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Lightspeed Media Corp. v. Smith

United States District Court, S.D. Illinois

November 18, 2014

LIGHTSPEED MEDIA CORP., Plaintiff,
v.
ANTHONY SMITH, et al., Defendants.

MEMORANDUM AND ORDER

DAVID R. HERNDON, District Judge.

I. INTRODUCTION

This case is before the Court on Anthony Smith's Motion for Contempt (Doc. 135) and Motion for Sanctions for Obstructing Discovery (Doc. 153) as to Paul Hansmeier, Paul Duffy, and John Steele (collectively, "Lightspeed's Counsel"). Both matters have been fully briefed ((as to Motion for Contempt: Response by Paul Hansmeier Doc. 154; Response by Paul Duffy Doc. 155; Response by John Steele Doc. 156; and Reply by Anthony Smith Doc. 161) and (as to Motion for Sanctions for Obstructing Discovery: Response by Paul Hansmeier Doc. 159; Response by John Steele Doc. 160; Response by Paul Duffy Doc. 162). The Court heard oral argument from the parties on November 12, 2014 (Doc. 187). For the reasons discussed herein, the motions are DENIED.

II. BACKGROUND

A. Overview

On December 14, 2011, Lightspeed Media Corporation ("Lightspeed") filed suit in the Circuit Court of the Twentieth Judicial District in St. Clair County. Lightspeed owns or operates one or more paid-subscription adult entertainment websites. In its first complaint, Lightspeed alleged that John Doe and more than 6, 600 "co-conspirators" had gained unauthorized access to its website. On December 16, 2011, the circuit court granted an ex parte motion for leave to obtain discovery by subpoena, from dozens of Internet Service Providers ("ISPs"), of information personally identifying the defendants. AT&T and Comcast subsequently filed motions to quash the subpoenas and/or for a protective order. On May 22, 2013, the Illinois Supreme Court directed the circuit court to vacate its order denying the motion to quash.

On August 3, 2012, Lightspeed filed an amended complaint. Lightspeed contended that Smith accessed content from Lightspeed's password-protected websites without authorization. Lightspeed asserted that AT&T and Comcast improperly opposed Lightspeed's discovery, failed to act to protect Lightspeed's websites, and conspired with their customers to Lightspeed's detriment. AT&T removed this action to federal court on August 9, 2012.

Plaintiff thereafter filed an emergency motion for discovery prior to the Rule 26(f) Conference (Doc. 9) requesting the ISP information. Judge G. Patrick Murphy held a hearing on the issue and denied the motion (Doc. 23). Defendants each filed motions to dismiss (Docs. 26, 28, 36). Prior to the resolution of the motions to dismiss, Lightspeed entered a notice of voluntary dismissal on March 21, 2013. Defendants subsequently moved for attorney's fees pursuant to 28 U.S.C. § 1927 (Docs. 61, 78, 82). Judge Murphy granted Smith's motion (Doc. 65) and Lightspeed's Counsel sought reconsideration of that order (Docs. 66, 68, 74). On November 13, 2013, Judge Murphy held a hearing on the motions for reconsideration and the motions for attorney's fees by ComCast and AT&T (Doc. 96) in which he deferred ruling.

On November 27, 2013, Judge Murphy denied the motions to vacate, or in the alternative, reconsider the order granting Smith's motion for attorney fees, granted ComCast's and AT&T's motions for attorney's fees, and ordered Lightspeed's Counsel to pay attorney's fees totaling $261, 052.11 (pursuant to 28 U.S.C. § 1927). The fee order was to be paid within 14 days

On December 27, 2013, defendants filed a joint motion for contempt, or in the alternative, for an order directing Lightspeed's Counsel to show cause why they each should not be held in contempt (Doc. 107). As of the filing of the December 27th motion for contempt, Lightspeed's Counsel had not paid the fee order or sought a stay. Duffy and Hansmeier filed oppositions (Doc. 111 and Doc. 113). Duffy argued that defendants had failed to determine whether any of plaintiff's counsel "has assets sufficient to comply with the judgment of the Court" (Doc. 111 p. 6). Hansmeier claimed, "the quarter of a million dollars liability created by the... Order would impose a crippling financial liability on Hansmeier" (Doc. 113 P. 6). In January 2014, Steele moved to stay the sanctions order (Doc. 114). Steele claimed, "[t]he quarter of a million dollars liability created by... Order would impose a crippling financial liability on Steele" (Doc. 115 p. 3).

The Court heard argument on February 13, 2014. During the proceedings, plaintiff's counsel admitted on the record to noncompliance, each stating that he had not paid the sanction amount to defendants or otherwise sought a supersedeas bond. Additionally, Lightspeed's Counsel emphatically indicated an inability to pay. The Court denied Steele's motion to stay, and took the Contempt Motion under advisement, allowing Lightspeed's Counsel 10 days to submit asset statements from a certified public accountant. Thereafter, Lightspeed's Counsel submitted their financial records to the Court for in camera review.

The Court issued its order addressing the Contempt Motion on March 24, 2014 (Doc. 136). As to the inability to pay arguments, the Court found that Lightspeed's Counsel had not met the applicable burden. The Court concluded the records submitted by Lightspeed's Counsel were incomplete and suspicious. The Court found Lightspeed's Counsel in contempt and issued a sanction in the amount of 10% of the original sanction. On April 4, 2014, the Court granted Lightspeed's Counsel's motion to stay pending appeal and for approval of form of supersedeas bond (Doc. 148). Supersedeas bond was posted by John Steele in the amount of $287, 300.00 on April 8, 2014 (Doc. 149).

On appeal, the Seventh Circuit affirmed the original order of sanctions and the additional sanctions issued on March 24, 2014. Thereafter, ...


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