Judicial System
in Guava v. Spencer Merkel
)

59. On or about September 28, 2012, Spencer Merkel ("Merkel"), a resident of Beaverton, Oregon, received a settlement shakedown letter, dated September 26, 2012, sent by Respondent on Prenda Law's letterhead, and signed by Paul Duffy. The letter stated that Prenda Law had been retained by Hard Drive Productions, Inc. "to file lawsuits against people caught stealing its movies." The letter stated that Merkel's IP address was identified by Respondent's client's forensic experts as illegally downloading Hard Drive's movie, titled Amateur Allure - Maelynn. The letter further stated that Prenda was authorized to accept the sum of $3,400 as full settlement of Hard Drive's claims against Merkel, and that the offer would expire on October 11, 2012. The letter gave the address of Prenda Law's office in Chicago for mailing in the settlement payment. The letter was identical to the October 2011 drafted, sent and signed by Respondent in the California AF Holdings litigation initiated by Prenda Law.

60. The September 26 letter stated that copyright owners like Hard Drive may recover up to $150,000 in damages per infringing file; that others who had engaged in similar conduct and contested the allegations ended up subject to damage awards of $222,000; that if Merkel wished to avoid the stress of litigation he could settle for $3,400 and avoid being subject to a public law suit where he would be named as a defendant. The letter stated that Prenda Law's client had weighed aspects of the case including "likelihood of success, recovery of damages and the burden of federal litigation on all parties" and was willing to accept a settlement offer in exchange for not filing a lawsuit. The letter contained litigation hold language and threatened damages for spoliation of evidence if Merkel deleted any files on his computer.

61. Shortly after Merkel, who lived below the poverty level in Oregon, received the letter from Prenda Law, he phoned the Prenda Law offices and spoke with a Prenda employee who identified himself as "Mike or Michael." Merkel informed "Michael" that he could not afford the $3,400 settlement payment. At that time, and at Respondents' direction, "Michael" told Merkel that Prenda Law would settle Hard Drive's claims against Merkel under the following terms: Merkel would agree to be sued, and in the lawsuit filed against Merkel, Prenda Law would request a copy of the BitTorrent log from Merkel's computer under the pretext of corroborating Prenda's evidence of Merkel's IP address. Upon receipt of Merkel's BitTorrent log, Prenda would then dismiss the lawsuit against Merkel. "Michael" informed Merkel that he did not know of any pro bono attorneys in Oregon, but that he could provide the name of a Minnesota attorney who would represent Merkel pro bono in the lawsuit Prenda would file against Merkel. Merkel agreed to be represented pro bono by a Minnesota attorney, Trina Morrison ("Morrison"), and further agreed to be sued by Hard Drive and Prenda Law in the State of Minnesota.

62. On or about October 15, 2012, Respondent and Paul Duffy, operating as Alpha Law, not Prenda Law, served Merkel with a complaint, purportedly on behalf of Guava LLC, not Hard Drive, which was titled Guava LLC v. Spencer Merkel. On October 17, 2012, Respondent caused the complaint to be filed in the Fourth Judicial District Court, Hennepin County, Minnesota. Michael Dugas ("Dugas"), a Minnesota attorney who went to law school with Morrison, had been an associate for Prenda Law, and handled cases with Respondent, signed the complaint on behalf of Alpha Law. The Clerk of the Court received the matter and docketed it as Guava LLC, v. Spencer Merkel, case number 27-CV-12-20976. In the complaint, Guava LLC was described as "a limited liability company that owns and operates protected computer systems accessible throughout Minnesota," and alleged that Merkel engaged in the interception of electronic communications in violation of a Minnesota statute, and that he also engaged in civil conspiracy to violate the same statute.

63. On October 25, 2012, Guava filed an "unopposed discovery motion for authorizing order," in which it sought the court's approval of subpoenas directed to more than 300 Internet Service Providers, purportedly to discover Merkel's alleged co-conspirators' names, addresses, telephone numbers, e-mail addresses, and media access control addresses.

64. On October 31, 2012, the court held a hearing on Guava's discovery motion, at which neither Morrison nor Merkel appeared. At that time, the court denied the motion, finding that Guava had "not demonstrated that the personally identifying information possessed by over 300 Internet Service Providers…is relevant and material to this matter."

65. On November 6, 2012, Guava filed an "emergency renewed unopposed discovery motion for authorizing order" in case number 27-CV-12-20976. In its renewed motion, Guava sought the court's approval to subpoena 17 ISPs, and asserted that "these specific ISPs unquestionably possess information connected to the issues in this litigation."

66. On November 7, 2012, the court held a hearing in case number 27-CV-12-20976 on Guava's emergency motion. At that time, the court issued an order granting Guava's motion, but allowing the targeted ISPs a period of 30 days to file motions to quash the subpoenas.

67. In or about November 2012, Guava issued subpoenas to the 17 ISPs outlined in its emergency motion. After service of the subpoenas from Guava, certain ISPs and individual Internet subscribers, referenced as "John Does," moved to quash the subpoenas.

68. On November 27, 2012 and January 12, 2013, Respondent, through Anti-Piracy Law Group, not Prenda Law or Alpha Law, caused a letter to be sent to James Jungers ("Jungers"), a resident of Nebraska, settlement shakedown letters signed by Paul Duffy, advising Jungers of case number 27-CV-12-20976. In the letter, Jungers was informed that Respondent's client's "engineers" had observed Jungers' IP address as associated with an IP address engaged in activities violating "computer access statutes" attempting to circumvent their client Guava's computer security measures. The January 12, 2013 letter offered to settle Guava's claims for the sum of $4,000, or else Jungers' identity would be disclosed in a public lawsuit. The letters contained language similar to the language in the settlement shakedown letter described in paragraph 10, above, and Merkel's letter described in paragraphs 51 and 52, above.

69. On January 15, 2013, Merkel received a voice mail message from a phone call on behalf of Prenda Law stating that he needed to make payment arrangements or he would be sued.

