from www.arstechnica.com – Every time we think Prenda Law [run by attorney John Steel, pictured] can’t get in any more hot water, the firm behind dozens of mass copyright lawsuits proves us wrong.

In recent months we’ve written about a Florida judge blasting Prenda for “attempted fraud on the court.” We’ve covered a Minnesota man’s charge that Prenda named him the head of one of its shell companies without his knowledge or permission.

And we’ve covered Prenda’s efforts to avoid answering questions about these allegations by claiming that California defense lawyer Morgan Pietz invented his “John Doe” client. Prenda also unsuccessfully sought the dismissal of a California judge who started asking questions about Prenda’s alleged misconduct.

Now Prenda is facing a fresh round of allegations. An Oregon man named Spencer Merkel says that Prenda asked him to serve as a sham defendant in order to provide Prenda with legal cover while it sought contact information for dozens of people Prenda describes as Merkel’s co-conspirators.

Like most copyright trolls, Prenda does its best to avoid actually litigating. Fighting in court against named defendants is expensive, so Prenda focuses on using the threat of being named in a lawsuit to extract settlements. Indeed, as Prenda adversary Morgan Pietz documented in a recent court filing, until February 2012—almost 18 months into the firm’s anti-piracy efforts—Prenda had not served a single named defendant with a lawsuit.

Recently judges have become suspicious that Prenda wasn’t actually interested in litigating any of the “John Doe” lawsuits it had filed. So to allay these concerns, Prenda began naming a trickle of individual defendants over the last year.

But once Prenda began naming individual defendants, there was a risk that some of them would lawyer up and defend themselves. Not only would that cost Prenda time and money, but it would create a risk of losing in court, setting precedents that could create problems in other cases. Even worse, defendants could use the discovery process to uncover embarrassing details about Prenda’s legal tactics and business practices.

Spencer Merkel’s declaration suggests that Prenda came up with a novel, if ethically unsound, solution to this quandary: file fake lawsuits against defendants who were in bed with Prenda. By promising the people they sued that their lawsuits would eventually be dismissed, Prenda could ensure that the “defendants” wouldn’t put up a serious fight. The tactic could buy Prenda more time to continue collecting contact information and extracting settlement payments from other, real defendants.

Merkel was one of thousands of defendants who received an ominous letter from Prenda in early 2012 warning that he could be sued and face tens of thousands of dollars in damages if he didn’t pay up. Merkel called Prenda and admitted he had downloaded Amateur Allure—MaeLynn, but he said he couldn’t afford to pay the $3,400 Prenda was asking for. So Merkel says a Prenda rep offered him an alternative deal.

Under Prenda’s proposal, Merkel would “agree to be sued” by a Prenda client. Then Prenda would ask Merkel for “a copy of the bit-torrent log” from Merkel’s computer. Once Merkel had turned over the information from his computer, Prenda promised to dismiss the case.

Evidently, Merkel took the deal Prenda was offering, because he was sued in Minnesota state courts by Prenda client Guava LLC in October. Rather than filing a traditional BitTorrent copyright case, Prenda accused Merkel of “hacking” by accessing a paywalled pornographic website with a pilfered password. Another Prenda client, Lightspeed Media, used the same legal theory to file a lawsuit in Illinois state courts last year.

In its complaint, Prenda accused Merkel of obtaining the password from a “website that allows its members to trade stolen usernames and passwords amongst [sic] one another.” Prenda charged Merkel with “civil conspiracy,” claiming that he “colluded with multiple members of a hacking community” to swap passwords. Prenda’s plan was evidently to use the lawsuit as a pretext to subpoena ISPs for the contact information of Merkel’s alleged co-conspirators.

But Merkel says Prenda broke its promise to eventually drop the charges against him, because on January 15 Prenda once again began demanding that Merkel pay up. At this point, he filed a declaration admitting to his arrangement with Prenda.

When we asked Pietz about Merkel’s allegations in a Friday interview, he declined to comment on whether such an arrangement would be ethical. But he noted that “federal courts have a requirement that there be an actual controversy” for a lawsuit to occur.

“Our justice system is an adversarial justice system,” Pietz told us. “So if you’re filing a lawsuit where the plaintiff and the defendant are potentially cooperating, it presents a justiciability problem, and starts to look like something that’s no longer a true adversarial proceeding.”

Prenda has not returned a Friday afternoon call seeking comment on Merkel’s accusations.