CAUSE NO JAMES MCGIBNEY, and IN THE 67th JUDICIAL VIAVIEW, INC., v. DISTRICT COURT. Defendants. TARRANT COUNTY, TEXAS

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1 CAUSE NO JAMES MCGIBNEY, and IN THE 67th JUDICIAL VIAVIEW, INC., Plaintiffs, v. DISTRICT COURT THOMAS RETZLAFF, LORA LUSHER, JENNIFER D ALLESANDRO, NEAL RAUHAUSER, MISSANNONEWS AND DOES 1-5 Defendants. TARRANT COUNTY, TEXAS PLAINTIFFS RESPONSE TO DEFENDANT RAUHAUSER S MOTION FOR FEES AND SANCTIONS TO THE HONORABLE JUDGE OF SAID COURT: Plaintiffs James McGibney and ViaView, Inc, come now to demonstrate that Defendant s requested attorney s fees are entirely unreasonable, were not actually incurred or were mostly incurred after Plaintiffs suit was already successfully defended against, and that justice and equity require only minimal fee award if any. Plaintiffs will also show that a minimal award of sanctions is all that is necessary to deter Plaintiffs from filing a similar suit. I. The Requested Fees Are Not Reasonable Because They Are Based on the Wrong Locality And Are Contingency-Based Defendant has not provided evidence towards all the relevant factors to show that the fees being requested are reasonable. The affidavit and invoices on the record focus primarily on the alleged expertise of Defendant s counsel, the assertion that counsel spent time on this case instead of another and that everything done was necessary for the outcome achieved.

2 (A) The requested fees are based against a standard for the wrong locality 1. The affidavit of opposing counsel Jeffrey Dorrell states that Dorrell is familiar with the hourly rates customarily charged by attorneys in Tarrant County, but Dorrell fails to assert that the rate he is charging is comparable to said rates. 1 Plaintiffs assert that $550/hr. for a defamation case is not customary for a Tarrant County attorney in any event, the pertinent fact is that Dorrell failed to assert or show any other evidence that his rates are comparable to local rates. Attorney Dorrell appears to acknowledge that this rate is his normal hourly rate at his Houston law firm, Hanszen Laporte. As the Court is likely aware, firms in a major metropolis like Houston can charge much higher rates than firms in smaller cities like Fort Worth. (B) The requested fees are based on a contingency rate, not a normal rate 2. In the instant case, Attorney Dorrell has made contradictory statements as to whether Hanszen Laporte is handling the case on contingency or for a standard hourly rate. Defendant s Engagement Letter, filed on the record this year as an attachment to the affidavit of Karen Keeline, the Controller of Hanszen Laporte, clearly states, The firm s representation and compensation will be contingent upon a recovery after the first $2, is depleted. (emphasis added) It also states, You will not be required to replenish this retainer when exhausted. 2 However, during the hearing on Plaintiffs Motion for New Trial, Dorrell stated to the Court, I mean, if Retzlaff knew anything about our business in this case, he would have known that we do not have a contingency fee arrangement with Mr. Rauhauser Attorney Dorrell is an experienced litigator and, on information and belief, is very accustomed to requesting attorney s fees in his cases. As such, he is well aware that a record 1 Tex. Disciplinary R. Prof. Conduct 1.04, State Bar Rules, Art. 10 9, Rule 1.04(iii) 2 Rauhauser / Hanszen Laporte Engagement Letter of March 14, 2014, attached to Affidavit of Karen Keeline 3 Transcript of Hearing, Motion for New Trial, February 4, 2016, pg. 28, lines 14-17, Exhibit F to Plaintiffs Affidavit