70. On January 25, 2013, the court held a hearing on the motions to quash the Guava subpoenas in case number 27-CV-12-20976. Respondent and Hansmeier represented Guava at the hearing. Respondent asserted that Guava was not required to file a certificate of authority, which was a statutory prerequisite for foreign entities doing business in Minnesota before bringing suit, because Guava was not doing business in Minnesota, and despite Guava's and Merkel's lack of connections to Minnesota, personal jurisdiction was proper because the parties consented to it. Counsel for the ISPs and John Does asserted at the hearing that the litigation was being pursued for the improper purpose of using third-party discovery to obtain names of Internet subscribers from whom settlements could be extorted. In support of their position, counsel for the ISPs submitted an affidavit from Merkel describing his interactions with Prenda Law prior to the initiation of the lawsuit, as described in paragraphs 51 through 53, above.

71. At the January 25, 2013 hearing in case number 27-CV-12-20976, the court also heard testimony from Morrison. In her testimony, Morrison stated that she graduated from law school with Michael Dugas, and that Hansmeier and Dugas told her they had some pro se defendants who they would refer to her so she could get experience and because it was easier to deal with lawyers than pro se litigants. Subsequent to her conversation, Merkel contacted Morrison and she agreed to represent him. Morrison testified that based on what she had been told, she expected a lawsuit against Merkel filed by Hard Drive and Prenda Law, and that "[t]here's been some bait and switch you might call it in this case." At the January 25, 2013 hearing, counsel for the ISPs and John Does also asserted that the improper purpose of the litigation was evidenced by Guava's failure to seek any discovery from Merkel himself.

72. An affidavit from Merkel was presented to the court at the January 25 hearing. Merkel stated under oath in the affidavit that the Hard Drive Productions, Inc. movie that he admitted to downloading was downloaded from a now-defunct website www.cheggit.com. The website operated on a membership-basis that was, when Merkel joined, free and open to anyone who was interested in joining, and Merkel did not illegally download Hard Drive Productions' copyrighted material.

73. At the conclusion of the January 25, 2013 hearing, the court indicated that it would take the matter under advisement, but was inclined to dismiss the entire action based on Guava's failure to file a certificate of authority as required by Minnesota statute.

74. On February 26, 2013, Respondent, through Anti-Piracy Law Group in Chicago, caused another settlement shakedown letter to be sent to Jungers, signed by Paul Duffy advising him of case number 27-CV-12-20976 and offering to settle Guava's claims against Jungers for the sum of $4,000. The letter also advised Jungers that he would be named in a public lawsuit if he did not pay them the demanded $4,000 and settle with them.

75. On March 1, 2013, before the court issued a ruling on the motions to quash, Guava and Merkel filed a stipulation for dismissal with prejudice in case number 27-CV-12-20976.

76. On March 1, 2013, counsel for one group of the John Does filed a motion to recover attorneys' fees, and requested that the court issue an order to show cause ("OSC") why Guava and its counsel should not be required to pay the attorneys' fees incurred by all of the ISPs and John Does in defending against the subpoenas in case number 27-CV-12-20976.

77. On March 6, 2013, the court issued an OSC in case number 27-CV-12-20976 requiring Guava, Dugas, and Alpha Law to personally appear at hearing on April 23, 2013, and show cause "why the court should not order them to pay the reasonable attorneys' fees and costs incurred by the non-parties to this action."

78. On April 23, 2013, the court held a hearing on the OSC in case number 27-CV-12-20976. No corporate representative from Guava appeared at the hearing as required by the OSC and neither Respondent appeared. The only attorney to appear was Dugas. The court inquired why there was no evidence presented regarding Guava's structure or its business, and stated:

So if you want to show me that you're not doing a fraud on the Court, then why wouldn't you say Your Honor, this is wholly unjust, how dare they say these things? Look here's my affidavit from the President and CEO of Guava LLC. This is the nature of the business that we do. This is how we found out about what Mr. Merkel was doing. Why don't I have anything like that?

79. On August 7, 2013, the court issued an order granting in part the nonparties' motions for attorneys' fees and costs in case number 27-CV-12-20976. The court ordered Guava, Dugas, and Alpha Law jointly and severally liable to pay within 30 days a total of $63,367.52 in attorneys' fees and costs to one attorney and four law firms representing the ISPs and John Does.

80. On August 30, 2013, the court issued a memorandum in support of its August 7th order in case number 27-CV-12-20976. In that memorandum, the court concluded that:

With no good faith pursuit against Merkel in this case, the Court is left only with Guava's attempts to harass and burden Non-Parties through obtaining IP addresses to pursue possible settlement rather than proceed with potentially embarrassing litigation regarding downloading pornographic movies.

81. On September 20, 2013, the court entered a judgment with findings of fact and conclusions of law and held that the plaintiff, Guava LLC and Respondent and Paul Duffy (through Alpha Law firm) acted in bad faith to the Non-Party John Does, Non-Party ISPs and their counsel, and found them jointly and severally liable in the total amount of $63,367.52.

82. On October 30, 2013, Guava filed a notice of appeal of the court's sanction order in case number 27-CV-12-20976. In an August 4, 2014 opinion, the State of Minnesota Court of Appeals upheld the court's order of attorneys' fees and sanctions against Guava, finding that Guava pursued the litigation in bad faith and engaged in an improper use of the judicial system.

83. As of July 14, 2015, the date the Inquiry Panel voted to file this complaint against Respondent, the attorneys' fees and costs totaling $63,367.52 had not been paid.

