Hy Cite Corporation v. Badbusinessbureau.co, et al

Filing 64

Hy Cite Corporation v. Badbusinessbureau.co, et al

Doc. 64

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John C. Scheller (admitted pro hac vice; Wis. SBN No.1 031247) Kevin M. St. John (admitted pro hac vice; Wis. SBN No.1 054815) MICHAEL BEST & FRIEDRICH LLP One South Pinckney Street, Suite 700
Madison, Wisconsin 53703

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[phone]
Don Bivens (#005134)

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Michael K. Dana, (#019047) SNELL & WILMER, LLP One Arizona Center Phoenix, AZ 85004-2202 [phone]

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Attorneys for Plaintiff
Maria Crimi Speth

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JABURG & WILK 3200 North Central Avenue, Suite 2000 Phoenix, AZ 85012 Fax: [phone]
Attorney for Defendants

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

Hy Cite Corporation, a Wisconsin )

Corporation, ) No: CV04-2856 PHX EHC

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v. )

Plaintiff, )
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badbusinessbureau.com, L.L.c., a St. ) JOINT PROPOSED CASE
badbusinessbureau.com and/or )

KittslNevis Corporation d/b/a ) MANAGEMENT PLAN

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badbusinessbureau.com/Rip-Off Report.com; )

ripoffreport.com and/or )
Xcentric Ventures, LLC, an Arizona Limited )
report.

Liability Company d//a )
badbusinessbureau.com and/or )
ripoff

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badbusinessbureau.com/Rip-Off Report.com; )
and Ed Magedson, an Arizona resident, )

com and/or )
Defendants. ))
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Case 2:04-cv-02856-EHC

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Dockets.Justia.com

1 Pursuant to Federal Rule of Civil Procedure 26(f) and the Court's Order Setting
2 Scheduling Conference, the Plaintiff Hy Cite Corporation ("Hy Cite") and Defendants

3 badbusinessbureau.com, LLC, Xcentric Ventures, LLC and Ed Magedson ("Defendants")
4 submit the following Joint Proposed Case Management Plan.

5 1.
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COUNSEL WHO P ARTICIP A TED IN DEVELOPING CASE MANAGEMENT PLAN
Plaintiff:
John C. Scheller

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j cschellerCfmichael best. com kmstj ohnCfmi chaelbest. com

(admitted pro hac vice; Wis. SBN No. 1031247) Kevin M. St. John (admitted pro hac vice; Wis. SBN No.1 054815) MICHAEL BEST & FRIEDRICH LLP One South Pinckney Street, Suite 700 Madison, Wisconsin 53703 [phone] [phone]

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Don Bivens Michael K. Dana Snell & Wilmer, LLP One Arizona Center Phoenix, AZ 85004-2202 [phone] [phone] E-mail: mdanaCfswlaw.com

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Defendants: Maria Crimi Speth, Esq. Jaburg & Wilk 3200 N. Central Ave., Suite 2400 Phoenix, AZ 85012 [phone] [phone] E-mail: mcsCfjaburgwilk.com

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NATURE OF THE CASE

23 This is an action relating to certain postings published by Defendants. Hy Cite
24 alleges that Defendants operate Internet websites purporting to be a consumer advocacy

25 clearinghouse and that Defendants have posted negative, misleading, false, and
26 defamatory content about Hy Cite. After fiing an Amended Complaint in this action,
27 Defendants moved to dismiss for failure to state a claim. This Court granted in part and

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denied in part Defendants' motion. Currently pending before the Court are Hy Cite's
2 counts alleging: (1) violation of 18 D.S.C. § 1962(c); RICO conspiracy; (3) common law

3 defamation; (4) disparagement-trade libel; (5) tortious interference with business
4 relationships; (6) common law trademark infringement and unfair competition; and (7)
5 violation of

Wis. Stat. §§ 110.18, 100.20.
ELEMENTS OF PROOF NECESSARY FOR EACH COUNT AND DEFENSE
Hy Cite's position is that the elements of

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its claims are as follows:

a. Violation of 18 D.S.C. § 1962(c) requires a showing that Defendants are an

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"enterprise" within the meaning of 18 D.S.C. §§ 1961(4) and 1962(c) and was engaged in
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activities that affected interstate commerce; that Defendant Ed Magedson is a "person"
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within the meaning of 18 D.S.C. §§ 1961(3) and 1962(c); and that Magedson has control
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over the enterprises such that he can conduct and participate in the conduct of Defendant
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badbusinessbureau.com and Defendant Xcentric. Defendants requested payments from

