Copyright Law

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A federal appeals court has upheld a $1.5 million restitution order against a Minnesota lawyer who pleaded guilty in a scheme to upload porn to file-sharing websites and then sue people who downloaded it.

In a Feb. 10 opinion, the 8th U.S. Circuit Court of Appeals at St. Louis said the restitution calculation was accurate in the case of disbarred Prenda Law lawyer Paul Hansmeier, who was sentenced to 14 years in prison for the porn lawsuit scheme.

The appeals court also upheld a trial judge’s refusal to dismiss charges against Hansmeier before his August 2018 guilty plea to conspiracy charges of mail fraud, wire fraud and money laundering. When Hansmeier pleaded guilty, he reserved the right to withdraw the plea if he succeeded in his appeal of the denied dismissal motion.

Hansmeier and his law partner, John Steele, had at first sued people who downloaded their clients’ films. Later, the lawyers obtained copyrights to films and even made their own porn, which they uploaded to file-sharing websites before suing and obtaining settlements.

The appeals court said the accusations supported the fraud charges. During the scheme, Hansmeier was accused of misleading courts, partly by obscuring his personal interests in lawsuits and falsely alleging that his sham clients’ computer systems had been hacked, the court said.

“Because the facts in the indictment, accepted as true, describe a fraudulent scheme prohibited by federal law, Hansmeier cannot succeed in his claim that it is facially insufficient,” the appeals court said.

The appeals court also rejected Hansmeier’s argument that the trial judge’s restitution calculation had failed to distinguish between settlements paid in legitimate copyright lawsuits and those paid in fraudulent ones.

The appeals court said Hansmeier had admitted in his plea agreement that he and Steele had received $3 million in fraudulent proceeds. In addition, Steele had identified only two people on a government restitution list who were not fraud victims. And the government restitution list may have left out some victims, the appeals court said.

Steele pleaded guilty in March 2017 to federal conspiracy charges of money laundering, mail fraud and wire fraud. He was sentenced to five years in prison in July 2019.

Judge Jane Kelly, an appointee of former President Barack Obama, wrote the majority opinion. Her decision was joined by Judges Duane Benton and Bobby Shepherd, who are appointees of former President George W. Bush.

Hat tip to Law360 and Thomson Reuters Legal, which covered the opinion.