84. By reason of the conduct described above, Respondent has engaged in the following misconduct:

  1. bringing a proceeding without a basis in law and fact for doing so that is not frivolous, by conduct including filing lawsuits without supporting facts, under the names of fictional entities, for purposes of exacting settlements, for the improper purpose of using third-party discovery to obtain names of Internet subscribers from whom settlements could be exacted, in violation of Rule 3.1 of the Illinois Rules of Professional Conduct;

  2. knowingly disobeying an obligation under the rules of a tribunal by conduct including failing to appear as ordered at the OSC hearing, in violation of Rule 3.4(c) of the Illinois Rules of Professional Conduct;

  3. in a pretrial procedure making a frivolous discovery request by conduct including filing the motions for early discovery on behalf of a shell corporation, in violation of Rule 3.4(d) of the Illinois Rules of Professional Conduct;

  4. in representing a client, using means that have no substantial purpose other than to embarrass or burden a third person, or using methods of obtaining evidence that violate the legal rights of such a person, by conduct including sending the settlement shakedown letters, in violation of Rule 4.4 of the Illinois Rules of Professional Conduct;

  5. conduct involving dishonesty, fraud, deceit, or misrepresentation, by conduct including filing lawsuits without supporting facts, under the names of fictional entities, for purposes of exacting settlements, and for the improper purpose of using third-party discovery to obtain names of Internet subscribers from whom settlements could be exacted, in violation of Rule 8.4(c); and

  6. conduct that is prejudicial to the administration of justice, by conduct including filing lawsuits without supporting facts, under the names of fictional entities, for purposes of exacting settlements, and for the improper purpose of using third-party discovery to obtain names of Internet subscribers from whom settlements could be exacted, in violation of Rule 8.4(d) of the Illinois Rules of Professional Conduct.

COUNT IV
(Bad Faith Litigation and Dishonest Conduct
in Lightspeed Media Corp. v. Anthony Smith
)

85. On December 14, 2011, Respondent caused to be filed suit on behalf of an online pornography site called Lightspeed Media against one John Doe defendant, who was identified only through his IP address, in the circuit court of St. Clair County, Illinois. The Clerk of the Court received the matter and docketed it as Lightspeed Media v. John Doe, case number 11-L-683. In the complaint, Respondent and Paul Duffy alleged that Doe's IP address was associated with the unlawful viewing of Lightspeed's pornographic movies, which was made possible by the use of a widely shared, "hacked" password. The complaint identified approximately 6,600 other IP addresses as "co-conspirators" in an alleged scheme to steal passwords and content.

86. On December 16, 2011, the court in case number 11-L-683 granted the ex parte motion for leave to obtain discovery by subpoena from ISPs who were not parties to the lawsuit which Respondent caused to be filed. In the subpoenas, Respondent and Paul Duffy requested the personally identifiable information of each of the 6,600 alleged co-conspirators, none of whom had been joined as parties.

87. In or about January 2012, two of the ISPs which had been served with subpoenas through Respondent, SBC Internet Services, LLC, d/b/a AT & T ("AT &T") and Comcast Cable Communication ("Comcast"), filed motions to quash the subpoenas that issued to them in case number 11-L-683. In or about February 2012, the court denied the ISPs' motion to quash. At that time, Paul Duffy called an attorney representing the ISPs and requested the name and title of each employee who decided that an ISP would not comply with the subpoenas. On April 26, 2012, Respondent submitted an affidavit in case number 11-L-683 stating that an ISP attorney refused to provide the requested information.

88. Beginning in or about May 2012, Anthony Smith ("Smith"), a 27-year-old nursing student living in Collinsville, Illinois, began receiving settlement shakedown letters from Prenda Law stating that if Smith paid Prenda Law $4,000, Lightspeed Media Corp. would drop its allegations that Smith had illegally downloaded pornographic videos from the internet. Smith did not respond to the letters he received from Prenda Law.

89. On June 27, 2012, the Illinois Supreme Court issued a Supervisory Order, requiring the trial court to quash the subpoenas in 11-L-683.

90. On August 3, 2012, Respondent and Paul Duffy filed an amended complaint in case number 11-L-683. In the amended complaint, Smith was substituted for defendant John Doe. The amended complaint also named as defendants and co-conspirators AT&T, Comcast, and unidentified "corporate representatives" of AT&T and Comcast. The complaint alleged violations of the Computer Fraud and Abuse Act, deceptive practices, and aiding and abetting. After filing the amended complaint, Respondent caused new subpoenas to be issued seeking the personally identifiable information of Smith's purported 6,600 co-conspirators.

91. On August 9, 2012, AT&T removed case number 11-L-683 to the federal district court for the Southern District of Illinois. The Clerk of the Court received the matter and docketed it as Lightspeed Media Corporation v. Anthony Smith, et al., case number 12-CV-00889, and was assigned to the Honorable David R. Herndon.

92. On August 16, 2012, Respondent and Paul Duffy filed an emergency motion in case number 12-CV-00889 requesting that the court order the ISPs to produce the same "co-conspirators" personally identifiable information that Respondent and Paul Duffy had previously sought in the subpoenas in case number 11-L-683.

93. On August 20, 2012, Judge Herndon held a hearing on Respondent's emergency motion in case number 12-CV-00889. At the hearing, Respondent, Paul Duffy and Hansmeier appeared on behalf of Lightspeed. Respondent identified himself as being with the firm of Steele Hansmeier PLLC, Duffy stated he was with Prenda Law, and Hansmeier, who had moved for pro hac vice admission, stated that he was with Alpha Law. During the hearing, Respondent presented arguments to the court as to Respondent's need for the requested information. At the conclusion of the hearing, Judge Herndon denied Respondent's emergency motion.

94. Between August 29 and September 18, 2012, the defendants in case number 12-CV-00889 filed motions to dismiss.

95. As of March 21, 2013, defendants' motions to dismiss remained pending in case number 12-CV-00889. On that date, Respondent caused case number 12-CV-00889 to be voluntarily dismissed.

96. At the time Respondent and Paul Duffy voluntarily dismissed 12-CV-00889, they were under an order entered by Judge Wright to explain the questions he posed in his February 7 and March 14 orders in case number 12-CV-8333, as described in Count I, paragraphs 31 and 36, above. Respondent voluntarily dismissed 12-CV-00889 because when he filed the case they did so to obtain the names of individual IP subscribers to whom he could send settlement shakedown letters, not to determine the identity of actual infringers, and only sought early discovery to identify individuals from whom he could exact settlements. Respondent and Paul Duffy dismissed case number 12-CV-00889 because he did not want his litigation strategy to come under scrutiny by the federal court in Illinois.