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Hy Cite, and Hy Cite feared economic loss from refusing to cede to Defendants' demands.
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Defendants' program amounts to attempted extortion under 18 D. S. C. § 1951, which is a
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predicate act listed in 18 D.S.C. § 1961 (1). The Defendants' several acts together

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constitute predicate acts sufficient to establish a "pattern of racketeering activity" as that
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term is defined in 18 D.S.C. § 1961(1) and (5). The overall scheme of

the Defendants'

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websites as a means to extort money from companies such as plaintiff and the fraudulent
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claims made in furtherance of that scheme constitute a violation of 18 D.S.C. § 1343.
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These activities were undertaken intentionally and with full knowledge and appreciation
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of the intended results of the scheme to extort money, including knowledge of false and
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fraudulent representations to unlawfully deprive Plaintiff of its money for Defendants'
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pecuniary gain. Plaintiff has been injured in its business and property and reputation by
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the Defendants' extortionate scheme that comprises the violation of 18 D.S.C. § 1962(c)

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alleged in this claim.
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1 b. RICO conspiracy requires that Defendant and other unnamed individuals
2 associated with badbusinessbureau.com and Ed Magedson, have combined, conspired,

3 and agreed to violate 18 D.S.C. § 1962( c) by agreeing to conduct an enterprise affecting

4 interstate commerce, directly or indirectly, through a pattern of racketeering activity all in
5 violation of 18 D.S.C. § 1962(d). Plaintiff

has been injured in its business and property by

6 reason of the foregoing violations of 18 D. S. C. § 1962( d) as alleged in this claim in an
7 amount to be determined at triaL.

8 c. Common law defamation requires proof of publications with false
9 information about Plaintiff; knowledge by Defendants that the publications would cause

10 pecuniary and reputational harm to Plaintiff; knowledge that the publications included
11 false information or that Defendants otherwise acted with reckless disregard of the truth or

12 falsity contained in their publication; and damage to Hy Cite's business reputation and
13 property by reason of

the Defendants' false publications.

14 d. Disparagement (trade libel) requires publications by Defendants knowing or

15 constructively knowing that the publication of such statements would cause pecuniary and

16 reputational harm to Hy Cite. Defendants knew the publications included false
17 information or otherwise acted with reckless disregard of the truth or falsity contained in

18 their publications. Those publications caused injury to Plaintift s reputation, business,
19 and property.
20 e. Tortious interference with business relationships requires proof of valid

21 contractual relationships between Hy Cite and purchasers of its Royal Prestige product
22 line and expected relationships between Hy Cite and persons who, but for Defendants'

23 libelous publications, would have entered into valid contractual relationships; knowledge

24 by Defendants of Hy Cite's relationships and business expectancies; intentional and
25 wrongful interference by Defendants with these relationships and business expectancies
26 by knowingly publishing and creating negative, false, misleading, and defamatory content

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27 in exchange for their own business profit; and injury to Plaintiff.

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f. Common law trademark infringement and unfair competition requires
2 actions that constitute trademark infringement under the common law as well as unfair

3 competition and damage to Hy Cite as a result of those actions.
4 g. Violation of Wis. Stat. §§ 110.1 8, 100.20 requires proof that Defendants

5 made untrue, deceptive, or misleading representations about Hy Cite and/or Royal
6 Prestige for the purpose of increasing Defendants' service revenues and resulting in losses

7 and increased costs to Plaintiff.
8 For Defendants, the elements of

their defenses are as follows:

9 a.. Counts I and II - Violation of 18 D.S.C. § 1962 and RICO Conspiracy

10 Pursuant to the Racketeer Influenced and Corrupt Organizations act ("RICO"), it is

11 "unlawful for any person employed by or associated with any enterprise engaged in, or in

12 the activities of which affect, interstate or foreign commerce, to conduct or participate,

13 directly or indirectly, in the conduct of such enterprise's affairs through a pattern 0
14 racketeering activity." 18 D.S.C. §1962(c). Racketeering activity includes the predicate
15 act of extortion under 18 D.S.C. § 1951. "Extortion" is defined as "the obtaining 0

16 property from another, with his consent, induced by wrongful use of actual or threatened
17 force, violence or fear." 18 D.S.C. § 1951 (b )(2).

18 The predicate acts alleged by Plaintiff do not rise to the level of conduct
19 contemplated by the statute. To support its claim for damages under 18 § 1962, Plaintif

20 has attempted to allege that Defendants "predicate act" was attempted extortion.
21 However, extortion requires the wrongful use of actual or threatened force, violence or

22 fear to obtain property. 18 D.S.C. § 1951. Plaintiff has not made an allegation of

23 wrongful use of force or fear but instead alleges that it "feared economic loss from
24 refusing to cede to Defendants' demands, but nonetheless did not accept Defendant's

25 offer." Plaintiff has alleged nothing more than an offer to provide services for

26 compensation, which offer was rejected. Such a claim is not actionable under RICO. See,

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27 e.g., Suirs v. Mew Metro Fed. Svgs. & Loan, 873 P .2d 1401, 1401 (11 th Cir. 1989).