3 alleging accrued fees for a contingency agreement is less likely to be granted in its entirety than an agreement for fees already paid or actually incurred. In Arthur Andersen & Co. v. Perry Equip. Corp, the Texas Supreme Court stated, A contingent fee may indeed be a reasonable fee from the standpoint of the parties to the contract. But, we cannot agree that the mere fact that a party and a lawyer have agreed to a contingent fee means that the fee arrangement is in and of itself reasonable for purposes of shifting that fee to the defendant. 4 Plaintiffs assert that this is precisely why Attorney Dorrell is now attempting to assert that the agreement is not a contingency fee agreement. The characterization of his fee agreement as a contingency agreement is a risk that Attorney Dorrell is not willing to take. The fact remains, the engagement letter signed by Defendant Rauhauser expressly states that the fee agreement is a contingency agreement. II. The Requested Fees Were Not Actually Incurred (A) Defendant Rauhauser admits that he is not liable for the fees 4 Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812 (Tex. 1997)

4 4. As indicated from the blog-posting admission above, a bona fide question still exists as to whether Defendant Rauhauser actually incurred the fees requested in this case. Specifically, Rauhauser s says that anything to come from this judgment is Hanszen Laporte s receivable and that Plaintiff McGibney, not Rauhauser, is on the hook for Rauhauser s enormous legal bill. This admission comports with everything else we ve learned from the colorful Tweets, blog posts and public records in this case. This also comports with our understanding of Rauhauser s lack of means and substantial debt, including his $68,000+ child support arrearage. (B) There is no evidence that Rauhauser incurred or paid the requested fees 5. There is no evidence to show that Rauhauser has paid any fees in this case. The engagement letter describes a $2, initial retainer, but Defendant has not provided evidence that this retainer was actually paid. No record of this payment appears on the Hanszen Laporte invoices. Those invoices likewise do not indicate any other payments by Rauhauser. All we have is an engagement letter that states, The firm s representation and compensation will be contingent upon a recovery after the first $2, is depleted. 5 (emphasis added) This means that Rauhauser has not incurred the fees Hanszen Laporte has incurred the fees and Hanszen Laporte is the only entity to benefit from this protracted litigation. (C) Defendant never agreed to pay fees allegedly accrued prior to engagement 6. Invoices from Hanszen Laporte allege that fees started to be accrued on February 25, 2014 despite the fact that Defendant had never been served. Defendant confidently cites to American Heritage Capital, LP v. Gonzalez, 436 S.W.3d 865 (Tex. App. Dallas 2014) in support of the notion that fees accrued in asserting an anti-slapp defense can begin to be incurred by their client before service, so service should be irrelevant. Plaintiffs do not dispute this. But it is well understood that a client cannot be liable to an attorney for fees accrued prior to entering 5 Rauhauser / Hanszen Laporte Engagement Letter

5 into an agreement with the attorney unless the agreement specifically addresses the fees already accrued. Defendant s engagement letter with Hanszen Laporte was not executed until March 14, 2014 and it makes no mention of work done prior to March 14. Therefore, Defendant cannot be liable for fees allegedly accrued by Hanszen Laporte prior to March 14. Since Defendant is not liable for those fees, and did not actually incur those fees, he has no standing to shift those fees to Plaintiffs under the anti-slapp statute or any other mechanism of law. The record shows that Hanszen Laporte accrued $12, between February 25, 2014 and March 13, Plaintiffs are not liable for these fees. III. (A) The Requested Fees Were Not Incurred In Defending Against The Suit Fees cannot be awarded for actions taken after a suit is defended against 7. The anti-slapp statute is a shield, not a sword. A fee award is not to be used for retribution. It's not to be used for deterrence, either. That's what the sanctions are for. Here, the record clearly shows that Plaintiffs moved to nonsuit this case on March 20, END. STOP. FINISH. DONE. OVER. Winner: Neal Rauhauser March 20, Plaintiffs are not asserting that Defendant s Motion to Dismiss should not have survived their nonsuit. The law shows that it should have survived. But when Plaintiffs withdrew their claims and effectively ceased any activity that would have needed to be defended against in Texas, fees could no longer be incurred. When Plaintiffs stop throwing punches and announce that they give up, a defendant cannot keep kicking them over and over and over and claim that he is still defending himself. 9. When Plaintiffs dropped the suit, Defendant could have pursued his counterclaims, his Rule 10 sanctions. Instead, he chose to file an interlocutory appeal about the anti-slapp motion to dismiss. Why are the Plaintiffs being punished for that? None of the time spent on the appeal,