97. On April 5, 2013, attorneys for Smith filed a motion for attorneys' fees and sanctions against Respondent and Paul Duffy in case number 12-CV-00889. On October 30, 2013, Judge Murphy granted the motion.

98. On November 8, 2013, attorneys for the ISPs filed a motion for fees and costs. On November 13, 2013, the court held a hearing on the ISPs' motion for fees. At the hearing, the court stated that Respondent and Paul Duffy were engaged in abusive litigation, stating that "simply filing a lawsuit to do discovery to findout if you can sue somebody. That's just utter nonsense." The court further held that the Lightspeed lawsuit was frivolous, baseless and "smacked of bullying pretense".

99. On November 27, 2013, the court awarded attorneys' fees to Smith and the ISPs, and ordered Respondent, Hansmeier and Duffy to pay attorneys' fees totaling $261,052.11 within 14 days.

100. On December 12, 2013, Respondent caused to be filed a notice of appeal to the United States Court of Appeals for the 7th Circuit, appealing the district court's imposition of attorneys' fees and sanctions against him and Duffy.

101. As of December 27, 2013, neither Respondent nor Duffy had complied with the Court's October 30 and November 27, 2013 orders awarding fees and costs in case number 12-CV-00889, and had not sought a stay of the order. On that date, counsel for Smith and the ISPs submitted a joint motion for contempt, or in the alternative, for an order to show cause why Respondent and Paul Duffy should not be held in contempt.

102. On February 13, 2014, Judge Herndon held a show-cause hearing, at which Respondent and Duffy admitted that they had not paid any part of the sanctions, and claimed an inability to pay. Based on their claim, Judge Herndon ordered Respondent and Paul Duffy to submit a financial statement from a certified public accountant that verified Respondent's and Duffy's asserted lack of resources within 10 days. During the show-cause hearing, and in response to Respondent's claim of an inability to pay, Bart Huffman, attorney for AT & T ("Huffman"), informed the court that Respondent had previously stated that they had "made millions of dollars" in this type of litigation. Respondent objected to this characterization, asked Huffman to indicate where Respondent would have made such a statement, and Huffman advised the court that there was an article in Forbes in which Respondent had made such a statement. In response to Huffman's assertions, Respondent stated:

No, absolutely, I never did, and I resent being told that I've said something that's not true. If Mr. Huffman would like to present something that I personally made money of a certain amount, feel free, but it will never come, Your Honor.

103. Respondent's statement at the show-cause hearing that he had never stated that he had made millions of dollars was false and Respondent knew it was false. Respondent was interviewed in October 2012 for a Forbes magazine article titled How Porn Copyright Lawyer John Steele Has Made A ‘Few Million Dollars' Pursuing (Sometimes Innocent) Porn Pirates. In response to the article's author's suggestion that Respondent had made $15 million settling copyright suits, Respondent stated "Maybe a little less. We don't track the amount we've recovered. More than a few million."

104. On or about February 23, 2014, Respondent and Duffy submitted their financial statements in case number 12-CV-00889. Attached to Respondent and Paul Duffy's statements was a letter from Respondent's certified public accountant stating that Respondent had "elected to omit substantially all of the disclosures required by generally accepted accounting principles."

105. On March 24, 2014, Judge Herndon entered an order granting the defendants' motion for contempt. In his order, Judge Herndon found that Respondent and Paul Duffy had willfully violated the sanctions order and made no effort to comply. In making his ruling, Judge Herndon noted that the magnitude of harm was significant, particularly as the underlying case was baseless and a misuse of the courts. Judge Herndon further found that Respondent and Paul Duffy made misrepresentations and presented "half-truths" at the show-cause hearing, showing clear disrespect for the court, and cited to Respondent's statements and the Forbes article described in paragraphs 93 and 94, above. Judge Herndon sanctioned Respondent and Paul Duffy in the amount of 10% of the original sanction and ordered the sum to be divided equally among them, and also set up a schedule of additional fines if Respondent and Paul Duffy did not pay.

106. On March 31, 2014, Respondent and Paul Duffy caused a notice of appeal to be filed with the United States Court of Appeals for the 7th Circuit, appealing Judge Herndon's contempt finding, which was consolidated with their earlier appeal.

107. On April 8, 2014, Respondent posted a bond in the amount of $287,300 in connection with Respondent's notices of appeal described in paragraphs 91 and 97, above.

108. On July 31, 2014, the United States Court of Appeals for the Seventh Circuit issued a decision in which it upheld the imposition of sanctions and attorneys' fees against Respondent and Paul Duffy, and the contempt finding. In its affirmance, the Seventh Circuit stated that:

Lightspeed's suit against the ISPs was premised on the notion that because the ISPs challenged [Respondent's] subpoena of the personally identifiable information of Smith's 6,600 "co-conspirators," they somehow became part of a purported plot to steal Lightspeed's content. If there was any conceivable merit in that theory, then perhaps fees would have been inappropriate. But there was not.

The Seventh Circuit affirmed the sanctions order imposed against Respondent and Paul Duffy, and also affirmed the order holding Respondent and Paul Duffy in civil contempt and imposing fines. The Seventh Circuit further held that the costs of appeal were to be taxed against Respondent and Duffy jointly and severally.

109. In its opinion the Seventh Circuit noted that the firm affiliations of Respondent and Duffy were "provisional, to put it kindly." At the emergency motion hearing Respondent identified his firm as Steele Hansmeier PLLC, Respondent Duffy said he was "with Prenda Law," and Hansmeier said he was with "something called Alpha Law Firm." The court noted that Steele Hansmeier and Prenda are listed "at the same street address, 161 North Clark St, Chicago in different suites."

110. The matter proceeded in district court on various motions to quash subpoenas for financial information regarding their ability to pay the sanctions. Smith filed a motion for renewed contempt and discovery sanctions. In response to a subpoena sent for Respondent's financial information, Smith received information revealing that just before and after the original show-cause hearings at which Respondent claimed to be insolvent, Respondent had withdrawn $355,627.83 from a Sabadell account he shared with his wife. On June 5, 2015, the District court granted Smith's motion for reconsideration and awarded Smith reasonable discovery costs and contempt sanctions of $656,263 which were to be paid by July 15, 2015. In addition discovery costs were awarded in the amount of $94,343.51 apportioned equally between Respondent and Duffy.

