In a particularly animated order issuing sanctions under its inherent authority, the district court outlined the contours of a scheme by which the plaintiffs and their related entities, related individuals and attorneys “outmaneuvered the legal system” by accusing individuals of copyright infringement based on their alleged downloading of a single pornographic video using a peer-to-peer BitTorrent file-sharing system, and then offering to settle at a sum “calculated to be just below the cost of a bare-bones defense.” The court previously issued an Order to Show Cause as to why plaintiffs’ counsel should not be sanctioned for ignoring the court’s discovery-stay order, filing complaints without reasonable investigation and defrauding the court by asserting a copyright assignment secured based on a stolen identity. After the court recognized counsel’s role in a nationwide “porno-trolling collective” and copyright-litigation scheme, the court expanded the scope of its order.
Although the court issued its previous order under Rule 11 of the Federal Rules of Civil Procedure, the court determined that sanctions under Rule 11 were procedurally inappropriate because the underlying lawsuits had already been dismissed and Rule 11 prohibits monetary sanctions on the court’s own initiative without notice prior to dismissal. Instead, after setting forth its factual findings detailing plaintiffs’ deceptions before the court – including naming individuals as defendants without evidence that they had actually downloaded a viewable copy of the video and forging a copyright assignment – the court exercised its inherent authority to award “fitting sanctions” for plaintiffs’ “bad faith” conduct. In addition to awarding attorneys’ fees and costs of more than $40,000 to defendants, the court doubled the award as a punitive measure justified by plaintiffs’ “brazen misconduct and relentless fraud.” The court also referred the plaintiffs’ attorneys to their respective state and federal bars as well as to the district’s discipline committee. Finally, the court suggested that the plaintiffs’ conduct resembled a RICO enterprise and referred the matter to the U.S. Attorney’s Office and the Internal Revenue Service for potential criminal prosecution and notified all other judges before whom the plaintiffs’ attorneys have pending cases.