6 the subsequent hearings or related expenses can be characterized as having been incurred in defending against Plaintiffs lawsuit. Only fees incurred in defending against the suit can be shifted to Plaintiffs and even then, those fees must be reasonable and must be required by justice and equity. IV. The Requested Fees Are Not Required By Justice And Equity 10. The anti-slapp statute gives little guidance in exactly what factors should come into play when determining the amount of fees that are actually required by justice and equity. Plaintiffs shall simply discuss evidence that should be relevant to justice and equity in a general sense. (A) Rauhauser defamed McGibney, harassed his family and business partners and ruined numerous business relationships 11. There is no question Defendant Rauhauser and former Defendant Retzlaff played major roles in the coordinated harassment of Plaintiff McGibney, his family, his employer, his business partners and attorneys. The Court has firsthand experience with Retzlaff s harassment in particular. This case has gained major attention and numerous people are following the activities of all parties. Anecdotally, Attorney for Plaintiffs, Evan Stone, was recently stopped by a woman at a Denton City Council candidate forum who said, I know you. You re Evan Stone. 6 Rather than saying something about Stone s political campaign, the woman then said, surprisingly, You re BullyVille s attorney. You re suing Neal Rauhauser. Somewhat startled, Stone acknowledged this. The woman continued, Good. He needs to be sued. Rewarding this troll for his behavior is against the public s interest and the interests of justice. 12. Plaintiffs assert that Rauhauser has made enemies across the globe and has not done so for any valiant or noble cause. He also has a criminal record of online harassment, including 6 This is not entirely uncommon now, as Stone is now a running as a candidate for district judge.

7 multiple outstanding warrants related to those charges. This record is not in dispute. Has Rauhauser found new hobbies since the filing of this suit or has this suit simply emboldened him to continue his harassing activities? The Court need look no further than the record in this case to see that Rauhauser continues his harassing activities undeterred, continues to be a fugitive from the law and continues to owe tens of thousands of dollars in child support arrearages. The interest of justice do not require an award of fees for someone in this position who has engaged in such behavior leading up to this suit and during this suit. (B) A defamation suit against Rauhauser, successful or not, would not have resulted in any change in his bad behavior 13. Plaintiffs assert that their failure to prosecute their claims against Defendant Rauhauser is not proof that Rauhauser did not engage in the activity alleged. But the more relevant issue at play is: did Plaintiffs suit stifle Rauhauser s exercise of free speech? Again, the Court need look no further than the record in this case to known immediately that the answer to this is a resounding, NO. Neal Rauhauser s right to exercise free speech was not stifled, hindered or deterred by Plaintiffs suit in ANY way. 14. Texas anti-slapp statute expressly states the purpose for which it was enacted: The purpose of this chapter is to encourage and safeguard the constitutional rights of persons to petition, speak freely, associate freely, and otherwise participate in government to the maximum extent permitted by law and, at the same time, protect the rights of a person to file meritorious lawsuits for demonstrable injury. 7 Was this at play here? Was Rauhauser s act of calling McGibney a pedophile an act of free speech for the purpose of participating in government? No, it was not. Do the interests of justice require an exorbitant fee award to Rauhauser for cleverly using the anti-slapp statute in an attempt to prolong litigation and win an exorbitant fee award? 7 Tex. Civ. Prac. & Rem. Code

