By Roy Strom Published: Jun 30, 2016
Bad Romance: Porn Company, Longtime Lawyer Face Public Breakup

Keith Lipscomb Keith Lipscomb
What was once a well-oiled partnership between a California porn production company and a Florida lawyer who teamed up to fight copyright infringement is now publicly unraveling as back-and-forth lawsuits allege one side owes money to the other.

Keith Lipscomb’s law firm helped porn producer Malibu Media become one of America’s most litigious companies in recent years. It has filed more than 4,000 copyright infringement lawsuits in federal courts since 2009, seeking out-of-court settlements from individuals it accuses of illegally downloading its adult movies.

That partnership began to strain earlier this year when in April, Lipscomb’s firm, Lipscomb Eisenberg & Baker, began withdrawing representation from cases it brought on behalf of Malibu Media, whose pornographic movies are put out under the brand “X-Art.”

But the breakup was made official Tuesday when Malibu Media filed a lawsuit in the U.S. District Court for the Central District of California accusing its former lawyer of professional negligence and saying his actions have led to at least one plaintiff seeking more than $150,000 in fines against the company.

Lipscomb, meanwhile, said he filed his own lawsuit in Florida state court against Malibu Media and a law firm that appears to have succeeded his in operating the porn company’s mass-litigation scheme, Beverly Hills, California’s Pillar Law Group. Lipscomb said Malibu Media owes him “massive amounts of money” and that his lawsuit, filed under seal, alleges ethical violations “in spades” against the Pillar Group lawyers.

“Their lawsuit was a totally false and disgusting attempt to gain leverage in a pending suit, and their complaint will be dismissed,” Lipscomb said.

Anthony Lupu, a Pillar Group attorney listed on the California docket, did not return an e-mail asking for a response to Lipscomb’s comments.

The California lawsuit provides a glimpse behind the business arrangement and alleged financial struggles of the nation’s largest “copyright troll,” as detractors have dubbed the mass-litigation practice. Loyola University Chicago School of Law’s Matthew Sag, who has studied porn-based copyright litigation, calls the lawsuits “blackmail and abuse” of the copyright statute.

Malibu Media alleges Lipscomb contacted the company in 2011 about representing it in a program to enforce its copyrights, which the lawsuit says were being infringed en masse through an Internet file-sharing protocol known as BitTorrent.

Malibu Media’s lawyers use a service that tracks IP addresses associated with BitTorrent downloads of its movies. They then file lawsuits naming “John Doe” defendants and ask the court to direct Internet providers like Comcast to hand over the names and addresses of customers linked to those IP addresses. The lawyers then send those people letters threatening litigation unless they pay a settlement less than the cost of an attorney to defend the case.

This practice, known as file-sharing litigation, has skyrocketed in recent years and now accounts for more copyright infringement suit filings in the U.S. than traditional copyright infringement cases, according to research firm Lex Machina.

But there is no filer more frequent than Malibu Media, which a Lex Machina report says filed 4,332 lawsuits from 2009 to August last year. The next most frequent plaintiff was the holder of the copyright to the movie “Dallas Buyers Club,” which filed 274 suits in that span.

Despite the size and scope of this campaign, the lawsuit filed in California says the legal operation ran into financial problems in the fall last year. The lawsuit says Lipscomb told Malibu Media he wanted to seek out a litigation funding firm to help finance the lawsuits. He then told Malibu Media he would be taking a larger share of the funds, the lawsuit says.

And at some point last year, Malibu Media said in the complaint, Lipscomb “ceased to tender funds” to the company.

Malibu Media then requested financial documents related to the litigation campaign, the lawsuit says. But that request was complicated by another claim in the filing: Malibu Media lacked a written financial agreement with Lipscomb’s law firm. There were no set percentages for how settlement money would be dispersed, the lawsuit says.

That is the basis for one of Malibu Media’s claims of professional negligence. The suit says Florida Bar rules require contingent-fee agreements must be in writing and agreed-upon when a lawyer engages a client.

After receiving what it said were inadequate financial records from Lipscomb, Malibu Media says in February it hired Pillar Law Group to look into Lipscomb’s firm’s accounting.

In April, the lawsuit says Lipscomb told the Pillar attorneys that Malibu Media’s litigation campaign was winding down because it was “no longer profitable.”

Attempted negotiations over the transition of counsel ensued, according to the complaint. Lipscomb allegedly warned Malibu Media that “if the cases (or the steps in a wind down process) are mismanaged … Malibu will lose cases or be sanctioned by courts,” Malibu Media alleged in the complaint.

That is what the lawsuit says happened in April when Lipscomb withdrew from a case in federal court in Michigan. When Malibu Media was unable to retain counsel in that case, the suit says the defendant has asked a judge to order Malibu Media to pay $158,685 in costs and fees.

The lawsuit alleges similar fines have been imposed on Malibu Media in other cases. The company is seeking disgorgement of Lipscomb’s proceeds from the litigation and punitive damages.

For now, it appears the Malibu Media litigation machine has a stuck gear. Its last lawsuit was filed in April, according to Lex Machina.