Well, at long last, the epic battle of NXIVM versus Susan Dones and Kim Woolhouse is over (For those who missed my earlier posts on this case, go HERE and HERE and HERE). And the result? A complete and utter ass-kicking verdict in favor of the two women!
The battle began on October 18, 2010 when NXIVM filed last-minute “adversary proceedings” in the just-about-to-be-discharged bankruptcy cases of Dones and Woolhouse. (Since Dones and Woolhouse had originally filed for bankruptcy on July 9, 2010, they would have been eligible for discharge only a day or so after NXIVM filed). Per those filings, NXIVM asserted various financial claims against the women; sought to have them return certain NXIVM-related property; asked the court to prevent them from saying anything publicly about NXIVM; and asked that their bankruptcies be denied.
Throughout the next 14 months, NXIVM used four major law firms and at least 7 attorneys in its efforts against Dones and Woolhouse. NXIVM’s Hall-of-Shame list of lawyers included the following: Stephen R. Coffey, Pamela A. Nichols and Richard H. Weiskopf/O’Connell & Aronowitz PC (Albany, NY); Robert D. Crockett/Latham & Watkins LLP (Los Angeles, CA); Paul D. Swanson and Tiffany H. Scott/Lane Powell PC (Seattle, WA); and Terrence J. Donahue/Eisenhower & Carlson PLLC (Tacoma, WA). The two women represented themselves.
And just like every other NXIVM lawsuit, this one had lots of twists and turns along the way. Some of the more notable ones are:
1. A change of law firms by NXIVM, which is the one of the things they do in almost every case and which usually guarantees at least a couple of months delay in the proceedings;
2. Two amended complaints, each of which included new allegations that required new responses and allowed for new motions to be filed, etc.;
3. Numerous discovery requests that were repetitious and that asked for documents and information that were totally unrelated to the case (NXIVM is incessant in its attempt to obtain phone records, text messages, emails, etc.); and
4. Numerous depositions of parties that have absolutely nothing to do with the bankruptcy case but that allowed NXIVM to go on “fishing expeditions” in the hope that it might find some reasons to sue other people.
When all was said and done, NXIVM claimed that Dones and Woolhouse had disseminated NXIVM’s confidential information; refused to return NXIVM’s training materials; damaged NXIVM’s business operations; included false oaths in their bankruptcy filings; concealed assets in their bankruptcy filings; and engaged in a civil conspiracy to harm NXIVM. In addition to seeking financial damages, interest, costs, and (of course!) attorneys fees for all of those alleged “bad deeds,” NXIVM also asked the court to issue a permanent injunction that would bar the women from distributing the infamous “I’ve had people killed for my beliefs” videotape (HERE) and require them to return all of their NXIVM materials.
At the outset, it appeared that Dones and Woolhouse would simply be the latest victims of NXIVM’s “terrorism by litigation” strategy. But a funny thing happened on the way to the trial…Dones and Woolhouse decided to fight back.
First, came their challenge to NXIVM’s way of issuing subpoenas to third party witnesses. That resulted in a rebuke from the judge about NXIVM’s “confusing and potentially abusive” tactics and a requirement that all such future subpoenas be approved, on a case-by-case basis, by him. Wait a minute, Batman…Now we can’t just depose anyone we want and ask them whatever we want?
Next, Dones and Woolhouse started issuing their own requests for documents and records, especially ones concerning NXIVM’s claims regarding disruption of business operations and lost revenues. WHOOOPS, Batman, we have a big problem here…The judge has ordered us to turn over our internal accounting records to Dones and Woolhouse. That would be like taking off our masks.
So, just five weeks before the trial was to begin, NXIVM dropped all of its claims for “monetary damages” against the two women. It also dropped its “civil conspiracy” claim because that also would have allowed Dones and Woolhouse to get access to information and records that NXIVM does not want to make public.
As a result of NXIVM’s sudden change of heart, the 2-day trial that took place back in September was limited to NXIVM’s request that Dones and Woolhouse be forced to return all of their NXIVM materials and that they be enjoined from distributing those materials to anyone else. But, once again, a funny thing happened on the road to justice…This time, the judge hearing the case, Brian D. Lynch, actually saw through all of NXIVM’s bullshit and nailed its ass to the wall. (Side comment: It’s too bad that our local bankruptcy court judge, Robert E. Littlefield, Jr. a/k/a Bobby Littleballs, has been unable or unwilling to do the same thing).