8 Absolutely not. Some award, yes. But nowhere in the neighborhood of $300,000. Rauhauser has insisted that he does not live in Texas and is not even subject to the jurisdiction of Texas courts but he has no problem taking gross advantage of flaws with the TEXAS CITIZEN S Participation Act. If this all sounds appalling, it should. (C) Plaintiffs dropped the suit early and took no act to prolong this litigation 15. The Court must consider what would have happened if the Court had done what the appellate court seems to feel would have been proper in the first place: deny Plaintiffs nonsuit and rule on Defendant s anti-slapp motion to dismiss when it was filed. If the court had granted the fees and sanctions then and there, in the Spring of 2014, for a month s worth of defense work, that would fit within the notion of what justice and equity require. But, through no fault of Plaintiffs, that did not happen. Nor did Defendant pursue his counterclaims for sanctions under Rule 10. He instead took the extreme action of an interlocutory appeal, causing the fees to spiral out of control. Is this what justice and equity requires? No. This has gone so absurdly far from what justice and equity require that it is making national news. (D) The 2nd Court of Appeals said that in determining a fee award this Court may consider that Defendant was never served and that Defendant knew the suit was being dismissed 16. Plaintiffs have repeatedly reiterated the fact that Defendant Rauhauser was never served and that he knew Plaintiffs had re-filed federally and that Plaintiffs would be dismissing this suit. Although this did not help Plaintiffs case with the appellate court, that court did address these facts specifically and stated that they may be relevant on remand to the trial court s determination and award of `court costs, reasonable attorney's fees, and other expenses incurred in defending against the legal action as justice and equity may require.` Rauhauser v. McGibney, 2014 Tex. App. LEXIS (Tex. App. Fort Worth Dec. 11, 2014) The entire list

9 of facts the court was referring to is as follows, a defendant's choice to file an answer before service of citation, a defendant's knowledge of an upcoming nonsuit, a plaintiff's good faith in filing a nonsuit, or a defendant's intent to use a dismissal in another lawsuit against him by the same plaintiffs. Id. All of these facts militate against a large fee award for Defendant. 17. Additionally, the date upon which Defendant filed his anti-slapp motion to dismiss was improper. The statute states that an anti-slapp motion to dismiss must be filed not later than the 60th day after the date of service... Tex. Civ. Prac. & Rem. Code If this filing window closes 60 days after service, when does it open? Obviously, it opens upon service and at least one court specified that the date of service marks the beginning of the opening of this filing window, the Law Firm needed to have filed a TCPA motion to dismiss within sixty days of the date of service of the First Amended Petition. Miller Weisbrod, L.L.P. v. Llamas-Soforo, 2014 Tex. App. LEXIS (Tex. App. El Paso Nov. 25, 2014) Because service on Defendant Rauhauser never happened in this case, the anti-slapp filing window never opened. And this did not leave Defendant without remedy. Defendant would have still been free to pursue his sanctions counterclaim under Rule 10. The interests of justice do not require a fee award pursuant to the anti-slapp statute if an anti-slapp motion was not timely filed. (E) If Defendant is not liable for all the requested fees, equity does not require an award of all the requested fees 18. Plaintiffs have shown that Defendant Rauhauser is not liable for fees in this case. If Rauhauser paid any fees at all, his payment was no more than $2,500. Therefore, an award of fees of $300,000 to Rauhauser would not be equitable because Rauhauser is not and has never been liable for $300,000 in fees to Hanszen Laporte. This award would not serve as a remedy to make Defendant whole, but as a bonus, much like winning the lottery. The only entity standing to benefit from an award of fees is Hanszen Laporte. Another firm attempted the same thing in