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b. Count III and Count iv - Common Law Defamation and Disparagement-

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Trade Libel

This cause of action fails against Defendant because the claim is barred by the
Communications Decency Act, 47 USC §230. The Ninth Circuit has expressly held that

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the Communications Decency Act ("CDA") immunizes a web site operator, such as
Defendants, for defamation it publishes if it is not the information content provider of the

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content at issue. Batzel v. Smith, 333 F.3d 1018 (9th Cir. 2003). Three elements are
required for §230 immunity: the defendant must be a provider or users of an interactive
computer service; the asserted claims must treat the defendant as a publisher or speaker or
information; and the information must be provided by another information content

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provider. Schneider v. Amazon.com, Inc., 31 P.3d 37, 40 (Wash.App.2001).
Here, Defendants are not the information content providers because they did not
author the reports that are alleged to be defamatory. Defendants are not responsible for

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the creation of the reports and the information is provided by the actual author of the
content.
c. Count V - Tortious Interference with Business Relationships

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Plaintiff has no proof that Defendants knew about Plaintifts contractual relationships with purchasers of its Royal Prestige product line or that Defendants intentionally

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interfered with such relationships. Moreover, as set forth above, Defendants are not
responsible for the creation of the alleged defamatory or disparaging remarks that Plaintif
alleges interfered with its business relationship. As such there are no damages resulting.
d. Count VI - Common Law Trademark Infringement and Unfair Competition

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Likelihood of confusion is the governing standard for common law trademark
infringement claims. Plaintiff

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has not and cannot allege likelihood of confusion here.
Wis. Stat. §§ 110.18, 100.20

e.

Violation of

26 Defendants maintain that there is no proof that Defendants did anything other than

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27 act as a website internet operator for the content authored by others.

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1 4. ISSUES IN DISPUTE

2 4.1 Factual Issues
3 a. The corporate structures of Defendants (Defendants do not agree that this is

4 a material issue
5 b. Defendants' involvement in providing content for their website

6 c. Defendants' processes for posting reports
7 d. Defendants' communications, if any, with alleged reporters

8 e. Identification of alleged reporters
9 f. Investigation into Defendants' corporate advocacy program
10 g. Details surrounding Defendants' request for money from Hy Cite
11 h. Defendants' knowledge of false postings (Defendants do not agree that this

12 is a material issue
13 1. Defendants' investigation, if any, into postings (Defendants do not agree

14 that this is a material issue)
15 J. Financial benefits reaped by Defendants connected to their po

stings

16 k. Whether there is any likelihood of confusion
17 L. Whether there was a wrongful use of actual or threatened force, violence, or

18 fear to obtain property
19 4.2 Legal Issues
20 a. Whether Defendants can establish protection under the Communications

21 Decency Act

22 b. Whether the Communications Decency Act, if applicable, provides an

23 affirmative defense for "Publisher Liability"
24 c. Whether Defendants are liable under the counts alleged by Plaintiff

25 5. JURISDICTIONAL BASIS OF CASE
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jurisdiction under 28 U.S.c. § 1331, 18 U.S.c. § 1964(a), (c), 28
jurisdiction under 28 U.S.C. § 1367.

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6.
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SERVICE OF PARTIES

Defendants Xcentric Ventures, LLC and Ed Magedson have been served.

3 Badbusinessbureau.com, L.L.C., an entity organized under the laws of St. Kitts/Nevis has

4 not been served. Plaintiff understands that the entity has been dissolved, and that Xcentric

5 Ventures, LLC and/or Ed Magedson have successor liability. Defendant denies that there
6 is any successor liability.

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PARTIES EXPECTED TO BE ADDED OR AMENDED PLEADINGS

8 The parties do not contemplate adding any other parties or otherwise amending the

9 pleadings.

DISPOSITIVE ISSUES TO BE DECIDED BY PRE-TRIAL MOTIONS

11 8.1 Hy Cite
12 Hy Cite contemplates eventually filing motions for summary judgment on most, i
13 not all, claims, following discovery.

14 8.2 Defendants
15 Defendants also contemplate filing motions for summary judgment following
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MASTER, OR UNITED STATES MAGISTRATE JUDGE FOR TRIAL
special master, or a United States Magistrate Judge.