111. On July 6, 2015, Respondent again appealed the sanctions to the 7th Circuit. On July 19, 2016, the 7th Circuit issued an order again finding that Respondent's entire pattern of "vexatious and obstructive" conduct justifies the award. The court noted that while Respondent and Hansmeier were claiming insolvency, they "were emptying accounts they controlled of sums vastly in excess of the sanctions they owed. This was obviously egregious behavior, and a flat violation of the district court's order." As a result of a procedural error, however, the 7th Circuit vacated the existing contempt order and remanded for further proceedings.

112. On August 17, 2016, the district court entered an order to show cause why Steele should not be fined for his contempt of court.

113. On November 23, 2016, the district court entered an order imposing civil contempt sanctions against Steele. The court noted that at the contempt hearing that:

Steele, as the last man standing, felt aggrieved at the possibility of being held responsible for all of Smith's costs. He feels he should not have to pick up the bill for Duffy and Hansmeier. But, the attorneys acted in concert to mislead this court. Steele and Hansmeier fraudulently alleged insolvency. Steele and Duffy then obstructed discovery in an effort to conceal Steele and Hansmeier's misrepresentations and to avoid paying the fine. The attorneys are jointly and severally liable for the misconduct. Finally the Court believes it has authority to impose additional costs on Steele to compensate the taxpayers for the time the Court has spent resolving matter pertaining to the attorneys misconduct.

114. By reason of the conduct described above, Respondent has engaged in the following misconduct:

  1. bringing a proceeding without a basis in law and fact for doing so that is not frivolous, by conduct including filing a lawsuit for the improper purpose of using discovery to obtain names of Internet subscribers from whom settlements could be exacted, in violation of Rule 3.1 of the Illinois Rules of Professional Conduct;

  2. in a pretrial procedure making a frivolous discovery request, by conduct including filing the motions for early discovery in violation of Rule 3.4(d) of the Illinois Rules of Professional Conduct;

  3. in representing a client, using means that have no substantial purpose other than to embarrass or burden a third person, or using methods of obtaining evidence that violate the legal rights of such a person, by conduct including sending the settlement shakedown letters, in violation of Rule 4.4 of the Illinois Rules of Professional Conduct;

  4. conduct involving dishonesty, fraud, deceit, or misrepresentation, by conduct including filing a lawsuit solely for the improper purpose of using discovery to obtain names of Internet subscribers from whom settlements could be exacted, and making misrepresentations to courts regarding his ability to pay sanctions, in violation of Rule 8.4(c); and

  5. conduct that is prejudicial to the administration of justice, by conduct including filing a lawsuit for the improper purpose of using discovery to obtain names of Internet subscribers from whom settlements could be exacted, and wasting the court's time in resolving issues relating to his misconduct in violation of Rule 8.4(d) of the Illinois Rules of Professional Conduct.

COUNT V
(Obstructing Discovery and Dishonest Conduct in Lightspeed
Media Corp. v. Anthony Smith
)

115. The Administrator realleges paragraphs 85 through 113 of Count IV, above.

116. In or about January 2014, in response to Respondent's claims of inability to pay the sanctions award entered against them in case number 12-CV-00889, Smith issued subpoenas to JP Morgan Chase Bank ("JP Morgan") and Sabadell United Bank ("Sabadell") requesting Respondent's financial records.

117. On January 29, 2014, Respondent informed officials at JP Morgan that he intended to file a motion to quash subpoenas issued by Smith requesting Respondent's financial records.

118. On January 30, 2014, Respondent filed a motion to quash subpoenas issued by Smith. On that date, Steele sent a copy of the motion to quash, without a file stamp, to JP Morgan. After receiving Respondent's motion to quash, officials at JP Morgan requested that Respondents provide them with a file-stamped copy of the motion to quash.

119. On February 19, 2014, Judge Herndon entered an order denying Respondent's motion to quash the subpoenas Smith issued in case number 12-CV-00889. Respondent learned of the order shortly after it was entered.

120. On March 3, 2014, two weeks after Judge Herndon had denied Respondent's motion to quash, Paul Duffy, at Respondent's direction, sent a file-stamped copy of the motion to quash to JP Morgan.

121. Duffy's actions, in sending the file-stamped motion to quash to JP Morgan after it had already been denied, were intended to mislead JP Morgan officials into believing that they did not have to respond to Smith's subpoena because it was subject to a motion to quash.

122. As of April 16, 2014, there was no stay in place in 12-CV-00889. On that date, Respondent sent an e-mail to officials at Sabadell informing them that a stay was in place in case number 12-CV-00889. Respondent's statement was false and Respondent knew it was false because he knew that a stay was not in place when he made that statement in his e-mail, and his statement that a stay was in place was intended to mislead Sabadell officials into thinking that they did not have to comply with the subpoena Sabadell had received.

123. On November 18, 2014, Smith filed a motion for sanctions against Respondent and Duffy for their actions described in paragraphs 115 through 122, above.

124. On June 5, 2015, Judge Herndon entered an order in case number 12-CV-00889, in which he found that Respondent and Duffy engaged in unreasonable, willful obstruction of discovery in bad faith, and awarded sanctions to Smith in the amount of the additional expenses incurred in conducting third party discovery. Judge Herndon also held Respondent in contempt for statements he made regarding his inability to pay in court at the February 13, 2014 show-cause hearing when financial records, including Respondent's $300,000 deposit into a new bank account at Sabadell two months before showed otherwise. Judge Herndon directed Smith to submit his reasonable costs and attorney fees incurred in connection with Respondent's and Paul Duffy's obstruction of discovery by July 3, 2015.

125. On July 23, 2015, Judge Herndon awarded sanctions against Respondent in the amount of $94,343.51, apportioned equally between Respondent and Paul Duffy. Judge Herndon further ordered that Respondent and Paul Duffy pay the sanction award on or before August 10, 2015.