10 the case of Cruz v. Van Sickle and that court ruled that the firm was in fact serving in a pro bono capacity and denied an award of fees: The undisputed evidence demonstrates the BOR defendants were being represented pro bono. Accordingly, they did not incur attorney's fees under section (a)(1) because they did not at any time become liable for the attorney s fees set forth in the invoices. Cruz v. Van Sickle, 452 S.W.3d 503 (Tex. App. Dallas 2014) 19. Hanszen Laporte assumed the risk of taking this case on contingency not for damages, because there are no damages at play for Defendant, but for the expected windfall of fees and sanctions. That was their risk, not Defendant s. If their bet didn t pay off, no harm is done to Defendant. The Court must ensure that the consideration of equity not be applied to attorneys in the case, but the parties. The interests of equity simply do not require an award of fees more than about $15,000 at most. V. The Purpose Of Sanctions Is To Deter, Not Punish 20. The statute clearly states that sanctions under TCPA are intended to be, sufficient to deter the party who brought the legal action from bringing similar actions described in this chapter. 8 Plaintiff has publicly stated and stated on the record in this Court that he will never file another defamation suit in Texas. Plaintiff McGibney now amends that statement to clarify that the mention of Texas was not intended as a limiter, but as a descriptor. To be clear, Plaintiff has since asserted that he will never file another defamation suit, ever, anywhere. 21. The $1,000,000 in sanctions sought by Defendant are, on information and belief, the largest anti-slapp sanction award in United States history. More importantly, such an award would be entirely disproportionate to the size of Plaintiffs business and the amount of Plaintiffs assets. 8 Tex. Civ. Prac. & Rem. Code

11 22. Defendant cites the $250,000 sanction in the Harris County case of Schlumberger v. Rutherford in support of the justification of his $1,000,000 sanction request against Plaintiffs. Defendant fails to mention, however, that Schlumberger has a current enterprise value of $93.6 BILLION U.S. dollars 10 and employs over 120,000 people. Plaintiff McGibney s company, by contrast, is a microscopic entity that should not by any logic be compared to Schlumberger, much less sanctioned more severely than a company that is literally 120,000 times the size of Plaintiff McGibney s company. Plaintiff James McGibney himself had a net worth of approximately $5,000 on January 1st, 2014 and as of June 1st, 2015 he had a new worth of $2, Plaintiff ViaView had a net worth of approximately $120,000 on January 1st, As of June 1st, 2015, ViaView is on the verge of shutting down and made less than $7,500 in revenue for Although this information was provided to Defendant during discovery, it works heavily against his position and he makes no mention of it in his motion for fees and sanctions. 23. Plaintiffs have painfully witnessed firsthand that civil litigation is entirely ineffective to prevent or remedy the actions of internet trolls of this derangement and tenacity. This lawsuit in fact increased the severity and frequency of defamation and harassment targeted at Plaintiffs and those surrounding them. Even if Plaintiffs had won this suit, this Court could never have prevented or remedied the irreparable harm brought about when McGibney attempted to confront these malicious, vile people. The record incontrovertibly shows that this irreparable harm was not only suffered by McGibney, but by his family, his employer, and his multiple attorneys, as well as their families and their clients. There is no award of sanctions that could deter Plaintiffs 10 Yahoo! Finance profile on Schlumberger Limited, available at 11 Exhibit A - Affidavit of James McGibney 12 Id. 13 Id.

12 more than they have already been deterred and devastated by the intensified harassment from which they originally sought relief. VI. CONCLUSION & PRAYER 24. Plaintiffs have shown that the great weight and preponderance of evidence militate against an award of attorney s fees in this case. Plaintiffs have also shown that the amount of sanctions requested are entirely inappropriate in these circumstances and are not necessary to deter Plaintiffs from similar filings. As such, Plaintiffs pray that the Court grant minimal fees to Defendant, only through March 2014, and sanctions of only $1. Respectfully submitted, Evan Stone Stone & Vaughan, PLLC State Bar # W. University Dr., #386 Denton, TX Tel: Fax: evan@stonevaughanlaw.com CERTIFICATE OF SERVICE I certify that on April 7th, 2016, a true copy of this motion was electronically served through efiletexas.gov on all active parties that have appeared in this case.

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