Any lawyer who has done any number of jury trials has heard a judge give this instruction:
If you wake up in the morning and see that the sidewalk is wet, you may find from that fact that it rained during the night. However, other evidence, such as a turned on garden hose, may explain the presence of water on the sidewalk.
That is the common example of so-called circumstantial evidence as opposed to direct evidence. In other words, direct evidence is direct proof of something. Circumstantial evidence is when you don't have direct evidence of a particular fact, but you can draw a reasonable conclusion about that fact from other direct evidence.
Why am I explaining this? Well, it's because of what happened at today's Prenda Law show-cause hearing and several of the comments and questions that I've read since.
Apparently all the Prenda Law lawyers showed up today in response to Judge Wright's latest order to show cause. Amazing. But when Judge Wright started asking questions, every one of those lawyers invoked their Fifth Amendment rights. Wow.
So let's consider what really happened. Judge Wright accused the Prenda lawyers of basically defrauding the Court by pretending not to be the real party in interest. In other words, Judge Wright wanted to know if Ingenuity 13 and AF Holdings was really just John Steele and Paul Hansmeier. If so, then John Steele and Paul Hansmeier basically lied to the Court by failing to just tell the truth.
Why is that a problem? Well, a couple of reasons.
First, you can't lie to the Court. Do I need to say anything more about that?
Second, lawyers cannot buy lawsuits. In other words, to maintain the integrity of the profession, a lawyer cannot pay a plaintiff for the right to be that plaintiff's lawyer. That is why almost all the states require that a client remain primarily responsible for the costs of litigation even if the lawyer advances them. This general rule is sometimes described as a prohibition against a lawyer being both the plaintiff and the lawyer. There is just supposed to be a difference between the lawyer and the client. It just makes sense.
Judge Wright has basically indicated that everything he's seen, including Hansmeier's deposition transcript, leads to the conclusion that Steele and company aren't just the lawyers, they are in fact the client itself. In other words, the facts suggest that Ingenuity 13 and AF Holdings aren't just represented by John Steele and Paul Hansmeier, they are owned by them.
And here is where it gets a little interesting. Judge Wright called today's hearing to try and get to the bottom of it. Judge Wright just wanted to know the truth: Do John Steele and Paul Hansmeier really own AF Holdings and Ingenuity 13 (and possibly other such companies). So when those lawyers invoked their Fifth Amendment rights, they basically said "we can't answer your questions because we might go to jail if we do."
But wait, is it really that bad? Is invoking the Fifth really close to an admisison of guilt? Well, in a word, yes. It is. In this case, it is.
Let's step back a second and examine why. The Fifth Amendment stems from a criminal defendant's right to remain silent. The prosecutor in a criminal case cannot force a defendant to take the stand and testify at trial. We've all seen this on TV.
Invoking the so-called "right against self incrimination" just means that you can't force someone to either perjure himself under oath or admit to criminal conduct. In this country, you just can't do that. Basically, the Fifth Amendment allows you to decline to make any statements under oath that could be used to put you in jail. That's it in a nutshell.
So today, in Judge Wright's courtroom, Prenda's lawyers basically said that answering the Court's questions could put them in jail. So they didn't answer any.
Now ordinarily the Fifth cannot be used as evidence of criminal guilt. Many, many years ago, it could. But not now. Not for about the last two hundred years. That's because a crime must be proven beyond a reasonable doubt. In other words, we don't send people to jail unless there is no reasonable conclusion but that the defendant committed a crime. As a matter of public policy, we don't want to send people to jail for no reason other than because they refused to answer some questions. Criticize it if you want, but that's the rule. Personally, I like that rule.
But these copyright troll cases are civil cases not criminal cases. In criminal cases, people go to jail. People get executed. In civil cases, people pay money--that's it.
So now I'll try to bring this all back together.
Many of the comments I've read sort of misunderstand the import of Prenda's lawyers taking the Fifth. I've read many comments to the point that since the lawyers didn't testify, there isn't really any direct evidence that they in fact are the owners of Ingenuity 13 and AF Holdings. Prenda's own lawyer actually made that exact statement during today's hearing. And that's actually true, there isn't.
But this isn't a criminal case. This is a civil proceeding.
Judge Wright isn't a criminal prosecutor trying to throw Prenda's lawyers in jail for committing a crime. Judge Wright is just exercising his inherent authority to govern proceedings in his own courtroom. Judge Wright doesn't need anything proven beyond a reasonable doubt. All Judge Wright needs is someone to show that it is more likely than not that Steele and Hansmeier are the real party in interest. If so, Judge Wright has undeniable power to sanction the shit out of those lawyers.
In other words, Judge Wright doesn't need anything but evidence that it is more likely than not that Steele and company are the real party in interest. And in this case (unlike a criminal trial) circumstantial evidence is enough.
So consider some of the circumstantial evidence:
When AF Holdings put forward a "representative" for a 30(b)(6) deposition (Google it), Paul Hansmeier showed up.
When AF Holdings was ordered to produce an actual representative at a hearing in Florida, Mark Lutz showed up. Mark Lutz is Steele's former paralegal.
No one has ever seen any real person associated with Ingenuity 13 or AF Holdings other than the lawyers.
Practically all the names for everyone associated with Ingenuity 13 and AF Holdings (other than the lawyers) appear to be fictitious names.
The lawyers never transfer any money out of their own bank accounts.
And finally, when asked to explain all this, the lawyers took the Fifth.
So in sum, Judge Wright told Prenda's lawyers that all the circumstantial evidence suggests that the clients are really the lawyers. Judge Wright gave those lawyers a chance to explain themselves. They took the Fifth.
Now Judge Wright has to make a decision about whether to sanction Prenda's lawyers or not. The question is not whether to throw those guys in jail, but just whether to fine them a whole bunch of money.
As I see it, there is plenty of evidence upon which the judge could reasonably conclude that Prenda's lawyers violated their duty of candor toward the tribunal.
Enough to throw them in jail? Maybe not.
Enough to fine the shit out of them? Absolutely.
In other words, Judge Wright woke up this morning, saw the grass was wet, and invited Prenda's lawyers to produce a garden hose. Instead, they took the Fifth. Expect bad, bad things to rain down on Prenda.
Max Kennerly over at The Beasley Firm, LLC wrote another excellent article on this topic from a different perspective.