126. By reason of the conduct described above, Respondent has engaged in the following misconduct:

  1. making a false statement of fact to a tribunal, by conduct including claiming an inability to pay the sanction awards imposed against them, in violation of Rule 3.3(a)(1) of the Illinois Rules of Professional Conduct;

  2. knowingly disobeying an obligation under the rules of a tribunal by conduct including failing to comply with reasonable discovery requests, in violation of Rule 3.4(c) of the Illinois Rules of Professional Conduct;

  3. conduct involving dishonesty, fraud, deceit, or misrepresentation, by conduct including obstructing discovery and misleading the court in an effort to avoid paying sanction awards imposed against them, in violation of Rule 8.4(c); and

  4. conduct that is prejudicial to the administration of justice, by conduct including obstructing discovery and misleading the court in an effort to avoid paying sanction awards imposed against them, in violation of Rule 8.4(d) of the Illinois Rules of Professional Conduct.

COUNT VI
(Bad Faith Litigation, Dishonest Conduct and Fraud on the Court
in Guava v. Comcast Cable Communication, LLC
)

127. On November 20, 2012, Respondent and Paul Duffy, purportedly on behalf of Guava LLC, filed a petition seeking discovery prior to suit in the Circuit Court of St. Clair County, Illinois, from Comcast Cable Communication, LLC ("Comcast"). The Clerk of the Court received the matter and docketed it as Guava v. Comcast Cable Communication, LLC, case number 12-MR-417. Respondent and Duffy brought the petition pursuant to Illinois Supreme Court Rule 224, and purportedly sought to identify responsible persons and entities that Paul Duffy alleged had committed computer fraud by hacking Guava's computers and obtaining their adult videos. Paul Duffy attached to the petition a document labeled Exhibit A, which listed approximately 300 IP addresses that were purportedly identified by Guava to be associated with individuals who had used stolen user names and passwords to gain unauthorized access to Guava's protected computer systems. Respondent and Duffy further asserted in the petition that Guava had determined Comcast was the ISP that issued those 300 IP addresses. Respondent and Duffy also attached a verification to the petition which was signed by an "Alan Mony-Declarant." The verification was notarized on November 20, 2012, by a Minnesota notary public, and the relationship of "Alan Mony-Declarant" to Guava was not stated in the petition or in the verification.

128. On December 10, 2012, Comcast filed a motion to dismiss Respondent's petition. In its motion, Comcast stated that Guava sought to discover the identities of persons who did not reside in St. Clair County. Comcast also noted that Guava did not plead that it was incorporated in Illinois, did any business in Illinois, or that it was a registered foreign corporation entitled to bring lawsuits in Illinois courts.

129. On December 12, 2012, the court entered an order denying Comcast's motion to dismiss and granting Guava's petition for discovery before suit. The order required Comcast to provide all of the John Does that were associated with the 300 IP addresses with copies of the petition and order by December 26, 2012, and that any John Doe seeking to file an objection, or a motion to quash or dismiss the petition, was given until January 25, 2013.

130. Between December 12, 2012 and January 25, 2013, forty-five John Does filed objections to the circuit court's order that their personal information be disclosed to Guava.

131. On January 14, 2013, one of the John Does filed a "Petition for Rule to Show Cause Why Petitioner Guava LLC, a/k/a Lightspeed Media, Its Officers and Directors, Declarant Alan Mony, Steve Jones, Paul A. Duffy and/or Kevin T. Hoerner Should Not Be Held in Contempt of Court and for other Sanctions" ("petition for rule to show cause"). The petition for rule to show cause alleged that Paul Duffy filed hundreds of copyright infringement lawsuits across the country alleging that ISP subscribers illegally downloaded pornography; the petition for discovery before suit was frivolous because Guava had admitted in federal court proceedings that identifying a subscriber associated with an IP address does not necessarily identify an alleged "hacker;" and that Guava used the information received pursuant to the court's order to send extortionate settlement demand letters to such subscribers before ascertaining their actual involvement with the alleged hacking activity. The petition for rule to show cause also asserted that the petition was verified by an individual who may not exist.

132. On or about January 30, 2013, Respondent and Paul Duffy caused a settlement shakedown letter to be sent to a John Doe whose information was disclosed by Comcast pursuant to the circuit court's initial order. The letter contained language similar to the letters described in paragraphs 10, 51, 52, and 60, above, and was signed by Brett Gibbs, a California attorney acting at Respondent's direction. The letter stated that Guava's computers were breached and their data was stolen and that Guava's "engineers" discovered John Doe's IP address accessing files taken from Guava's computers. Further the letter stated that Comcast had confirmed that John Doe was the account holder of the IP address so Guava was seeking to hold him liable for the conduct. The letter continued that in order for the John Doe to avoid being named as a defendant in the public lawsuit, Guava would accept a payment of $4,000. The letter also detailed the high costs of litigation and stated that the amount it was willing to accept to resolve the matter would increase over time.

133. On February 11, 2013, Respondent and Paul Duffy caused to be filed, on behalf of Guava, responses to the various objections of the John Does and the petition for rule to show cause. In response, Respondent and Paul Duffy stated that"[u]nknown individuals hacked into Petitioner's computer systems and gained unauthorized access to private and protected information. Petitioner does not know the true identities of these individuals, but has identified the individuals by the IP addresses." The response further stated "[i]n order to identify these unknown individuals and bring a lawsuit against them, Petitioner sought to identify them through a Petition for Discovery before suit."

134. On February 12, 2013, Respondent, listing his law firm association as Prenda Law, filed an entry of appearance on behalf of Guava in case number 12-MR-417.

135. On February 13, 2013, a hearing was held in case number 12-MR-417, at which Respondent appeared on behalf of Guava. At the hearing, an attorney for one of the Doe defendants presented a copy of the settlement demand letter described in paragraph 119, above, and the court entered an order continuing all pending matters in case number 12-MR-417 to February 21, 2013.