According to my sources in the legal community, most decisions in bankruptcy cases are pretty brief and very boring. Well, unfortunately for NXIVM, Judge Lynch’s decision in the Dones/Woolhouse case is neither of those things (HERE).
Written and structured like it anticipated an appeal, Judge Lynch’s decision includes a number of findings that will likely cause NXIVM some real problems in the future. Those include the following:
1. The infamous “Confidentiality Agreement”, which everyone who ever takes a NXIVM course is required to sign, only applies to “information provided to students by NXIVM instructors and contractors during formal classes and Instructions.” The court then went on to find that the “Confidentiality Agreement” does not cover “the entire scope of information about NXIVM, the business or its agents and affiliates.” Holy shit, Batman, that means that people can actually start telling the truth to one another about us! Our leaders are not going to be happy about this.
2. The videotape of the April 2009 meetings belongs to Dones. Because, however, she agreed at the outset not to distribute it, she is barred from doing so. Yikes, Batman, Raniere is really going to be pissed about this one.
3. Dones and Woolhouse (and, by extension, everyone else who was at the April 2009 meeting) did not try to extort money from NXIVM. Damn it, Batman, you know that this was Raniere’s #1 priority in this case.
4. Dones and Woolhouse did not do anything to injure NXIVM.
Holy fuck, Batman, we didn’t manage to convince the judge about this either?
5. Dones and Woolhouse did not use NXIVM’s training materials for their own purposes and/or in violation of the “Confidentiality agreement.” Another claim bites the dust…
6. The “Confidentiality Agreement” does not apply to Dones’ and Woolhouse’s emails. God damn, Batman, then why the hell did we bother paying all that money for copies of Joe Ohara’s emails?
7. Dones and Woolhouse did not hide any assets in their bankruptcy filings. OK…We all knew that we just made this one up.
8. Dones and Woolhouse did not refuse to return NXIVM’s materials – and it was, in fact, NXIVM that prevented this from happening. “The Court is left with the impression that NXIVM was less interested in getting the materials back than is using the turnover of the materials to gain an advantage regarding the other claims.” Fuck, Batman, I think this judge can see right through our disguises!
9. NXIVM is not entitled to reimbursement for its attorneys’ fees or costs. Better tell Sara and Clare to get out the old checkbooks, Batman.
10. Saving his best for last, Judge Lynch concludes his opinion with the following: “NXIVM’s pursuit of Woolhouse is another matter entirely and sheds light on its true motivations. Apart from participating in the April 2009 meeting with Raniere and joining in the subsequent email with the other participants, there is absolutely no evidence that she did anything to harm NXIVM. Her “sin” was to attempt to walk away after discovering that NXIVM was not what she thought or hoped. In return, she was labeled a “suppressive,” a term that NXIVM applies to former associates who leave the company or whom NXIVM perceives to be its enemies, and subjected to protracted litigation from two large law firms and a phalanx of attorneys. Despite multiple depositions and extensive discovery, they were never able to prove that Woolhouse did anything wrong. NXIVM’s treatment of Woolhouse in this adversary proceeding was, in a word, deplorable.” Uh-oh, Batman, I think this is where Raniere decides that we tanked this case on purpose and refuses to pay our outstanding fees.
Although elated by the decision, Dones and Woolhouse had to wait and see whether NXIVM would file an appeal. (This is, after all, the same bunch of idiots that appealed then denial of a Preliminary Injunction all the way to the U.S. Supreme Court). But, thankfully for them, the time to file any such appeal has come and gone.
After Judge Lynch issued his decision, the only issue left to be decided was how Dones and Woolhouse would remove NXIVM materials from their computer. NXIVM suggested that it would supply an IT specialist to do that – which would, of course, have given it access to everything on the computer in question. But the judge sided with Dones/Woolhouse and went with their suggestion that the hard-drive in the computer just be destroyed.
One of the interesting things that happened at the final hearing is that the judge granted NXIVM’s motion that he remove from the official file several of the documents that were attached to some of Dones’ and Woolhouse final filings. But, thanks to my trusty PACER account, I was able to pull down copies of those documents before they vanished.
So, a wonderful end-of-year victory for Dones and Woolhouse and a lump of coal for Raniere and his “phalanx of attorneys.” Let’s hope that this is just the beginning of the end for the NXIVM cult and all the harm and pain that it’s caused.