The Righthaven LLC copyright lawsuit saga will continue indefinitely after a judge on Wednesday blocked efforts to have Righthaven's CEO fired and its appeals canceled.
Righthaven is known for filing 275 no-warning lawsuits in 2010 and 2011 in partnership with the Las Vegas Review-Journal and the Denver Post. As a company, as opposed to being a law firm, Righthaven had acquired copyrights from the newspapers for lawsuit purposes. It sued individuals, companies and nonprofits it claimed infringed on the copyrights by posting content from the newspapers online without authorization.
The company essentially shut down last year after judges in three states rejected the lawsuits because the newspapers, not Righthaven, maintained control of material Righthaven was suing over. That meant Righthaven lacked standing to sue. Some defendants were also cleared based on the fair use concept in copyright law. The cases were controversial because while Righthaven claimed to be fighting rampant online theft of newspaper content, defense attorneys characterized it as a shakedown operation hitting unsuspecting Internet users with federal lawsuits in hopes of winning quick settlements for a profit.
Righthaven now has creditors in the form of defendants who defeated it in court and were awarded some $318,000 in attorney's fees. Attorneys for one defendant, Kentucky insurance agent Wayne Hoehn, persuaded U.S. District Judge Philip Pro in Las Vegas last year to appoint a receiver to seize Righthaven assets and auction them off to cover his legal fees after Righthaven couldn't or wouldn't pay them.
In Hoehn's case, Pro had dismissed Righthaven's suit against him on both standing and fair use grounds.
The assets Pro allowed to be seized last year included the very copyrights Righthaven had sued over, though they are believed to have little value given the rulings finding them ineffective in the Righthaven lawsuits.
The receiver later moved to fire Righthaven CEO and Las Vegas attorney Steven Gibson in a move that was aimed at having Righthaven's appeals dismissed at the 9th U.S. Circuit Court of Appeals. Prosecution of the appeals was only subjecting Righthaven to further liability, the receiver argued.
Gibson, however, maintains the receivership order only allowed the receiver to seize and auction the company's assets. Pro, during a hearing Wednesday, agreed and declined a request by Hoehn's attorneys that the receivership order be clarified or expanded so that the receiver could fire Gibson, settle with Hoehn and potentially dismiss Righthaven's two active appeals at the 9th Circuit.
"None of the orders I entered (last year) sought to interfere with the appeal," Pro said. "I think that appeal (in the Hoehn case) is properly before the Court of Appeals, unless that court says otherwise.''
Hoehn's attorney Marc Randazza said that when the receiver was appointed last year, it was everyone's intention that she assume full control of the company.
"A receiver is appointed when a company is so mismanaged that it can't run itself," Randazza told Pro. "Here we have a company that was organized entirely to evade the inevitable attorney's fees awards that would be levied against it.''
"What's Righthaven's purpose right now? To simply prosecute the appeal. Its sole purpose is to continue to beat up on defendants that it already lost to," Randazza said.
Pro, however, wasn't convinced and said, "The appeal will take its course.''
Pro's ruling creates what attorneys call an unusual legal situation in which Gibson is the CEO of a company with no assets and no mission except to pursue the appeal, which Gibson appears to be funding out of his own pocket.
On the other side, the receiver and other creditors can try to collect and auction whatever Righthaven assets they can find including the copyrights, office equipment and some computers.
Defendants like Hoehn, in the meantime, aren't going to recover their legal fees anytime soon. And in Hoehn's case, he's digging deeper into his retirement account to fund his continuing legal expenses now at the appeal stage, Randazza said.
After the hearing, Randazza said he's looking into some options to protect his client from having to face more financial liability in dealing with Righthaven, but he declined to identify those options.
Gibson said after the hearing that it's appropriate for him as a part owner of Righthaven to be funding appeal expenses even when Righthaven can't pay its creditors because it no longer has any assets.
That's partly because if Righthaven wins on appeal, the attorney's fee awards against it could be wiped out, he said.
If Righthaven wins the appeal, Gibson said he would consider recapitalizing the company so it could resume its copyright enforcement efforts.
"Righthaven is now effectively an idea," Gibson said.
Wednesday's hearing included some fireworks in which Gibson and Shawn Mangano, a former Righthaven attorney, accused each other of misrepresentations. Action in two key Righthaven cases has been stalled for most of the year because of Mangano's unexplained absence during that time, though Mangano has recently surfaced, aired complaints about Righthaven and is withdrawing from representing the company.
Mangano said that in another recently active Righthaven case that he's withdrawing from, against former federal prosecutor Thomas DiBiase, attorneys for DiBiase at the Electronic Frontier Foundation (EFF) now have possession of Righthaven computers so they can examine their hard drives in their own search for any Righthaven assets that can be located, seized and sold to cover DiBiase's fees. A judge on Oct. 16 ordered Righthaven to turn the hard drives over to the EFF attorneys.
Righthaven's new local lawyer retained by Gibson and replacing Mangano is Las Vegas attorney Michael Mushkin. Gibson has hired another attorney to represent the company at the 9th Circuit.