136. On February 21, 2013, the court held a hearing on all pending motions in case number 12-MR-417. Respondent appeared on behalf of Guava. At that time, the court entered an order stating "All Doe objections to the disclosure of identifying information are overruled and denied." The court also allowed Guava's motion to strike Does' petition for rule to show cause.

137. On March 1, 2013, some of the Does ("Doe appellants") in case number 12-MR-417 filed a notice of appeal from the court's February 21, 2013 order. The Clerk of the Appellate Court of Illinois, Fifth District, received the matter and docketed it as Guava LLC v. Comcast Cable Communications, LLC, Docket No. 5-13-0091. The Doe appellants also filed an emergency motion to stay the judgment pending appeal, which the appellate court granted.

138. On May 20, 2014, the Illinois Appellate Court, Fifth District, issued it decision in case number 5-13-0091. In its decision, the Appellate Court found that the trial court erred in granting Guava's request for discovery before filing suit, since the petition failed to allege sufficient facts to support a cause of action against the persons the petition sought to identify. The Appellate Court further held that the trial court erred in denying the petition of the "John Doe" subscribers, who were identified only by an IP address, which sought a rule to show cause and sanctions against Guava, especially when the underlying question in the matter was whether Guava intended to state a cause of action against the subscribers, or was actually seeking to harass or extort the subscribers without forming a reasonable basis for believing that they were culpable parties. The Appellate Court remanded the case and directed the trial court to dismiss the petition for discovery before suit and to conduct an evidentiary hearing on the petition for rule to show cause and adjudicate the merits of the Doe appellants' allegations of false and frivolous pleading, harassment, extortion, identity theft, and forgery.

139. On October 29, 2014, the court held a status conference in case number 12-MR-417. At that time, the court entered a scheduling order which required the parties to brief the issues which were to be the subject of the evidentiary hearing on the petition for rule to show cause and motion for sanctions.

140. By reason of the conduct described above, Respondent has engaged in the following misconduct:

  1. bringing a proceeding without a basis in law and fact for doing so that is not frivolous, by conduct including filing a petition seeking discovery prior to suit, under the names of fictional entities, for purposes of exacting settlements, and seeking discovery to obtain names of Internet subscribers from whom settlements could be exacted, in violation of Rule 3.1 of the Illinois Rules of Professional Conduct;

  2. in a pretrial procedure making a frivolous discovery request, by conduct including filing a petition seeking discovery prior to suit on behalf of a shell corporation, in violation of Rule 3.4(d) of the Illinois Rules of Professional Conduct;

  3. conduct involving dishonesty, fraud, deceit, or misrepresentation, by conduct including filing a petition seeking discovery prior to suit solely for the improper purpose of using that discovery to obtain names of Internet subscribers from whom settlements could be exacted, in violation of Rule 8.4(c); and

  4. conduct that is prejudicial to the administration of justice, by conduct including filing a petition seeking discovery prior to suit for the improper purpose of using that discovery to obtain names of Internet subscribers from whom settlements could be exacted, in violation of Rule 8.4(d) of the Illinois Rules of Professional Conduct.

COUNT VII
(Bad Faith Litigation, Dishonest Conduct and Misrepresentations to the Court in
Prenda Law, Inc., v. Paul Godfread, Alan Cooper, and John Does 1-10
)

141. On February 12, 2013, Respondent and Paul Duffy caused to be filed a complaint on behalf of Prenda Law against Paul Godfread and Alan Cooper, who were both citizens of Minnesota, and John Does 1-10, in the Circuit Court of St. Clair County, Illinois. The Clerk of the Court received the matter and docketed it as Prenda Law, Inc., v. Paul Godfread, Alan Cooper, and John Does 1-10, case number 12 L 75. In the complaint, Prenda Law alleged claims of libel, defamation, and tortious interference with contractual relationships in connection with the claims Cooper, and Paul Godfread as his lawyer, had made regarding Prenda Law stealing his identity, as described in Count I, paragraphs 15 through 18, and Count II, paragraph 43, above.

142. On March 1, 2013, the defendants in case number 12 L 75 removed the matter to federal court for the Southern District of Illinois, asserting there was federal jurisdiction based on diversity of citizenship, because Prenda Law was an Illinois company while Godfread and Cooper were Minnesota citizens. The Clerk of the Court received the matter and docketed it as Prenda Law, Inc., v. Paul Godfread, Alan Cooper, and John Does 1-10, case number 13-CV-207.

143. On April 10, 2013, Respondent and Paul Duffy caused to be filed a motion to remand case number 13-CV-207 to St. Clair County circuit court. The motion asserted that on February 21, 2013, an amended complaint was filed in case number 12 L 75 in St. Clair County circuit court, which included Alpha Law, a Minnesota company, as a plaintiff, and that there was now a lack of diversity so the matter could not remain in federal court.

144. On June 6, 2013, the Honorable David R. Herndon, Chief Judge of the federal district court for the Southern District of Illinois, denied Respondent's motion for remand and entered an order transferring case number 13-CV-207 to federal court in the Northern District of Illinois, noting that "a virtually identical, first-filed action is currently pending in the Northern District of Illinois."

145. In his June 6, 2013 opinion denying Prenda's motion for remand, Judge Herndon, adopting the reasoning contained in the defendants' opposition to the case being remanded to state court, found that prior to removal, Prenda Law filed an amended complaint in St. Clair County that would allegedly destroy diversity by adding a Minnesota plaintiff, Alpha Law Firm; that the purported amended complaint was a legal nullity because Prenda Law never filed the necessary motion for leave to amend the St. Clair County complaint; and that Prenda Law knew that the defendants had already been served with the original complaint, but represented to the Clerk of the St. Clair County Court that defendants had not yet been served in order to file the amended complaint naming Alpha Law as a plaintiff.

146. Upon transfer of case number 13-CV-207 to the Northern District of Illinois, the matter was consolidated with case number 13-CV-4341, which was assigned to the Honorable John W. Darrah.