SUITABILITY FOR REFERENCE TO ARBITRATION, SPECIAL

The parties do not agree that this case is suitable for reference to arbitration, a
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10. STATUS OF RELATED CASES
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Not applicable.
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INITIAL DISCLOSURES

The parties agree to make initial disclosures within 30 days of the scheduling
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conference.
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1 12. PROPOSED DEADLINES
2 12.1 Completion of Discovery.
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The parties propose discovery completion on February 28,2007.
12.2 Disclosure of Expert Testimony under Rule 26(a)(2)(C) of the Federal

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Rules of Civil Procedure.
The parties propose that all experts and reports be disclosed pursuant to Rule

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26(a)(2)(B) no later than March 16,2007, and that any and all rebuttal experts be
disclosed, with reports, no later than April 30, 2007.

9 12.3 Completion of Expert Depositions.

10 The parties propose that expert depositions, not including rebuttal experts, be
11 concluded no later than April 16, 2007, and that depositions of rebuttal experts conclude
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2007.

13 12.4 Filng of Dispositive Motions.
14 The parties propose that all dispositive motions be fied no later than June 15,
15 2007.

16 12.5 Settlement Talks.
17 The parties have undertaken settlement talks and are currently negotiating a
18 potential settlement of this matter.

19 13. SCOPE OF DISCOVERY

20 13.1 The extent, nature and location of discovery anticipated by the parties.
21 The parties intend to seek discovery of information reasonably calculated to lead
22 to the discovery of admissible evidence relating to the factual and legal issues in this case

23 to the full extent permitted by the Federal Rules of Civil Procedure.

24 The parties intend that discovery shall include depositions, document requests,

25 inspection, interrogatories, and requests for admission. Unique issues presented in this
26 case include issues arising out of the need to discover electronic information. Plaintiff

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27 intends to inspect Defendants electronic equipment. Plaintiff intends that all documents

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1 produced shall include any and all "meta-data" or other "hidden" information contained in
2 electronic documents, including, but not limited to IP addresses. The parties intend for
3 the location of discovery to be taken in accordance with the Rules.

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13.2 Suggested changes, if any, to the discovery limitations imposed by the

Federal Rules of Civil Procedure and LRCiv 16.2 of the Rules of Practice for the United States District Court for the District of Arizona
("Local Rules").

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The parties understand this case to be on a "standard" track. The parties recognize
that the standard time for the preliminary scheduling conference provided for by LRCiv.
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16.2 has been altered due to motion practice and the need for alternative service of
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process. All other dates are addressed herein.

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13.3 The number of hours permitted for each deposition, unless extended by
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agreement of the parties.

12 The parties intend depositions shall be conducted in accordance with Rule 30, and
13 that 7 hours shall be permitted for each deposition, absent a stipulation or court

14 intervention by motion to extend or limit the same.
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ESTIMATED DATE AND LENGTH OF TRIAL
5 days.

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JURY TRIAL REQUEST
Plaintiff requests a jury triaL.

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PROSPECTS FOR SETTLEMENT
Settlement discussions have occurred and the paiiies are continuing to engage in

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productive discussions to resolve all claims.

22 17. SUGGESTIONS ON HOW TO EXPEDITE DEPOSITIONS
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The Parties have no suggestions on how to expedite depositions.
III III III III
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1 RESPECTFULL Y SUBMITTED this 27th day of July, 2006.
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MICHAEL BEST & FRIEDRICH LLP
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BY:~¿~ fcr
John C. c eller ~
Madison, Wisconsin 53703

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Kevin M. St. John One South Pinckney Street, Suite 700
Don Bivens Michael K. Dana Snell & Wilmer, LLP One Arizona Center Phoenix, AZ 85004-2202 [phone]

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Attorneys for Plaintiff

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JABURG & WILK

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B~~ hMaria Crimi Speth /
3200 North Central Avenue, Suite 2000 Phoenix, AZ 85012 Fax: [phone]

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Attorney for Defendants

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CERTIFICATE OF MAILING
I hereby certify that on July 27, 2006, I electronically transmitted the foregoing to the

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Clerk's Offce using the CM/ECF System for filing to the following CM/ECF participant:
Maria Crimi Speth

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J aburg & Wilk 3200 North Central Avenue Suite 2000 Phoenix, Arizona 85012 Attorneys for Defendants

I further certify that on July 27, 2006, I served a courtesy copy of the aforementioned
document and transmittal of a Notice of Electronic Filing by mail on the following:
The Honorable Earl H. Carroll United States District Court 401 West Washington Street, SPC 48 Suite 521 Phoenix, AZ 85003-2151
John C. Scheller

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Kevin M. St. John MICHAEL BEST & FRIEDRICH LLP One South Pinckney Street Suite 700
Madison, Wisconsin 53703

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(!~t!~
1865957

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