147. On August 12, 2013, Respondent and Paul Duffy caused to be filed a motion to remand case number 13-CV-4341 to state court, which was identical to the motion that had been previously denied by Judge Herndon in case number 13-CV-207.

148. On August 14, 2013, a status hearing was held before Judge Darrah in case number 13-CV-4341, at which time Paul Duffy appeared and presented a renewed motion for remand. At the hearing, Paul Duffy stated to Judge Darrah that the court in the Southern District "denied the motion. They indicated - - - the Court indicated that on the four corners of the complaint, it stated that it was a Minnesota corporation. However, the complaint also states that its principal place of business is in Minnesota." At the August 14, 2013 hearing, counsel for the defendants explained the facts and reasoning adopted by Judge Herndon in his denial of the motion for remand, which did not include the statements Duffy attributed to Judge Herndon.

149. Duffy's statements at the August 14, 2013 status hearing, set forth in paragraph 135, above, were false, because Judge Herndon did not address whether or not Alpha Law was a Minnesota corporation.

150. Duffy knew his statements set forth in paragraph 135, above, were false at the time he made them because he knew that Judge Herndon did not address whether or not Alpha Law was a Minnesota corporation.

151. On August 14, 2013, Respondent caused to be filed a motion to withdraw his renewed motion to remand in case number 13-CV-4341, stating "plaintiff vehemently disagrees with representations made by Defendants [sic] counsel at the August 14, 2013 hearing regarding its Motion, but nevertheless due to the apparent confusion arising from Plaintiff's Motion, Plaintiff seeks to withdraw it [sic] motion. Rather than renew its motion, Plaintiff intends to, at the appropriate time if any, amend its complaint to ad [sic] Alpha Law Group LLC as a Plaintiff."

152. On September 24, 2013, Defendants filed a motion for sanctions in case number 13-CV-4341, alleging Prenda's actions with respect to its motion to remand amounted to frivolous litigation and abusive practice.

153. On February 13, 2014, Judge Darrah granted Defendants' motion for sanctions in case number 13-CV-4341, imposing sanctions against Prenda Law and Paul Duffy due to his unreasonable and vexatious conduct. In his decision, Judge Darrah stated:

After the case was transferred to the Northern District of Illinois, Prenda again moved to remand, filing essentially the same motion that the Court of the Southern District of Illinois has denied. Prenda had no legal basis for "renewing" this previously rejected motion.

When pressed, at the remand hearing on August 14, 2013, Duffy, counsel for Prenda, admitted he "filed substantially the same motion in the Southern District." As discussed above, when asked what the Southern District of Illinois said about the motion, Duffy stated to the Court: "They denied the motion. They indicated - the Court indicated that on the four corners of the complaint, it stated that it was a Minnesota corporation. However, the complaint also states that its principal place of business is in Minnesota." However, the record reflects that the Southern District of Illinois Court said nothing of the sort. Duffy had the opportunity to address this lie in his response to the Motion for Sanctions and did not. To fabricate what a federal judge said in a ruling before another court falls well outside the bounds of proper advocacy and demonstrates a serious disregard for the judicial process.

Judge Darrah further instructed the defendants in case number 13-CV-4341 to submit an itemized statement of attorneys' fees occasioned by the misconduct of Prenda Law and Paul Duffy.

154. On June 12, 2014, Judge Darrah entered an order awarding sanctions against Prenda Law in the amount of $11,758.20 in case number 13-CV-4341.

155. On January 22, 2015, Judge Darrah amended his June 12, 2014 order, and held that Prenda Law and Duffy jointly and severally liable for the sanctions awarded to the defendants in the amount of $11,758.20. Judge Darrah further ordered that, if either Prenda Law or Paul Duffy assert an inability to pay the ordered amount, Duffy was to submit financial statements from a certified public accountant verifying his financial status and stating any and all assets of Prenda Law.

156. At no time did Paul Duffy or Prenda Law pay the $11,758.20 sanction award ordered by Judge Darrah on January 22, 2015. At no time did Paul Duffy or Respondent provide any financial statements on behalf of Duffy or Prenda Law as a result of an asserted an inability to pay, as required by the January 22, 2015 order described in paragraph 142, above.

157. On April 9, 2015, Judge Darrah entered an order in case number 13-CV-4341. In the order, Judge Darrah stated that "Prenda Law and Duffy have been given multiple opportunities to file the requested information and to establish the inability of either to pay the levied sanctions." Judge Darrah further noted that Respondent and Paul Duffy have exhibited a "serious and studied disregard for the orderly process of justice."

158. As of the date the Inquiry Panel voted to file this complaint against Respondent, neither Duffy nor Prenda Law had paid the $11,758.20 in sanctions awarded in case number 13-CV-4341.

159. By reason of the conduct described above, Respondent has engaged in the following misconduct:

  1. bringing a proceeding without a basis in law and fact for doing so that is not frivolous, by conduct including filing a motion that had previously been denied without a legal basis for renewing that motion, in violation of Rule 3.1 of the Illinois Rules of Professional Conduct;

  2. knowingly disobeying an obligation under the rules of a tribunal, by conduct including failing to comply with the sanction orders entered by Judge Darrah, in violation of Rule 3.4(c) of the Illinois Rules of Professional Conduct; and

  3. conduct that is prejudicial to the administration of justice, by conduct including failing to comply with the orders entered by Judge Darrah, in violation of Rule 8.4(d) of the Illinois Rules of Professional Conduct.

WHEREFORE, the Administrator requests that this matter be assigned to a panel of the Hearing Board, that a hearing be held and that the panel make findings of fact, conclusions of fact and law and a recommendation for such discipline as is warranted.

Wendy J. Muchman
Chi (Michael) Zhang
Attorney Registration and Disciplinary Commission
130 East Randolph Drive, Suite 1500
Chicago, Illinois 60601
Telephone: (312) 565-2600
Emails: wmuchman@iardc.org and mzhang@iardc.org

Respectfully submitted,

Jerome Larkin, Administrator
Attorney Registration and
Disciplinary Commission

By:  Wendy J. Muchman

By:  Chi (Michael) Zhang